Financial Crisis Was Not A Pure Market Failure

An interesting Financial Times Comment on the financial crisis with an eastern European perspective.

"The argument that we have witnessed a pure market failure fails the most elementary tests. Financial institutions and markets operate within the macroeconomic, regulatory and political framework created and maintained by public bodies, and it is empirically not difficult to point to the serious deficiencies of this framework that contributed to the present crisis…. Mises, Hayek, Schumpeter, Nozick and other thinkers have noted that under democratic capitalism there are always influential intellectuals who condemn capitalism and call for the state to restrain the markets. Such an activity bears no risk and may be very rewarding. (This contrasts strongly with the consequences of criticising socialism while living under socialism.)

Dynamic, entrepreneurial capitalism has nowadays no serious external enemies; it can only be weakened from within. This should be regarded as a call to action – for those who believe that individuals’ prosperity and dignity are best ensured under limited government,"

writes Leszek Balcerowicz in the Financial Times. He is a former Polish deputy prime minister and governor of the National Bank of Poland, and a professor at the Warsaw School of Economics.