The Market, the State and the Credit Crunch

The government’s on-going public spending cull has got me thinking about the role of the state in a free market economy. My distaste for the free market is by now well documented. However, it is still very much the best option. The free market provides the greatest individual freedom, both positive and negative, of any economic system proposed. It allows the realisation of the individual in a way not found in any other. Within a free market, you can be whoever you want to be, do whatever you want to do. For that reason it is a necessity.

However, there is a down side. The free market was originally predicated on the idea that individuals will naturally do what is best for society, as what is good for society is good for them individually. It is a philosophy very much of its time, expressing an essential rationalist optimism about human nature common in the Enlightenment.

This is the foundation of the unfortunate assertion that “greed is good”. However, the systematic deregulation of the markets since Margaret Thatcher has shown unequivocally that this is not the case. Certain members of society abuse their freedom and act only for patently selfish ends. This is how we end up with mortgages sold to people who can’t afford them, and arms sold to terrorists and “rogue states” (to use an old-fashioned term). These are the abuses that led to the Credit Crunch (to use another).

In a free market, the state should act as a counterbalance to the market, to regulate its worst excesses and provide the essential services from which profit cannot be gained, or which would be diluted or corrupted by the pursuit of profit: health, education, justice and defence.

It is this conception of the state that has got lost somewhere along the neo-liberal way. Instead, the state is seen as a facilitator for the market, to create an environment conducive to good business. This is to a certain extent true. But the state should be the gardener, not the garden. After all, what is the state but the representative of the people? And what is the market but a disparate collection of individuals acting toward their own ends?

The free market is undoubtedly the best economic system on offer, but not without the counter-weight of the state. It’s time to wake from the neo-liberal dream and remember that.

The problem with life is…some people are only out for themselves.

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About Nick

I love music, vinyl, tube equipment, guitars. I love books, politics, science and philosophy. I'm cautiously in love with the internet.
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