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Regulating or not regulating the economy-

by on 14/08/2013

The major and very first political-economic question is not if the best system to coordinate the economy is the markets or the politically motivated regulations. Also the question is not  who runs the economy the private entities, or the political entity. Both this systems and instruments have their advantages and defects.

Just to mention the very first and most important ones;

Markets are absolutely unable to cope with long term problems, viz. their failure to handle the environment catastrophe overwhelming and endangering the human existence. On the other hand the politically motivated  governments proved to be again and again totally incompetent to manage efficiently an economic entity. But even if the government policy is not to interfere in the functions of the markets, and its actions are of a regulator and not as direct manager, its management system is centralized by its character. Eventually the decision process of all the governments is concentrating in very few hands This is the reason why the governments fail again and again to recognize the difference between the issues that serve the interests of wide general public and those that serve interests of particular group of people. At certain period of establishing its rule, the politically chosen government officials will be influenced more and more by their personal inclinations and at the end of the day prefer the particular interests and not the general ones.

Yet these major defects of the two systems are just cover up of the real problem both economic systems have, the difficulty to cope with; “How to create a system of continuous self destruction and rebirth, without to fall into too big calamities”. While the market economy followers claim that it has composed in its system the law of orderly default, the believers in the politically managed system claim that tight regulation and supervision is the tool to ensure clean and smooth continuous revival. Yet we all know both systems brought the economy many times to absolute collapse. The politically managed system, was in continuous collapse since its very beginning, until it was finally dispersed  in 1992, the market system came to brink of collapse in 1929 and evidently again in 2008. (We still don’t know when and how will this last crisis end).

When the both systems show signs of weakness, the usual response is, “The rules of the system were not implemented rigorously enough”. I would prefer if the signs of weakness would be checked inwardly in the system and not outwardly in rejecting dogmatically any combination of the two systems. If someone says the market economy failed because it didn’t implement rigorously its principles, by introducing some government regulations it is stuck in a dogma as kind of  religion.

Since every political system is a centralized system with few individuals on top of the political hierarchy, which is truth in any kind of political system (except maybe of the cantonised Switzerland with all the referendums, that doesn’t need real governance, since its economy is based on bank deposits of thieves, burglars and other kind of scoundrels,) it shouldn’t surprise us that the politicians tend to associate with the few at the top of the economic hierarchy. In the modern history the cure to this phenomena was centralizing also the economic system, with all the grave consequences it necessarily brings.  

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