Tuesday, October 14, 2008
The exuberant service-based New Economy unbound from regulations and cushioned with federal currency interventions was first chastened by the fall of the dot-coms. In the current global crisis, the apparatus will be overhauled for a more modest and regulated model. Economist Paul Krugman, newest Nobel laureate, credits British prime minister Gordon Brown with the more workable model of semi-nationalization of banks to bridge the crisis which U.S. Treasury Secretary Henry Paulson has now come around to. David Brooks outlines the expected tab for the meltdown, including bailouts, stimulus packages and tax cuts, which will far exceed a deficit of 5% of GDP. Interventions themselves are not unprecedented in the US, as banks, railways, and industries have been nationalized at various times of crisis. While this new phase of a now globally-interdependent financial system is ushered in, the question remains on what basis we will rebuild: with a system favoring the maximum profit for the clever few or a welfare state encouraging dependence. A third way is open: to foster stable local initiatives, while keeping a particular concern for the most vulnerable.