The Peter Principle of Capitalism

Today, we hear that the government may well have to nationalize the mortgages as well as formally nationalize Fannie and Freddie. So says Nouriel Roubini and Barney Franks.

While their recommendations may differ in details, both see the government as the savior of last resort.

If they are correct in their assessment of the gravity of the problem, i.e., that the so-called “shadow system of banking” is about to implode, resulting in the worst crisis since the Great Depression, then we may well need to rethink our “laissez-faire” system of capitalism. Certainly our financial system needs more oversight.

Health care is in deep trouble. Municipal bonds are failing at auction. Higher education is becoming less and less affordable. The mega-rich get richer; the rest of us, struggle. The list goes on and on. Privatization sans regulations seem to be a recipe for disaster.

I was struck with one comment on the Roubini post:

When will you guys learn that the regulatory welfare state is designed to save capitalism from its own excesses, not destroy it?
[Peter Principle]

Such an apt nickname for such a provocative comment. Has U.S. capitalism finally reached its level of true incompetence?

While many on this blog will shudder at such a conclusion and such a solution, events may so unfold that what we have been taught to believe as unthinkable may well be the only answer.