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Self regulating free market

“‘Self-regulating free market.’ I laugh so that I don’t cry.” - Tumblr “Kelsium

   This idea is a cornerstone of conservative economics.  On the surface it allows them to scream about “freedom” (who doesn’t want freedom?), but underneath it’s quite sinister.  Many people understand the lies, pretenses, and subtleties of American politics, though sadly many more read only headlines or simply don’t dig into the effects of so-called “freedoms.”

   If I were on a street corner screaming wildly about my lack of freedom to rob banks at gun-point, people would call me on my Bologna, and rightfully so.  Yet, financial institutions regularly scream about their rights to, among other things, raise interest rates retroactively, which amounts almost to the same thing.  

    In the end, these “freedoms” of the market end up going only to those with the most “votes.” Since economic votes are currency, this system gives voting privileges to the wealthy, and leaves the poor with no voice whatsoever.  A recent example of the improper application of economic force is Rand Paul’s questionable position on Civil Rights.  While the attacks calling him “racist” are misguided sensationalism, there is good reason for concern.  His proposed boycott would depend on whites (he graciously volunteered, but that doesn’t mean it would be successful) to bring economic pressure against other whites in order to achieve the goal of equal treatment.  Those who have inherited poverty (in this case blacks, descended from slaves, who’ve never had any real economic opportunity) would still not have any real “voting power” under his proposal.  In a place with broad economic equality (like Sweden, which Rand Paul would hate to advocate for, with massive socialization) his own plan would actually make more sense.  When most people have similar economic muscle, using it instead of political/legal force is closer to reasonable and fair.

     In America, we have massive wealth concentrated in a relatively small part of the population and that problem is growing.  If the trend continues it will magnify Rand’s screw up as politicians are already bought and sold (BP’s alleged help covering up the oil spill, by using the Coast Guard to keep reporters away from areas with clear views for taking pictures, for example), and the wealthy will continue to make laws that benefit the wealthy.  Ever play Monopoly?  Remember the last few rounds when people are just rolling the dice because one player has already built a clear unassailable advantage?   In a lot of ways the Bush administration helped tip us over the edge in that direction.  The wealthiest 1% of Americans got a HUGE raise during that era, while everyone else got to pay for Rove’s voter base to go play in the sandbox.  Trillions of dollars were stolen from the American Treasury by big corporations openly, and not one person went to jail.

     Our checks and balances are essentially reduced at this point to Democrats needing votes and buying them from welfare recipients in exactly the same manner that Republicans buy them from the military and defense industries.  Welfare programs (recently the “healthcare” bill, which does nothing to help anyone, but makes Dems look good in front of their most liberal supporters) cause the same kind of reactionary voting among the poor and Doves, that war cries conjure among the Hawks.  We need a social safety net, and we need a military that can defend our borders, but we don’t need politicians using either of these things to spend tax dollars on votes for re-election.

     Lastly, the Self-Regulation of the Free Market, even in theory is dependent on a “perfect information” scenario.  An “information bias” is an insurance term used to describe the situation that insurance companies face when people who don’t qualify for a given product have no incentive to tell the insurance company about the increased risks they pose to the insurance company’s margin.  Essentially, it’s a fancy term for “people lie, and don’t tell you they lie.”  All financial market participants suffer the same fate as insurance companies (think Enron’s investors not knowing what Ken Lay was really doing).   To think that markets would regulate themselves assumes, falsely and among other things that all people are essentially honest.  Imagine in Rand’s scenario that a small business put a sign outside in support of Civil Rights.  So everyone in town who supports civil rights choose to do business there.  Suppose the sign is completely bogus.  They lied.  They got your money.  They discriminated against the nice black couple standing next in line behind you.  You were victimized by an information bias, the same way Enron’s investors were, the same way SEC and other regulatory inspectors and many investors of the recent meltdown have been.  Obfuscation (or an outright lie) is the enemy of regulation, self or otherwise.  So while it’s possible to regulate your nation’s employers right out of employing anyone the threat of layoffs is often just one more gun that corporations hold to the head of politicians when they want to poison the environment, risk other people’s money and generally trash the average citizen’s real Freedom.

Sorry ‘bout the ranting, thanks for reading.

Filed under Rand Paul regulation American Politics racism not racism civil rights insurance banking industry finance recession depression collapse