Economic Liberalism - Essay Example

Economic Liberalism Introduction Economics and politics have an intimate connection though they are in different systems which is does not support the existing of both of them side by side. According to Friedman, a capitalist economic system promotes freedom both directly and indirectly. They promote freedom through market freedoms and broader political freedoms. Capitalist institutions are responsible for the current freedom that the public has as compared to the historical periods. Trade restrictions and overregulation by the government are harmful and burdensome to the economy. According to Friedman’s claims, the self-defined high values of the few intellectuals which are judged as above the individual freedom are not in consistence with the other citizens sense of freedom. The public views freedom as the ability to do what they want with their earned income. Capitalist economies play a crucial role in the separation of political power and economic power. They put each other into check while maintaining political freedom. Capitalism is not a sufficient condition for freedom despite the historical claims of capitalism as a necessary condition. Some economies such as Italy, Spain, and Russia did not have political freedom despite their enterprises being economically free. In the modern world, it is challenging to balance between individual freedom and capitalism due to the widespread interdependence that exist. An illustration is the dependence between farmers and consumers of the farm products. Capitalism promotes freedom in such a scenario by facilitating the sale of goods and services on a competitive market where all players have full information (Milton Friedman, 4). DISCUSSION Government regulation is almost a mistake. Friedman believes that government regulation is almost a mistake. He depicts regulation being initiated by power-hungry politicians. The key objectives of these politicians are to target their reelection and formulation of red tape for their own advantages. Many of the government regulation are derived from the special interests of a selected few entities in the private sector. Some organizations in the private sector use the government through its regulation powers to tilt the market in a direction, which facilitates them making more profits than their competitors do. These entities therefore interfere with the government’s work making the regulations inefficient. Government regulations have put in industries such as airlines, communication, truckers, and railroads to make it very difficult for competitors to penetrate through the market. Those firms already established in these industries enjoy a cartel status. National corporations to suppress any form of competition from local competitors use government regulation. Government regulation force health insurers to cover medical procedures and chiropractic care of less merit than they should. The above situations have explained how government regulations serve the purpose of a few groups with influential power instead of promoting and supporting the public interests. According to Friedman, the government regulation through its monetary policy interferes with the functioning of the free market system. The government through its fiscal policies such as increasing taxes to reduce the fiscal deficit would result in unemployment of many citizens. Deregulation leads to negative consequences such as the growing inequality, financial crises, and insecurity. In this segment, the essay will revolve around the negative consequences of deregulations according to Robert Kuttner. The consequences of deregulation arise from the deregulation of the labor markets, the deregulation of the mortgage markets, and deregulation of the financial markets. Deregulation of the labor market led to the erosion of the collective bargaining system. Many employers do not follow the labor unions requirements if they are not regulated by the government to do so. This will expose workers to poor working conditions and insecurity. If not regulated, employers will introduce wage and hour laws that only favor them. Deregulation will therefore increase inequality, as the majority of workers will be oppressed without proper work and hour laws to safeguard their interests. Deregulation in the labor market will also lead to a decline of the progressive tax system. This implies that the government will be unable to obtain sufficient funds from the employers. Lack of sufficient funds by the government will result to inadequate provision of public goods such as security creating inequality in the economy. Deregulation will result to stagnation of the real wages, leading to an increase in inequality in the economy (Robert Kuttner, 83). Deregulation in the mortgage markets leads to a financial crisis and exploitation of the less privileged in the economy. When there is deregulation in the mortgage markets, mortgage firms will lend loans to risky borrowers with the aim of getting high interests. In most cases, the loans will be defaulted leading to bankruptcy of the mortgaging firms. The shareholders will lose their wealth and employees lose their jobs. This effect will lead to both insecurity and a financial crisis. Deregulation in the financial market will lead to insecurity. In the case of deregulation, financial institutions will overtrade without keeping any reserve. This situation will easily lead to a bankruptcy. This will lead to insecurity of funds kept in the financial institutions. Self-regulation by the market is not sufficient. Amitai Etzioni refers to self-regulation as a fox that is intended to guard to chicken. Self-regulation generates from the idea that if consumers need protection from the market forces then they will pay for the service. This implies that if consumers want to get information on which business to trust then they can search through Web pages. If people want to look for a hotel to spend over the holidays then they can go through various travel advisor web pages. Government does not pay the costs to run these sites. The cost will be offset by the selling space to advisers. Often, the market will fail to provide the help described in the above scenario. If one intends to find the efficiency and adequacy of the medication given by a doctor, they will find either nothing or very huge quantities of irrelevant information. Much of the information in the internet such as the book reviews is skewed. It is hard for consumers of a product to get advice on whether to consume the product from the reviews of the company since they are usually made by the company themselves. All these illustration give evidence of the self-regulation not being efficient. Amitai Etziani proposes several ways to prevent the regulated from controlling the regulations. One of the ways is by ensuring that the government officials entitled with the power to enact and enforce these regulations are not members of concerned groups. This will prevent the conflict of interest that may arise. Another way may be by having a panel of many interest groups in enacting a regulation (Amitai Etzioni, 42). Conclusion Economists judge poorly the role of the state. Their judgments are mainly related with the state’s role in the economy. Theoretically, the state’s role is to regulate a market to meet the public interests. Meeting the public interests helps a country approach equity, high security levels, and financial stability. Despite all these positive intentions of the state regulation, it does not serve its purpose. The state officials have selfish interests that dictate the regulation they enact and enforce. Many corrupt officials in the state collude with the private sector to create regulations that prevent free market competition in the economy. The state has also fail in its role of providing public goods. The public goods provided by the state are inadequate and inefficient. It is usually the state’s role to take into consideration the public interests but due to human behavior of prioritizing one’s interest, this does not take place (Jon D. Wisman, Peter M. Lichtenstein, Paul Burkett, and William R. Waters, 11). Works Cited Amitai Etzioni. The Free Market versus a Regulating Government. Challenge 52.1 (2009): 40-46. Print. Jon D. Wisman, Peter M. Lichtenstein, Paul Burkett, William R. Waters. FORUM FOR SOCIAL ECONOMICS. Villanova University, 1986. Print. Milton Friedman. Capitalism and Freedom. Chicago: University of Chicago Press, 1962. Print. Robert Kuttner. The Squandering Of Americas Assets. Challenge 51.1 (2008): 78-90. Print. Read More