‘SVB shows that there are few libertarians in a financial foxhole,’ says the headline in the Financial Times. A comment piece in the newspaper says that, ‘like banking titans in 2008, tech tycoons favour the privatisation of profits and the socialisation of losses’.
Where are the champions of free market capitalism when another banking crisis threatens to devour billions? Interventions by governments to save banks were meant to be the antithesis of the late 20th Century capitalism of the late Milton Friedman and the neo-liberals.
Friedman was the patron saint of free market economics, the return to 19th Century laissez faire liberalism that was espoused by Margaret Thatcher on this side of the Atlantic and by Ronald Reagan on the other. Friedman provided the philosophy that undergirded the globalisation of economics since the 1970s.
I hated him in my student days. His 1962 book Capitalism and Freedom was one of the set texts during my first year at the London School of Economics. He had won the Nobel Prize for Economics three years previously and, as far as my economics tutor was concerned, to question his judgement was tantamount to heresy.
I re-read Capitalism and Freedom a few years ago. It was very different from the book I remembered. It was far more radical than anything that had actually occurred. I wonder then what Friedman had made of the walls of economic protection that the United States and the European Union had built around themselves.
Had I had the time I would have gone looking for his reaction to the Common Market ‘food mountains’ that were allowed to accumulate in the 1980s and the more recent tariff barriers erected to prevent imports from the developing world effectively competing in European markets.
Friedman really was a radical and I regretted that my teenage prejudice had blurred an appreciation of what he was saying.
There was a genuine desire for individual freedom in his book and his vision of capitalism was not one of transnational corporations using every opportunity to exploit situations to extract maximum profit, but one where the full and free operation of the market allowed the maximum of individual freedom and the maximum of competition between companies.
Friedman’s economics astonishingly seemed the best guard against the human selfishness that is otherwise manifested in institutions that pass laws to keep out the produce of the poor; that discriminate between people on the basis of the passport they carry; and that allow nations to be used for the furtherance of politician’s religious or ideological beliefs.
Friedman would not have contemplated the rescuing of reckless bankers by billions of money taken from working people; he would have said the market should determine their fate.
Capitalist market forces seem only to be applied only to working people; when it comes to the rich, there is an extraordinarily generous state socialism. We shall never know what Friedman would have made of such an arrangement.