The inaccuracies in this article start in paragraph 1. Hayek was Austrian!

Claim #1: that the Howard government consisted of “market zealots” who aimed to reduce the size of the state “as much as possible”
The reality may have been different but that was the Liberals claim

Claim # 2: that “free market economics” and “extreme capitalism” are to blame for the current financial crisis.
Yes, well most people agree that lack of regulation allowed the market to swing out of equilibrium.

Steve Keen argues that economists are using the wrong models of money supply. Far from following central bank policy the banks create money supply. http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/ At this stage of the economic cycle any money given to banks will be salted away. If you want to pump start the economy hand money directly to people who need it. "The trickle down effect" does not operate when the recipients use the handout to pay down debt or save.

"Since the Howard government hardly deregulated, and radically expanded the role of the welfare state, " I am sure that the poor sods who have to face Centrelink feel that Howard's lasting legacy was the sheer brutality of its inhuman compliance regime. See Adele Horin's description http://www.smh.com.au/news/opinion/youll-work-like-a-dog-to-make-centrelink-happy/2009/01/30/1232818724404.html

Now it would be nice to elect a government that had a vision for a sustainable Australia where the inhabitants had a decent standard of living rather than electing politicians who are mouthpieces for big business interests who look upon the continent as one large quarry with an uppity workforce that needs subduing. It would be nice if we purged the public service of people who believe that economic prosperity can only be achieved with a world underclass of half the population.

Myth? Certainly! If you start an argument with FALSE assumptions then the result will likely be at least as false, as Mr Rudd's argument demonstrates.

We have not previously had capitalism. We have an ACCC to ensure business can not get on with business; how could that exist under a capitalist system?

We have takeovers regulation panels to protect lesser business from better ones. Government propping up the least efficient and worst of businesses which really should be allowed to fold - like certain automakers.

Capitalism has not failed, it has not been tried yet.

Welcome Milo!

Fortunately for Australia "we haven't tried capitalism" because otherwise we would be in the same parlous position as the United States. Our [weak] regulators might have saved us from the worst excesses of capitalism.

Will Australia follow the United States, undoubtedly - because when America coughs the rest of the world catches cold.

Thanks Billie,

You have eloquently proven my point. It was NOT capitalism that brought about the US sub prime situation; it was government interference in the free market with Clinton directing banks to lend to unworthy (un credit worthy) applicants. Banks responded by protecting their own interests; securitised those rubbish loans and sold them off to the biggest sucker - which ultimately proved to be other banks!!

More proof? A very big Australian retailer wanted to buy a largish NZ based retail operation and was forbidden to do so by a competition regulator; said small NZ retailer is now in receivership and a vast number of people are unemployed because of government interference - not a failure of capitalism at all.

Autos: Why would maker T invest in new fuel efficient hybrid vehicles when maker G gets government handouts for not doing so? Which brand have customers voted for with their wallets? Capitalism? Not so.

Billie,

The United States is not a capitalistic state. You cannot have true capitalism while your currency is not backed by anything substantial (eg gold) and you operate a fractional reserve banking system.
It was US government intrusion into the markets that helped to promote the current crisis by artificially lowering interest rates and forcing banks to provide credit to un-creditworthy individuals.

Without having seen the article itself and going only on what one has read it does smell as if this is nothing more than a politically expedient way to tarnish the ‘conservative’ sides economic credentials. the press coverage to this point appeals completely to vapid pseudo intellectual demographic that constitutes Rudd's support base. The allusion to economy that permeates all facets of political discussion in Australia will continue until the day this planet adopts new economics and new social values. It is sad to see in this new world of environmental challenge and with myriad dilemmas facing our fundamental social institutions of family and community – Rudd leaves the real decay for another day - he chooses, callously chooses to expend his intellectual capital on issues such as this. The selective amnesia of Rudd is breathtaking. From what excerpts and commentary I’ve seen he blames Thatcher, Reagan, and Howard for the economic climate of this day. What happened to the proud legacy of the Hawke and Keating governments that was leveraged in an attempt to gain economic credibility in the lead up to the 07 election and the months immediately following that? let's not forget that it was Labour who dismantled the’ Keynesian’ state through privatization, lets not forget the financial deregulation of that same Labour era – and lets not forget above all that any government today is subject to the whims of market forces - only becausee the people they 'represent' pursue cravenly the gold consumerism affords.

I find Rudd's comments a little alarming. While it is true that the market has failed badly, it is also true the the record of government regulation and intervention is equally dismal. When the market pushed down the shares of HIH to reflect a high risk company, the regulator did nothing. In the US, the regulator ignored warnings about Madoff.

We must accept that both the government and the market will make mistakes and we should not believe in the infallibility of either of them. There has to be a middle way.

It's like watching a field of straw-men having a riot.
Both sides agree that government spending is needed. The argument is over what to spend it on.
Both positions start with ideals that are then spoiled with pragmatic exceptions.
The left at least seem to have some good objectives, but are sometimes clueless as to being manipulated. Idealism over pragmatism.
The Right are just a boys club when in power and are almost always clueless or careless of being manipulated. Pragmatism over idealism.
Wisdom is somewhere in the middle, and always with concrete examples.
Wealth is created in factories, fields and workers hands, *not* banks, insurance agencies or any other accounting practice.
It is not only the credit crunch that will cause the depression. By allowing a small bunch of traders, managers, directors to earn ridiculous returns in the boom they have sucked the space capacity from the economy. Individuals that would have had opportunity to start businesses have been denied because of the parasites' excesses.
Both sides of politics should be ashamed.
Rudd, alas is Howard 2.0 at this stage but still preferable to "which way is the wind blowing" Turnbull.

“because [the Howard government] aimed to reduce state power to the maximum possible extent”. Would that it had been so! Far from it, unfortunately.

As regards Rudd’s approach: policies which embrace openness, competition, change and innovation promote economic growth, while interventionist policies stifle it. Markets are imperfect, but their superiority to central planning is well attested; government failure is more common and more damaging than market failure. The World Bank has advised that “countless cases of unsuccessful intervention suggest the need for caution. To justify intervention it is not enough to know that the market is failing; it is also necessary to be confident that the government can do better.”

The Economist points out that government intervention must overcome three formidable difficulties: the tendency of regulated firms to “capture” their regulators, weak incentives for efficiency within the public sector, and missing information (where markets lack it, governments are likely to lack it as well). The record of intervention is poor - history suggests that the burden of proof should lie with those who would extend the government’s role.

A BIE assessment of 15 major Commonwealth interventions found that 13 had negative returns, results for the others were unclear. Similar results have been found throughout the world, and Kevin Rudd’s new interventionism threatens dire consequences.

There are some supporters of Ian Lowe on OLO. His contribution to this debate in today’s Australian is the bizarre claim that "the financial crisis was precipitated by the impact on US suburbia of fuel prices, the first tangible indicator of “peak oil.’" This runs contrary to all evidence and analysis, and far overstates any conceivable impact of a price increase for one consumtpion item. To believe that a minor shift in consumption expenditure in the USA could shatter the world economy suggests a complete ignorance of reality.

Good article.

Yes it laughable to represent the Howard government as standing for small government and unrestrained capitalism.

Both major parties are Marxoid/Keynesian with a bit of monetarism thrown in.

Both believe in government monopoly control of the money supply, and a policy of permanent inflation of the currency.

Both hold the Marxist belief that the relation of employment is intrinsically exploitative and abusive, and should be suppressed in myriad ways: "industrial relations".

Both believe that forcibly taking from A and giving to B is a valid function of government. This gives rise to endless redistributionist thieving, from the baby bonus, to the bailouts of billionaire corporations.

Both believe in governmental 'economic management', the fruits of which are there for all to see. The main governmental contribution to the crisis is not poor regulation itself, it is the permanent fiddling of the nerve centre of a market economy, the money supply. This has enormous economic consequences, which the ignorant then blame on capitalism: see http://mises.org/

Both believe in encouraging, by subsidising, the resulting unemployment, poverty and disadvantge: "social security".

Both believe in fielding Australian troops in foreign military adventures in support of the American empire.

Both believe in handing out billions of money taken from Australians every year to prop up corrupt overseas government to engage in similarly inept meddling generating similar disadvantages overseas.

Both believe in a grand vision of governmental meddling in any and every aspect of private life, to be enforced at the world level: the "United Nations".

Both believe in the official establishment of the new religion of environmentalism, and expansion of governmental power at whim.

Both believe in a tax system so complex that even the tax office can't be trusted to make consistent decisions on the same question.

It is in their interest to paint their differences large as possible, while simultaneously making them in fact as little as possible. Only a fool would believe it.

Neither of them believes in individual liberty and responsibility, private property, very low taxation, sound money, and free markets.

Socialism just keeps changing its name, that is all.

So let's see. On the one hand, our learned blogger opines that "the Howard government hardly deregulated, and radically expanded the role of the welfare state, it follows that it cannot be said that its agenda was small government and unrestrained capitalism."

Can this be the same Leon Bertrand who wrote here in December 2007:

"The Howard government was very much a government for the dries of the Liberal party, as it continued the economic reforms of the Hawke and Keating years, in many areas going further than Labor ever would have.

His government implemented tax reform, further reduced tariffs, introduced work for the dole, sold Telstra and introduced two separate waves of industrial relations reform."

Then again Howard was supremely opportunistic so I guess he can't complain when his once-faithful followers turn against him. I bet his BFF George W Bush knows just how he feels.

LB's soul searching article is skirting the abysmal truth relating to the Global Financial crisis enveloping Aust. Never fear, with our naked Emperor at the helm, and his long awaited Economic Management Hyperbole 7700 word thesis soon to be released, we ordinary folk in the meantime, can only wait for " Magnum Opus Mk1 ( Plan B ) " to restore faith in out fearless Leader, solve the Nation's fiscal recession, and boost our faltering lachrymose confidence.

Importantly, can Kevin save us ?

Laurie Oakes, and Glen Milne, through their G2 spy syndicate, assures it will be a bottler. Ridicule aside, his erstwhile Plan A where $ 10.4 B taxpayers dollars meant to revitalise the retail industry, was instead squandered on the pokies, magic million's, and assorted gaming venues. The remaining one third went into expatriates with dual citizenship living in Greece, Lebanon, Italy etc. The other stimulus windfall of $ 4.5 B Commercial Property Fund to reinvigorate the Big Four Pillar Banks resulted in a bailout of insolvency loans eg Storm Financial, Highrise developer Raptist, MFS etc. Money loaned to high flyers on shonky collateral. Worst, battling families, pensioners investing their only asset, their homes on Bank loans to put into a tenuously fickle stock market. Then theirs the GMH deal involving $ 6.2 B to boost flagging union membership.

One can be sure, the Coalition will be crucified abd scapegoated for being the root cause of the Global crisis, even though it's conviently forgotten JWH left a war-chest $ 20 B surplus, all of which lamentably been fritted away on schemes only the Govt is privy to. The Canberra lobbyist, ACTU, camarilla party-hacks, syncophants etc doubly ensure their wish list is aptly serviced.

The infamous Sub Prime debacle has it's origins in the USA. It's skewed thinking to blame the housing crisis, defaulting home owners, and sundry local collapses on the Opposition. The architects of the Sub Prime destruction comprise:

. Economic theorist/ budding fiscal whiz-kids/ gamblers
. Mortgage companies/insurance/ brokers
. Politicians and law-makers
. Banks/loan-sharks/lobbyist
. Hedging/short-selling/derivatives/leverage markets
. SEC ( Securities Exchange Commission )

The SEC is America's watchdog which is found wanting, like our ASIC, ACCC. The NYSE, Standard & Poor gave erroneous quotes, advice, exacerbating the dilemma.

The creators of the crisis is America's Hall of Shame. A Nation consumed with unbridled GREED, that has met it's Armageddon, and left the rest of the World smouldering in it's aftermath.

The accusation JH sought to reduce the State's Powers is not only correct, Rudd is aping his predecessor.His grand Plan includes usurping all the Public State Hospitals and Medical services. His infrastructure plans include the Dams, Waterways, desalination plants, inclusive the Great Barrier Reef enclave. Universities, Education and Tertiary Ed is a prime target. Amalgamation of Councils, local Govt under Commonwealth jurisdiction. His manifesto and magnus opus would eventually lead to a giant, mammoth Bureaucracy which will nationalise the Power Industry, Transport Industry, Tourism and Trade. The ACTU will control workplace relations and Aust peak Business Council will play second fiddle.

The Rudd Utopia.

The writing is on the wall. You can bet on it.

C'est la vie !

Why do we pay K Rudd to be PM when he spends his time writing a politically motivated, logically unsound treatise on who to blame for the economic crisis.

But he'd have plenty of spare time while aboard his private jet travelling buckshee the world. The only reason he didn't go to Davros was his focus groups were telling him people were sick of seeing him make a fool of himself and Australia on his self-promoting overseas jaunts.

I wonder what take they'll have on his latest piece of professortial lecturing junk. If he fails to make that UN position he'll easily get a job at Griffith.

Why does he ignore the effect on the Australian economy of the inept and unsound apparatick run labor state regimes?

What ever happened to ending the blame game?

Why's he dropped his sycophant bleatingss about the dominant role his beloved and invinsible Chinese power house is having on the Australian economy? Doesn't he speak Manderin anymore? Or is it that he doesn't want anymore lectures on human rights from the Chinese dictator, you know, the one from that Government run, not merely interventionist, imploding economy?

Why's he ignoring the fact the Chinese economy started to implode during the Olympics, well before the impact of the US collapse in Sub-Prime loans started?

Oh why oh why are we forced to listen to the idiot and his sycophant supporters in the traditonal and now 'official' Australian media?

Don't people realise that the Australian media is so insular and led by the nose by incompetent comentators that they would report a fart by Laurie Oakes as a significant event worth reporting?

The media in this counrty is a disgrace and the fact the garbage written by a very very dumb PM is published widely in our media and accorded the status of intellectual comment is laughable and shows the depths to which it's credibility has plummeted.

Anyone who now thinks the traditional media in this country is anything other than a propaganda machine for inconsistant, dysfunctional and demonstratably failed left wing political views is a fool.

Rudd should actually read Mises and von Hayek ... they actually do show an effective way to deal with the current crisis ... most effective. But no Rudd has his views fixed and set. He is leading us up his populist garden path and hasn't a clue about the realities.

I bet he hasn't even heard about Alt-A loans. They are the reason banks are currently hoarding money. They represent 40% of US housing loans. The subprime were 15%.

The terms for Sub-prime and Alt A had three significant differences.
1. Qualifying for an Alt-A you needed no income no assets but a credit rating. No credit rating was required for a sub-prime.
2. Alt- A loans had a low start period of five years. Sub prime was three years. Sub-prime toxic loans started to show in April 2006, two years ago.
3. Alt-A loans were parcelled and on sold as prime loans. Sub-prime ... well ... were honestly sold as sub-prime.

Rudd and his funny little out of his depth treasurer infectually threw our savings of $20 billion at the sub prime fiasco. What are they going to throw at the Alt- A horror? A $60 billion annual deficit?

And nobody yet knows much at all about the US 'Junbo' loans.

Ken L,

You appear to have missed the article's distinction between pro-market reforms and deregulatory reforms:

"While the Howard government certainly did allow markets to function more freely in many cases, it is inaccurate to say that it was dedicated to deregulation."

Given this distinction, it is quite clear that there is no contradiction.

Also, you seem to analyse the article in terms of personalities, where people 'betray' Howard or Bush. Being an academic, it's surprising you you don't seem to appreciate the value of free enquiry and debate. If you did, you would welcome being presented with a rebuttal of the PM's thesis.

'... the Chinese dictator, you know, the one from that Government run, not merely interventionist, imploding economy?'

No no Keith. "China’s economy is primarily capitalist." I have it in writing from no less an authority than the author of this very post, Leon Bertrand :D. See http://kenalovell.com/blog/2008/03/03/why-giving-is-wrong/

Really? Do you think that pensioners can live on 281 Australian dollars a week. Run their cars (if they have one) pay their rates, insurance on their homes and cars, eat...electricity and heating then have a few pets ... well you lot that are sitting there pondering on your jobs, well think about us. We were once in your situation, but age etc., divorce, etc., forgot us.

We are loosing our teeth, health,(and only so much Medicare will allow?) and if we live in the regional areas are deprived from many council services that the inner city councils provide.

While a reverse mortgage is great, but we won't have anything to leave
our kids, as my parents worked for. It went up to 10.45% interest last year.

Sure the capitalist world is great, but it is controlled by greedy
business people, who have gambled their investors monies. In my opinion conning them on the strength of their investments.

And now capitalistic revenues and basic agendas have collapsed.

The thing that went wrong was when they allowed private people to own gold bullion. Before it was restricted to banks. Now anyone can own gold bullion, without restriction.

I'm not a economist but to me capitalism has imploded on itself. And I am sure the Islamic world bankers controlling petro dollars has helped them indirectly do it?

And those costly wars?

Ozandy - yes the left have some great ideas, their best was communism, that worked really well, most communist state are doing great. Why reward people for working, a lazy person just did not have a working gene, they should not be disadvantaged by not having this gene

“the “neo-liberal” experiment of the last 30 years, which allegedly pursued policies which were anti-tax, anti-regulation and anti-government,”

I suppose that would be the deregulation initiated by Hawke (which I thought at the time was counter to the usual “protectionist” posture of soclalism)?

And continued by Keating, through his orchestration of the “Recession we had to have”

Leveling the playing field (and much industrial infrastructure) for John Howard to rebuild the economy.

And for Krudd to suggest it “failed”, begs the question

If the efforts of the Howard government were such a failure

Why was the KRudd government sitting on an annual budget surplus when they came to power, yet the Howard government inherited a non-sustainable deficit from Keating?

I personally believe the share of GDP expropriated from individuals and into the pockets of government bureaucrats has an ongoing and long term detrimental effect upon the commercial interactions upon which wealth is created and taxes generated

In short “killing the golden goose”

Therefore, the pursuit of “smaller government” is a worthy and ethical pursuit which is more likely to generate a healthy economy rather than the sort of economic stagnation which initiated the 1991 recession and was at the cause of the moribund economy, which dominated performance and (what passed as ) quality of life in the early 1970’s and instigated Hawkes departure from tradition.

“Sadly, the Rudd Government appears to be repeating many of the mistakes of the Whitlam years,”
Yes the tried and trusted failures of the past…
Simply packaged and paraded out as “policy nouveau”

Margaret Thatcher described it thus

"Socialists have always spent much of their time seeking new titles for their beliefs, because the old versions so quickly become outdated and discredited."

Milo, I track the sub-prime crisis back to Jimmy Carter’s Community Reinvestment Act but agree, it is not rampant capitalism but rampant government meddling in what should have been a free acceptance of commercial risk by the investor/lender.

Jacinta comments on SEC etc.. are valid… when government "co-habits" with commerce, the regulator replaces his primary responsibility with political expediency.

Regarding Rudd’s mania to return Australia to a Labor Socialist state, over-regulated and ruinous, see Christian Kerr’s comment in today’s Australian:

“Why does Rudd want to re-regulate when last week's line (Rudd’s) said "This crisis was not of our making"? Didn't that imply our regulation was fine? “

This very day in Australian Politics ought to have demonstrated the level of and the abundance of pathological liars who will stop at nothing to sell you the virtues and abilities of the Federal Labour and Kevin Rudd – Aka a; A Messiah. – As was pert raid, but in fact, the high calibre of being a National Masochist of a scale never seen before;--

Maybe it was only a spelling error.

A new named socialist sport ;- Kevin Rudd’s very own newly created Gaza Strip economics ; Lob Idiot spherical econno Missiles at random - at anything – anywhere - at any time.

Then blame Someone or something else for it .

And what the hell does Roof Bat Insulation have to do with economic stimulating?
Unless it is a Labour party owned industry- Don’t laugh- Remember the future fund?
Have a guess who manages it now ?

The Kruddy proposition is that capitalism has failed therefore government must step in to regulate and manage.

False assumption 1: “We have had capitalism up until now.”
WRONG, we have not. We have a very overregulated, overgoverned market place. Capitalism has no need of an ACCC, FIRB, ASIC or any of the other myriad of bureaucratic regulators at each level of government.

False assumption 2: If what we have has failed then the government can – without argument or justification – do better.

WRONG! Others have eloquently quoted examples of government failure in the commercial marketplace.

My point is: If your Cruddy argument starts on a false premise (we have capitalism), develops on a false assumption (government can do better) then no rational debate is possible and the outcomes will be flawed – as they are.

Evidence: The banking system was politically interfered with by US politicians, I wrote Clinton but Col Rouge points out Carter’s also. Either way it was GOVERNMENT interference demanding loans for uncredit worthy folk without security to support them. The result is clear.

Interesting: although the world has been dramatically affected by the savaging of the banking system, worst effected have been the UK not the USA, arguably because UK has more market interference than the USA.

Bush Bunny (above) accepts that capitalism has collapsed and blames it for his meagre pension. That pension is paid for by those still working – corporations and individuals who are also providing for their own retirement not wanting to sponge on others in retirement.

Business basket case handouts: Hawke supported Kodak in Melbourne. Like candlestick makers they did not keep pace with technological change. Billions spent propping up old style vehicle manufacturers who have not invested in fuel efficient cars won’t keep them afloat, no matter how many unionists they employ. Worse: the huge disincentive to the makers of hybrid and other genuinely fuel efficient vehicles which have been developed with capitalist shareholders funds.

Net result: Productive investment and more jobs thrown on the scrap heap by a government investing our money in a wasteful and unproductive manner.

Milo just out of interest, can you nominate any country which has had a capitalist system? Or is it your view that capitalism has never been adopted anywhere?

As an old Aussie cockie who was able to retire well to play golf after Keynesian economics, wonders why the hell we ever changed to - the get big or get out - global free-maket deregulation scharade?

Reminds one of Adam Smith and the double E E's warning.

First the ee's in free-market, then came the double ee's in Need.

Bt as Smith went on, comes the danger with the double ee's in greed, especially when the speculator starts to lose.

Certainly that was why even Smith himself believed that loan banks should be owned and run by government.

Cheers, BB, WA.

Extreme capitalism is NOT the cause of this economic mess. It is extreme socialism.

1) The Fed set interest rates at 1%, creating credit expansion which gave the illusion that there are "extra savings", when in fact there wasn't. With houses going up 40% per year, this sent false price signals to consumers and investors, and hence resources were (mis) allocated to that sector. The Fed then set interest rates up higher to 6%. Debt ensued. Defaults occured, houses plummeted, consumption and investment fell. There is nothing free market about a "People's central bank", which is a part of the Marxist regime. The solution is to return to a free banking system i.e. a hard currency system or let the free market set the interest rate (which would be higher than a reserve set interest rate). Government seems to employ itself, through its own mistakes.

2) Spurious lending practices (thanks to this low interest rate environment), and government intervention by allowing poor people to take up "subprimes" they could not afford. Insolvency ensued. It is thanks to centralisation and government intervention that we are in this mess!

3) Moral hazard - most of the banks knew if they screwed up, the government would bail them out. Thus, encouraging reckless lending. The government subisided bad lending practices, blaming SOCIETY when responsibility ought to be internalised with INDIVIDUALS, not SOCIETY. Again, smells like socialism to me. If we had STRICTER laws on graft, corruption and fraud, and a stronger law of torts, rather than US or Aus government bailing out immoral individuals or dodgy banks (wait, till our housing market pops over the next year)...insolvency 101.

4) Can anyone look at our tax system, level of labour regulation and say we are under a free market? HA! NO!

As such, Kevin Rudd is sprouting properganda to keep himself and his government employed, while the employment of Australians themselves drops. So much for being an "economic conservative".

Yes indeed, and as typical as it is of Socialism, in the mastered Ponzy schemes, it is our Children and two generations of their children that will be paying for all the Socialist espionage and sabotage of Western societies.
To be honest, I don’t think we can , or ever will recover.
It is not just the loot gone ; the very principle that enabled our society to prosper has been corrupted, perverted – and near annihilated in favour of misery -- envy - and Agitprop. Much more in there ;-

I think the chronology of events is well documented, and clearly there ought to be – Yes - Ideological War Crimes trials for the purveyors and the masters – and as it has been pointed out, it is Working Families that end up paying for this outburst of incessant Idiocy and the grand Looting festivities – And you must wonder in a Religious Lawyer-ness alter ego Quran like law society, how come those responsible are given more and never held accountable for their criminality?

More of a retorical Question - most already know the answer.

Ken_L (above) asks can I point to a country with a capitalist system? No, I can not.

Ayn Rand published a series of essays titled “Capitalism, The Unknown Ideal” (Signet) – and note that one of the authors was Alan Greenspan. (www.aynrand.org). Worth (re) reading in the current environment especially.

Democracy is not an ideal system of government; just better than alternatives so far tried. The concept is flawed unless the people who consent to be governed set strict bounds to the power they are delegating to their government – we have nothing like that and even the Bill of Rights is nowhere near adequate.

Example: Rather that bailing out car makers, our federal government could mandate that in the interests of an efficient country we would all drive the same government produced car built in Australia by Australians and prohibit manufacture or sale of others. We would all be driving Standard Vanguards (India??) or the like for the next hundred years. Nothing to bound the power of government!

Until we define what governments can do they will go on interfering in matters which should not be their role to the detriment of all of us. Defence to secure the national borders; police to ensure freedom from violence (the ability to exercise free will); Courts to resolve disputes, EG Fraud or dishonest dealings. Registrar to maintain title records (Land, Corporate Name etc), NO Central Bank, no ACCC, no hospital and medical services – no wonder we have such lousy medical services as in NSW when doctors have to work for only one employer who does not pay them! Slavery is back. The examples of government making things worse is inexhaustible so consider the Kruddy motive for moving in that direction.

AustralianWhig89 has stressed how government actions have brought us to where we are – not a failure of capitalism.

All- is spot on “It is not just the loot gone ; the very principle that enabled our society to prosper has been corrupted, perverted – and near annihilated in favour of misery -- envy - and Agitprop”

Comments of all governments are telling us we will soon be back on the road to “Growth’ and then everything will be OK.
None of them realize that it is growth alone that has brought the crisis.
It is impossible to continue to have constant growth forever in a finite world.
What will happen, like it or not, is a slowing down of growth and then a reversal down to a sustainable level.
It will not be nice, there will be a lot of pain and many will fall by the way side but it is inevitable.
All of the bailout schemes are band-aids to provide hope to the population for a short while.
None will call for “depopulation” because it would mean not winning the next election and holding on to power.
In fact governments including Rudd labour are actively encouraging increased population by increasing the baby bonus, subsidies for child minding, taxbreaks for parents Etc. They have also increased immigration using lack of skilled labour to bring in more people.
This is going to exacerbate the problems we face now with the economy falling off a cliff.
The cures for the crisis to spend billions on supposedly urgent infrastructures that are when analyzed are not doing anything to help.
Additional buildings and repairs for schools, a vote catcher for mums.
Big spending on roads, well all Australians live (and die quite often) in their cars so another vote catcher. But no money should be spent on roads at all. It should instead be spent on providing new railways and upgrading the present railway system.
Money to be spent of insulating roofs. It would cost nothing to legislate for all new buildings to have a white or light coloured roof. This would do two things, reduce heat in the buildings and reflect a large amount of heat back into space. Making up partially for the loss of albedo effect that is occurring with ice melt at the poles.

Lets take a honest look at the economic history of capitalism. the golden age 1945-70s was underpinned by the financial system under the control of elected democratic institutions. Exchange rates were fixed. International trade flourished because the system of monetary regulation provided certainty. Companies did not have to devote huge amounts of money to hedge against potential currency movements. Deregulation of exchange rates has a cost. It creates uncertainty.

In addition fiscal policy and monetary policy development was able to be coordinated.

What changed in the 70s. There were two significant events. Firstly the world's reserve currency felt the effects of inflation induced by the Vietnam War. Additionally OPEC triggered additional inflationary pressure by ramping up oil prices.

What was the response deregulate finacial markets exchange rates etc.
What has this led to? Billions of dollars siphoned off to hedge funds to guard against exchange movements. These hedge funds triggered the property bubble in Japan, currency crisis in South East Asia, dot/com bubble and finally the property market/derivative asset.

What we need is a new Bretton Woods agreement to provide certainty in international trade risks. We need to return the control of monetary policy back to democratic institutions not the technocrats.

But Slasher, Capitalism did NOT exist in 1945-70s as you state.

You are correct, exchange rates were fixed and in many countries citizens were not allowed to own gold. That is not capitalism.

Governments had very strict import and export controls for restraint of trade reasons; you could not import a large aircraft into this country without government permission to protect the Ansett/TAA duopoly. Rail had government protection from the trucking industry. Capitalism?

Farm produce had (and has still in many cases) to be sold through monopoly marketing boards. That is not capitalism. Neither are the huge EU and US agricultural subsidies – then and now – any part of capitalism.

Labour is permitted to organise and bargain in a monopoly manner but business is not permitted to do so. Capitalism? Nope.

Government controls traditional media ownership to restrict normal business transactions and in the case of TV to preclude entry of new players – not capitalism.

Private health facilities exist in Australia (and US, UK) but do not flourish because of government run hospitals BUT as recent events particularly in NSW show, the government system is not coping. Doctors, food and drug suppliers not paid for six weeks? No morphine in a major base hospital? No anaesthetist available outside business hours at a major hospital hundreds of miles from an alternative? Illegal to insure for medical disaster (IE a bill over $5000 say) to compel people to be “community rated”. Not capitalism and all contributing to particularly Kruddy health services. Health administrations have lots of money – but not to provide services; look at the offices in your state.

Capitalism would ensure a viable electricity grid; more frequent failures are certain in future as governments limit investment returns and in NSW, maintain government ownership of generation – good luck when both fail and people die!

No, CAPITALISM has not failed; it has not been tried yet. GOVERNMENT has failed. The remedy is not more government. Businesses have to be efficient to survive; government acts without competition, no incentive to be efficient, plenty of scope for corruption. QED.

We are cerrtainly living under socialism at the momment. Government keeps itself employed: it meddles with the economy, and hence, when the economy does turn sour, it uses this as a pretext to intervene in the economy yet *again*. Personally, I think that we should return to 1. "free banking" (i.e. abolish central banking altogether, and have banks print their own currencies) and 2. abolish all taxes (or certainly most taxes) and have a flat, simple reasonable tax on the non-value added price of land (i.e. don't tax wages and profits, tax rents). The former means interest rates are not set too low, the latter means price of land becomes sustainable quenching speculation. The latter also means government, small government, when it builds infrastructure, can recycle the windfalls back into the Treasury to build more infrastructure. Alas, both are pipe dreams and hence the boom bust cycle shall continue forever more until people are educated enough to tackle land speculation (like in Hong Kong) and abolish central banking.

ps free banking may involve a gold standard (my point is a gold standard would be better than the *status quo*)

pps the most stable currency ever was a currency back in land values, known as the pennsylvania pound. This produced inflation of only 3 over the course of a decade, the most price stability ever seen.