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Argument: Too much regulation, not too little, caused US economic crisis

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Revision as of 21:23, 28 September 2008; Brooks Lindsay (Talk | contribs)
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"Scapegoating markets". Chicago Tribune. 28 Sept. 2008 - Although capitalism has shown its superiority to other systems, it has always had plenty of detractors. The meltdown in the financial sector is their latest excuse to assert the dangers of greed, the need for greater government regulation and the folly of unfettered commerce. They see the market the way it's depicted in the sculpture in front of the Federal Trade Commission in Washington, which shows a well-muscled man restraining a rearing stallion: a wild steed in need of a bridle.

Markets, of course, consist of interactions among human beings, and any institution featuring people is bound to suffer from human fallibility. No one ever said markets were perfect at the tasks required for a functioning economy—only that they are generally superior to the alternative. Sometimes those imperfections require government intervention—to prevent unwanted side effects like pollution or to promote the sort of information needed for sound decisions. But the causes of this debacle lie elsewhere.

Focusing on greed is a mistake. As economist Lawrence White of the University of Missouri-St. Louis puts it, blaming greed for economic dislocations is like blaming gravity for airplane crashes: Greed and gravity are both ever-present. Wall Street traders are not more or less avaricious today than they were 10, 20 or 50 years ago.

Nor is lack of regulation the root of the problem. Among the alleged lapses is the 1999 repeal of the Depression-era Glass-Steagall Act, which forbade the mixing of commercial and investment banking. Removing that barrier, we are told, spurred commercial banks to get into such risky investments as subprime mortgages.

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