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The failure of the free market: what are the alternatives?


Hewson

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The link below is to an article penned by Edward Hadas on Reuters. In it he raises the question of more market regulation and what, if any, benefits might flow from it.

The experience of recent years has confirmed to all but the most fanatical free-marketeers (usually those with a vested financial interest in retaining the status quo) that the current policy of hands-off regulation has been disastrous economically, and in its subsequent toll on society generally.

Excessive market volatility distorts the rest of economy. Exchange rates always move too fast for companies to respond sensibly. Share price frenzies lead to unhelpful excesses and shortages of new capital. Bond prices are generally less flighty, but the rapid emotional gyrations in the euro zone government bond market – overconfidence followed by panic – brought the region into crisis. When a decade of blind investor optimism suddenly exploded into the financial panic of 2008, developed economies entered a recession which has not yet ended.
Everybody is affected by how the markets operate. Whether you are unemployed or retired, a CEO or self-employed, a factory worker or home carer, what happens in the world's markets has a direct bearing on your quality of life, for good or ill. We've seen this in spectacular fashion here in Ireland with the dot com bust and the implosion of the banking system through lack of oversight and the destructive effects of unfettered, naked greed.

For several years I've dabbled in shares and have watched their values fluctuate wildly as irrational waves of panic swept the markets, followed by equally irrational waves of optimism, usually based on QE.

The questions that arise from the attached article are both of ethics and morality and the freedom of markets to function without interference, regardless of the cost to the 99%.

After the catastrophe of 2008 is the world ready to grasp the nettle of regulation in the interests of those who habitually pay the price, literally and in terms of a poorer society, for the unending greed of the one percent?

And how do we begin to develop an acceptable model?

The menace of financial markets | Edward Hadas
 


LamportsEdge

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There was one form of market regulation that was pretty much automated until recent years, it was ubiquitous and everyone understood it.

That was the subordination of business interests to the interests of the society and nation around it.

I can't help noticing that ever since 'globalisation' became an excuse for letting supranational corporations dictate terms to national governments that we seem to have come a cropper somewhat.

Standard Oil once started dictating to the US government when it almost escaped national control. The US government very wisely broke it up.

When I say 'supranational corporations' I mean banking corporations and their close partners in organised crime and of course any business endeavour which manipulates its profile in order to sell to everyone and pay tax to no-one.

I include the IMF, ECB and Federal Reserve in the United States among those 'supranational corporations'.
 

GDPR

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After the catastrophe of 2008 is the world ready to grasp the nettle of regulation in the interests of those who habitually pay the price, literally and in terms of a poorer society, for the unending greed of the one percent?
No.

The land of the free will never go for it and until they do, no one can go for it.
 

stopdoingstuff

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The very definition of a free market includes people who make losses going out of business, and this appears not to be the case the way we run things. What we appear to have is a bad case of crony capitalism, where even the regulations are written to suit the incumbents. So where one's success depends in laws and regulations, the hottest commodities become legislators and regulators. Therefore I can conclude that a very, very good way to start would be to get the money out of politics.
 

stopdoingstuff

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The next would be to outlaw bailouts for any institution that does not submit to very conservative regulation.
 

Hewson

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No.

The land of the free will never go for it and until they do, no one can go for it.
The United States will no longer be the world's most powerful economy in a few short years, as China overtakes it. While the Chinese model of capital-based Communism is deeply flawed, the US model has had a far more destructive effect world-wide.

We need something in between the two.
 

seabhcan

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There was one form of market regulation that was pretty much automated until recent years, it was ubiquitous and everyone understood it.

That was the subordination of business interests to the interests of the society and nation around it.
I disagree. The state has almost always served business interests as its first objective. Any 'golden age' period is a myth.
 

Hewson

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There is no such thing as a Free Market , it is rigged.
Correct. And rigged to such an extent that financial institutions can fail and be saved by those most badly affected.
 
D

Dylan2010

statist regulation will tend to fail and when it does it tends to be systemic. Reason being firstly the regulators get to close too their clients the producers and secondly the state only has short term economic goals in mind so creates an environment where risk is socialised. why was a hypotethical 75 year old able to deposit 100K with an "anglo" type bank knowing that the money was going straight into high risk property deals, yet such a person didnt have to give it any consideration? it would have been safer for the economy if she had to pay the bank to keep it in a safe.
 
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Telemachus

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The failure of the free market is that it was never allowed to operate, with the property taxes and highly command control economy we have today - with bailouts for shytty newspapers, insurance companies and an entire sector of the economy(banking) - we are closer to communism then the free market. We probably have the worst of both systems.
 

Howya

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The commodity markets (cereals, sugar, food etc) were predominantly used by agri businesses to protect against price movements - over the last 20 years the commodity markets have been heavily invetsed in by hedge funds and are therefore distorted - yes we need regulation to protect the basic commodities.
 

Hewson

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The commodity markets (cereals, sugar, food etc) were predominantly used by agri businesses to protect against price movements - over the last 20 years the commodity markets have been heavily invetsed in by hedge funds and are therefore distorted - yes we need regulation to protect the basic commodities.
The richest people on earth dictate how much the world's poorest will be paid for both their production and consumption of certain foods.
 

Howya

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There is no such thing as a Free Market , it is rigged.
And while the concept of a pure Free Market may be attractive to some, it will never happen because it will be poisoned by greed (which is why regulation is needed).
 

statsman

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There was one form of market regulation that was pretty much automated until recent years, it was ubiquitous and everyone understood it.

That was the subordination of business interests to the interests of the society and nation around it.

I can't help noticing that ever since 'globalisation' became an excuse for letting supranational corporations dictate terms to national governments that we seem to have come a cropper somewhat.

Standard Oil once started dictating to the US government when it almost escaped national control. The US government very wisely broke it up.

When I say 'supranational corporations' I mean banking corporations and their close partners in organised crime and of course any business endeavour which manipulates its profile in order to sell to everyone and pay tax to no-one.

I include the IMF, ECB and Federal Reserve in the United States among those 'supranational corporations'.
I disagree. The state has almost always served business interests as its first objective. Any 'golden age' period is a myth.
The fundamental question is not 'what economic model do we want?' but 'what kind of society do we want and what economic model will support that kind of society?' Ultimately, the state needs to be seen to exist to support a society based on across-the-board justice and the economy needs to be seen as a tool to support the same thing. Market control should be driven by the requirement to provide a basic minimum standard of living for everyone, appropriate health, education and infrastructure for the greatest god of the greatest number, and to prevent the powerful from exploiting the vulnerable for profit. The fact that this will never be fully realised should not stop us from working towards it.
 
B

Boggle

The free market needs to be fixed and we, as workers, need protection from competing with slave workers. Simplest solution in my mind is to simply levy the balls off anything manufactured in a country which pays less than an EU minimum and which provides less than adequate working conditions.

As a customer, there is also the issue of ridiculous terms and conditions being written into the sale of products and actually standing up in court. You should be entitled to opt out of a contract at an any time without comeback and you should be able to do what you like with what you buy. We should also not enforce ridiculous patents or copyright as selling their stuff and finding their edge is their problem, not ours.

Banks should be kept as banks and well regulated, as should any insurance products which are required by state law. Everything else, including pensions, should be relatively hands off/ All regulation and control should have demonstrable need.

Global taxation policy needs to be revewed also so that profit making companies have to pay a fair share in taxes and countries cannot whore themselves out as tax havens. Even if ireland is also a whore and it may hurt us, it's the principle more than anything as it sets taxes up as something to be avoided.

Housing needs to be looked at too. There is supposed to be protection in teh constitution which means that both parents shouldn't have to work out of economic necessity and the fact that you need two wages to buy a home is an obvious violation of that.



Thats bout it, with the exception of looking at the social value along with potential downsides of a maximum wage.
 
D

Dylan2010

The completely "free market" is a myth. Markets exist only if there is regulation. Without rules and enforcement markets collapse.

Corporate desire for deregulation will ultimately destroy those corporations.
what you mean though is State controlled regulation. It is possible to regulate without the state. The only purpose of any regulation is to identify risk not socialise it away. Everyone needs to act on the basis that action A is more or less risky than action B , not the statist approach of "please dont even look and get back to watching TV please"
 

seabhcan

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what you mean though is State controlled regulation. It is possible to regulate without the state.
You mean that the largest players in a market can set the rules. Of course thats possible, the question is whether its a good idea.

Such 'self regulation' tends to collapse after a while. Over time, the rules get set to exclude competition and new entrants.
 

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