A column about the global financial crisis

You know, John Howard warned us that if we elected Kevin Rudd, the economy would go to hell in a handbasket. (I’m not sure why that seems to be the preferred transportation method for those sentenced to eternal damnation, but apparently handbaskets are the appropriate way to get there.) But he could might clarified that he meant the entire world economy. If we’d only known tossing Howard out of Kirribilli House would cause the whole of Wall St to collapse more rapidly than Sarah Palin’s popularity, surely we’d have thought again.

The other day, for instance, Iceland was on the verge of going bankrupt. Let’s stop to think about that for a moment. An entire country – and not a basket case African nation like Zimbabwe, a mature Scandinavian liberal democracy – faced being simply unable to meet its debts. Which seems about as implausible a scenario as the yowling in Björk’s latest single shattering the entire polar ice cap, and causing sea levels globally to rise by a metre. (Although anyone who’s heard Volta will realise that this was, in fact, a distinct possibility.) It was only averted after the Swedish Government lent them billions of dollars, and the Icelandic Government nationalised all three of the major banks.

Now, I’ve no idea how Kevin Rudd was responsible for the collapse of Iceland’s economy, but I know that somehow, when all the facts are known, his perfidious involvement will become clear. If only Peter Costello’s steady hands were still on the tiller of our economy, instead of busily stabbing the backs of everyone else in the Liberal Party. Or, if only Malcolm Turnbull were in charge, instead of merely taking credit for things like the recent drop in interest rates without actually having had anything whatsoever to do with it. Don’t forget that Turnbull used to run Goldman Sachs, the local division of one of the big Wall St banks. So he presumably understands how to cause an economic crisis, if not stop one.

Though most dramatically illustrated in Iceland, banks everywhere are getting taken over by national governments to stop them from falling over. Even in America, with its abiding love of small government, the Fed is preparing to buy strategic stakes in the major banks. And most astonishingly of all, everyone, even the Republican Presidential candidate for goodness’ sake, is complaining about the greed of Wall Street, and threatening tighter regulation.

While it’s too early to assess the long-term impact of this crisis, one thing is clear. For decades, we’ve been told that the market always gets it right, and that the job of governments is to get out of their way. That the road to utopia involves to allow millions of people to act in their own self-interest, and somehow, magically, everything will come up roses. Well, guess what? It turns out that most central tenet of capitalism, the invisible hand, doesn’t work. So, like a spoiled child who’s devoured too many chocolate biscuits, the bankers of Wall St came crying to the White House, asking Uncle Sam to somehow make everything better.

It seems that in 2008, public ownership is the new black – or perhaps more accurately, the new red. (And if – God forbid – Mac Bank goes under, can we have our darn airport back, please?) While though I know it’s unfashionable to even mention him, Marx did predict that untrammeled capitalism would lead to exactly this kind of chaos. Oh how he’d laugh, if he’d ever exhibited any evidence whatsoever of a sense of humour.

But the truly strange thing, at least for Australians, is that despite the disaster that we seem to have been plunged into, nothing much has changed. Sure, the dollar’s fallen badly, and that’s rough for many people – but it was really high, so all this means is that things are now essentially back to normal. Against that, interest rates have been slashed, which is a pretty darn sterling silver lining if ever I saw one. There even was an article in the paper today predicting zero interest rates in the next little while. In the event of which, I can tell you right now, I’m going to be running me up one sweet credit card debt.

And sure, Kevin Rudd seems to be doing a great job of buttressing us against the worst of it, guaranteeing all of our savings and releasing money into the economy so that things don’t slow down too much. He’s even chucking in a grand to buy nearly every Aussie kid a Christmas present. But never should we forget that if we hadn’t elected him last November, none of this whole economic crisis thing would have happened.