Quote Of The Day

Image credit: Mark M./Occupy Together

Economist Nouriel Roubini is sounding an awful lot like David Frum today in an essay published at Al Jazeera:

[T]he rise of the social-welfare state was a response (often of market-oriented liberal democracies) to the threat of popular revolutions, socialism, and communism as the frequency and severity of economic and financial crises increased. Three decades of relative social and economic stability then ensued, from the late 1940’s until the mid-1970’s, a period when inequality fell sharply and median incomes grew rapidly.

Some of the lessons about the need for prudential regulation of the financial system were lost in the Reagan-Thatcher era, when the appetite for massive deregulation was created in part by the flaws in Europe’s social-welfare model. Those flaws were reflected in yawning fiscal deficits, regulatory overkill, and a lack of economic dynamism that led to sclerotic growth then and the eurozone’s sovereign-debt crisis now.

But the laissez-faire Anglo-Saxon model has also now failed miserably. To stabilise market-oriented economies requires a return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of unregulated markets and the continental European model of deficit-driven welfare states. Even an alternative “Asian” growth model - if there really is one - has not prevented a rise in inequality in China, India, and elsewhere.

The Instability Of Inequality

Or, he's sounding a lot like me when I talk about the free market fairy. Take your pick.

Anyone who thinks that markets are going to work to the betterment of people in them all the time is not only mistaken, but clearly has chosen to ignore much of modern history. As Roubini suggests when he discusses the "flaws in Europe's social-welfare model", government involvement isn't always a good thing, either, but a truly enlightened society will use its government to keep its markets working the way they should, and make up for the situations when they clearly can't.