A Leap In The Dark. Be Very Afraid

Mr HG tells me that he no longer understands what is going on. This is not to say that he doesn't have the historical, analytical, intellectual, technical, professional, experiential tools to analyse events. After all, he has hung on to almost all of our wealth and safeguarded it for the children. And done quite a bit of that sort of thing for others and their children in the turbulence of the last 20 years.

'There is no precedent for what is happening. Well, except in the 1930s when Mussolini responded by nationalising ailing banks and enterprises, putting them under the control of the Institute for Industrial Reconstruction (IRI). This was a successful operation but it provided the playground for post War corruption, the spoils system, clientilismo, the illegal funding of politcal parties, and it had to be dismantled under the requirements of economic efficiency and the demands of democratic politics. Prodi took it apart.

Just as there should be no taxation without representation so there must not be subsidies without government management of those subsidies. But this is extremely dangerous. Our institutions are not built to contain such transfers of power. Moreover it is not clear whether the massive intervention of central banks and governments will be sufficient to stem the crisis. The commitment is open-ended, both in practice and formally, and could well end in hyper-inflation.

The range of alternative outcomes goes from the maintenance of everyday normality to Armageddon. Armageddon being chain bankruptcies, mass unemployment, deep and prolonged depression, and hyper inflation. That set equals war - civil war and interstate war.

When current events are without precedent then this range of possibilities is without means of assessment.'

With Lenin, Mr HG would say "There is no such a thing as no exit". Unlike Lenin, he is eternally optimistic about the adaptability of capitalism.

Which kind of capitalism contains our best hopes for the maintenance of everyday normality (the hopes of all normal people, not the confrontationist, wilful disrupters of reality who slouch in every society). Are Russia and the former socialist bloc better placed with their skills and experience of the planned economy, to avoid Armageddon?

'No. Planned economies didn't work because politicians are not willing to surrender their power to the market. We know that. Planned economies failed.

We appear to be moving towards some kind of state market economy - the worst of all possible worlds with all the inefficiencies and rigidities of state planning and fewer of the benefits of the capitalist market economy.'

Could you run an economy like that?

'Oh yes, certainly. But you might not like it. Though once I had the powers needed to run such economy, I might not mind what you liked.'

Might not mind what I like! Fortunately lunch is served.