Different conclusions

Both Posner (2009) and Rajan (2010) say that it looks as the state intervention came at the wrong time and in the wrong direction.

Rajan emphasizes that the problem is not the functioning of the banking sector. It is natural that banks want to make money because the sole criterion of their usefulness is money. Having huge income shows that the society demands its services. According to his opinion maybe there are more profound fault lines in the society and economy that caused the crises. The fault lines are: the changed income distribution in the society, the unequal access to means of adjustments and the worldwide imbalances between states. It has changed in recent times how society relates to the rich. In earlier decades the shoeshine boy could be a millionaire but most of the rich were the local self-made entrepreneurs. They came from the same school as everybody else. Today they are the distant overpaid CEOs, the greedy bankers. “The rich are no longer us, they are them” (Rajan, 2010 p. 184). There is an unnecessary income inequality in the society which is for most of the population unacceptable. To reduce this, the best way is to improve access to better human capital. Why is Rajan stressing the importance of human capital? This economy today is more and more a knowledge – based economy. In a system such as the one in the USA, where learning is quite a big investment, few can afford it out of those coming from the lower layers of the society. And then the fate of poorer layers is sealed. They never will command the necessary skills and knowledge to apply for jobs where they could earn more. They will be unwanted members of the society, their sole function is to consume... (That was promoted by the cheap credit offered by the government intervention. But, being indebted, they are on a path they never can escape from.) Inequality feeds itself, if nothing is done by the state to improve access to better schooling of the poorer members of the society. Unequal access, and the resulting inequality destroy consensus amongst different layers of the society which is one of the important character-lines of the developed societies. Improving access should start early; in childhood. The “No child left behind” movement in America is one step in that direction but not enough. Interestingly, Rajan stresses that not only the quality of teaching is important but the whole family life, even the meals that a little kid gets, as well as the atmosphere within the family: so Rajang is supporting the idea that welfare

payments should be conditioned on parents meeting some milestones in health and education (Rajan, 2010, p. 186). (We might recall the attacks in the Hungarian political life against the law which connected childcare payments to sending children to the school. And all this in the name of „liberal”

and „social” ideas!) Rajan would give vouchers to the students to choose the best fitting school for themselves, that way guaranteeing the competition among schools for offering better services. It is the best solution if private efforts are combined by state help - but never offering subsidies without any personal efforts. It is also important to develop the health and pension system nationwide. It is a shame for a democratic country to let suffer a big part of the nation, all those who have no health insurance, says Rajan (2010). The same is stressed by Krugman (2010) who has analyzed the political system in the US and assigns as one of the most urgent task for politicians to build up a nationwide health insurance system. Rajan (2010) draws our attention to the fact that the „growth without employment”

creates special problems in the States, because health care and pension are connected with employment. If the employees lose their job, they lose their health care and pension as well. (By this suggestion the American economist invents the social market economy, invented in the old continent a hundred years ago... Better late than never.) Naturally, Rajan (2010) thinks that changes in the field of regulation are necessary, too, concerning the financial intermediary system. But his idea is that the most important thing is that the state should intervene less into the economic life. Let the market economy really be what it is, a playing field, where success and failure are also possible. He thinks that banks should not have even deposit insurance - maybe only the small ones. The other big banks must be much more cautious taking risk than they were before, and their clients should evaluate their reliability. He suggests that too big institutions should be cut in parts. It is a problem if an institution is too big to fail. He throws the attention to the fact that sometimes a smaller firm can be dangerous, too, if it is systematically too important. So it is better to exclude the possibility of being too systemic to fail.

It is also important to correct worldwide imbalances. Export-led strategies of developing countries (and of some European economies, too) need over-consumption in other countries “The global trade surpluses produced by the exporters search out countries with weak policies that are disposed to spend but also have the ability to borrow to finance the spending- at least for a while” (Rajan, 2010 p. 67).

They found it in the USA, and it has led to overconsumption in that country. The housing bubble is a sign of this, too.

Posner condemns the lack of regulation in the last two decades. He says that the cause of the crisis was not that there was too much of the state, but that there was too little of it - in the field of regulation.

According to him the professional blindness is excusable because the rival theories of depression were so different, even contradictory. Even the failure of officials to heed the warning signs is understandable – “Cassandras rarely receive a fair hearing and for reasons that only in hindsight can be seen to be mistaken” – as he says (Posner, 2009, p.328). What is inexcusable is the failure of the FED and the government to have pre-prepared contingency plans for the possibility for a depression.

When the crisis hit in they were fully unprepared and responded with improvisations: flooding the economy with money, massive deficit spending bail-out actions, and regulatory changes. All this having been thought out in advance. It creates more problems for the future. He says: “the expensive treatment cures a deadly illness but leaves the patient debilitated”(Posner, 2009. p.330) We may even say, looking at the European problems following the American-originated crisis, that the illness really infected the whole world...

References

1. Botos K. (1987): Világméretű pénzügyi egyensúlyhiány (Worldwide financial imbalances) Közgazdasági és Jogi Könyvkiadó, Budapest.

2. Galbraith, K. J. (2008): The Predator State. Free Press, New York.

3. Krugman, P. (2010): A liberális lelkiismeret (The liberal conscience). Demos, Budapest.

4. Posner, R. (2009): A Failure of Capitalism. Harvard University Press, Cambridge.

5. Rajan, R. (2010): Fault Lines. Princeton University Press, Princeton.

Changing central bank transparency in Central and Eastern