Even Ron Paul is wrong in his fundamentalist belief that free market has nothing to do with the financial crisis today.
But free (unregulated, uncapped) market allows concentration of resources in the hands of a few (corporatism) and allows these guys to stretch everything else, from government regulations to wars; the lack of science-based regulations allowed this crisis to happen; so the free market thing has everything to do with the current financial crisis, through corporatism. Corporatism is a necessary result of the evolution of free markets. Oversight/regulation/capping is the only factor that can tame the savages in the free markets and prevent crises of these magnitude.

Free markets without a cap, as well as personal wealth without a cap, in a human world which is physically capped (the earth), is no realist approach at all. The presence of a government is a requirement for a society, the government/parliament is made of citizens' delegates to implement what the citizens want. Keeping the government in check is absolutely necessary, but dismissing its regulatory powers whenever the market is concerned is not rational, actually this is only protecting the monkeys among us to exploit these “freedoms”, with the consequences we see today.

If you believe in the uncapped free market you should be against the bailout completely and also pay for your choice. In the free market those who leverage their fortunes for big profits should be prepared to personally lose them as well.

Moreover, a financial system where you can have leverage of 20-60 is outlandish: only people with no real scientific training can accept that as a reasonable way of handling things in whatever market. The larger the leverage, the lower is the quality of life in that society (unless the government cushions its people): this becomes a pressure onto all the workers to perform to the unrealistic expectations of their exploiters, so nobody has time to enjoy living. That’s why uncapped capitalism is so wrong there’s no fit metaphor to express it.

A bailout now means nobody should ever accept again a free market model, where everything is supposed to be self-regulating. It is obvious it’s not, instead it ultimately relies on public property: government funding. That’s the ultimate “self-regulating” factor. That also means recognizing that socialism is to be taken seriously into discussion as a practical way for a society to evolve.

Perhaps the best approach is to let these institutions fall, and let a new, more responsible and better controlled, financial system emerge. It will be painful but will prevent systemic crises like these in the future. Maybe slowly capping the leverages used in the market won’t be painful after all.

This entry was posted on Monday, September 29th, 2008 at 10:00 pm and is filed under humanist. You can follow any responses to this entry through the RSS 2.0 feed. You can trackback from your own site.