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on government intervention in the market - Political Solutions Forum

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From:serge_nn
Date:July 18th, 2007 01:45 am (UTC)
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As much as the socialist in my heart wants to say "yes", my mind tells me otherwise. These are very controversial issues. Your examples of "markets failures" prove it.

Take cigarettes (I'm a smoker, so it's a hot topic). Isn't it the governments, be it a town, state or federal, who goes all populist (as the smokers are a minority) and, like you said, "taxes the shit out of them", plus humiliate the smokers by refusing them the right to enjoy legally purchased product even outdoors, or in their own homes, like in Belmont, CA? On the other hand, there is market competition, and the manufacturer can raise the prices only so much - after all, tobacco is not heroin, and few people will steal and rob, if they can't afford to buy. Zero price - no profit, infinite price - no customers - no profit, so there must be some optimum number in between. This is market.

Oil and big pharma are the biggest lobbyists (and I don't blame them, corporations exist to make profits). Besides "legal" ways of lobbying, there is also corruption. So if government starts regulating the prices, it may become easier to bribe some buareucrat than compete in the open market. These companies are huge, but there is competition, and they can dictate the price only so much - see above. If it comes to a real oil crisis, it will be too late to regulate the price, it will be time to regulate the consumption, like during the war. Plus again, the governments already "tax the shit out of oil", why else the gas prices in Europe are so much higher than in U.S.?

I kinda liked tabula_rasa's point about oil prices. No matter how hard you try to persuade people to switch to alternatives, it will happen when it'll become economically justified, no sooner, no later. You'll just notice one day that gasoline cars are becoming extinct, with no pressure from the government or green party.

So the answer is "no"? wait a sec, no so fast. I come from Russia, where the fast transition to free market was a disaster for most of the people. Without government interference, it would be, probably, communist again, or fascist, or fell apart. As much as everybody likes to throw dirt on Yeltsin and Putin, they are walking the 100,000,000 country through a narrow path between tyranny and chaos.

Closer to your topic: it was admitted that in country like Russia, there are "natural monopolies", which are:

- Ministry of Railroads (Russia's transport system relies heavily on railroads, the highway system doesn't exist beyond the very central region);
- Electric production and distribution: so complex and centralized that it could be destroyed in one day, but impossible to rebuild in 20 years;
- Natural gas production and distribution.

Everything else was auctioned and privatized in several years (lightning fast), but these three are critical things, basically keeping the country together and population alive.

So, instead of breaking them in pieces and selling, as was suggested by liberal economists extremists (and World Bank, by the way) the Russians preserved the monopolies and didn't privatized them completely. Private capital got 49%, the government kept 51% and decisive voice in the Boards of Directors (oil companies were set free, but now it's being reverted -- the amounts of money and influence in oligarchs hands became too big a threat).

Next, the government did what tabula_rasa said is their job - stayed in power, which, if you're not Hitler or Stalin, is impossible without keeping your population's life conditions at least bearable. This meant, keep internal prices reasonable, make more profits on exports, assume responsibilities that Soviet system historically placed on enterprises (social infrastructure, retirement funds, etc.)

I hope you get my point. Sometimes you can't avoid government's interference and regulation, sometimes it's plain harmful. But when there is the right reason to interfere, government should step in and do it's job. Like FDR during the Great depression. Or the Brits, Canadians and everybody else creating universal health care systems.
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