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The financial crisis of 2008, still far from over, has done severe damage to the reputation of the free market. The crisis, we are assured, was caused by the withdrawal of the state and an excess of deregulation. To get out of it will thus require a massive return to public spending and intervention, which is in fact what we see happening all over Europe and in the U.S.
However, what we might call the Greek affair should make us question the statist solution. We ought to consider the possibility that public management could prove even more dangerous than private — that state regulation is no less chancy than deregulation.
The duplicity and corruption of Greek public accounting was more than an error of bookkeeping. The concealment of the country's real budget deficit necessarily involved a gigantic network of complicity that included the whole political class, the state bureaucracy and the banks.
This network was not confined to Greece: it included Greece's European partners, Europe's political leaders, the governors of the euro zone, the directors of the European Central Bank and the European Commission.
It's hard to believe that the European Commission's directorate general for economic and financial affairs was ignorant of what was really happening in Greece; and it will come as a surprise to some but not others that Eurostat, the statistical institute of the European Commission, has for years been publishing deliberately false numbers that make the phony accounting of the ratings agencies implicated in the 2008 financial crisis pale in comparison.
What was the motive for all this deception? Obviously, to give credibility to the euro, a common currency supposed to rival the American dollar.
Recall that the theoretical virtue of the euro is to bring down interest rates in Europe: the more solid the money, the lower the rates, which encourages economic development (or, in the case of Spain and Portugal, real-estate speculation).
It was therefore much to Europe's advantage to cover for Greece and protect the euro.
What's telling is that the people who brought the hoax to light were neither the Greek nor the European authorities but private speculators. The Greek state, to its great dismay, suddenly discovered that it could no longer sell treasury bonds on financial markets at the same rate as the Germans did. The open market had decided that euros owned by Greeks were not the same as euros owned by Germans.
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Posted By: jpdwn(110) on 3/23/2010 | 1:34 AM ET
Why repeat the fiction that the Free Market brought on the latest financial crisis? The Free Market wouldn't voluntarily bring it on because it would be self destructive. Only the coercive force of government where there is no price to pay could do that. Statist solutions just put the abusive power into the hands of that coercive force. No pleasant outcomes there.
Posted By: Serfdumb(1040) on 3/22/2010 | 9:43 PM ET
This points out the stupidity of global socialists and new world order types (like SEIU Pres Andy Stern-most frequent WH visitor). Stability comes from local Gov't with local solutions. While they chant 'can't we all just get along', the EU is collapsing, Iran wants to Nuke Israel, China is aligning w/Russia, Radical Islam would destroy all infidels, etc. - Of course 'NO' we can't just all get along. But maybe they just want to Plunder what they can now and the lefties are just 'useful idiots'.
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