This business elite did not only bring the current crisis upon us, says Johnson, but it is also preventing the government from taking the necessary measures to get us out of it by fixing what's wrong. The solution he proposes is to temporarily nationalize all the ailing banks and financial institutions, chop them apart, heal them, and privatize them.
While Johnson's description of the excessive influence of America's financial industry is correct, he is mistaking the symptoms for the causes of America's current illness. The financial sector became as big as it is due to excess liquidity. Large amounts of artificially cheap money made the financial industry grow, and not the other way around. The reason for all this cheap money in America is China's habit of spending the proceeds from selling goods priced using an artificially low currency (RMB) to purchase US Treasury Bonds in order to ensure (artificially) low interest rates in the US. This arrangement, of course, was convenient for both China and the US, and each of them is equally responsible for it.
Ironically, most US economists seem to suffer from the same type of economic
imperialism they are out to criticise. They refuse to accept the fact
that anyone other than the US could be responsible for such a big
crisis. Such economists talk about a global imbalance of unprecedented
scale, but refuse to accept that it might have something to do with the
fact that the world's third largest economy does not play by the basic
rules of international trade (which include a free currency, IPR
protection, and more).
Indeed, as Johnson points out, America must take an honest look at itself in order to come out stronger from the current crisis. This look should be pointed outwards as well as inwards. America owes this to itself, as well as to the rest of the world, and especially to China.
While China seems to be benefiting from the current crisis in the short term, America's current actions and lack of faith in its own values encourage China to push forward with a development model that is not viable. This model, based on foreign and government investment in cheap manufacturing and fixed assets - instead of in human capital and healthcare - will only lead to further financial (and possibly political) woes down the line. But we'll leave this discussion for another time.
Indeed, as Johnson points out, America must take an honest look at itself in order to come out stronger from the current crisis. This look should be pointed outwards as well as inwards. America owes this to itself, as well as to the rest of the world, and especially to China.
While China seems to be benefiting from the current crisis in the short term, America's current actions and lack of faith in its own values encourage China to push forward with a development model that is not viable. This model, based on foreign and government investment in cheap manufacturing and fixed assets - instead of in human capital and healthcare - will only lead to further financial (and possibly political) woes down the line. But we'll leave this discussion for another time.
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