Interior Dialogue

Market fundamentalism holds that market failures result from misguided or excessive regulation. Deregulation, that is, leaving markets unencumbered by government intervention leads to the best and most efficient allocation of resources.

The criticism of bureaucratic meddling in the economy is based on the argument that even though bureaucracies are created to serve the public, they tend to increase their power beyond their mandate. They take on a life of their own, and start defending their own interests instead of the interests of the public, leading to inefficient allocation of resources. The result is that rather than the bureaucracy working to serve the citizen, it is the citizen who ends up working to serve the bureaucracy.

The first (and classic) criticism that may be brought against this view is that deregulation does not necessarily lead to what market fundamentalists call a “free market”. In order for a market to function a set of rules must be enforced, such as the rule that once committed to the rules of a contract, one must respect them. Markets are not known to exist in any environment without a strong central authority guaranteeing a set of basic rules. Examples are lawless tribal areas in several regions of the world, as well as historical circumstances such as pre-Columbian North America. It is hardly tenable to claim that the economic system of pre-Columbian North America, which lacked any kind of government, was an optimal allocation of the resources of the continent. Thus when market fundamentalists talk about deregulation, that’s not what they really mean. What they mean is this: “we want the kind of regulation that allows us to make as much money as possible”. However, they never specify the details of the regulation they require. Thus the debate continues, and the only two real arguments a market fundamentalist has ever had are
A. “this particular piece of regulation is bad because in this particular instance it prevented me from making this amount of money”
and
B. “communism failed so government regulation is bad”.

The first argument is too narrow in time, taking into account only conditions in a very specific set of circumstances, and the second argument is far too broad, since even the most overzealous government bureaucrat in the Western world today would never dream of seriously proposing a communist economic reform.

But perhaps an even more important, second criticism of market fundamentalism is that markets are just as capable as bureaucracies of falling into self-serving spirals. Markets also may become ends rather than means, where rather than serving the consumer, it is the consumer that ends up serving the market.

An excellent example of this extreme situation is the massive bailout plan proposed by the Bush administration this weekend. This plan basically requires American consumers to hand over a blank check of over 1.2 trillion dollars (700 billion, plus the 500 billion already committed) in order to keep the market alive. The circle is complete. The consumer now officially serves the financial system (i.e. the market), rather than the financial system being in the service of the consumer.

This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 Unported License. Alexandru Ioan Căbuz 2008.