Greenspan admits he was wrong on deregulation

This is shocking, in a good way. Greenspan “testified to Congress”:http://www.nytimes.com/2008/10/24/business/economy/24panel.html?_r=1&hp&oref=slogin that deregulation and a free-market don’t always work and it caused the recent bank failures:

bq. “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

The “invisible hand”:http://en.wikipedia.org/wiki/Invisible_hand sometimes pushes too hard, apparently.

bq. Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

When Alan Greenspan says that deregulation is not always good, you know it’s true. America rarely repeats the same mistake twice, so I’m optimistic that this economic disaster can help us return to a sane model of the economy where we don’t believe a free-market solves all problems, that regulation can be a positive and that taxes can create positive incentives.

Republicans love to quote Adam Smith in defense of the free market, de-regulation and low taxes. But even Adam Smith believed in taxing the rich more heavily than everyone else:

bq. The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. … It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.

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