C-I: And Why That Matters

An editorial in today's Wall Street Journal complimented former U.K. Prime Minister Tony Blair for his "clear-sighted views on the financial crisis" - he stated that the market did not fail, though one part of one sector did.  Mr. Blair made that statement in the last chapter of his just-released memoir, "A Journey." 

Mr. Blair writes, "First, 'the market' did not fail. One part of one sector did." Then he adds: "[G]overnment also failed. Regulations failed. Politicians failed. Monetary policy failed. Debt became way too cheap. But that wasn't a conspiracy of the banks; it was a consequence of the apparently benign confluence of loose money policy and low inflation." 

    The Journal:  Mr. Blair also rightly puts his finger on the bigger picture, saying:

"the failure was one of understanding. We didn't spot it. You can argue we should have, but we didn't. Furthermore - and this is vital for where we go now on regulation - it wasn't that we were powerless to prevent it even if we had seen it coming; it wasn't a failure of regulation in the sense that we lacked the power to intervene. Had regulators said to the leaders that a huge crisis was about to break we wouldn't have said: There's nothing we can do about it until we get more regulation through. We would have acted."

    The Journal:  This truth, according to the Journal, hasn't stopped the global rush to throw more power at the regulators who failed to anticipate the panic or diagnose the bubble. 

    The Journal:  On stimulus, Keynesianism and re-regulation, Mr. Blair is also astute:

"Ultimately the recovery will be led not by governments but by industry, business, and the creativity, ingenuity and enterprise of people. If the measures you take in responding to the crisis diminish their incentives, curb their entrepreneurship, make them feel unsure about the climate in which they are working, the recovery becomes uncertain."  

    The Journal:  One can question whether Mr. Blair's record in office always reflected this sort of clarity. His "New Labour" politics steadily increased the size of government and the regulatory state for most of its time in power. But since leaving government, Mr. Blair has offered a more compelling diagnosis of our recent—and continuing—problems than most of our current leaders.

[C-I Note:  In our opinion, this well-written piece by the editorial staff of The Wall Street Journal was right on target.]