Monopolists Do not Like Competition
A regular reader sends me this:
"More broadly, the events of that week are likely to redefine the debate over the role of markets in a democracy, and even the nature of capitalism. At least since the Reagan revolution of the early nineteen-eighties, free-market ideology has been ascendant, with even Democratic Administrations following its precepts of market discipline, limited regulation, and unfettered rewards. George W. Bush was only its latest exponent, governing on a platform of economic growth and lower taxes. Yet it was Bush, and his Republican appointees Paulson and Bernanke, who orchestrated the virtual nationalization of the U.S. financial system. Although a vocal minority continues to argue that the system should have been left to the forces of creative destruction, the overwhelming consensus is that free-market principles failed to address a global financial panic. In an intellectual debate that has been going on since the Depression, Lehman's failure may mark a victory of John Maynard Keynes over Adam Smith--the government interventionists over laissez-faire capitalists."
James B. Stewart, A Reporter at Large, “Eight Days:the battle to save the American financial system,” The New Yorker, September 21, 2009, p. 59. HERE
and Here
Comment
James B. Stewart: "In an intellectual debate that has been going on
since the Depression, Lehman's failure may mark a victory of John
Maynard Keynes over Adam Smith--the government interventionists over
laissez-faire capitalists."
That is the contentious simplification I would object to. In Smith's
day "laissez-faire capitalists" did not exist - he did not advocate
'laissez-faire (a Physiocratic doctrine favouring freedom for
merchants, not consumers) and 'capitalists' had not yet attracted the
title in English. They were a 19th-century phenomenon (post-1854).
"The forces of creative destruction" (using Schumpeter's phrase -
shortened from 'the creative gale of creative destruction') was the
force on innovation, not of capital per se. Monopoly can stagnate
technologically; competition lets loose the forces of change. Keynes
advocated government funding of projects, not necessarily that they
were managed by the state.
Monopolists do not like competition. That has been true since the 18th century.
If we do not understand these differences, we risk repeating the same errors.
"More broadly, the events of that week are likely to redefine the debate over the role of markets in a democracy, and even the nature of capitalism. At least since the Reagan revolution of the early nineteen-eighties, free-market ideology has been ascendant, with even Democratic Administrations following its precepts of market discipline, limited regulation, and unfettered rewards. George W. Bush was only its latest exponent, governing on a platform of economic growth and lower taxes. Yet it was Bush, and his Republican appointees Paulson and Bernanke, who orchestrated the virtual nationalization of the U.S. financial system. Although a vocal minority continues to argue that the system should have been left to the forces of creative destruction, the overwhelming consensus is that free-market principles failed to address a global financial panic. In an intellectual debate that has been going on since the Depression, Lehman's failure may mark a victory of John Maynard Keynes over Adam Smith--the government interventionists over laissez-faire capitalists."
James B. Stewart, A Reporter at Large, “Eight Days:the battle to save the American financial system,” The New Yorker, September 21, 2009, p. 59. HERE
and Here
Comment
James B. Stewart: "In an intellectual debate that has been going on
since the Depression, Lehman's failure may mark a victory of John
Maynard Keynes over Adam Smith--the government interventionists over
laissez-faire capitalists."
That is the contentious simplification I would object to. In Smith's
day "laissez-faire capitalists" did not exist - he did not advocate
'laissez-faire (a Physiocratic doctrine favouring freedom for
merchants, not consumers) and 'capitalists' had not yet attracted the
title in English. They were a 19th-century phenomenon (post-1854).
"The forces of creative destruction" (using Schumpeter's phrase -
shortened from 'the creative gale of creative destruction') was the
force on innovation, not of capital per se. Monopoly can stagnate
technologically; competition lets loose the forces of change. Keynes
advocated government funding of projects, not necessarily that they
were managed by the state.
Monopolists do not like competition. That has been true since the 18th century.
If we do not understand these differences, we risk repeating the same errors.
Labels: Laissez-Faire
5 Comments:
"business is no friend of free enterprise"
Milton Friedman
Entech
What a beautiful quotation!
Clearly, even in Smith's day he understood this truth. The French merchant who challenged Colbert to 'leave them alone' was no speaking on behalf of his customers but on behalf of himself and his fellow merchants. 'Laissez-faire' was a cry for freedom to arrange their affairs into local monopolies (like the Town Guilds in Britain), which 'narrowed the market' in favour of producers, not customers.
That is why Smith never advocated 'laissez-faire', despite being hoisted in support of it in the 19th century.
Gavin
“in a more striking and interesting manner”
Of course, The Candlemakers Petition says it in a “in a more striking and interesting manner”
david
entech
Bastiat's satire was very metaphorical in style. It's also a cracking great piece too.
Gavin
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