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← Michael, we hardly knew ye

gos's Avatar Jump to comment 26 by gos

I find it very disturbing that people still take Ayn Rand's and Milton Friedman's economic ideas seriously after 2008 (I'll give Adam Smith a pass for now, as he seems to have realized a lot of the problems inherent in capitalism).

After similar market freedom led to similar behavior and a similar crash in 1929, at least most people in the world realized that markets cannot be trusted to regulate themselves, nor provide basic necessities to all people. Even in the United States, communism became quite popular, and FDR felt that Keynesian economic measures by the state (which Friedmanites would call "socialism") were necessary - even though it's a certain bet that business interests lobbied just as strongly against that idea as they do today - incidentally bringing about the greatest age of prosperity for the American middle class in history after the economy had fully recovered.

It took over 4 decades for people to start taking free market ideology seriously again that time, but it seems that the latest crash didn't even faze capitalism's fans this time around. It hardly even seems to embarrass them.

There certainly are interesting ideas to explore in the relationship between trade and evolutionary psychology - how trust and greed play out in the context of business relations - and it's easy to armchair philosophize about this: I certainly see that you need to trust the people you're doing business with; the problem is that, for larger businesses, the people that are making the decisions that matter are doing business with wholesale suppliers, government regulators, and large stockholders, not the consumers who buy their products. Free market ideologues often romanticize small business settings: mom-and-pop stores, casbahs, and the like, and draw analogies from these situations to modern capitalism without recognizing that the position of the modern consumer and modern business manager is not analogous to that of buyer and seller in a farmer's market in 1776.

The simple matter is this: trade will always happen, no matter what legal framework or political system is in place. There are quite a few things that we can all agree on: money is a good facilitator for trade, trade generally creates wealth, the opportunity for profit motivizes many people. These things are often held up as arguments for unregulated trade. A moment's reflection shows that they are truisms for all forms of trade, regulated or not.

Trade generally creates wealth, yes, and less regulated markets generally create more wealth. It has become pretty clear over the last century that this is true, but it has become equally clear that less regulated markets create great wealth disparity. It seems that the less regulation there is, the more wealth is concentrated in the fewest hands. I surmise that the vast majority of people would choose an appropriately regulated market which would guarantee the majority of all citizens a comfortable existence, if that is possible. Many would probably choose a system that guarantees everyone food, water, shelter, and possibly other things.

The opportunity for profit motivizes many people, yes. But to do what? Greed does not encourage people to do morally good things over morally bad things in the quest for wealth. In fact, when the only measure of success is money, those who can leave aside all considerations other than profit are generally more successful than others.

I'm in favor of trade. It just needs to be carefully regulated so that the wealth it creates is distributed equitably (exactly how should be decided democratically and can vary from place to place), and its bad side effects are mitigated.

Tue, 31 Aug 2010 10:30:52 UTC | #508439