An Open Letter to my Friends on the Left

Professor of Economics at St. Lawrence University ^ | September 28, 2008 | Stephen Horwitz

[smokingfrog]

My friends,

In the last week or two, I have heard frequently from you that the current financial mess has been caused by the failures of free markets and deregulation. I have heard from you that the lust after profits, any profits, that is central to free markets is at the core of our problems. And I have heard from you that only significant government intervention into financial markets can cure these problems, perhaps once and for all. I ask of you for the next few minutes to, in the words of Oliver Cromwell, consider that you may be mistaken. Consider that both the diagnosis and the cure might be equally mistaken.

Consider instead that the problems of this mess were caused by the very kinds of government regulation that you now propose. Consider instead that effects of the profit motive that you decry depend upon the incentives that institutions, regulations, and policies create, which in this case led profit-seekers to do great damage. Consider instead that the regulations that may have been the cause were supported by, as they have often been throughout US history, the very firms being regulated, mostly because they worked to said firms' benefit, even as they screwed the rest of us. Consider all of this as you ask for more of the same in the name of fixing the problem. And finally, consider why you would ever imagine that those with wealth and power wouldn't rig a new regulatory process in their favor.

One of the biggest confusions in the current mess is the claim that it is the result of greed. The problem with that explanation is that greed is always a feature of human interaction. It always has been.

[smokingfrog]

Interesting read. Opinions?

[Man50D]

Someone should personally deliver this letter to leftist McCain even though he probably wouldn’t suddenly do something conservative.

[EyeGuy]

“..failures of free markets and deregulation.”

#####

Mother Canuckin’ Liar

[PGR88]

“.... It is when corporations can use the state to rig the rules in their favor that the negative effects of their power become magnified, precisely because it has the force of the state behind it.....”

Few people also understand - the more regulation, the more need for lobbying for large corporations to game the system, and thus more corruption. The irony is that the most interventionist politicians use the slogans of changing “politics as usual.”

[Green52]

You seem to have a short memory. We have been down this road before. In the 1980’s, the economy crashed due to the S&L failures. (McCain’s role in the “Keating Five” part of that affair has been one of the skeletons yet to be brought out of his closet.)

We listened to those who wanted an unregulated finance sector again. Once again we have paid the price.

[Para-Ord.45]

reference ping

[Para-Ord.45]

reference ping

[Sergio]

I wonder if this is why McCain hasn't gone after Obama for his dealings/ties to the Fannie Mae/Freddie Mac fiasco?