Saving capitalism

Financial Times

Gordon Brown came to save capitalism, not to bury it. Paying £37bn to part-nationalise some of the commanding heights of the economy may not be many people’s idea of what free marketeering governments do, but the prime minister has taken bold steps to save the financial system and – with it – the real economy. The model he has set out for rescuing banks is a good one, and is now being imitated across Europe and in the US. …

So, does this rescue mean the end of private financial capitalism? Of course not. Although the size of the crisis requires an exceptional response, this is but the latest in a long line of banking crises and state rescues. Nationally owned banks seem likely to be a reality in many countries for up to 10 years. In the next great financial crisis — rest assured, there will be others — bank rescues with equity purchases may be a first step rather than a last resort. But these stakes will, eventually, be sold back to private investors. Governments — rightly — will regulate to avoid further crises. They will fail, and then be forced to act to pick up the pieces. There is no alternative.