The author of Odysseus and the Ferrets looks into the relationship between the state and the free market.
During an economic crisis, one is led to believe that markets control everything. When the major crisis of 2008 broke out, markets required swift responses and unlimited support from governments across the world. Parliaments seemed to have lost their sovereign right to decide how to spent taxpayers’ money. But that was an illusion. In fact, the market is but a sum of irrational choices by its players, some of whom might also not be very intelligent. If at times the market seems to rule the world, to figure out what or whom it represents might prove a difficult task. Often, all a market in a state of panic requires is a leader, and that means a politician. Left alone, a market could hardly cope. It needs a set of regulations created by a government.
So what are these economic and market regulations that governments need to put in place? Every nation decides for itself, but the general logic is clear: if the aim of the government is the wellbeing of the people, the best results can usually be achieved in a free market economy. Corruption and inefficient regulation pose a major threat to economic growth. Financial markets only seem as a threat where the national economy is faulty, or badly regulated—which means the state can be made to implement the wrong policies. In free market societies, on the other hand, the state can only do whatever it wants if it ensures competent market regulation and acknowledges the basic laws of economics.
History offers many sad examples of market actors (public bodies or individuals) trying and failing to benefit from a free market and all the while avoiding its traps. I would like to discuss several interesting cases, which might appear funny to an onlooker but must have been traumatic for the parties involved. It is always better to learn from somebody else’s mistakes, so a look at the great financial delusions of the past can be useful for most of us.
Supported by Ad Marginem Press and Goethe-Institut.