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Practically Speaking

Kyle and her husband moved to Brookfield in 1986. She became active in local politics and started blogging in 2004. Her focus is primarily on local issues but often includes state and national topics, too. Kyle looks at things from the taxpayers' perspective in a creative, yet down to earth way, addressing them from a practical point of view.

Anglo-Saxon vs. Euorpean-style, who will speak for us?

Common sense, Conservatives, TAXES, THE ECONOMY

Telling It Like It Is At A Tipping Point http://www.ibdeditorials.com/IBDArticles.aspx?id=311472435104525

By INVESTOR'S BUSINESS DAILY | Posted Thursday, November 13, 2008 4:20 PM PT

Milestones: European leaders gathered in Washington for the G-20 summit are pushing for an end to American-style capitalism. But on Thursday, President Bush made it clear that ain't gonna happen on his watch.

In a badly needed speech that seemed to bring the stock market back to life late in the day, the president delivered a sweeping, and eloquent, defense of free markets during a luncheon talk to the Manhattan Institute. Amid all the gloom and the revived enthusiasm for massive government intervention in the world economy, Bush's comments were a breath of fresh air.

A few remarks in particular caught our attention:

"History has shown," Bush said, "that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market."

He went on to show how this was the case in the U.S. with Fannie Mae and Freddie Mac, which were created by Congress and lay behind the whole subprime mortgage mess that later begat our current financial meltdown.

From all this, Bush said, "There is a clear lesson: Our aim should not be more government — it should be smarter government."

And he took it even further, to what he called the "most important principle that should guide our work: While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth. And the surest path to that growth is free markets and free people."

We hope President-elect Obama and the world's leaders heading for Washington were listening closely. Because President Bush is dead right.

The 20 nations that will meet this weekend are rightly in a panic over the global financial meltdown that has now sacked the world economy. But they should follow the economic policy equivalent of the Hippocratic Oath: First, do no harm.

Sadly, that doesn't seem to be the case.

On Monday, for instance, British Prime Minister Gordon Brown called for a "new global order" and "global governance" over nations' financial regulators. He's not alone in his sweeping, and ultimately dangerous, vision: Both France and Germany likewise would end what they derisively call the "Anglo-Saxon" model of free-market capitalism practiced mainly in the English-speaking world.

They would replace it with what might be called the Continental Model of capitalism — the slow-growing, hyper-regulated version that reigns in the stagnant European Union.

"We see friction between Anglo-Saxon capitalism on the one hand and the European-style capitalism on the other hand," said French Finance Minister Christine Lagarde last week, after meeting with other G-20 ministers.

"Self-regulation to solve all problems, it's finished," French Prime Minister Nicholas Sarkozy has said. "Laissez-faire, it's finished. The all-powerful market that is always right, it's finished . . . It is necessary then for the state to intervene."

Germany's Angela Merkel is more circumspect. But even she proposes that hedge funds be punished, and that bankers' pay be capped by law.

These are dangerous ideas, from a bad model — the European model. It's certainly not one that will fix the troubled world economy. It's a recipe for slow growth, stagnant labor markets and declining standards of living. It would mark an end to the creative, dynamic capitalism that has enriched not just Americans, but the entire world.

That's surely what Bush had in mind Thursday when he pointedly noted that the financial meltdown "was not a failure of the free market system. And the answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe."

By the way, U.S. per-person GDP, after adjusting for inflation and currency fluctuations, is anywhere from 15% to 36% greater than any member of the European Union. And the gap is growing wider.

In 2007, each American produced $43,267 in goods and services, measured in 2005 dollars. By comparison, the average German produced $32,228, the average Dutch citizen $36,783, the average Swede $34,457 and the average Briton $33,191.

Europe's leaders, so in love with top-down economic solutions and socialism, are clearly losing the long battle for economic supremacy. So they're using a financial crisis to tear down the one global economy that truly delivers for its citizens.

The only question is, even in the midst of a global meltdown in which once-radical ideas suddenly have come to the fore, why would we adopt such a failed system?

The Europeans would have us do what they've already done to themselves: Create an infantilized version of capitalism where every move is regulated, where few jobs are created and where breakthrough innovations are rare. A spoon-fed economy.

They'll try to sell the U.S. and developing nations on the idea that the world economic slump is really a result of insufficient regulation, of unbridled "cowboy capitalism." In fact, the exact reverse is true. Inept and excessive regulations — the very antithesis of free-market capitalism — are to blame for our problems. And nothing the Eurocrats now plan to do will end that.

Unfortunately, Bush's wise remarks aren't likely to be the last on this subject.

The European Union hopes to hold a series of these meetings, extending into President-elect Obama's first term, to hammer out a "new world order" and to browbeat the U.S. into seeing things their way.

At a time when many are calling for a revival of Keynesian thought to validate massive government intervention into the workings of the free market, it's important to have someone who knows that Milton Friedman's vision of free markets and free minds was ultimately the correct one.

We hope President-elect Obama, members of the incoming Congress and Americans in general will mark President Bush's timely words as closely as the financial markets seemed to do on Thursday.

 

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