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Over-reliance on Market Forces - Mo's Journal
September 12th, 2008
03:11 pm

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Over-reliance on Market Forces
I think that the fundamental problem with American culture today is over-reliance on market forces to meet needs that government ought to be meeting. There's this erroneous romantic view of the the markets, the sense in the US that markets can solve all problems and contribute to none. It used to be a far right view but it has come to be a very widespread one. I see that as the sad legacy of the Reagan Revolution, and of the Clintonian Accommodation to it. Eight years of GWB has only made it worse and a McCain presidency will be disastrous in this area, as well as many others. I certainly hope an Obama presidency will begin to turn it around.

Here's how I see it:

* Market forces lead to solutions to various problems that benefit individuals, but are detrimental to society as a whole. Cars are a great example – from an individual POV, it's great to have private transportation that's completely within your control and available at all times. From a societal POV it's terrible to have a wasteful, environmentally hostile method that kills 40,000 Americans a year. But without a government-supported railway system and federally supported municipal transportation, only very high traffic routes and very high density municipalities have the more efficient public transit, so it becomes more necessary for individuals to have cars.

* Market forces tend lead to solutions that work well in the short term but poorly in the long run - quick money rather than long investment. Areas that require long investment before they show monetary return (education, public health promotion, pure science) are neglected. Downsides of short term solutions (e.g. environmental impact of industrial activity) are not adequately considered.

* Market forces tend to favor lots of intellectual and financial resources geared towards making money out of the markets themselves, with no underlying value, rather than pouring those resources into true advances. People (very few) make money out of money rather than out of production of useful things or useful ideas. Without regulation, the making money out of money becomes more and more speculative and eventually the bottom drops out. This is as true of the current mortgage crisis as it was of the stock market crash in 1929.

* Market forces tend towards the tyranny of the economically able. The voices and needs of the poor are given short shrift, and that increases the divide between rich and poor.

* Market forces don't work to meet the needs of the society because what makes money for corporations doesn't necessarily make for happier, healthier, more fulfilled people or for a more cooperative and better functioning society.

* Market forces tend towards remedies rather than prevention often (e.g. more money can be made from treatment of complications of diabetes than from teaching health habits to avoid complications).

* Market forces tend towards monopoly rather than the "healthy competition" the market enthusiasts/romantics say they will. Without vigorous government regulation and oversight the big guys eat up the little ones and there is no healthy competition. Over-reliance on the romance of the market leads to gutting of anti-trust.

* It's in society's interest to provide basic services to all but it's not always in corporate interest. If companies providing basic services are not regulated, including the requirement that they provide to all of society, segments of the population get left out (e.g. communities that don't have banks or redlining if they do, transportation that doesn't cover areas that don't have a lot of money to pay, etc).

Thoughts?

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From:executrix
Date:September 12th, 2008 08:04 pm (UTC)
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Agreed! My formulation is that for things where there's a reasonable chance of earning a profit, then the market (...subject to regulation for, e.g., safe products and sustainable economic impact) should be allowed to work, either alone or in competition with government (so that you could choose either public or private systems, the way you can send kids to public or private school). But it's even stupid in the short run to just ignore the things that the market refuses to do because there's no potential for profit. Because you can't drive your SUV across the bridge after the bridge collapses, and if there's a plague you may or may not be able to get treatment (there may or may not BE a treatment) but you can't escape being infected.
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From:gaelushawk
Date:September 12th, 2008 08:28 pm (UTC)
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oh, yes, sadly, is a disease that my country also suffers...
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From:lilacsigil
Date:September 13th, 2008 05:40 am (UTC)
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Agreed. Australia has been tilting more to the American/corporate side of things in the last decade, and I'm really hoping the Rudd government tilts it back. Healthcare is the big one, of course - no-one wants to have to buy it, and it's vastly more efficient when administered by governments rather than private enterprise, and I really hope the US can get its act together on that one. Good luck - the rest of the world has its fingers crossed for you.
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From:mofic
Date:September 13th, 2008 12:29 pm (UTC)
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Thanks! I just used health care as an example to st_crispins. The fear of "socialized medicine" is completely irrational but so pervasive here.
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From:st_crispins
Date:September 13th, 2008 12:50 pm (UTC)
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Yup. I think that's one of the hangovers from McCarthyism and perhaps the Reagan era as well. They made the word 'socialism' a boogeyman and now folks are afraid of it.

But our best social programs ---like Social Security ---are forms of socialism. FDR, capitalist rich guy that he was, wasn't afraid of a little experimenting, a little mix and match.

But people forget...
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From:st_crispins
Date:September 13th, 2008 12:04 pm (UTC)
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Sure. Capitalism is a form of Social Darwinism, and that's not a good thing from a social justice POV.

But unfortunately, the alternative ---Marxism ---comes with its own baggage and doesn't work either.

That's why we need govt. regulation on market forces.

Edited at 2008-09-13 12:06 pm (UTC)
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From:mofic
Date:September 13th, 2008 12:28 pm (UTC)
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I agree we need government regulation on market forces in a number of areas. As a former bank regulator, I see the current mortgage crisis (as well as several previous economic ills) as directly resulting from deregulation.

We also need to carefully think through which activities rightfully should be done by the government. There are economies of scale and coverage issues for a lot of activities, where it's cheaper and more effective if government run and publicly funded, because it's in society's interest for everyone to be covered.

Nobody thinks, for example, that each homeowner should have his/her own fire department or that it should be a choice whether to subscribe to it, because if one house burns down because the owner couldn't or wouldn't pay the subscription then likely so will many of the neighbors'. But that's equally true of health care - society needs to provide it to all and to insist that all contribute because the lack affects all. But the fear that any public ownership and public provision of such is "Marxist" is what has stopped it from happening in this country, making our health care delivery system extraordinarily inefficient. The Big Lie is that markets are always more efficient.
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From:executrix
Date:September 13th, 2008 12:38 pm (UTC)

Bill Gates Walks Into a Barroom...

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Replying to mofic and st_crispins: a country's political and economic systems are never entirely separate, but they're not the same thing either, and I see the real problem of Communist states is not the economic inefficiency of Marxism but their cheerful willingness to massacre, imprison, and torture many of their citizens to keep the rest in subjection.

The economic well-being of people in a society depends not just on the society's GDP but on how it's shared. It doesn't make it any easier to pay *your* health insurance bill, or put gas in your car, or food on the table, just because a billionaire has moved into town so the "average" income is now a gazillion dollars. (Sorta like the six-foot-tall economist who drowned in a pond with an average depth of one foot.)
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From:st_crispins
Date:September 13th, 2008 12:48 pm (UTC)

Re: Bill Gates Walks Into a Barroom...

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I see the real problem of Communist states is not the economic inefficiency of Marxism but their cheerful willingness to massacre, imprison, and torture many of their citizens to keep the rest in subjection.

I studied Marxism in college and there was nothing in Marx's theory about massacre, imprisonment and torture. :) That got added later.

No system works perfectly, and the ideal is probably some combination of socialism and capitalism that keeps the extremes of both in check.

The problem is getting the balance. But if you look back in history, we've had this from the beginning with the federalists vs the social democrats (Hamilton vs Jefferson).


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From:st_crispins
Date:September 13th, 2008 12:44 pm (UTC)
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Oh, I agree. And I wasn't using Marxism as a negative. I think socialism is a good thing ---in its pure form though, it doesn't work because people are selfish.

I think overall the problem is that folks don't always act rationally but they often act selfishly (and that's probably in our DNA). We're not always good with the long view ---and that's true, unfortunately, of our political leaders as well.
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