Free marketeers support some legislative controls
letter published in The Australian, 7 Oct 2008
Kevin Rudd (“The children of Gordon Gekko”, Opinion, 6/10) claims the US crisis bears “the finger prints of the extreme free-market ideologues …who have a naïve belief that unrestrained markets are always self-correcting” (Opinion, 6 October). He fails, however, to identify any of these mythical ideologues. Milton Friedman, widely regarded as the personification of free-marketeers, acknowledged that “government is necessary to preserve our freedom”.
It is pertinent for Australians who support the principle of “free markets” to identify the worrying misconceptions inherent in Rudd’s comments. So-called free marketeers actually support legislation regulating the operation of private enterprises, including the control of monetary conditions, the regular publication of corporate transactions and financial positions and anti-monopolistic regulations providing for a competitive environment.
Financial markets in the US have been allowed to operate in a much less than transparent fashion and have been exposed to policy changes by government authorities, including Congress and the Federal Reserve, that created a moral hazard environment that encouraged transactions incompatible with the stability of the financial sector. In short, the US has experienced a failure of regulation by government.
By contrast, the Rudd Government has benefitted by inheriting an independent central bank and a well-operated financial system. But Australians should not overlook that we acquired this after experiencing problems in the 1980s not totally dissimilar to recent US ones, ending with "the recession we had to have" inherited from a Labor Government.
Des Moore
South Yarra Vic