This is an absolutely terrible article!

Yep, the author has the same old blind spot that I’ve picked authors up on many times on OLO;

He can only see an economic system that is predicated on continuous and never-ending growth…and at a very considerable rate; well in excess of 3% per annum, in an era when we need to be acutely aware of the folly of expanding economic activity, of human expansionism per se, and of our overall effect on the planet’s resource base and environment... and on our own future.

Ok, I guess that at about this point Dr Hartwich has turned away from my comments, rolled his eyes and passed me off as some extreme leftwing greenie tree-hugger! (;>\

Based on the necessity for humanity to very quickly steer itself towards a sustainable existence, what is the better system, a free market or a strong regulatory regime?

The answer is crystal clear – strong government control.

I hope to goodness that the current global fiscal dilemma will engender a regime of much-improved government regulation of economic matters. It is certainly looking that way.

However, it has got to be the right sort of intervention….and that is not looking too crash hot. All indications are that a regime of continuous quite rapid growth is being propped up and that any thought of slowing economies down or of strongly focussing on the technological innovation side of growth and moving away from the increasing resource exploitation side…let alone declaring limits to growth…are still not even within the mindsets of economists and politicians.

Even so, there has got to be greater hope for the achievement of a sustainable future with strong government regulation than with a relatively unfettered market-forces regime.

The author's comments about central banks seem poorly informed. For example, a look at Wikipedia shows that the US Federal Reserve System, the USA's central banking system, is fundamentally different from a central bank controlled by a socialist state:

Structure of The Federal Reserve System
http://en.wikipedia.org/wiki/Federal_Reserve_System

"Independent within government

The Federal Reserve System is considered to be an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive branch of government.

The System is, however, subject to oversight by the U.S. Congress.

The Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government; therefore, the description of the System as “independent within the government” is more accurate.

[see] (http://www.federalreserve.gov/pf/pdf/pf_1.pdf)"

Oversight by the US Congress is hardly "hands on the tiller" by radical socialists, or even left-of-centre politicians. My general impression, (sorry to break the consensus) is that the Fed has largely been controlled by the big investment banks in the US. Show me I'm wrong, and I'll correct my impression.

Get a grip, Oliver. And show you know a bit more about what you are supposedly analysing.

Hiyah, Ludwig, mate.

Not really a full bottle on the subject myself, but do have a good knowledge of philosophical history, which does bring in Adam Smith, so-called father of the free-market.

In my own words, it seems Smith, though favouring competition,
did talk about the difference between need and greed.

Smith thus as also a philosopher does point out, that though freedom was necessary for the entrepreneur to ply his way for the good of the nation, it still needed strong and sensible government to have laws to protect the need for competition from overmuch human greed.

Simply means, Ludwig, that the term economic deregulation itself sounds a bit crazy when even honest moneymakers can soon gain that lust in their eyes for bigger profits.

Regards, BB, WA.

I must give the author some support. The cause of problem has not been the free market but Greenspan's reign at the Fed. His job as any person who is head of a country's Central Bank is to lean into the wind and also stop market excesses. He does have a planning role. However unlike MacFarlane and Stevens who pricked the Australian property bubble by raising interest rates and speaking out against spruikers like Kay, Greenspan let the money supply rip using the excuse that the market would take care of it. The market has taken care of the distortion with a vengeance. The irony is that Greenspan distorted the market to help his crony Republicans,the tragedy is that we are now going to enter a period of quasi nationalisation. One only has to see shambles like the Australian car industry where the annual subsidy to keep each worker (who mostly immigrants) in his job is over $100,000 and which under Labor will rise dramatically to see where anti-market measures will lead.

Ludwig
You're suprised at this article? .... from the CIS the independent (sic) think tank who has never supported a people centric policy and OLO's resident "free market" (sic) advocate,surely you don't expect a mia culpa.
Notwithstanding this he does have a point to dump the system entirely would be worse than the disease. But it seems to me that you and I are in agreement with a significant paring of the excesses.

All their so called experts all ignore the human element. And that Humoungus is both uncontrolable and doesn't have humanity as its primary interests.
But beyond that his piece is little more than a weazle worded, mudding of the water as an excuse for not seeing the obvious before.
If you start your deliberation from a commited perspective don't be surprised if GIGO is the result.

The difficulty with these discussions is that the term free market has taken on too wide a meaning.

When it comes to buying and selling goods and services free markets are the most efficient method to allocate resources.

Trying to allow capital markets to determine the budget allocation between competing priorities has failed. Governments still have to budget how much as a community we spend on defense, health, education, infrastructure etc and no money market mechanism is going to provide a short cut to do that.

Markets are not designed to be a replacement for budgeting.

So markets are good at allocating resources efficiently but they are not good at determining the priority of where the resources should be allocated.

We have confused the issue by corrupting the measure of value money by making it a measure of debt instead of measure of asse.

We need to keep markets and extend them where appropriate.

1. Let budgets priorities be set in the political marketplace of where the vote is the measure of value.

2. Let budget allocations be disbursed by a market mechanism.

3. Let us turn our money back into a measure of assets not debt so that money markets are markets in something more easily valued than debt.

We sort of have 1 but it can be improved by extending voting to more cases where money markets are inappropriate such as voting for ABC directors and the board of the Reserve Bank.

Our privatisation attempts for 2 have failed and we need a better way of doing 2. Those of you will who have read my other submissions know I propose Rewards as a market mechanism to spend money.

3 is the most immediate problem and it can work with 2 by eliminating debt money by only allowing banks to lend money if they have it on deposit and by the Reserve bank creating new money as needed for the growing economy. Let them then distribute the money through the market mechanisms of 2.

MYTH: The more CEO's are paid the better they COMPETE & perform and thus the greater profits for shareholders and the company. This is nonsense propagated by Reaganomics when America's back was against the financial wall due to te Cold War. It has led to fat, lazy & corrupt executives who take bad risks because the US government has implicitly TOLD them well beforehand that it will bail them out "no (real)questions asked"

REALITY: If first world governments legislated CEO remunerations to be less than twice that of senior government officials, removing subtle forms of bribery & baseless hero worship amongst the vast ranks of elected officialdom, the only COMPETITION for performance goals would be within the company's ranks and between companys. True CEO performance would be stellar & unknowns in listed companies would finally be free to show their worth and forge into leadership roles rather than being blackballed by the unhealthy plutocratic &nepotistic competition that currently exists.

MONKEY in THE WRENCH:
10% of first world populations have 80% of the world's wealth and the other 90% are BEHOLDEN to those rich elites in ways like employment, debt etc. These elite imbeciles are going to be hard to shift, especially when their most prized possessions are monopoly MEDIA empires replete with Fox&Fiends talking heads who make an unjust world seem so Koshy, warm & apple-pie friendly.

LIGHT at TUNNEL'S END:
Adolph hitler had less than 10% of the EURO population under his propaganda control & no one thought he could be defeated for many years. BUT HE WAS! Hitler's mistake was to go too far and that is precisely what the rich 10% have done and beyond media reports of restraint, are STILL DOING at a breathtaking lift-pumping, $oozing-up economic rate. The pump is primed as the stock market moves up&down, up&down....oooozing money from the middle-class to the upper-class as stock market gurus move&shake it with able assistance from self-interested government officials!

THE WAY I SEE IT: Governments of the world have a choice:
Legislate CEO remunerations as specified or face public REVOLUTION of Gail Wynan proportions (http://mk2.porch.org/stories.php?story=01/09/23/2791872).

Ludwig, the problem with your theory is that when you give Govt
employees a monopoly, as you propose, they land up working in their
own self interest. I'd prefer competition thank you.

I don't have a lot of time for Rupert Murdoch, but he wrote
an interesting piece in last weekends Australian and I quote a
snippet :-

*Meredith quotes a former Indian finance secretary who puts it this
way" We got more done for the poor by pursuing a competition agenda
for a few years then we got done by pursuing a poverty agenda
for decades."

What separates poor nations from rich nations is not talent and ability.
The poor have plenty of talent and ability. Usually what
people in poor nations do not have is the opportunity to develop
their talents. That is why trade is such a powerful engine for
prosperity and upward mobility*

Goldman Sachs estimate that the global middle class are growing
by 70 million a year. Free trade has a huge amount to do with
that.

The thing is this Ludwig. You have your large public servant
salary, your car, your house, your computer with internet etc.
People in China and India etc aspire to what you have. Should
they not have a right to your own aspirations?

Population is another matter entirely. As you well know, my
view on that topic is that there are far too many people on the
planet, for us to live sustainably.

Dear Mr Oliver Hartwich,
I could rave on four hours about your article.
But to cut it short I would suggest that you ' go ask the third world what they think of the free market economy' There is none. it's a lie that people like you promote in your little conservative effort to please the ravaging elite. Thumbs down to you mate, go help your pals rape another third world country.
Cheers

I'm glad to see articles such as this...the wheezings of a dying breed, desperate to see the goliath corporate patient emerge from triage with yet another dose of public money to feed its private profit hunger. The free market as we know it is based on pillaging the many for the benefit of a few. And when it begins to fall apart, our corporate freeloaders ensure that government acts as enforcer and ensures those who paid dearly the first time get to pay again. How many countries ravaged by Friedmanesque madness do we need to look at? Chile? Russia? Poland? New Orleans? Bolivia? Iraq? And the human misery is dwarfed by the environmental vandalism of these halliburtons. They not only don't allocate resources equitably they exploit them with total indifferent to the damage they do. Some deaths are more equal than others.

A superb article.

Freedom must always have rules and some regulation to avoid excess.

For example freedom of expression does not include the right to distribute hate speech or child porn, and the fact that some one does does not mean that free speech itself should be curtailed.

Stronger regulation is called for such as exists in Australia, not abolition.

The free market has delivered prosperity and reduced poverty as has no other system, and where the free market has been curtailed as in the 3rd world, the penalty is poverty and persecution.

The answer is to put a bridle on the wild horse, not shackles.

Shadow Minister; "The answer is to put a bridle on the wild horse, not shackles."

Yes

Yabby; "Ludwig, the problem with your theory is that when you give Govt
employees a monopoly, as you propose..."

No, no, I'm not proposing that..... just a stronger degree or regulation. Especially regulation that encourages competition.

"People in China and India etc aspire to what you have. Should they not have a right to your own aspirations?"

Of course they aspire to what we have. So they need the right sort of regulatory regime that efficiently spreads the wealth so that they can all have a decent quality of life (which doesn't have to mean the same level of consumption that we have in Oz), instead of a large part of the wealth ending up in the hands of a very small number of people.

Sir Vivor et al.,

What has been occurring over recent decades is a shift from market capitalism not corporate capitalism. Wherein, in one asks in whose interests does Government primarily operate all The People or the a sub-set of people, via Government? I would posit too recently the latter.

Moreover, one can compare attitudes today, with those in the 1928-1930, when most Banks (the top executives of the same) took the position that shareholder dividents (profitability) was secondary to the national interests.

We should not be protecting Banks, especially Banks thwarting the RBA's policies. The market must be allowed to operate and if it happens some Banks fail. What Bankers realised in 1930 was if the Banks worked against Government, international corporations would go around the Banking system offshore (e.g., exchange currency between themselves) and Australia would loose domestic control.

Regards,

O.