The Instigator
brian_eggleston
Pro (for)
Losing
15 Points
The Contender
Ragnar_Rahl
Con (against)
Winning
20 Points

Free market economics are redundant

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Voting Style: Open Point System: 7 Point
Started: 1/2/2009 Category: Politics
Updated: 8 years ago Status: Voting Period
Viewed: 1,788 times Debate No: 6387
Debate Rounds (2)
Comments (15)
Votes (5)

 

brian_eggleston

Pro

President Sarkozy of France, a staunch right-wing capitalist, recently said of the free market economy:

� L'autor�gulation pour r�gler tous les probl�mes, c'est fini. Le laissez-faire, c'est fini. Le march� qui a toujours raison, c'est fini. �

http://www.lefigaro.fr...

Which transliterates into English as:

"Self-regulation of all problems is finished. The free-market economy is finished. The markets are always right philosophy is finished."

You only find out who has been swimming naked when the tide goes out. Given level of incompetence, corruption and greed that the current economic crisis has exposed, it has become apparent that most investment bankers have been financially skinny-dipping for years.

Given the enormous cost of their ineptitude to the ordinary taxpayer, the markets should be much more tightly regulated in order to prevent any future reputation of the current fiasco. Even devout capitalists such as President Sarkozy realise that, and governments around the world will, rightly, introduce legislation to put an end to deregulated free markets.

Thank you.
Ragnar_Rahl

Con

Referring to Sarkozy as a "devout capitalist" is laughable. For one thing, whether he is "right wing" has little to do with whether he is capitalist, in fact, capitalism as a consistent political position is only meaningful on a two-axis scale of politics, not the "left right" one axis scale. For another, he backed a partial nationalization of an engineering company (Alstom) in 2003.

He backs a maximum taxation rate of FIFTY PERCENT, this is capitalist?

His so called"laissez faire" reputation is derived mostly from the fact that in France they want more taxes than that, along with his backing the reduction of deficit (i.e., he doesn't want to pass the buck to the next generation), and his denial of unemployment benefits to those who refuse work, which, I here, even YOU back.

This makes your main argument a straw man in essence. He is not and never was a laissez faire capitalist, and so he is incapable of "Admitting" anything for the laissez faire position.

The "investment bankers" argument ignores the fact that the behavior of modern bankers has not occurred in a regulatory vacuum. It has occurred IN THE PRESENCE of strict regulation, along with subsidies, in the US coming from the
Federal Reserve and FDIC. Indeed, "financial skinny-dipping" in the form of lending to people who could not afford it was LEGALLY MANDATED in the United States of all places.

A free market would not have any bailouts to encourage banking behavior like that by our present set of bankers, nor any FDIC, nor any Federal Reserve, which decides who gets to be the bankers, for all intents and purposes, by loaning money to them.

In a free market, idiots like the present set of bankers would fail, and so would their investors, leaving a place to step in for non-idiots. This is the most effective form of regulation, indeed the only form of regulation, possible-- regulation by those who stand to lose money if a bank screws up, by refusing to offer capital if it's going to screw up. Also known as a free market. No regulator has ever been able to surpass this mechanism, only to shut it down by way of subsidies. No regulator ever can, no regulator can ever catch up. Regulation leads to nothing more than lazy investing, and crises like these.

Controlled markets, not free markets, are what is disproved by the present crises.

"
Given the enormous cost of their ineptitude to the ordinary taxpayer"
The costs to the ordinary taxpayer come 100% from the regulators who are bailing out the inept. That's a problem squarely on the regulator's hands, for doing so.
Debate Round No. 1
brian_eggleston

Pro

I would like, first of all, to extend my sincere thanks to Ragnar Rahl for accepting this debate.

Secondly, I would like to accept that President Sarkozy may not be considered an overt capitalist by American standards - European politics tend to be generally more liberal than those in the US.

I also accept that, there has always been an element of regulation in banking, which has traditionally been fiercely resisted by the finance industry, right-wing politicians and Libertarians, as a consequence of which it has been light, and as we have seen, ineffective.

They have argued, as my opponent has, that market forces should prevail in all cases. The successful will prosper and the devil will take the hindmost. On the face of it, it is difficult to see fault with this proposal.

However, if the latest financial crisis were allowed to develop without any government intervention, chaos would have ensued.

The banks would have collapsed, leaving not just private depositors and savers out of pocket, but also corporate investors such as pension funds and insurance companies. This would leave pensioners penniless, and render private pensions and medical care policies worthless. The banks' administrators would call in the home loans in order to liquidize their assets, which would lead to mass repossessions of homes, as almost all mortgages would then become sub-prime. The huge rise in unemployment that we are currently witnessing would be dwarfed as industry collapsed due to lack of liquidity. At this stage foreign investors, most likely from cash-rich Asian and Middle Eastern countries, would step in and take advantage of a practically worthless dollar, to buy up private and corporate assets at rock bottom prices. In short, the entire country would be brought to its knees.

At that stage, people would take to the streets and demand to know why the government didn't intervene to prevent this disaster.

If you don't believe me, why else would a Republican administration nationalise private organisations at the cost of trillions of taxpayer's dollars? They knew the writing was on the wall and they had no choice.

That is why no Western government can afford, politically or economically, to allow this situation to develop again and which is why they will insist on introducing legislation to regulate the banking industry far more tightly.

Thank you.
Ragnar_Rahl

Con

"
I also accept that, there has always been an element of regulation in banking, which has traditionally been fiercely resisted by the finance industry, right-wing politicians and Libertarians, as a consequence of which it has been light, and as we have seen, ineffective."
Last I checked, having a government body directly control the flow of capital to institutions (a la the Federal Reserve), universally insure an entire category of account (the FDIC), etc, are not light regulations. And that's just scratching the surface. In order to understand the degree of financial regulation in the United States, which you hold is less regulated than the rest of the world, it takes an ELEVEN VOLUME book (http://www.seclaw.com...)... and that's just the stuff on statute, let alone the case law, thousands upon thousands of things published in the Federal Register for unlegislated regulation, etc. Then State laws, and stuff that's probably illegal, like about half the bailout, that never really gets written down anywhere.

Finance is about the most regulated industry there is other than the ones that have been completely outlawed. "Light" regulation would describe, say, software. Not finance.

Libertarians, electorally speaking, do not exist in Europe, and neither do significant numbers of "right wing" politicians in the American sense. Yet Europe has been hit by the crisis too. As such, your accusation of causation is not just false, but impossible.

And in America we don't have any power, as evidenced by the bailout :).

"
However, if the latest financial crisis were allowed to develop without any government intervention, chaos would have ensued."
The latest financial crisis was a DIRECT RESULT of government intervention. Austrian economics (the most free-market school of economics out there) was predicting things essentially like our current crisis would result from government intervention over three quarters of a century ago (I direct you to the work of Ludwig von Mises). Fannie and Freddie, artificially low interest rates from the Fed, the CRA, etc, were a lethal, unstable concoction. This crisis was the inevitable result of that. This crisis would not have existed without government intervention. Chaos HAS presently ensued, but it would not have in a free market.

"
The banks would have collapsed, leaving not just private depositors and savers out of pocket, but also corporate investors such as pension funds and insurance companies"
The banks in question in this crisis would have collapsed a LONG TIME AGO in a free market. Long before they had many investments. Better banks would have resulted, banks immune to this sort of crisis.

"
If you don't believe me, why else would a Republican administration nationalise private organisations at the cost of trillions of taxpayer's dollars?"
Because it's a Republican administration that is both stupid and evil, I thought the left knew that :).

Why are you trying to imply "Republican" means "free market" anyway? It hasn't meant anything within miles of that since Goldwater.

"
That is why no Western government can afford, politically or economically, to allow this situation to develop again and which is why they will insist on introducing legislation to regulate the banking industry far more tightly.
"
Contradiction. The legislation in question will, by it's very nature, cause this situation to develop again, and worse.

You don't say "I can't allow you to die" before you shoot someone, so why would you say you can't allow a credit crunch (or "recession") to happen and then extent unbacked credit (the source of all the regulations) to make it possible?
Debate Round No. 2
15 comments have been posted on this debate. Showing 1 through 10 records.
Posted by Ragnar_Rahl 8 years ago
Ragnar_Rahl
Tell ya what, Hendrix. Find someone who thinks we live in a capitalist country, and tell them to challenge me :)

I'd be rightly accused of abuse if I INSTIGATED such a lopsided debate. lol.
Posted by Phil 8 years ago
Phil
Anyone who thinks the current economic crisis was caused by a lack of regulation is just plain ignorant of the facts, and is a puppet of the left-wing media and Democratic Party. The fact of the matter is overregulation has caused the US economic meltdown. Here's how it happened:

1. The liberals in congress forced banks (by law) to give loans to people who couldn't afford them. The purpose of these new laws was to eliminate the bank's practice of not giving loans to black and other lower class neighborhoods. (Under free market conditions, no bank in their right mind would give loans to people who couldn't prove their income, or provide a reasonable down payment [20-30%].)

2. The banks in turn sold these worthless loans to Freddy and Fanny, which were buying them to pad their assets so the (Democrat) CEO could walk away with their $100M bonuses. (Side note, George Bush tried on 8 separate occasions to stop this practice, but the Democratic congress said no [because they were getting major donations].)

3. The influx of easy loans took homes off the market, creating less supply and more demand (economics 101), inflating the value of all of the homes. The inflation caused people to take out equity loans on the properties where there was no equity.

4. After several years of this practice, the bad loans began falling out, and the banks and Freddy and Fanny lost their shirts. Now we have an influx of homes on the market due to foreclosures and walkaways, and people have lost the equity in their homes, and then some.

5. This major loss of equity, and banks hoarding the cash reserves and eliminating credit, combined with the bad assets on the books for most of these banks, is what has brought us to the economic crisis.

Thank you liberals and your pro-government, anti-free-market ideology. Now people are losing their jobs left and right, and ironically looking to the same government (that caused the problem) for a solution.
Posted by jason_hendirx 8 years ago
jason_hendirx
>What's that got to do with anything? I am not a conservative, nor is Eggleston. :)

I know. I'm just saying that by coopting capitalism, conservative statists ruined its good name.

>I highly doubt anyone would argue against me...

Then argue that our current system isn't capitalism, it's government-supported of corporatism. THAT would be a debate.
Posted by Ragnar_Rahl 8 years ago
Ragnar_Rahl
"Here's the problem with conservatism in the modern world."
What's that got to do with anything? I am not a conservative, nor is Eggleston. :)

"The Industrial Revolution wasn't a triumph in laissez-faire capitalism. Railroads received the most subsidies during their genesis than at any time in their history in the form of land grants, and the greatest railroad tycoon of the age, Cornelius Vanderbilt, fought tooth and nail to oppose the railroads that lived off of them.
"

It is true that the nineteenth century was not pure capitalism. Nevertheless, it is as close to it as we've ever come, and the fact that Vanderbilt thrived in that era while resisting both subsidized enterprises and the government itself is testament to that.

"Ragnar, you should start a debate stating that pro-business governance is not equal to laissez-faire capitalism.
"
I highly doubt anyone would argue against me...
Posted by jason_hendirx 8 years ago
jason_hendirx
Ragnar, you should start a debate stating that pro-business governance is not equal to laissez-faire capitalism.
Posted by jason_hendirx 8 years ago
jason_hendirx
Here's the problem with conservatism in the modern world. Conservatism has drafted capitalism into the Big Fight with Communism when in fact it's just the business of getting things done. To do this, political conservatives have done everything in their power to gain the favor of the business elite by drafting pro-business legislation at every turn. The Industrial Revolution wasn't a triumph in laissez-faire capitalism. Railroads received the most subsidies during their genesis than at any time in their history in the form of land grants, and the greatest railroad tycoon of the age, Cornelius Vanderbilt, fought tooth and nail to oppose the railroads that lived off of them. From its very beginning, laissez faire capitalism was tainted by wrongheaded legislation from both the left and the right.
Posted by Ragnar_Rahl 8 years ago
Ragnar_Rahl
*takes a look* huh, guess it was just someone similar in attributes.. but yeah nvm, they weren't asian :)
Posted by jason_hendirx 8 years ago
jason_hendirx
I haven't vote either way.
Posted by Ragnar_Rahl 8 years ago
Ragnar_Rahl
"I vote Pro because the government has really become too spoiled and corrupt.
"

Um... you realize that Pro's position gives the government moar power? ROFL.

"
There is nothing free or Edenic about our implementation of "capitalism".
"
Um... we haven't implemented capitalism. We've implemented Keynesianism, the debate was not about what is currently going on, it is about actual free market economics in their pure form.

"The real problem is corporatocracy. What everyone really hates isn't deregulation, it's pro-business legislation.
"
In which case you agree with me, deregulation is not the problem :).

Read the debate before you vote people! I see two commentsers, the comments being definitely on my side, but both voted against, meaning people aren't reading :)
Posted by jason_hendirx 8 years ago
jason_hendirx
The real problem is corporatocracy. What everyone really hates isn't deregulation, it's pro-business legislation.
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