Wednesday, 24 December 2008

Markets aren't all bad

We need to follow the facts rather than the zeitgiest.

The Cambridge professor William Ralph Inge once quibed that ‘whoever marries the spirit of the age today will be widowed tomorrow.’ The Credit Crunch is producing a lot of future widows. It is suddenly fashionable to trash the market and laud the state. Those who now engage in this practise will look deeply unfashionable as soon as state intervention produces the next crisis and fashion changes accordingly.

Such thinking is the product of a false choice. To talk of just ‘market fundamentalism’ or ‘statism’ is glib and simplistic. If we try to understand the Credit Crunch in terms of this dichotomy, then we will not understand it. The credit crunch does not show that markets in general fail but that certain markets fail. Nor does it show that state intervention works because the crisis has been caused in part by bad interventions. We need to look at the particular mix of markets and interventions that produced the crisis and replace them with a mix that works better.

This post was inspired largely by this month’s edition of Liberator, which is full of statements like ‘the notion...that the efficient operation of markets can largely be taken for granted has been brutally assualted’ and ‘economic liberals have been left looking pretty silly by this autumn’s meltdown.’ In fact the truth is more prosaic. The present crisis is macroeconomic in nature and financial in origin. It does not tell us much about, for example, the merits of using Quasi-markets to deliver public services. And why should it; running schools is very different from trading in derivatives or deciding whether to approve a loan for a poor man in Detroit.

The fact that the Credit Crunch has financial roots is important because financial markets are unusual. So the lessons derived from them will not easily translate to other markets. Banks are both uniquely powerful and uniquely vulnerable because trading happens at an extraordinary speed and involves massive sums of money, so the potential for sudden and destructive crises is that much greater. Compare the bankruptcy of Woolworths and Northern Rock. The former decayed over years, the latter imploded in days. And because money underpins every other part of the economy a financial collapse creates economic carnage. Taken together, this makes the financial markets unusually dangerous and unusually important and as a result they will need an unusually large amount of regulation.

Gloating statists should also bear in the mind the role of government in producing this crisis. The cheap money that banks so eagerly lent to people unable to pay it back was available because of state interventions. When the American economy last stumbled back in 2001, policy makers responded with exceptionally low interest rates. The Chinese government encouraged Americans to borrow vast some of money from Chinese savers by pushing down the value of their currency. These interventions are at least as important as the deregulation of financial markets in creating the crunch.

The present crisis has been a boon for simple minds on the left, much as the fall of the Berlin wall was for their counterparts on the right. We need more thoughtful analysis than ‘more state, less market’ if we are going to understand what is happening to our economy and how we can stop it.

Tuesday, 23 December 2008

Not in God's name

Christians should be as worried as the gay community are by Pope Benedict’s comments on homosexuality

Anyone hearing a Christian leader suggesting there is a moral equivalence between homosexuality and the destruction of the natural environment could reasonably assume that either Christianity condemned homosexuality unambiguously or that the harm caused by tolerating same sex relationships is both massive and evident. Neither of these is true.

If one was to try to discern God’s view of homosexuality solely from specific references to it in the bible, then one would come away with no clear answer. In Leviticus there is the famous edict ‘that man shall not lie with another man.’ There are also (as every West Wing fan can tell you) rules covering topics such as eating shell fish, the correct price of slaves and only wearing clothes made from type of thread. These are now seen by most Christians – including presumably Benedict – as anachronistic pieces of Hebrew law that are no longer binding on Christians today. There is no obvious reason to jettison those rules yet retain the ban on same sex relationships. Other (generally negative) references to homosexuality may simply be injunctions against rape and male prostitution. There is no unambiguous biblical reference we can point to that says what is right, one way or another.

What we can say, however, is that homophobia contradicts many key Christian principles. The hate and violence directed against the gay community, ought to motivate anyone who believes in ‘loving their neighbour’ to trying to strip away any religious justification for such bigotry. The condemnation of all same sex relationships by people, who may themselves be in imperfect relationships, is hard to square with the injunction ‘judge not, lest you be judged.’ Most importantly of all, if Christians condemn people for being gay then we make it harder for anyone who is gay to become a Christian.

If we look away from scripture and look at the impact that homosexuality is having on the world around us the case against being gay looks even weaker. The millions of loving, faithful same sex relationships should be celebrated by Christians not condemned. Allowing these couples to marry, surely strengthens the institution rather than undermining it.

Christians ought to condemning homophobia and not homosexuality. To do anything else undermines too many Christian values. That really is more worrying the destruction of the rainforest.