There seemed something terribly wrong about the three chiefs of America’s biggest car markets flying in three separate private jets to Washington, DC to request the government to use taxpayers’ money to bail out their near bankrupt firms. Many people have drawn many conclusions but the main point is simply this: the private sector has been terribly slow at jettisoning its old ways and models, and has been reluctant to accept the sort of heterodoxy which is sweeping through the world of government and opinion at large.

We have been told repeatedly how this is a once-in-a-generation crisis. Obviously such a dire crisis needs radical solutions. Governments, normally never the fastest to get off the mark, have been particularly adroit at addressing the crisis — none more so than in the US. The Fed has slashed interest rates dramatically, all the way to below 1 per cent. A conservative free-market government has committed $700 billion to recapitalise and rescue failing banks. Now, there seems to be a bipartisan consensus emerging around a huge fiscal stimulus, which some reports say may be as large as $700 billion. Make no mistake — this is heterodoxy at high noon.

Other governments in Europe and Asia have been quick at adopting similarly heterodox policies. Governments of different countries have even managed to achieve the impossible and coordinate policy action; a group of 20 has even managed to agree to some common minimum principles on reframing the global financial architecture.

Unfortunately, the response from the private sector has been much less encouraging. The US auto industry typifies a wider malaise — everyone struggling for profits wants a taxpayer bailout while doing little to change their business models which it now seems were designed to work only in times of unprecedented boom. Surely, if private enterprise expects the government to throw away the textbook, then they must think out of the box too.

... contd.