Unintended Consequences

Just as it took President Richard Nixon to go to China and President Bill Clinton to reform welfare, so it has taken George W. Bush, the most rigidly free-market president in memory, to turn the United States into a socialist country–at least temporarily.

I don’t know how else you define an economic system where the federal government has effectively nationalized some of the largest banks and other financial institutions–at least temporarily.

This is quite in keeping with this administration’s deep-mining of unintended consequences, however. Nixon, at least, planned to go to China and made good on it. Clinton, confounding all the naysayers, took the welfare reform bull by the horns.

However, let’s hope that the meltdown of the U.S. economic system was not something Bush actually planned for. I think he simply allowed too much laissez in the laissez-faire attitude of the last 8 years and this is the consequence.

The week of Oct. 6 was nothing less than terrifying and that came on top of a string of events that even a couple of months ago would have been unthinkable. So many brand names, so many icons, now nothing but detritus or no longer their own masters.

One day the historians will look back on this time and identify what went wrong over a period of years and what were the pressure points that accelerated a burst mortgage bubble into a global economic cataclysm.

Right now the instant historians are at work and many of them have identified the decision by the government to let Lehman Brothers fail as the event that seemed to propel the system headlong into the current chaos. Whereas others had been judged too big to fail, Lehman was judged too small and not significant enough to save.

There seems to have been a fundamental misapprehension of what the failure of such an institution, one whose business was so intertwined with others around the globe, would set off.