To what extent should govt meddle in the free market?

submitted by la_cues from (self.debatealtright)

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[–]StrategicTactic 1 insightful - 2 fun1 insightful - 1 fun2 insightful - 2 fun -  (2 children)

No.

I guess in some respects that doesn't really explain much does it. The moment the government "meddles" in a free market it is no longer free. Just a central planner cannot identify every single factor that drives an economy, so a government agent or agency cannot. All that you are left with are interests who can encourage certain regulations and payouts which always hurt someone. Since those who have the extra capital are usually the larger businesses, it almost always hurts the smaller business owners. It does not matter if you are talking about bailouts, certifications, or environmental regulations, ALL INTERFERENCE is bad for a "free" market. Once you start the interference, you no longer have a free market, and start on the slide to corporatism.

[–]literalotherkinNorm MacDonald Nationalism 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (1 child)

So in terms of interference in the 'free market' I'm wondering what your opinions on banking are. At the moment in most countries we have a system where the state allows and provides the opportunity for banks to loan out around 10 times their actual reserves -- last Basel agreement is a requirement for banks to posses no less than around 11 percent of actual capital to their loans.

So in a 'free market' there would absolutely be no state central bank as lender of last resort to allow a bank to create money out of thin air. A bank would just have to loan out whatever currency it possesses and no more.

Would you prefer that to the way the state meddles in the banking sector right now and could you tell me why you would or wouldn't?

[–]StrategicTactic 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

Banking as currently done in the US (and most other places) is abhorrent. People should not hold any place to be sacrosanct, and that includes banks. Creating money out of nothing drives the cost of all existing money down, which is the primary cause of inflation- the devaluing of existing currency.

I would prefer that the state have no hand at all in the market, which would include the banks. To allow an exemption for any business is to subsidize that business and not allow it to fail. By not failing, you have created a tiered society (economically at least) where those employed at XYZ company are never allowed to fail, even when they should from poor business practices, and all the other companies still suffer from their choices. This can get far worse when you factor in social costs, as now if a upper tier business decides to implement a policy that all X people are not treated the same, the government has to step in AGAIN, causing a ballooning government. In a free market, people would have a competitor they would go to and that XYZ company would start to fail.

The interference of government is the reason why the Great Depression of the 1930s lasted so long. FDR is hailed as a hero president in high schools eager to encourage socialist control of the market, and yet even a moderate economist can tell you that the New Deal only prolonged the recovery. It is a simple fact that there is no one on the planet that can fully identify every existing market force, let alone predict every future trend. The only way that is close to doing so is when the government has total control of the market- socialism.