Credit crunch bail-outs are threat to democracy
Efforts to stave off recession only make a 1930s-style cataclysm more likely, says David Cox
So, what was really to blame? Greedy bankers, lax regulators and the oddities of the American housing market are mere proximate causes of our current discontents. The business cycle is capitalism's way of correcting its innate rapacity. This time, it was artificially held back, creating the unmanageable dam-burst that now confronts us.
The 'hugely successful economic stewardship' of the last ten years actually amounted to the fostering of a giant debt bubble that enabled both individuals and governments to gorge themselves on money that did not exist. To create this bubble, regulation was relaxed and interest rates were kept down. Now, bad debt that should be purged is being nationalised, so that immediate pain can be avoided at the expense of worse pain in future.
Why? Democratic politicians must make popular promises. If they do not, their
opponents will. Five-year time-horizons mean that the long-term can be ignored. Democracy and capitalism are therefore not such natural bedfellows as they are cracked up to be. Nor are they any longer everywhere twinned.
China and Russia opted to participate in the recent wave of madness. They will, however, be free to steer their way out of the current fiasco more intelligently than Western regimes required to trade in illusion. If this happens, the moral may not be lost on the battered and disillusioned citizens of the democratic world, whose belief in the ineffable superiority of their own system will necessarily evaporate.
Some see our current plight as a crisis of capitalism. It may become instead a crisis of democracy. Already, we have cheerfully sacrificed free speech, habeas corpus and personal privacy to lesser threats than economic cataclysm.
In the 1930s, after the last great financial disaster, many of our fellow Europeans chose to place their material wellbeing above their political rights. We should not assume that this could not happen again, or that it could not happen here. 
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