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Thursday, 23 October 2008

Free markets and deregulation

My friend Alan testifying on Capitol Hill

23 October 2008 - "I have found a flaw" so said the great maestro of the free market. I couldn't help to say I felt sorry for Alan Greenspan who could not defend the laissez faire economy last night. Alan admit that his belief and ideology in the system of self-interest is not absolute in bringing a viable economic ground in the case of financial sector. 

Even though it is heartbreaking for me to watch Alan testimonials on the defect of the laissez faire system last night, I still believe that free market system is the best system in creating a better economic well being for the mankind. What happened in the credit default swaps catastrophe was that the nature of the system itself went into a rectifying mode by bringing down the whole bulk of the "reckless gambler" and its institutions. I can't blame the market economies for bringing this large institutions down to the drain because it merely do what the system was destined to do which is punishing the reckless players for its inefficiency in forecasting the future market for housing properties. 

But indeed this punishment came in with enormous numbers and would bring a long winter in the credit markets. I myself had been bombed by critics of the Capitalism ideology and it seems hard to counter these critics at this point of time when the free market system is in a state of default itself. Let's hope there is a positive outcome from this crash perhaps in evolving the banking sector to be more responsible in self-regulations for the next 100 years perhaps. 


hassan amir said...

market economies serve only one master- ever increasing profit margins. the financial crisis could have a silver lining if it made the financial institutions more transparent, accountable, less eager to gamble with peoples' money and if it sorted out the bad eggs. but the lesson to be learnt, i believe, is that government oversight, advice, intervention and control has to be made more foolproof, more proactive rather than reactive and it has to be sustainable. financial bailouts across the board maybe the short term panacea, but is it really the solution?
this crisis compels us to ponder whether the governments should play a more regulatory role in the economies, and especially in the financial sector.

Faizal Zakaria's Blog said...

Failure :-(
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Teddy said...
This comment has been removed by the author.
Teddy said...

yeah, i agree with u hassan. some rethinking need to be done in regulatory framework in need of responsible capitalism players. It would be a tough work when living in a capitalism world where strict regulations in market economies is a big no no is very hard to chew especially in terms of market liberalization. but i guess in financial sector its a whole different ball game where u can make money out of nothing and gamble with peoples money and their risk.

I want to back up my recent statement why Capitalism will bring larger freedom and democracy to the people... i think Muthiah Alagappa say it best in his work - The National Security of Developing States and I highly recommend the book especially in detailing how the elite were manipulating the economic security to emphasize ones personal goal. I still believe market economies is the best system in bringing freedom and better well being.

hassan amir said...

one of the most cynical remarks aimed at Obama in the recent days is that he is trying to steer US towards 'Socialism' (which is erroneous). Responsibility, accountability, transparency and morality has to be there. in the mdern world, when economic might is linked directly to a states' national security and international prestige, to let it crumble due to the actions of irresponsible entrepreneurs is tantamount to a breach of national security.
US was rocked to its very core when USSR undermined its national security in 1962, when it based nuclear missiles in Cuba. now, US owes more than US$ 1 trillion in debt, more than US$500 billion to China alone. it is inconcievable to think that US could still maintain the same international presence in the face of such bankruptcy, thus it becomes a matter of national security for US.

Capitalism, in my view, favors the efficient and the hard working, and punishes the lazy.
private ownership of property can lead the way to the establishment of huge fortunes by single individuals, while the less fortunate, less efficient and less connected are relegated to the status of second class citizens. the rise of coffee barons, oil sheiks, landowners and industrial tycoons promoted the industrial development of the third world...but did it really bring about greater democracy or freedom for the people...of Africa?...Indian peasants?

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