The current global financial crisis has brought about some very outlandish scenarios. We had a free market Republican president (George W. Bush) scrambling to bail out irresponsible banks as, indeed everyone was ready to dish out as much cash as possible into a financial black-hole.

Soon the car industry wanted a bailout, and then state governments the municipal governments and finally local government; it seemed as if everyone felt a sense of entitlement.

The prize for sheer audacity had to go to the US pornographic industry which demanded a $5 billion bailout of its own. While mouths were agape with shock and outrage; the pornographers used patriotism as they attempted to sway the Senate.

They stated that unless they received a bailout then the US porn industry would soon be out of business and the senators would be at fault if (god-forbid) "foreign porn” was allowed to swamp the US market.

In other words "Save our good-old American filth otherwise we will be inundated with foreign filth.” This made me think of protectionism and the degree to which nations are ready to go to protect inefficient industrial sectors.

In Africa there is a fine line between government, parastatals and the private sector. Western economic advisers repeatedly told us to separate the three main sectors of the economy and we did as we were told; we privatised utilities, sold stakes in parastatals and refused to intervene to save failing companies like the good pupils we were.

But the West has done everything they warned us against; they have ploughed more than $1 trillion to save the banking system yet their attempts are likely to fail because the banks are simply paying the price for the lack of proper management.
For example take bank A; they were prudent and didn’t invest in sub-prime mortgages and post healthy profits but their share-price is low due to the whole sector collapsing.

Then there is bank B that did all the wrong things and racked up a mighty loss. However in the bailout the government pumps billions of dollars into bank B and then Bank B uses this money to buyout bank A at a very cheap price.

That is the problem now; the government is rewarding bad management with even bigger bailouts while the well-run banks are paying the price.

It is like the prodigal son blowing his inheritance then getting a red-carpet welcome for his efforts. This is a defining moment for capitalism when the old Darwinian doctrine of "survival of the fittest” has been abandoned for a neo-socialist ideal of government co-ownership.

The alternative is slightly worse, other than pumping in billions down the black hole the government could set up a bank to buy up "toxic debt” and thus free the capital already in the system.

But this has its problems as the banks haven’t fully declared their toxic debt and it could be several times what they claim it is and banks might just dump all their liabilities on the government whether related to the current crisis or not.

Then there is the option of doing nothing; which is the right thing to do but political suicide. The reality is all parties of all ideologies are protectionist; all that varies is the degree to which they will go to protect and whom they would protect. When Margaret Thatcher battled the unions against subsidising the coal industry it was mainly because miners were not her natural constituency.

At the moment all voters are in peril as all sectors are collapsing; what made the great depression so great was the fact that Herbert Hoover stood still while the whole stock market and eventually the economy crashed and it needed the new deal by FD Roosevelt to stimulate the economy.

In the long run this bailout will cost America dearly both in capital and wasted energy but it had to be done because the image of doing nothing would have been disastrous.

Contact: ramaisibo@hotmail.com