“I have found a flaw in free markets”. Wow

It is almost like live blogging as history is being made right in front of our eyes- today we have Allen Greenspan admitting that that he has finally found a flaw in the free- market system that he has believed to be working exceptionally well for the last 40 years.

It is one thing when the heathen criticize the neo- liberal assault, another when the gods themselves begin to doubt the divine.

Allen Greenspan: “I have found a flaw

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

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13 thoughts on ““I have found a flaw in free markets”. Wow

  1. ishwar

    After fukuyama’s article ‘The Fall of America, Inc.’ it is amusing to read Greenspan’s confessions. Very revealing… i am trying to remember a couplet:
    SAMAJHANE WALON KO HAI THODA SAA ISHAARAA,
    THODI SEE NAQAAB WE UTHAAYE HUE HAIN….

  2. hpx83

    I have, once again, only one question to ask :

    Why do you think there was a free market? Is a 50.000-page of regulation-market free? No. And thus, of course the system of Greenspan has collapsed. 50.000 pages of regulation + anti-market measures such as keeping the interest rate unnaturally low = Market collapse.

    But dont blame it on the “free market”, because there never was one.

  3. ishwar

    hpx83: Can there be ‘regulated freedom’?

    An individual is free or unfree only within a CONTEXT. So at the outset these are the contexts which determine the character and quality of one’s freedom. > and this is universal rule… because there is not one individual in the world, but individuals. Moreover individual always menifests personal and societal RELATIONS( voluntary or unvoluntary)…

    Who will defend me if my freedom will be obstructed by someone else (suppose some gunda/ rougue.)
    …. Someone would say LAW.
    But then, if some law regulates my freedom, then how could it genuinly be the freedom?…This is the paradox of freedom.

    As legal freedom is always a regulated freedom, the freedom of market, trader or captialism is always bound by the economic RULES of capitalism

    Now a postmodernist or alike would jump to the conclusion that
    1. freedom is a fictious thing.
    Or 2. every thing either equally free or unfree. Partial freedom is no freedom and as there cannot be any absolutely freedom, so there is no freedom. OR there can only be an ideal of freedom{ or idea of free person, idea (or ideal)of free market… always at distance to achieve…}

    But those feel that they are not relativist…can still talk about freedom, and can see the varying degrees of freedom…

    –It is true that every market is, in a sense, a regulated market……but a regulation can encourage of discourage the freedom of marketees…That’s why there is two conflicting ideologies of free market and of regulation

    Open competion, race of greed, flourishing of market can not be achieved now without STATE’s helping hand. ..otherwise impulses of socialisation would be encouraged….

    This is the paradox… more free market can be possible now in more anti-people regimes, by more national and international regulations (think of IMF and WTO…)

    A more free society cannot possible without curbing ‘freedom’ of market!!!

  4. hpx83

    One should separate between human beings and economic actions. As for human beings, of course one could argue that the limitation that one “may not impose on someone elses freedom” makes you not free. However if there is one “freedom” any sane person would be willing to give up, it is the “freedom” to impose on someone elses freedom.

    The regulation of markets is something completely different. A regulation can never encourage the freedom of markets, because a regulation is a direct attack on the freedom of markets. This kind of thinking comes from the idea that markets should be “regulated into stability”. Let me ask you this :

    A person comes to the hospital with a slight caugh and sneeze. The doctor makes his best guesses and prescribes some pills. The next day, the patient is feeling acutely worse, with new symptoms and new problems. What should the doctor do?
    1. Nothing
    2. Prescribe more pills
    3. Take the patient off the pills, because they are making the stituation worse.

    This analogy is of course not ideal – there are good medicins out there, but no good regulations. However it pretty clearly paints the picture I would like to visualize – most people go for option 2, and regulate the regulations. Some people believe in the “self-healing” force of markets, which does not work as it should under regulation. Nevertheless, they choose to do nothing (1). Finally, there are people like me, who after seeing the effect of regulations decide that the regulations themselves is at the core of the problem, and opt for removing them.

  5. ishwar

    hpx83: It seems that you agree that unregulated freedom is a myth. But you insist that this should be applied only to human beings as economic relations are altogether different entities.

    There is a irony that you gave an example of a “person” in support of your argument. If economic relations and human persons are exclusionary entities than why an example of a person.
    One can argue that this not an example of a person, as this related to MEDICAL SYSTEM.
    Well, I concede that every person is linked to enextricably web of relations. Often we name these relations as legal, social, economic, political, etc. Society per se can be called the ensemble of these relations. Medical relations…indicate to complex interconnection between patients, doctors, drug industries, para medicals, medical discourses, social beliefs about diseases etc..

    What is the difference between human beings and economic actions?
    One difference is economic entities, relations and actions are not generated and sustained by the FREE WILL of singleor many human beings, but taken place in a CHAIN (please take its both meanings) of events, actions and counter-actions…
    Every economic relations and actions have some history and determined by various force of circumstances. Market too has history.
    Are Market as institution completely autonomous of political, legal relations of the time?
    Can Market ever be free from the CLASS RELATIONS ?
    Can market be free from human beings…buyers, sellers, distributors and mediators…… ??
    If you are a seller and I m a buyer. What is the gurrantee that you will not impose youf freedom to me? If two sellers quarrel with each other who will mediate?
    Are market free from ETHICS and MORALITY?
    If not, then who will be the ARBITRATOR? And regulator?

    The distinction between human individual and (non-human) social structure/ institutions is only for anlytical convenience…. Exclusionaru freedom and self-regulation of some entity are PHILOSOPHICAL myths, which cannot be explained by autonomous economic or market theories……

  6. hpx83

    I would not say that unregulated freedom is a myth. In an ideal society, participation should be volountary. I would argue however that some sort of minimal government would always be created (voluntarily). Because once a society realizes that a small fraction of its citizens are not interested in respecting other peoples freedom, only acting out their own, the society will realize the need for law enforcement. Law enforcement in itself unfortunately seems to require the participation of the vast majority to work, so I guess the ideal society would here be split into a “minimal government”-fraction that volountarily creates a government, and a “completely free”-fraction that do not wish any government at all. I strongly believe that the “completely free”-fraction would over time join the other fraction, but this is not important – as long as the “minimal government”-fraction join it volountarily.

    The difference between human beings and economic actions is pretty simple. The first creates the second. Markets and economic actions do not have a will of their own – they reflect the will of their actors. And no – the _free_ market is not lacking ethics and morality. It’s ethics and morality states that all transactions should be volountary – which is the only ethics and morality it needs. This will efficiently guarantee that no actors wishes will take precedence over another’s – they have to go hand in hand or no transactions are possible.

    If you think that distinction between human individuals and social structures/institutions are only for analytical convenience, then you have no free will, nor do you wish to have any. You consider yourself belonging to the hive mind, and do not wish the responsibility of your own life. Whether self-regulation is a myth or not is irrelevant – the free market does not need any kind of regulation.

  7. ishwar

    Yes, self-REGULATION is the best kind of regulation.
    Minimal GOVERNMENT is welcome. Self- governance is the final dream.
    But capitalist mode of production (with its basic contradiction of socialisation of production process and privatisation of appropriation..) is a big impediment in the path of self- governance of the masses.
    Self-governance of MASSES cannot be achieved without the abolition of CLASSES.
    Freedom from oppressive structures is the prerequesite of the Ethics of Freedom.

    It seems that your vision of free market is not the vision of capitalist market. It would really be interesting if you provide some idea. I heard that many persons want to integrate socialism/ self-governance with mecanism of market.

    Does the category of free market consist of sphere of production?

    All the epestemological categories and especially dichotomies are only our vehicle for grasping reality. Individual and Structure is really such kind of dichotomy, which should be replaced by more nuanced notion such as structuration (Anthony Giddens), morphogenesis (M.Archer).
    Action and structure as different categories not only presuppose, but also interpenetrate one another.
    This approach also trancendes the dichotomy of voluntarism and determinism.
    Dialectical thought also trancendes the dichotomy of subject and object.

  8. hpx83

    Yes, self-REGULATION is the best kind of regulation.
    Minimal GOVERNMENT is welcome. Self- governance is the final dream.
    But capitalist mode of production (with its basic contradiction of socialisation of production process and privatisation of appropriation..) is a big impediment in the path of self- governance of the masses.

    [Which basic contradiction? How does capitalist production “socialize the production process and privatise appropriation”. Please explain.]

    Self-governance of MASSES cannot be achieved without the abolition of CLASSES.
    Freedom from oppressive structures is the prerequesite of the Ethics of Freedom.

    [What do you mean by CLASSES? What are the “oppressive structures”? Who wrote the “Ethics of Freedom”]

    It seems that your vision of free market is not the vision of capitalist market. It would really be interesting if you provide some idea. I heard that many persons want to integrate socialism/ self-governance with mecanism of market.

    [I do not need a “vision” of a free market. A free market is just that – free. No regulation, only volountary transactions between people. That is a free, capitalist market. The attempts to integrate socialism with the mechanisms of markets have been going on for decades, almost a century. The current financial crisis is the result.]

    Does the category of free market consist of sphere of production?

    [The free market consists of anyone who wishes to trade with anyone else, and the goods and services they trade]

    All the epestemological categories and especially dichotomies are only our vehicle for grasping reality. Individual and Structure is really such kind of dichotomy, which should be replaced by more nuanced notion such as structuration (Anthony Giddens), morphogenesis (M.Archer).

    Action and structure as different categories not only presuppose, but also interpenetrate one another.
    This approach also trancendes the dichotomy of voluntarism and determinism.
    Dialectical thought also trancendes the dichotomy of subject and object.

    [I do not believe in making things overly complicated. I am an individual. A group is a set of individuals that share a common attribute. That which performs an action is the subject, that which an action is performed on is the object. I do not see how this in any way interpenetrates/transcendes/determins any presupposition/dichotomy/dialectical thought, and I definitely do not see what it has to do with our discussion. If you wish to pursue this line of thought, then you’d better explain what it has to do with the difference between a social institution/structure and an individual, because currently I see none what-so-ever. But of course I have never taken any class in the dysfunctional, illogical, anti-conceptual philosophies that exist these days, nor will I ever. I believe in logic.]

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