From semiconductors to electric vehicles, governments are identifying the strategic industries of the future and intervening to support them – abandoning decades of neoliberal orthodoxy in the process. Are industrial policies the key to tackling twenty-first-century economic challenges or a recipe for market distortions and lower efficiency?
TOULOUSE – If history punishes those who fail to learn from it, financial history does its punishing with a sadistic twist – it also punishes those who learn from it too enthusiastically. Time and again, financial crises have reflected the weaknesses of regulatory systems founded on the lessons learned from previous crises. Today’s crisis is no exception; nor will the next one be.
The post-war system of financial regulation was founded on three supposed lessons from the 1930’s. First, we thought that the main reason why banks fail is that depositors panic, not that the main reason depositors panic is that banks are in danger of failing.
Like the view that running away from lions provokes them to eat you, there is a grain of truth in the view that banks fail because depositors panic. But it is a small grain, and one on which the average uninsured depositor, like the average tourist in a game park, would be ill-advised to rely. In fact, many panics happen for a good reason. Even in the 1930’s, most banks failed as a result of bad management and illegal activity, as is true today.
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