The market and the state: Capitalism caught between libertarianism and populism

One of the recurring themes in these blog entries is reflecting on the age old discussion about defining the respective roles of the state and the market in ensuring the efficient and equitable functioning of a modern economy. Today's entry will be yet another footnote to that ongoing conversation. I heard an interesting new way of framing this debate today from Eliot Spitzer, the disgraced former Governor of New York, who became famous in his earlier incarnation as Attorney General in pursuing crooked dealings on Wall Street, including a prosecution of AIG, which makes anything he has to say on the subject timely. Plus, he's a smart and thoughtful guy. Perhaps his prescience in predicting the sort of trouble that Wall Street (and for that matter, the nation, and the world) is going through now, and the fact that he actually tried to do something about it, will help revive his political career, laid low after the prostitution scandal that brought him down as Governor last year. We'll see.

But back to the point at hand. Spitzer was on Fareed Zakaria's excellent new CNN program, GPS, earlier today, commenting on the current controvery over AIG's executive bonuses, amongst other things, and legal avenues that the US government might pursue in recovering those monies for the American taxpayer. The whole interview is well worth watching, and, if you're reading this today, Sunday, March 22, you can catch it again at 5 pm Eastern time this afternoon. In due course, it will no doubt be archived on the show's website. Here is the link:

http://www.cnn.com/CNN/Programs/fareed.zakaria.gps/

Interesting and topical stuff, but much the most interesting part of his discussion was on the very subject of the market and the state, on which I've been opining recently. Spitzer framed the debate in an interesting way, by saying (and here I paraphrase) that we had during the last twenty years was libertarianism masquerading as capitalism, and, if we're not careful, what we're likely to get in the next twenty is rank populism instead, that, if not nipped in the bud, will threaten the system of capitalism itself. This is a more provocative and pungent way of saying what I'd put more prosaically, that we might be about to witness another pendulum swing, from the balance tipping from the market back to the state. Or, to be more precise, this would involve a putative move from an insufficiently regulated market to an over-regulated one. On this fundamental point, I believe that Spitzer's framing of it is accurate, and, alas, his predictions may once again prove to be prescient.