As Lehman crashes the short sellers are making millions. Ah–the wonders of the free market.
Great post. Thanks for the info.
There’s nothing wrong with a free market — in fact, there’s plenty more right with it than wrong. Yes, I could quote statistics and facts, but my own personal view on this is deeply rooted in having grown up in a socialist country and having seen the effect of the supression of free market principles on an economy and a people.
There’s plenty wrong with an unregulated free market, and pure laissaz faire capitalism. It’s a fundamental disagrement I have with the Bush administration — they seem to go by the old Herbert Hoover maxim that “What’s good for business is good for the country”. The result is disaster (anarchy always is).
However, it doesn’t mean that free markets are wrong in and of themselves, which seems to be the postulate of this blog.
We don’t have free markets here in the US. We have gamed markets controlled by lobbyists and their hired politicians.
“There’s plenty wrong with an unregulated free market”
I can’t speak for anyone else, but that is my view exactly. The question is: What is regulation?
I’m not a rah-rah cheerleader for free markets by any means. Many people seem to think that the only path to happiness, contentment, and enlightenment is through (their particular version of) free markets. I think that’s just as true as, say, the Spartan concept of harsh overlordship of their helots and even harsher military regimens for their own elites. Or the Yanamamos’ social policy of infanticide for almost all girl infants. Different times and different cultures develop strong and, to outsiders, peculiar ideas about what is absolutely the best form of government or society, and what is the worst and most immoral way of doing things. I imagine our talk about free markets would have left the Spartiates scratching their heads.
But I think that free markets in terms of economy are equivalent to democracy in terms of government: messy, unpleasant, sometimes leading to disaster, but still better than the alternatives.
And for the record, my perception of any “postulate” of this blog is that it is closer to the kind of thing I just said rather than that free markets are wrong in and of themselves.
Unregulated markets are not free markets, they are contained feeding pools for ruthless sharks who will lie, cheat, manipulate, intimidate and extort their way into big money and then leave the mess for the rest of us to pay for.
But what is regulation, how far should it go, and who sets the policy? In my opinion, the biggest single reason for the massive influx of Mexican and Central American immigrants over the last several years is NAFTA, which drove countless farmers south of the border off of their land when cheap American grain was dumped on their markets. (I’ll probably get the stupid label again for that remark.) Now we talk about rounding them all up and dumping them back across the border. Yet we also complain about our own jobs being shipped overseas.
Simply opening markets up and letting them play out, come what may, will most definitely benefit some large investors, and there will also be smaller players who will benefit; no question that many Chinese have worked their way up into the middle class over the past 15 years making all of the cheap goods we buy at Walmart.
But it also causes massive disruption, job flight and emigration, legal or not, and the cosequences of such things can be unpredictable, to say the least. I fear those words will prove to be harrowingly prescient over the course of the next couple of years. Hope I’m wrong.
And of course in our own most peculiar, short-circuited version of free markets, the biggest cheerleaders of all coming crying to Big Mama every time their market manipulations go awry and demand that she replace their lunch money.
Lehman being but the latest example.
Should markets be regulated to establish fairness, for social policy, to enforce ethics, to protect producers, consumers and how do we assess responsibility within the market box constructed?
Markets should be regulated primarily to ensure that inputs like labor and environmental impact are priced to reflect their real cost to society. Thus dumping pollution or exploitative labor practices should carry government imposed costs that help to price them more accurately. This isn’t a simple thing to achieve, but it’s important to recognize that “free markets” optimize use of resources based on their prices. If something is underpriced, it is overused.
Naturally, government should not attempt to regulate the price of just anything. There should be a short list of basic resources that naturally require government attention. Karl Polanyi points out three areas: money, labor and land (which I’ll take the liberty of replacing with ‘environment’).
A lot of noisy arguments about “regulation” go on without the slightest reference to the fundamental reasons for it. We’ve got libertarians calling for what amounts to anarchy and old-fashioned ‘liberals’ (no really good name for them anymore) looking to the government to fix everything.
Seth, Thanks for the response.
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