The Chicago Tribune offers a solid editorial against the scapegoating of markets during the current financial crisis.
Although capitalism has shown its superiority to other systems, it has always had plenty of detractors. The meltdown in the financial sector is their latest excuse to assert the dangers of greed, the need for greater government regulation and the folly of unfettered commerce….
Markets, of course, consist of interactions among human beings, and any institution featuring people is bound to suffer from human fallibility. No one ever said markets were perfect at the tasks required for a functioning economy—only that they are generally superior to the alternative….
Focusing on greed is a mistake. As economist Lawrence White of the University of Missouri-St. Louis puts it, blaming greed for economic dislocations is like blaming gravity for airplane crashes: Greed and gravity are both ever-present. Wall Street traders are not more or less avaricious today than they were 10, 20 or 50 years ago.
Nor is lack of regulation the root of the problem. Among the alleged lapses is the 1999 repeal of the Depression-era Glass-Steagall Act, which forbade the mixing of commercial and investment banking. Removing that barrier, we are told, spurred commercial banks to get into such risky investments as subprime mortgages….
The demise of Glass-Steagall turns out to be a boon. Were it still around, Bank of America would not have been allowed to buy Merrill Lynch..
..Then there was the big role played by mortgage giants Fannie Mae and Freddie Mac, government-sponsored entities whose failure is a testament to the dangers of mixing public and private enterprise. Conservatives had long warned that the government’s implicit backing of these companies would someday mean a big bill for taxpayers. Guess what? They were right.
When this crisis has settled down, Congress and the president are welcome to consider if the experience indicates the need for some precise and prudent changes in the law governing financial institutions. But it’s more likely a careful examination will prove that the biggest failures were ones of too much government, not too little.
Locally, there’s already too much demonization of markets, and an unwillingness to admit that unrealistic regulations and impractical zoning restrictions have made life here worse. We are poorer, more backward, and less free because of failed local government policies.
Neighboring cities have less poverty; we are exceptional for a town of our resources in how much poverty we have.
Draconian enforcement is a bad idea and false promise.
It’s also a example of ignorance that some confuse specific businesses with markets. Government tries to pick winners by excluding presumed losers. Taxpayers are the true losers – subsidizing special-pleading companies is not a winning game for anyone except the companies.
Expect to hear some argue that national events justify greater regulation locally.
Calls for increased government intrusion into commerce do, in a way, unite national and local policy: it’s a bad idea in both cases.