AxeMental wrote:Your going to use the banking industry as an example of the entire free market going to pot?
Sure I am.
Margaret Thatcher deregulated our banking industry and removed the proper government controls that enabled the market to function. It's taken 25 years for those particular chickens to come home to roost, but with hindsight, they were always going to.
The free market can only function in a properly-regulated environment, where the government controls the natural behaviour of a profit-seeking board by preventing monopolistic, untruthful, exploitative or unacceptably high-risk business strategies from people who rely on statutory protection from liability.
I see the following fundamental flaws with Western capitalism.
First, a company's shareholders should be able to exert reasonable control over the board--but because, in modern capitalism, shareholders are likely to be pension funds and investment trusts rather than private individuals who know and care about the business they have a stake in, an important control over the board has been lost and company directors are insufficiently accountable.
Second, governments exert much stronger controls over trade unions than they do over corporations. This means the unions are emasculated in terms of their proper role in preventing exploitative behaviour; and instead, the government relies on statutory bodies and legislation to do things like setting minimum wages or preventing monopolies. In fact, unions consisting of people who actually work in the relevant industry should shoulder more of the burden there and governments should take less.
Third, despite their pretended anti-monopolistic legislation, our governments have allowed some businesses to get too big, or too vital, to fail, which forces the taxpayer to be the guarantor of last resort, enabling banks and financial firms to run unacceptable risks. To me, it's blindingly obvious that if a business is so important the taxpayer can't let it fail, then the taxpayer should own it; and it should be run for the benefit of the taxpayer. In other words, I'm in favour of compulsory nationalisation for any business that the taxpayer has to bail out--and the government should take ownership of the shares by means of confiscation rather than purchase (so neither directors nor shareholders receive any financial reward from that business once the taxpayer's had to take it over).
And then the board should be imprisoned for dereliction. This would probably mean new legislation to make the board of a company accountable for any burden its activities inflict on the taxpayer.
After nationalisation the government should subdivide the business into pieces that are small enough to be allowed to fail without taxpayer intervention and then sell it off in an attempt to recoup its losses.
Fourth, businesses are permitted to circumvent the natural workings of the free market in too many ways. For example, they're allowed to sell products so complicated and non-transparent that only a specialist can understand them. (Good examples of this kind of thing are pensions, mortgages and investments, where the competence of the fund managers and the charging structure to the investor are very far from transparent).
In fact, overall, the free market works for products like carrots or potatoes or beer, where both buyer and seller can be presumed to have perfect information about the product. It works less well for products where the customer has to rely on the seller for information, because sellers conceal important truths.
So in my opinion the free market can ONLY function in a properly-regulated environment. Which is what we don't have, and in the UK it would take a sharp lurch to the left to achieve it.
