Euromoney 30th anniversary: The state still rules the market
Laisser-faire never was quite what it seemed. It required a lot of state power to create and a lot of state power was acquired under the guise of free markets. The process hasn't finished yet. Globalization, far from undermining the nation state, is fostering stronger governments capable of standing up to the new forces. Laisser-faire is over, re-regulation has begun and welfare spending is about to rocket, especially in the emerging markets. The 21st century will witness more varied forms of capitalism than ever before, each with a differing role for the market and a strong role for the state, argues Brian Caplen
To understand the future it is necessary to debunk the myths of the recent past. During the 1990s certain platitudes have been repeated so often by economists, entrepreneurs, politicians and journalists that they are now accepted as statements of fact. Every speechmaker inserts these clichés into their texts as if such references give credence to all other ideas they wish to relay.
The underpinning proposition goes something like this: laisser-faire capitalism has triumphed over all other types of economic system; free markets occur naturally and will flourish if left to their own devices; governments are reducing their role in economies; the welfare burden is being passed from the state to the individual; globalization is spreading the free market to the rest of the world; globalization is undermining the position of the nation state.
This article will argue that none of these assertions is borne out by the facts. It's not a question of whether markets are good or bad, or whether the best government is small or large, the problem is that the evidence to support the triumph-of-markets idea just isn't there.
Only when it is realized that markets are not the singular way of social organization, that governments are playing a larger role in economic and cultural life than ever before, and that globalization (in the sense of universal laisser-faire) is much less far reaching and less enduring than is widely thought, can anything useful be said about future trends.