Wednesday, January 30, 2008

Economic History (hidden behind controversy)

A recent George Soros op-ed in the Financial Times warned the world of an impending financial crisis, the worst since WWII.

This spawned a flurry of repudiations from market fundamentalists - the true believers.

I have yet to see any economists take on the Soros article. I would be willing to bet some real money (albeit, grad student money) that the outlook is not necessarily so bleak. But this isn't the point I'm trying to make.

As the basis for Soros' article is the historical assertion that the financial crises of the last 70 years have been corrected not by the Market (big M), but by governmental regulatory intervention. He goes on to say that it is the intervention that is artificially keeping us afloat, but it is intervention nonetheless that has saved our economy from collapse.

Intervention. Not the Market itself.

Market fundamentalism is the dogged belief that the market is an animal that, unleashed into the wild, unfettered by constraint, will find true harmony. It's the scientific recounting of the age old liberal theory (careful, not Liberal) that the greater good is served by pursuit of self-interest embodied in property. This medievalized dogmatic belief found its age of reason in Free Market economic theory and has since become the religion of America, with Republicans as true believers and Democrats as lapsed agnostics.

Soros is pointing out the agnostic realism of history. We need government, and as is evidenced by our current financial crisis, governmental regulation in order for our "free market" to work. Is this then a planned economy, socialism behind the sheen of capitalism? The question is just political semantics. This is economic/political/social reality.

There has never been a perfect "free market" society. Locke's original man, living happily consuming the fruits of his own labor, is simply a creative myth. Market fundamentalists might be better served politically by dropping the rhetoric, taking a hard look at history, and inserting a little agnosticism into their lives.


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