Which Way Goes Capitalism? In Search of Adequate Policies in a Dramatically Changing World

Which Way Goes Capitalism? In Search of Adequate Policies in a Dramatically Changing World

Which Way Goes Capitalism? In Search of Adequate Policies in a Dramatically Changing World

Which Way Goes Capitalism? In Search of Adequate Policies in a Dramatically Changing World

Excerpt

I write these words at a time of a deepening financial crisis which is ricocheting worldwide and causing tremendous anguish and tremors, a spreading economic downturn. It is also not a long while after the European Parliament passed a report which I worked out together with a Dutch colleague, leke van de Burg, in which we argue in favour of an overhaul of the regulatory and supervision frameworks of financial markets in the EU. I should underline that the paradigmatic underpinnings of our report were not dawned upon us by a growing financial mess engulfing western economies; for a longer period of time both of us, though belonging to two different political groups in the European Parliament, had harboured similar views on what has been wrong with the dynamics of world finance.

Economic freedom and entrepreneurship, which lie at the root of innovation and economic advance, rely on and feed on free markets; this explains why communist economies collapsed, eventually, during the last century. But it is misleading to argue that free markets are synonymous with non-regulated markets, with the practical extinction of public sectors and public policies. Modern economies and societies do need regulations and public policies so that public goods be in adequate supply and negative externalities be prevented or constrained; this implies the functioning of public sectors against the backdrop of a free allocation of resources (at market prices) and vibrant economic

leke van den Burg and Daniel Dăianu, “Report with recommendations to
the Commission on Lamfalussy follow up: future structure of supervision,”
Rule 39 of the Rules of Procedures, European Parliament, 2008 (see Ap
pendix 1). I am glad that the main recommendations of the de Larosière
Group Report are in consonance with the spirit and the letter of our report.
The same can be said of the recommendations made by the Turner Report
in the UK.

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