December 25, 2018

The crisis of modern liberalism is caused more by authoritarian besserwisser distortions than by market forces.

Sir, Wolfgang Münchau writes: Margaret Thatcher’s successful brand of entrepreneurial capitalism in the UK in the 1980s… Through the sale of council houses, she turned tenants into property owners.”, “The crisis of modern liberalism is down to market forces” December 25.

True, but later immense injections of liquidity, ultralow interest rates, and extreme preferential risk weighted capital requirements for banks when financing the purchase of houses, has helped turn houses from being just homes into being investment assets. That of course has left all those who do not own these investment assets, even further behind.

Therefore I cannot agree with Münchau’s conclusion that liberalism is failing because of market forces. At least in this case the distortions are not caused by market forces, but by regulators and central bankers who have insufficient idea about what they’re doing. Of course, if crony statism forms part of market forces, which perhaps de facto it sadly could be, then I would be wrong.

When Münchau finally opines, “Any system that leaves behind 60 per cent of households will eventually fail” that is not necessarily so. The world is plagued by examples by how such systems have too often proven to be even more resilient than those who do not. On a small model scale, just look at how Venezuela’s current regime has been able to hang on to power for at least a decade more than it should have been able to.