September 14, 2008

Suddenly Regulators are the Good Guys

I recently wrote about the Death of the Free Market, by which I meant the free market fundamentalism in which regulation was bad. Watch how quickly the free market touts run from that unquestioned economic principle, which has dominated for the past three decades. You'll hear revisionist statements from both Democrats and Republicans, "We never really meant "free" markets. We've always recognized the necessary role of regulation."

Sorry. Too late. The damage has been done. Now the regulators are attempting to ride to the rescue. Unfortunately, after years of being the bad guys, having budgets and staff cut, the regulators probably don't have the tools and experience needed to do the job.

In response to news about the negotiations to control the collateral damage from the Lehman Brothers' implosion, J.P. Morgan economist Jim Glassman said,
For us to know there's a comprehensive approach going on, that's a constructive theme for the markets.... It's in everyone's interest to take a stab at this and be good public citizens because if this problem keeps spreading, eventually it's going to engulf everybody.

In other words, "The invisible fist of the market is about to pummel us, so we better forget about free market competition and work collectively, outside of the economic paradigm, to resolve this social crisis." Milton Friedman's free market fundamentalism is dead.


Washington Post, Major Financial Players Map Out Lehman Options, September 14, 2008.



libhom said...

The funny thing is that it wouldn't be that tough to get the regulators back in working order. Setting legislation back to the pre-regulation forms, increasing budgets, and hiring the many disgruntled laid off Wall St. employees should give the teeth needed to clean things up.

GDAEman said...

"hiring the many disgruntled laid off Wall St. employees" to be regulators. Now I like that idea.