A pretty lousy hack job

How to descredit George Soros..

The news: George Soros sets up a $50M New Economic Thinking foundation to study alternatives to ‘free-market fundamentalism’ (see below for the article). Some people seem to want to suggest he wants to abolish capitalism..

Some stylized facts:

  1. Completely unregulated markets do not exist (for instance, try doing business where contracts are not enforceable, you’ll soon find yourself having to deal with some sort of maffia). Markets simply cannot function in a social, moral, or legal vacuum.
  2. But completely unregulated markets are still the paragon of efficiency of many (especially introductory) economic textbooks
  3. The present crisis is to a large extent the result of bad regulation of financial markets. This bad (or absent) regulation was itself infused by that free-market fundamentalist ideology where the market is always right, the government always the problem. One of the best exposé’s ever about this is from the former chief economist of the IMF, Simon Johnson
  4. The market fundamentalists remain very influential, to a considerable extent because the financial sector interests (see that piece by Simon Johnson mentioned under 3. above)
  5. Any person arguing for better regulation is branded a lefty, a socialist, anti-free market, etc. (see article below about Soros)
  6. This happens even if their position (like our own) really is one in favour of markets, but rather arguing that for society to benefit most from markets, they need propper regulation. Markets are not infailable, they are a tool, an instrument, not an end in itself.

Soros: $50 Million to End Free Markets
Monday, November 2, 2009 11:08 AM
By: Gene J. Koprowski

Billionaire George Soros — a financier of various left-wing causes — this week promised $50 million for a new foundation that will tout alternatives to what he call “free-market fundamentalism.”

“The ideologists in the free markets are still in command and I think they’ll be very difficult to remove because they have tenure,” Soros told the Financial Times.

Dubbed the Institute of New Economic Thinking, the new foundation will assemble luminaries’ economists to ponder the ideas that allowed the latest economic crisis to occur and to bring new ideas to counter free-market ideology.

The foundation’s advisory board will be filled with economists like Jeffrey Sachs, George Akerlof, Kenneth Rogoff and Joseph Stiglitz as well as opinion-makers like Anatole Kaletsky and John Kay. Soros has pledged $5 million a year for a decade.

“I think that the financial crisis has proven that is unrealistic,” Soros said of the prevailing economics theories, which assume that people behave rationally.

“The dogma has lost touch with reality.”

American businesses are not taking this criticism of the free market lightly.

The Wall Street Journal reports that the U.S. Chamber of Commerce says the belief in the free market has been challenged by the recession. But the chamber is running TV commercials now touting the virtues of the free enterprise system.

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