The Austrian view, according to Russell Roberts, is more or newer financial regulation won’t solve the crises of capitalism. It’ll just make matters worse.
advocating ‘better’ supervision or ‘more vigorous’ regulation or even something more specific such as larger capital cushions, ignores the empirical record that regulators and politicians either for venal or human reasons, seem unable to maintain these restrictions in the face of pressure from participants.
No surprise there, for a follower of Hayek.
But what is interesting is (1) the relation between the state and civil society (which Roberts addresses, and mainstream economists ignore) and (2) the way that relation currently works:
We are what we repeatedly do. Not what we say we are. Not what we’d like to be. But what we do. What we do as a body politic is rescue rich people from the consequences of their decisions. That is bad for democracy and bad for capitalism. Until we fix that, we as citizens are playing a game of “heads—Wall Street executives win a ridiculously enormous amount, tails—they just win a ridiculous amount, paid for by the rest of us.” Until we fix that, little else matters.
Roberts clearly understands that, in the midst of the current crises, the capitalist state bails out rich people and Wall Street and not the rest of us. His mistake is failing to recognize that such government interventions are not bad for capitalism, just bad for a particular—free-market or private—kind of capitalism. In fact, they’re an attempt to save capitalism, by creating a more regulated form of capitalism.
occasional links & commentary 