‘Pure’ market economy? Pure fiction.
The notion of a ‘pure’ market economy – in which the government sits back and just lets the chips fall where they may – has always been a fiction. The government sets the ground rules in ways that impact significantly on economic outcomes.
And of course governments set the rules around labor management relations. Rules that are more labor friendly make it easier for workers to organize unions and bargain effectively. As a result, they are likely to get a bigger piece of the pie.
But the bailouts of 2008 went beyond just rule-setting; it was active intervention.
Most of the interventions came with relatively few conditions. Clearly the goal was to save the banks and to largely restore them to their prior position.
This should be troublesome. These huge banks should be able to look out for themselves in a market economy. They are happy to pocket the profits when times are good; this should mean that they are willing to suffer the losses in bad times as well.
However, this is not what happened in 2008 and is probably not what will happen the next time the major banks face a serious crisis. It is likely that they will again turn to the government and get whatever money is needed to stay afloat.
This narrative is precisely the opposite of the one that has government encroaching on the role of the private sector. Instead, wealthy private interests are using their power to tap government coffers as a source of limitless and unpaid insurance. This is not the way a market economy or democracy is supposed to work […] Citizens do, however, have a right to be very upset.