TW: As I have posited earlier, the current financial crisis has implications far beyond the near term. From my perspective, this crisis is another chapter, albeit a key one, in the emerging competition between Western, liberal democracy and capitalism and alternatives. I actually believe this competition while fraught with massive risks can ultimately result in significant improvements to the Western model of governance and economics that has become in certain respects ossified. I expect this topic to be the dominant theme for at least the next decade. We can either retreat into our shells and pout (e.g. like the Palineolithic/Pat Buchanan wing of the Republican Party) or embrace the challenges and seek to strengthen the best model of goverance ever devised. Barack Obama embraces these changes, John McCain does not know what to think at this point.
From Zakaria/Newsweek
"America's financial crisis has allowed all sorts of people...to declare that we're seeing the end of laissez-faire capitalism and free markets. We're not...It doesn't mean the end of capitalism. But it might well mean the end of a certain kind of global dominance for the United States.
...The real fallout of the financial crisis will be the delegitimization of American power. People around the world once saw the United States as the most modern, sophisticated and productive economy in the world. Now they wonder, was this all a house of cards? They listened to American policymakers with respect, even awe. Today, they wonder if these officials know what they are doing. This loss of credibility will have hard consequences. The scholar and analyst Zachary Karabell said..., "We will look back on this as the moment that the global capital base moved outside America." For decades, the United States has attracted massive amounts of capital—80 percent of the surplus savings of the world—which has allowed it to live beyond its means. That era is drawing to a close. America will have to fight to attract capital and investment like every other nation.
In a world of competitive capitalism, you need not big government or no government but smart government. We are not in a race to the bottom, on wages, regulations, or anything else. But we are competing against other countries to come up with the government policies that most effectively foster growth, innovation, and productivity. It's a time to figure out what works, not what ideological mantras to keep repeating. It's the age of Michael Bloomberg, not Margaret Thatcher.
In America today we're getting government wrong in a big way. We have a patchwork of bad regulations, subsidies, and ad hoc interventions. Policies are designed to pay off powerful constituents rather than generate long-term growth. We have the most expensive and inefficient health-care system in the industrialized world, the most wasteful energy usage, the lowest savings rate, the worst maintained infrastructure, a complex and corrupt tax code. We've gotten by despite all these problems because the overall system has been dynamic and the world looked to America as the place to put its savings and its faith. But the free ride is coming to an end. It's time to get serious.
http://www.newsweek.com/id/162272
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