DISCLAIMER: THIS PICTURE IS THE PROPERTY OF ACATHEUNDERGROUND.WORDPRESS.COMRight from the time I began studying economics for the first time, I was told the different forms of economic systems being practiced by governments around the world: the Capitalist, the Communist and the Mixed Eco,omic systems. I was told these were the three main economic models, and that of the three, the Capitalist system, also known as the Free Economy, was the most growth accomodating and most succesful system. Even more important, was the fact that there was little or no government intervention in the free functioning of the market. This in effect meant that the government played onlly a limited role in the market, that of making sure no one an unfair advantage over the others, and that no one was bending the rules to their own advantage. It was assumed that the model being thought in the classroom was merely a model and the model could only be practiced to a certain extent. However, it was also agreed upon that countries like the United States and many other develooped countries had developed so fast because of the high degree of freedom in their markets, not to say that these countries did not pass regulations to regulate the business environment. Infact for decades, western countries edged out the East simply because they had a free market that encouraged entrepreneurship and the free movement of capital and resources.
The situation seems to be changing, and changing really fast. Nowadays, governments are seriously engaged in the running of the free market and wider economy, and sometimes understandably so. But sometimes, this sort of intervention is deemed unnecessary and politically motivated, and when it thus happens, it goes against the core values of the free market system. A good example was the US government's bailing out of the large banks that caused the financial crisis in the aftermath of the crisis. This was a necessary move to prevent the total collapse of the financial system, many analysts would argue, but considering the size of the bailout packages, considering the fact that almost none of the executives of the banks that were responsible for the banks that caused the crash faced any jail time. In his interview on CNN's Fareed Zakaria GPS the then US Treasury Secretay Timothy Geithner, who has been highly criticized for being the guy that convinced President Obama to approve a multi-billion dollar bailout package for the big banks. He has tried to explain his decision several times, but the american people seem to have made up their minds. The bailout package eneded up getting so big that the authorities themselves seemed overwhelmed by the size. It's no doubt, many Obama critics said he was a communist, because the very act of protecting these guilty banks from a failing, sounded like something out of a Communist Russia manifesto. The thing is, they almost always never seem to appreciate just how big a fall those banks would have taken, and the national and global ramifications.
Most recently, we have heard that the US government pressured american CEOs to boycott the St Petersburg forum hosted by russian president Vladimir Putin, due to the political crisis arising as a result of Russia's 'actions' in the Crimea and Ukraine in general. Most economists would condemn this move as unnecessary, as it goes against the basic principles of free, global interconnected markets which the US governement itself has been preaching for decades. Also, some political analysts would argue that it shows a 'double standards approach' on the part of the US government, as they have not boycotted Saudi or Bahraini oil, even though both countries have some of the most brutal internal policies and some of the worst human rights records.
It is not only on the American side of the Atlantic, but also in Europe. We have woken up several mornings to new updates the american drugs maker Pfizer's proposed takeover of the British drug giant Astrazeneca. In a perfect free economy, that deal would have been signed, sealed and delivered, but that's not the case here. It has faced stiff opposition in the UK parliament.
It has become almost a 'new normal' for governments to stand in the way of takeovers nowadays.
The story is not very different for the French governments opposition to American giant General Electric's proposed takeover of French company Alstom SA's energy business. The french also oppose the takeover of the same company by German company Siemens, in both cases by fortifying French anti-takeover laws. This is just part of the story. Trade protectionism has been on the rise in recent years.
All these bring two questions to mind, "Is there really such a thing as a free market or a free economy?". It would depend on what degree of freedom you expect in a market, or how capitalist you expect the economy to be. I was also thought in my introductory economics lessons that the perfect capitalist system had lots of flaws and only worsened the gap between the rich and the poor. It also led to crimes, and so much bending of the laws for personal gains, all classic prototypes of what happens on Wall Street.
The other question that comes to mind, "Should we really be seeking a perfectly free market or economy?". If you ask me, based on the disadvantages of a free market we just saw above, the answer is "Probably not". The rise of countries with 4alternative systems' like China casts serious doubts on just how necessary it is to have such a system.
Whatever it is you think after reading this piece, just keep in mind that in as much as a free economy sometimes requires governments to back off and let the price system act, governments can't stand by and watch the rich and powerful reep off the benefits of the masses and keep for themselves. It is on these bases that the actions of interfering governments should be judged.
EGEOGHO CARLSON KIMBI
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