By Sell on News, a global macro equities analyst. Originally published at Macrobusiness.
Lambert here. Note the use of the phrase “market state,” invented if not exactly defined by Phillip Bobbit in his The Shield of Achilles, and portrayed as a historical inevitability.
For the last couple of years, in the wake of the financial crisis, the banking and finance community has darkly warned about the dangers of over regulating the sector. “We mustn’t impede the free flow of capital”, it is claimed, “otherwise efficiency and productivity will be lost and the real economy will not recover.” The other camp claims that the finance sector must be reined in, re-regulated, otherwise crises will continue to happen. The dichotomy is entirely false. Finance is rules. You cannot increase or decrease the amount of rules in rules. You can only change their character. And you can decide who will set them.
BOOSTERS of financial regulation are making hay from the widening scandal over allegations that LIBOR, a key interest rate, was rigged repeatedly for at least five years since 2005. Yet the trove of documents that have emerged also reveal the very flawed nature of regulation, in which government bureaucrats are asked to keep tabs on high-flying financial sorts. Transcripts of calls between officials at the Federal Reserve Bank of New York and traders at Barclays show that regulators didn’t really pick up on cues, even when they spelled out misbehaviour.
Of course it is only through ignoring the pervasive evidence of government failure that they can have their cake and eat it: sure, spontaneous coordination in the marketplace is efficient and innovative, but let’s rein it in as we see fit. Rules are not enough; we are entitled to some enlightened ad hoc regulation. That will make the market process non-spontaneous? Oh well, it’s for our benefit, and some greater good.
If contemporary conservatives could get over their ideological aversion to the state, they would recognise that American government is both necessary and in great need of reform rather than abolition. Private sector companies have
undergone huge chang.es in recent decades, flattening managerial hierarchies, upgrading workforce skills and experimenting ceaselessly with new organisational forms.American government, by contrast, seems trapped in a late 19th-century bureaucratic model of rules and hierarchy. It needs to be smaller but also stronger and more effective. And this will not happen unless people see public service as a calling, rather than a despised occupation for people unable to make it in the private sector. In this regard, conservatives have an advantage because they can call people to public duty on the basis of the American nation rather than abstract ideals.