Monday, January 29, 2007

Is Market Fundamentalism the Problem?

Over 20 years ago, Ronald Reagan repeatedly said: "Government is not the solution. Government is the problem." The acceptance of this idea has led to several rounds of tax cuts and cuts in social programs. The populace, having generally accepted the central idea that government was inefficient and ineffectual, elected politicians that voted to cut social programs and cut taxes because, the voting public was repeatedly told: "you can spend your money better than the government can."

Now we are starting to come full circle; the political pendulum is swinging back. Market Fundamentalism, as a progressive think tank called the Longview Institute calls it, is starting to be questioned. The Longview Institute provides a definition of Market Fundamentalism:

Market Fundamentalism is the exaggerated faith that when markets are left to operate on their own, they can solve all economic and social problems.

I suspect we are just now starting to see the pendulum swing back toward the idea that sometimes government provides the only effective solution. After the Jack Abramoff and Duke Cunningham scandals, the Enron and other major corporate bankruptcies, the attempt to privatize Social Security, our health care mess, the current housing bubble and the rising debt problems have led the public to question just how "efficient" the markets really are. Many of these problems are based on excessive greed by private business interests to outright financial fraud using government as the conduit to commit the crime. The public, I suspect, has become dissillusioned with the idea that the "market" will solve their problems. The public appears to now be starting to think: "the free markets are not the solution, they are the problem."

The problem right now is that our country is out of balance. We do not have laws strong enough to protect the working class against Enron-type dealings. Corporations can file bankruptcy and leave long-employed workers without pensions and health care. Wages for the working class are not keeping up with inflation; the executive's salaries are rising precipitously at the same time that their employees continuously face insolvency. Health care costs, along with excessive interest rates and fees on short-term and revolving debt, are leading to financial insolvency of the working class. Furthermore, lending institutions and their lobbyists were able to get the very bankruptcy laws they wanted -- without any debate or amendments -- into law and reduced their risk of loss like they say they needed. But did it lead to a reduction in interest rates and fees? Nope. Just the opposite. Interest rates and fees have continually risen even though the risk is less now.

This proves that laissez-faire economics just don't work. The lack of government regulation and interference has allowed excessive greed to ruin the market for those with less economic bargaining power. So, at this point in our history, government is not the problem; it is the solution.

5 comments:

Brad said...

Amen!

(that wasn't too fundamentalist of me to say that was it?)

Teri said...

I bought grapes for sale at Safeway for $.99 a pound. Same thing with cherries. Both came from Chile. Now exactly how can the local farmers (and I live in an area that is the country's major supplier of sweet cherries) compete with prices like that? Cherries in season here are $2.99. It's not the farmers' greed that causes those prices. They have to pay a certain rate for labor and there are lots and lots of laws to comply with.
The same is true for many other companies unfortunately and we are again competing with other countries. More laws here is not going to fix that. I don't have the solution, but I'm pretty sure that more government is not the answer.

Heidi said...

Okie Lawyer,

May I add my Amen! to Brad's. I'm glad I linked over and read your post. Thank you.

Anonymous said...

Some pretty sloppy thinking mixed with some good ideas. Any time a government official is bribed or otherwise illegally involved with somebody in the private sector, it is a failure of government, not the market! The whole point of limited government is to limit these opportunities and minimize negative consequences of government intervention. Government is no better, and usually worse at picking the "right thing to do".

As far as the greed at the top, I don't think many would disagree, regardless of which side of the market vs. government argument they tend towards. The end game for this is that the market will seek out lower prices, e.g. corporate headquarters will start to move out of the US. Chrysler did it for a while, Haliburton. I think this is quite possible as a future trend.

OkieLawyer said...

Anonymous:

Your thinking that "it is always the fault of government is the epitome of Market Fundamentalism. (It's not wrong to offer the bribe, only to accept it?)

Even Libertarians think that the government ought to intervene to prevent fraud. Well, that encompasses a whole lot of government regulation.