The problem is that if you provide perverse incentives, you get perverse prices (for housing over the last few years, or oil earlier this year).

One of the odd characteristics of the economy over the last few years has been the freedom of capital to exploit the cheapest credit available (in asia mostly) and put it to work elsewhere. Because capital could cross borders more easily than people, this led to huge arbitrage opportunities – by exploiting cheap credit in one part of the world, cheap labour in another and then selling the finished products to customers in high cost areas like Europe and the US.

Since there is little to be gained by the erection of barriers and since it would be difficult to imagine a world in which labour could travel as freely as capital (because it will always be harder to move a family than a bank account), shouldn’t it be a major project of the left to insist upon a more international framework of labour rights?

For example, is it possible to imagine erecting trade barriers not on goods made in certain countries but on goods made using exploited labour. This would require a complex interplay between international and local labour standards (wages might be different but everyone needs time off and sick pay). But if it became cheaper to pay your staff a living wage than paying the tariff required to access developing world markets then living standards would increase. Moreover, by reducing the cost advantage of doing business in the developing world, you protect jobs in the rich world. This would lead to a much quicker levelling out of living standards than the “free capital – fettered labour model we have seen of late.”

What we are seeing happening in the banking sector is an effective armegeddon of capital hence the desperate rush of governments to pump new capital into it….however, it is my view that this will amount to plugging a hole in the side of a ship with a hatpin…..all it will acheive in the long term is to further alienate people from the system because as far as they can see they are bailing out reckless people who have gambled with their money and lost….

I like that.

Secondly, if your “coherent set of counterproposal” to capitalism essentially amounts to the socialism you always wanted, do you really think this crisis is enough to turn that into an electoral winner? I wouldn’t bet on it. I reckon if socialism was a bad idea before this crisis, it’s not gotten any better of an idea because of it, and although it might win some more votes, my guess is that is will remain a minority view. I could be wrong – if we do enter a depression, and the popular view becomes this was the fault of ‘markets’, that might well be enough to sweep a socialist party to power.

One potentially coherent set of counterproposals amounts to some left-wing version of capitalism (which needn’t be just the Labour status-quo – see Chris Dillow’s small-state, citizen’s basic income ideas for example – yet remains essentially capitalist in its attitude towards markets, prices etc.) – but is that what you mean by the “left”? When you ask will the left gain, do you really mean how will the socialist-left gain, and you’re not interested in the capitalist-left? (this is not a rhetorical question – I don’t know your politics well enough to know the answer) – the first half of your post is about how the anti-capitalist message does not resonate with younger people – I can’t work out whether you are thinking that therefore the left must abandon the anti-capitalist stance, or whether you’re thinking this is the opportunity for socialism to win people over.

If you are asking how can the socialist left turn this crisis to its advantage, perhaps the answer is it can’t – not because it lacks the necessary political infrastructure, but because that would just be trying to flog the same old dead horse back to life. My answer is the socialst-left will gain by becoming the capitalist-left (but I thought that before this crisis). Or are you hoping for the creation of something new, not socialism as we know it, but not what I’d call capitalist-left? If so, I’m going to repeat myself again – the left has to learn* what financial markets do and how they work (I’d be very interested to read short essays by left-wing thinkers on that topic) then the left needs to figure out what it wants financial markets to do differently, and how that woud look any different to just a better regulated version of what we have now.

* okay, of course lots of the left already know, and plenty on the right don’t either. Still my impression is that the left is more interested in finding out things it doesn’t like about capital markets, as opposed to understanding what good they do.

And it never did. A bunch of economists did, and it so happened that many of the most convinced people were on the left.

Then, when other economists advanced a systematic diagnosis of what was wrong with state control of the economy, so happened that many of the most convinced people were on the right.

Right and Left are just alliances of political factions, not theories of government. There are more than two of those.

My apologies, I appear to have logged on to Comment Is Free by mistake. I was after a lefty site.

My apologies. Carry on.

(also, if anyone thinks we’re coping any worse with the choppy conditions than any other Western economy, they’re an idiot who hasn’t been following the international news. We’re all in the same boat… and the boat is slightly leaking and full of panicking ninnies, rather than sinking…)

No-one in the world would replace Liberal markets with state control, we can replace casino capitalism and a corporate state with supporting the SMEs that accout for 805 of employment and have been decimated by the New Labour con

Anyone want to have a first stab at a coherent set of counterproposals?