OPINION:Many of our long-held sacred cows are shown to be outmoded - just before they get swept away in the maelstrom, writes Tony Kinsella
WE ARE living through the political and economic equivalent of what meteorologists call a perfect storm. A powerful force created by a rare, or even fluke, combination of different elements which feed off, and drive, each other. We are still incapable of completely identifying either the proportions or the interactions of all those elements, which makes forecasting an imprecise science.
One of the few things we can clearly grasp, as each day brings its lot of dramatic headlines and policy reversals, is that many of our long-held sacred cows are shown to be outmoded - just before they get swept away in the maelstrom.
When the US celebrated its 232nd national holiday last July nobody could have predicted that the Bush administration would propose massive public intervention in the markets with the president warning that otherwise "this sucker (ie the US economy) will go down".
This rare reality-driven volte-face from the Bush White House proved to be too much, too quickly, for a Republican party suckled on the concept that government is always the problem, never the solution. Representative Jeb Hensarling of Texas explained his vote against the Tarp package by saying it would put the US on "the slippery slope to socialism."
The US economy is certainly on a slippery slope and while it remains to be seen if the amended Tarp package will deliver the promised traction, socialism is certainly not its destination.
Indeed the irrelevance of many older ideological reference points, and the absence of any new ones, leaves us floundering, leading some to clutch at straws, fundamentalist, xenophobic or just plain bizarre.
Some 29 per cent of Austrian voters endorsed two far-right parties in their country's recent elections. Although there are worrying xenophobic overtones to some of those votes, most can be laid at the door of dissatisfaction with the staid Social Democrat-Christian Democrat grand coalition which has ruled in Vienna for most of the last 60 years.
Bavarian voters gave their similarly immutable Christian Democrat CSU a severe drubbing, opting to vote instead for a difficult-to-decipher independent list.
It was noticeable that Governor Sarah Palin, despite her evangelical engagement with the Assembly of God and Bible churches in Wasilla, made not a single reference to creationism in her debate with Senator Joe Biden. Whether or not you believe that the Jewish deity made the world in seven days 6,000 years ago is of little relevance to an electorate watching its economy tank.
There is not a single major political force in the world that now argues for state ownership of what the British Labour Party used to quaintly describe as "the commanding heights of the economy". Nor will you find any electable right-wing parties proposing utterly laissez-faire models.
Yet there are those, from Joe Higgins to Jeb Hensarling, who continue to iterate yesterday's questions, and answers. Nostalgia is fine, but becomes dangerous when used as a substitute for confronting reality.
We have found, through trial and error, that democratic mixed economies are, to paraphrase Winston Churchill, the worst form of economies except all those other forms that have been tried from time to time.
The central question of economic policy today is how we deliver reasonable public provision and appropriate regulation while encouraging innovation. It is a rarely posed, and even less frequently debated, question.
The answer has to lie in logical deductions from what has been shown to work, and what has demonstrably failed. Britain's railways are just beginning to recover from decades of under-funding and a nonsensical privatisation through levels of public investment several times greater than what was available to the old British Rail.
Britain's railways needed levels of investment which the private sector, even in sunnier times, could not mobilise. Fantasies may be endearing, but facts offer a much sounder basis for decisionmaking.
The bald statement by the president of the European Central Bank, Jean-Claude Trichet, that Europe lacks the political and budgetary structures for a single response to the growing economic crisis offers eloquent, and disturbing, evidence of just how wrong were those who argued so vigorously against the Lisbon Treaty on the basis that it would copperfasten some form of European superstate. Just when we urgently need operational and responsive European systems to address a menacing crisis, we discover that we chose to tie one hand behind our backs.
The relative inaction of Fianna Fáil and Fine Gael during the recent referendum campaign stands out in stark contrast with their instant response to saving the Irish banking system.
The deregulation of banks, financial institutions and markets over the past decades has been a major contributory factor to the mess we now face. The non-regulation of new financial products added to the mayhem.
Although personal greed certainly didn't help, it was never more than a bit player. As Steven Pearlstein, business columnist of the Washington Post put it. "The big problem with Wall Street isn't that it's greedy - it's that it keeps making the same mistakes over and over . . . To some, that may be a story of greed. To me, it looks more like old-fashioned incompetence."
When we emerge from the current chaos, we will find ourselves with fewer banks and hopefully with many, many, fewer virtual financial instruments. The surviving institutions must be better regulated and dedicated to offering an efficient method of connecting those with money to those who wish to borrow it.
Once the markets have settled we will undoubtedly start to once again hear siren songs about how bureaucratic regulations are strangling innovation. We must remember to heed the warnings of old seafarers, and close our ears to such dangerous tunes.
Otherwise we will all wind up paying for the same mistakes again. And again.