Market Economy Needs Market Regulation
PHOTO/COURTESY
John Bassett is the president of Clark University.
A recent cover story in Newsweek read: “We are all socialists now.” My friends on the left said, “How silly, when government is just bailing out capitalists and letting unemployment rise rather than making real changes to an unjust system.”
My friends on the right said, “Aha! Obama is turning this country toward socialism.”
Truth be told, outside of a few marginalized countries, all substantial economies today are market-driven and allow significant concentration of wealth as both a private incentive and as a tool for economic growth.
Political Partinsanship
Where nations differ is in the degree of government market regulation. In purportedly communist countries like China and Vietnam, the arm of a single-party system can regulate and control with little restraint. Yet both of those nations are savvy enough to let their business people invest, build, buy, and sell successfully in western and eastern economies.
In some democratic European countries, the level of regulation—and often taxation—can be high because the culture has decided upon trade-offs.
American capitalism has depended to a great extent on global investors’ confidence that the Securities and Exchange Commission could effectively oversee the world of securities.
Since 2000 it has been less able to do so, and in fact there is evidence that one agent tried long ago to blow the whistle on Bernie Madoff, only to find a home office unable or unwilling to follow up on the lead. It is no surprise that subprime mortgages, overextended banks, and a crisis of investor confidence signify that the system is now broken.
The larger problem is that America’s political and economic dialogues are disconnected. To win an election, a political candidate need only get his opponent labeled a “socialist” or a “greedy hog” (read capitalist), demand tariffs on incoming products to protect jobs, insist on curbing executive pay, or push some other hot button for his or her constituents.
The actual economic issues may be more complicated than the election dialogue implies. Free trade and the resulting lower prices are better for all Americans except those losing jobs because of it.
Were free trade agreements coupled with retraining and re-education programs, the political capital of protectionism would be reduced. Regulation and oversight can be the best friend of markets when adequately funded. Under those circumstances, the playing field remains level and the market can run according to civilized rules. Without those rules, the market can be as savage as the tyrannies we most despise.
If this economic crisis is to be remembered as an opportunity, it will be because Americans learned to break down sacred political dividers and to rethink their economic concerns more pragmatically; to discard terms like “socialism” and “capitalism” in any absolute sense; and to re-establish a market economy with levels of regulation that help the market function most effectively.
Invariably, politics trump economics in our legislatures, and lobbying trumps wisdom. But if we could put aside old, partisan habits in order to rebuild a national bipartisan dialogue, at the very least we could connect our political discourse more relevantly to the crucial economic realities of our times.
John Bassett is the president of Clark University. He can be reached at jbassett@clarku.edu.
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