The dark lord says:
The typical arguments are made by the right too. If the economy is going good “see, the deregulation has brought about unprecedented wealth. How can you propose more regulation?”
When the economy goes bad, we get the answer “see, the crisis is brought about due to regulation in the housing mortgage market. How can you propose more regulation?”
Yes, the libertarian right makes this argument, but there is a consistency in it. We believe that most regulations do harm, and that a lightly regulated economy works best.
If the socialist left made the counter-argument, that too would be internally consistent. If you really wanted to regulate the economy all the way to the Soviet Union, you could justifiably claim that both the US and India are variants of the same system. But in my post, I wasn’t arguing with the socialist left – I don’t need to, as history has already answered them.
My argument is with those who say that “we need a free market with some regulations, but that doesn’t mean that we should be socialist”. If you hold that belief, I would expect you to believe that there is some point at which additional regulations do more harm than good, so you’d support some regulations and oppose others. But what I notice is that for supporters of regulation, the right amount of regulation is always “A little more than we have now”.
As Ajay Shah points out, we don’t just regulate our financial system, we micro-manage it. When things are going well in the US, and we make the case for deregulation, we get the answer: “See, even in the US, we don’t have a completely free market system. Even they have regulations. How can you propose that we junk ours?”
When things go wrong in the US, we get the answer: “See what happened to the US because they followed a free market system? How can you propose that we junk our regulations? We need more.”
This bias ensures that we will always follow suit when the US moves left, never when it moves to the right.
It turns out that the UPA government, which presided over the boom phase of the business cycle has ended its term with an incredibly high fiscal deficit. It got away with its legal responsibility to keep the budget within limits by keeping them within limits on paper and simply spending more than it was allowed. Chidambaram’s response to those who pointed out that he had not actually provided funding for the NREGA was, in effect “Trust me. Do you think I am so stupid as to not provide funds for such an important scheme?” Now, we will enter the bust phase of the cycle burdened with a huge deficit. For some reason, I am reminded of the discussion I got into here.
A year back, we were visiting my wife’s relatives. The head of the family, my wife’s uncle, used to be in the police force before he drank himself to death.
As is the norm in these cases, his eldest son was given a job in the police department. Of course, he had to pay a bribe for the job. He got a discount because of his late father, but he wasn’t exempted. If the son had been a graduate, the amount would have been lower, but he would still have had to pay.
And oh – he did not get an actual policing job. That would have cost him much more. He was given a clerical job in the department, dealing with personnel matters. That cost lower.
“I don’t suppose you have any opportunities to make extra money in this section?” I asked him.