The Economist says that many of the charges of socialism directed at financial regulation are misplaced. Such regulation has been a normal part of the American economy for more than fifty years and was in effect during the height of the cold war.

Apparently all over the United States, charges of socialism and communism are bandied about as if Soviet style governing committees has sprung up all over the United States. Ironically, many of these same individuals are worried by the specter of Sharia law, not a likely possibility and fully contradictory to a anti religious Marxism. The latest and quite possibly strangest concept of all is liberal facism. Liberals were opposed to both Italian and German fascism early on and paid for it in blood. Yet the example of their courage to the point of sacrificing everything has no effect on the current dialogue. It is okay to affiliate one of the opposing belief systems that brought down Nazism because the phrase, National Socialist, has the word, socialist, in it? Is that academic analysis? Does that bespeak intelligence? Or judgment?

Read what the Economist has to say.

From the Economist –

The Economist is in favour of free markets, but both words are important. If banks are too big to fail, then their cost of capital is implicitly subsidised. This creates barriers to entry and encourages risk-taking at the taxpayers’ expense; the market is thus not truly free. In an ideal world, we ought to be able to let banks fail in the same way that we let widget manufacturers fail. But since bank failures have a devastating economic impact, we need to have some approach to regulating them. Markets also have externalities, a concept long established in academia; a chemical company cannot be free to pollute a river, for example.

To say that any further regulation is socialism, or that any consideration of inequality is misguided, seems wilfully blind. If banks earn huge profits, and their traders huge bonuses, only because of an implicit state subsidy, that seems a legitimate matter of public concern. For those who believe this is the road to Cuba, one might easily respond that the other camp is on the road to 18th century France, where wealth was concentrated in the hands of a tiny, hereditary elite. A gross caricature? No more than the Cuba example. After all, the evidence suggests that social mobility is falling in America and Britain, probably because the wealthy can gain advantages for their offspring via private education.

The issues of education, a level playing field and “too big to fail” are not going away. The issue of whether to regulate or not to regulate is a legitimate one. There is no religious imperative to not regulate. The same people who say that Marxism failed and would have failed no matter how it was practiced are unwilling to believe the same thing about unregulated markets, but the evidence is clear. Unregulated markets are inherently predatory. There is no historical example that can be pointed to where this was not the case.

Market choice and regulation are choices of policy. They require intelligence to apply. They are not matters of faith.

James Pilant