| Soleron said: The economy "works" usually because it has freedom to react - good or bad - to unplanned events. Governments will never be able to make it work that well. |
Not at all. The point of any government is to make the long-term investments businesses can't or won't make - science, education, research, infrastructure, a diverse mass media, a fair and equitable legal system.
Just look at global warming. Why hasn't the magic of the marketplace solved that problem? Because you can't price future costs of warming today, no market mechanism can do that. You need objective scientists to tell us what's going to happen, and then a diverse mass media to report the truth, and then governments to step in and jump-start renewable energy programs, by subsidizing clean energy so consumers can afford to buy it. Only then can entrepreneurs step up to the plate and carry the ball from there. Germany is doing this, China is doing this. Successful economies are a blend of smart government and innovative businesses, working together.
The problem with letting the banking system go under is similar. Yes, any individual bank which makes bad decisions should go under, no question. But when the entire credit system seizes up, even sound, well-managed banks are exposed to runs and crises of confidence. That's what's happening now - most of the banks are fine, it's the mortgage mess which is the problem, and trust has broken down. So the government does have an obligation to rescue the system - but not the bankers involved, who should be fired, their bonuses seized, their assets impounded.
