The Transparent Paradox

The Free Market appears to be a logical utopian vision but it is also being criticised for leading to the failure of the banking system and the questioning of Capitalism. As the debate continues one of the biggest questions that should be asked is why do monopolies exist in a free market? If during the last decade regulation has been too weak and markets too free why didn’t monopolies get broken by free competition? There are a number of reasons, some political, but perhaps the greatest is the lack of transparency in business and the free market.

With hindsight most people can see that the complex repackaging of toxic debt relabelled and sold as AAA grade investment was not only unethical but also improbably stupid. Yet it happened. Some would argue that this was down to lack of regulation but the more regulation you have the more complex the system becomes and exactly the same hidden problems will eventually arise but just in a different light. The problem is that the language of the products sold and the illusion of the free market fooled people into naively not looking too hard at what was being traded. Some people did act unethically but I suspect a lot of people were just playing a system that they genuinely believed was stable. Now ignorance isn’t necessarily a defence for incompetence but further regulation just provides an even greater level of misplaced reassurance as problems bubble away. Would these problems have occurred had the products sold been transparently labelled as toxic and in a free market why didn’t this automatically occur?

The collapse of various banks has led people to portray Capitalism as a system that feeds off the people through a competitive ideology rather than support the people through cooperation. Yet if you do any research into charity models you begin to question how ‘companies’ that make no profit and pertain to do good in the world seem to achieve so little but still manage to pay such generous salaries. Maybe both sides of the ideological battle need to swallow the bitter pill of transparency. This is especially true if you receive any sort of state support or tax benefits from the people. There are many systems in our civilisation that are corrupt but hopefully the human species isn’t one of them. Maybe Competition + Transparency = Cooperation?


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Planet Earth ‘Winners’

 

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2 thoughts on “The Transparent Paradox

  1. Written in December 2001!!!!!!!! An extract from the political link above:With its exemption from scrutiny in hand, Enron revealed relatively little about its trading portfolio, leaving analysts guessing how it had made its profits. Enron’s secrecy was one factor that caused investor confidence to plummet in recent weeks, after the company revealed some unorthodox financial arrangements that benefited top executives."Enron was getting very heavily into derivatives, and along with Wall Street banks, they went to bat to keep us away," said Michael Greenberger, who was director of trading and markets at the Commodities Futures Trading Commission until September 1999. "This should be as scary for regulators and Congress as Long- Term Capital was."Representative Markey agreed that Congress should demand more oversight of energy trading. He said regulators should begin requiring transparency from companies like Enron, while examining the adequacy of their capital and the stability of their trading portfolio, much as banking and securities regulators do for companies in their domain."We’ll do it now," he said, "or we’ll do it when we get the next shock."

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