Another Voice

14 February 2009

O ye of little faith! This economic crisis is evidence that the market is working

Like skaters on a lake’s frozen surface, we are sometimes reminded how thin is the crust of philosophical confidence on which our systems of political economy rest. Two years ago we were mostly agreed that free market economics had won the ancient argument between capitalism and the planned economy. Two years ago the case for a single market for goods and labour within the European Union was widely thought unanswerable.

Yet everywhere we turn today, wise heads mutter that the global free market has failed. And (after some placard-waving at the Total refinery and beyond) we heard Alan Johnson, the Health Secretary, declare on the Andrew Marr programme on BBC television last week that labour from outside Britain might ‘undercut’ domestic workers — as if this ‘undercutting’ were a bad thing, rather than the very engine of a capitalist economy.

Mr Johnson was not challenged. No senior colleague came to the public support of Lord Mandelson, the Business Secretary, in his restatement of the obvious about the single market. Is our grasp of general principle so weak? Do politicians not understand that if we say workers should not travel to ‘undercut’ local labour markets, the corollary that cheaper goods should not travel to ‘undercut’ locally produced goods cannot be far behind? How can our confidence in Adam Smith have evaporated so fast?

It is true that part of the reason for our former philosophical certitude lay in results. Why doubt prevailing theories when we were demonstrably getting richer? By their fruits we should (we thought) know them; and even an ignoramus may, if medical science cures him, claim to ‘believe’ in its theoretical base.

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wonderfulforhisage

February 12th, 2009 8:27pm Report this comment

How can the global market be considered free when one of the major players, China, controls her exchange rate and Opec distorts the price of oil. It was the surplus cash China and Opec chanelled into the Western banking system that has got us into the mess we're in.

That is not to say that the bankers and politicians and their advisors shouldn't have seen it coming but a free market can't be blamed when the market wasn't really free.

Rob Slack

February 13th, 2009 1:03pm Report this comment

When the car splutters because the carburetter is wrongly set and requires adjustment, it does not mean the car should be scrapped. Perhaps we should have learned that the sub-prime mechanics who set the carb. to save fuel should never again be trusted. Perversely, the opposite is likely to happen.

John Herbert

February 13th, 2009 11:44pm Report this comment

Can you send this article to Kevin Bloody Rudd of Australia. He is a first class reactiony fool who has backflipped his way to total ignomy over this whole correction. please take him off our hands, maybe he and Gordo and can go up the highlands and do a merry dance and never come back.

Ruby Duck

February 15th, 2009 2:14am Report this comment

It wasn't a free market bubble. It was a bubble promoted and artificially prolonged by governments seeking to hang on to power and popularity.

The Masked Marvel

February 18th, 2009 3:51am Report this comment

Calming words such as these will not reach any of those "turning away from the faith". They were never true believers in the first place, but were merely the modern political equivalent of early monotheists. At any hint that the church can't fix the latest problem, out come the old idols.

Tom Burroughes

February 18th, 2009 10:46am Report this comment

Superb article, a sharp dose of much-needed common sense.

Remember also that much of the bubble was created, however unwinttingly, by central banks, which are state institutions. That point is often simply not grasped by all those now proclaiming the demise of "unregulated capitalism".

Rush-is-Right

February 20th, 2009 5:22pm Report this comment

A good article this. The trouble is that, the politicians in charge here and in the USA have adopted policies that are bound to make things much, much worse. They really have turned a disaster into a catastrophe.

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