WHAT KIND OF GOVERNMENT DO WE WANT?

The Market, when properly regulated by a democratic government, is the most effective way to conduct business so far developed. At present, the democratic political system and the market directed capitalist economic system have combined to under a tenuous coalition to be the dominant paradigm. There presently is no competing system or combination of systems to threaten the hegemony of this system.

The great strength of the market is its ability to provide incentive. One of the weaknesses is that the market cannot provide leadership even on non-political straight economic issues and flounders in the absence of government regulation. Economist Robert Heilbroner gave a lecture in which he presented the following example:

“The world- wide depletion of fish stocks is a recent example of the need for suitable long-term regulations. The number of fish caught between 1950 and 1989 multiplied by five. The fishing fleet went from 585,000 boats in 1970 to 1.2 million in 1990 to 3.5 million today.”

The market ignored the long-term consequences to reap short term profits. The eventual financial shortfall will be felt by the fishermen, the boat builders, fish wholesalers who have found uses for the fish that includes fertilizer and chicken feed; but only some of the financiers. Each party was in pursuit of their own interests some short term, others longer.

The over- fishing minimized the public good and now the fishing industry is approaching government to impose and enforce regulations to protect them. The call this process “interest mediation” and crisis is the motivator and about the only time corporatist groups remind governments of their responsibility to lead and do the job that is proper to government.

The marketplace is limited to the calculation of exclusive costs; that is, excluding all the possible costs that interfere with profit. The market place ignores social capital and the leadership of society requires the calculation of inclusive costs.

Industrial pollution is an example of this. Steel producers have no incentive to cut down on pollution because they don’t have to pay the laundry or health bills to which they give rise. The market mechanism does not accurately do what it claims to do, namely giving society an accurate assessment of the total cost of production.

We can add to this list by filling in the blank with our favorite industry: cigarettes, auto production, tire manufacturing, meatpacking, fuel production, etc. ad infinitum ad nauseum.

There is no way a responsible society should allow the unregulated exercise of the markets. By the same token, a symbiotic relationship between business and government can allow business to operate on a level playing field for the mutual benefit of both. Government protection of the consumer is part of the mechanism that can smooth out the excesses the market is subject to.