Free markets are not ‘free’; the cost is eternal public (investors, shareholders, voters, etc.) vigilance, which requires investment of time, money and attention. When you notice the first symptoms of ‘bird flu' start ‘culling’ using powers like ‘recall’. If you ignore, the blight will spread fast causing incalculable destruction. .

What is the normal level of public vigilance? What percentage of voters vote? What percentages of shareholders attend Annual / Extraordinary General Meetings? What percentage of citizens exercise right to information and show courage to bring wrongdoings in the governments and corporations to light?

If the figures are dismal, the disasters like the present ones we face are inevitable.

Let’s remember ‘God helps those who help themselves’. Let us be ‘hawk-eyed’.

Really, the question is should health care be tied tied to jobs? The answer, clearly, is no. It's not good for people, and it's not good for business.

We seem so polarized in this country between left and right that we are not seeking win-win solutions. My European colleagues are not stressed out about health care in total, including dental and eye care. nor education - 2 key issues for a healthy, well educated population.

I just think we need to re-visit a more centrist, hybrid solution to these two essential components for a progressive society.

Great comments, Steve. As you recall, Milton Friedman and his disciples argued that free markets were the solution to every conceivable problem, and the torpedoes be damned. As we are currently realizing, America as a society -- and many people around the world -- have paid and continue to pay dearly for blind and sustained faith in Friedman's cruel notions, which have advanced plutocracy and diminished democracy. History will show that his ideas (and those of his followers, including Ronald Reagan, Margaret Thatcher, and my personal favorite, Augusto Pinochet) ultimately did more harm than good.

Yes, the Fannie debacle- and of course- the whole subprime mess- has been a cruel and dangerous exposure of the folloy of "Free market" approach. Of course there is no truly "free market" situation that exists anywhere once a business (national or international) reaches a certain size and level of interdepedency. Milton Friedman may have been right but only on a purely theoretical level since our complex financial institutions are ultimately intertwined with areas that are, in fact. reguated. What the right-wing has championed as "deregualtion" really means "let me take as much advantage of the current situation as possible, even if it hurts the ecomony in other sectors now or in the near-future."

Jon R.

Very interesting discussion. I think that such stories of the government helping Fannie Mae and Freddie Mac (and encouraging JP Morgan with Bear Stearns) only encourages people to analyze and understand their motives. I suppose I am pretty naive, but this subprime mortgage mess opened my eyes to the Fed and what sort of cartel it is. Now that Freddie Mac and Fannie Mae are in trouble, I too am learning what sorts of companies they are as well. When we are all prosperous, very few people question the science of the business world, but when times get rough (as they appear at present) we become privy to the dirty truths that got us through the prosperous times.

-Amit
www.brilliont.com/

I think the problem may have been mis-identified. Mr. Prokesch himself said the following:

"Societies elevate certain values and aspirations to the status of universal rights. In the United States, these include freedom from discrimination, a decent education, a chance to own a home, retiring with some measure of security, and now access to affordable, high-quality health care.

"Markets should be structured and governed to ensure that these universal rights take precedence over special interests, including business. And when the potential profits are insufficient to generate the private investment required to achieve society’s goals, yes, there’s a role for taxes."

When did owning a home or being able to retire become a right which should be ensured by the taxpaying base?

Beth, I totally agree with you. About the only thing we get for our tax dollars is a big military. I think it's about time that our allies paid their fair share, which might allow us to spend more on health, education, etc.

Jason, home ownership is already subsidized by taxes in a number of ways--most notably the income-tax deduction for mortgage interest. I would argue that taxes and regulations should be structured to discourage the kind of speculation in the housing market that helped drive up prices to ridiculous levels, which made it harder for people to afford houses and helped set the stage for the current financial crisis.

Regarding "retiring with some measure of security"... I would argue that most Americans DO feel that a combination of employer- and government-provided pensions should allow people to retire at some point in their lives. Given the demise of the employer-provided defined pension benefit and Social Security's woes, that point now seems to be receding, which undoubtedly will trigger a national rethink of the public and private pension systems in the not-too-distant future. It can't come too soon.

Steve I think that the very concept of a perfect market is wrong-headed, just as in evolutionary theory, some place too much emphasis on optimum design - which is purposiveful evolution through the back-door. The market is certainly not perfect - nor should we go for portfolios or policies that are predicated on that - rather we should have a dualist approach to the market - two world's - think of the archer fish and how that inhabits one world and aims a shot at a spider on the outside that inhabits another, a model that can work with the variables of these two worlds and correlate them, would "aim" at a best bet portfolio - we can use this model also with government and the free-market, consider them as a "perfect" or organized economic mdel and one that is completely all over the place - what joins the two is the observer, tracking the variables.A Markov tracking algorithm would do the trick of mediating between the predictions and expectations.

Steve
Perhaps on a completely different tack, it might be good to remember Marx and suggest that each system we create is based on feeing the interests of those in power. In a long economic era when the banks (and their owners) have undoubtedly had pre-eminent power to work their will out in this iteration of a market economy, is it any wonder that a whole system has evolved which privatizes gain and socializes risk.
For the whole game to keep on working, Fannie and Freddie are certainly too big to fail, as long as the presumption is that what is good for the bankers is good for America. Social Security, (the program which enshrines the power of the working class) will also be too big to fail, but if we keep bailing out the investor class, we will so debase the currency that the SS checks won't be worth much. Since the bankers can move money around in the international market but the workers can't, guess whose interests get porked as the taxpayers continue to bail out all the special interests?

You can't seriously be suggesting that the mortgage market, Fannie Mae and Freddie Mac are somehow examples of the failure of free markets. Fannie Mae and Freddie Mac were setup by the federal government. Congress created the subprime mortgage market in its desire to try to provide everyone (even those who really can't afford it) home ownership. They very idea that owning a home is somehow a "universal right" that should be provided to every person also helped create the mess by providing loans to people that couldn't afford to pay them.

Had the government kept its hands out of the market it may very well not have come to the crisis that it has become. Would lenders have given loans to people that most likely were going to default if they didn't have some guarantees from the government (in the guise of Fannie Mae, Freddie Mac, etc)?

The government's role should be no more than enforcing the contracts between parties and making sure that the marketplace is fair for all participants. When people make bad choices both as individuals as as part of corporations they must feel the effects of those bad decisions so that they aren't repeated. If the government swoops in to "save"

Perhaps it was less the guarantee of the government and more the ridiculously fat commissions that all the middle men were taking off the sub-prime mortgages (before reallocating the risks) that caused the current mess.
Dave - I find it misguided that implicit in your message that home ownership is not a universal right is that the irresponsibility (moral and economic) lies with the individuals who want better housing (and extended themselves beyond their means by ACCEPTING loans they did not qualify for) as opposed the the crooked bankers who OFFERED them the loans they did not qualify for (and then lied and profited from such).

Dave, I would argue that Fannie Mae's and Freddie Mac's hybrid status -- part private, part public but not fully either -- has been a big part of the problem. My guess is if they were one OR the other, they would have behaved more responsibly.

As for your comment "Had the government kept its hands out of the market it may very well not have come to the crisis that it has become..." The current mess is largely the result of the govenment pulling back its hands and allowing greed to prevail. If you recall, we once did have much more regulated financial markets -- a response to the failures of the banking system that the Great Depression exposed. But in the last 25-30 years, we have dismantled much of that regulation. And some of companies instrumental in undermining those regulations -- e.g, Citicorp -- are among those being hit the hardest by the current financial turmoil. Surprise! Surprise!

Regarding your comments about home ownership as a right... Again, societies decide what should be universal rights. And American society did decide that responsible citizens who worked hard should be able to afford to own a home. The experiences of the Great Depression and World War II contributed heavily to that belief.

We now seem to be in the same place with health care. If free markets are the answer, why are there 47 million people in the U.S. without health care coverage and millions more with inadquate coverage? Do you believe that people whose employers don't provide health care coverage and who can't afford it on their own don't deserve it?

There is a lot of political dogma being proposed as "fact".

Home ownership and healthcare are NOT guaranteed by our society and these goals routinely fail when put to the ballot with Americans.

America attempts to arbitrate "fairness" by enforcing our laws and our society universally agrees that "fairness" is the "American way".

American government participates in wealth redistribution makes things go awry.

Example: I eat vegetables, drink milk, exercise, avoid alcohol and do not smoke. I am a healthy guy.

If it were possible, would you forcibly take my excess health and give it to someone else? I earned my good health. What gives someone the right to take away my good health?

Thus, why is it justifiable to take my money to benefit another? You only take my money because you can. You cannot take my health (thank God), but I suspect some of you would if you could!

We seem to have a sub-society that is willing to exploit productive citizens to benefit unproductive citizens (expanding to non-citizens).

Isn't this what Rome did before the fall?