The media is still talking about the global financial crisis – as well they should. Of course, the politicians are talking about it too and Kevin Rudd has now hatched a global plan to regulate the salaries of banking executives.
Whilst this may be popular in some circles, as any kooky idea will be popular in some fringe group, Rudd’s plan shows how he is driven by populism rather than serious policy.
On one hand, Rudd is saying our banks are the shining light of the financial world. They are safe and well-managed. On the other hand he maintains that there is a need to stop the executives of these institutions from getting too much money.
Rudd is at the vanguard of the new brand of socialism that is starting to creep into our political system. It will be pitched as a ‘new way’ – a fresh path between business and government. It will be packaged into attractive sound bytes that will appeal to those struggling to understand just what has gone wrong with the world economy. But socialism, no matter what cloak it shrouds its collectivist intentions with, is a failed philosophy.
At the risk of boring you silly, I have to repeat a crystal clear truth. The problems we are now experiencing are due to failed government policies interfering with the operation of the free market.
This includes the US mortgage market where borrowers have non-recourse mortgages, often available for more than the purchase price of the property. This removed any requirement for prudence or responsibility on the part of the borrower.
Further, Clinton Government policies that allowed NINJAs (No Income, No Job or Assets) to have access to home loans has proved disastrous.
The final nail in the economic coffin was the quasi-government firms (Fannie Mae and Freddie Mac) effectively guaranteeing to purchase any package of securitised loans from the Wall Street banks.
These three things (and others) made the US mortgage market one that was corrupted by government policy.
Rather than recognise the contribution of government to distorting the equilibrium of supply and demand, Kevin Rudd and Co have retreated to their roots and launched a war on capitalism thinly disguised as a war on greed.
Cory Bernardi is the author of seven books and has been a member of the Australian rowing team, a publican, an investment portfolio manager and spent nearly 14 years as an Australian Senator.
