Failure of Free Market Economics

A recent article in the NY Times concerns the increasing concern about our current Great Depression II, brought about by free market conservative, Republican economic policies. In the best tradition of “free market” economic policies, governments basically keep their hands off global trade, allowing the traders and the producers to decide themselves how best to devise both the markets and the supply sectors to optimally meet the needs of private business. Governments, it is held, only get in the way to stifle free trade, and render markets “inefficient.”

So, for at least eight years, we saw the growth of free-marketeering, including especially two activities: 1) investment banking, and 2) global outsourcing.

The first activity produced the real estate “bubble”, which burst cataclysmically, bringing down much of the global banking systems to the point that massive government intervention was required to avoid the worst form of a meltdown of the world’s financial systems.

The second activity has been growing for a long time, even under prior Democratic administrations (see Clinton and NAFTA). The net result of this activity is the creation of an economic system in which global trade is dominated by a single criterion—low cost. That criterion has virtually eliminated all others, e.g. quality, reliability, energy efficiency. And from the perspective of the United States that single criterion produced a massive shift of production sources from the US to other lower cost countries.

Within the US, that shift was disguised for a time by the housing bubble in which, as manufacturing shifted outside the US, reducing manufacturing employment, the real estate industry sucked up the available workforce. When the housing bubble broke, bringing the entire real estate industry to its knees, the workforce shrank almost immediately, delivering to our Nation the worst unemployment picture since the Great Depression of the 1930s. The handwringing now going on keeps pointing to the static employment market, which is the worst we have seen literally since the 1930s.

And the prospects look grim for the foreseeable future, precisely because global outsourcing has virtually eliminated the manufacturing base in the country. When was the last time you bought anything made in the US?

So, now our free marketers are beginning to yell for government intervention—specifically massive government investment in new industries (not yet subject to global outsourcing) such as clean energy, and other high tech infrastructure. So, do these same experts now admit that free market approaches basically don’t work and some mixed public-private economic system is required to stabilize the world’s economic systems? Well, no, of course not. They admit nothing. They simply want to be bailed out again, as was the case with the banking sector.

And what would happen if the President complied and attempted to go even further into debt to get us out of this employment-less recovery cycle? Well, in the best tradition of “No Good Deed Goes Unpunished”, the right wing extremists, currently in charge of the loyal opposition (aka Republican Party) would immediately trash him for fomenting a socialist takeover of the nation. So, go ahead and do the right thing Mr. President . . . if you dare.

And on another front, the Holy Roman Catholic Church in Scotland has weighed in on the immorality of the US, decrying the compassion shown by the Scottish government in releasing the Lockerbie Bomber, because he is dying (aren’t we all?). Really guys . . . the Catholic Church is lecturing us on morality and compassion?? Wow, that meets any definition of Chutzpah!