This week saw the first spate of nationalization of the century. Loss making investment banks were "bailed out" by congressional votes. Do we now assume that this paves way for calibrated risk taking or unbridled risk taking? A glance at the history of financial business in particular shows that the cycle of nationalization, liberalization, privatization and globalization continues unabated. As Institutions take high risks and fail! nationalization raises its head. low level of risk taking and ultra conservatism leads to lower profits (but PROFITS) and prepares for liberalization and as the risk taking propensity of Institutions increases, this liberalization leads to privatization and globalization until the institutions fail after taking unbridled risks which paves way for nationalization again!! That in short is the cycle of economics.
This also props up a pertinent question. Does the state need to bail out private business and absorb losses? Does the state need to disinvest while making profits? The answers are obvious: The state cannot take risks but can underwrite all risks and the STATE is the INSURER OF LAST RESORT.