Wednesday, January 18, 2012

Capitalism run amok ...

I think I was supposed to go dark today. Hey, I have enough trouble keeping my passwords straight, bringing down my blog temporarily would be near impossible. And would my two readers notice .... (Car talk reference, right?)

When I was in college thirty some years ago, studying economics, it was simply understood that if there was a problem, like, say, air pollution, the government needed to address it. After all, one of the basic components of capitalism is (private) property rights. If you dump a bag of garbage on my lawn, I will take you to court. But if your factory spews smoke out, who takes you to court? Who "owns" the air, or the water? So the government has to step in. A slightly more complicated case involves, say, companies that get "too big to fail". When you think about it, too big to fail means that if a big bank fails, a lot of people get real hurt. In the case of the recent financial meltdown, the collapse of Lehman Brothers because of the toxic assets of the same type that were held by other big banks sent a shiver of panic through the financial industry. So the failure of a big bank can harm not only its own depositors, but also start a domino effect in the industry.

These problems I describe are in fact problems of distortions of the free market, where either companies are unable to find a price for a negative byproduct of production (pollution) or companies getting so large as to reduce real competition to almost nothing. That they occur pretty much indicates how the free market is unable to address these problems, and for the longest time were considered to be the responsibility of the government. That was the automatic assumption in the halls of academia in the early eighties.

But now a-days Republicans say that there are too many regulations,and that wealthy people drive job creation in this country. Sorta the opposite of what I learned when I was young.
But that leads some to say the private industry successes of a Mitt Romeny inform and improve his (potential) performance as President. But maybe we should see some (or all) of the actions Romney took in any given private sector situation as showing some sort of success.

Reuters filed this report (In the spirit of not being an online pirate ... I forget where I got this from, I thought it was Greenwald, but as far as I can see Greenwald is mostly only pointing out Chris Dodd's current hypocrisy).

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