Introduction
With the failure of markets to factor in external costs, the government has to regulate the economy in order to maintain fair practice as well as uphold the common interest. The Great Depression during the 30s resulted in massive reforms within the economy in order to stabilize it’s boom-bust cycles, and gave the state more control over financial markets (ex: separating people’s savings accounts from the stock market, or drafting a charter on the savings and loan associations).

The recent trend in the agenda of the White House has been deregulation. And with that, now we are seeing recession and insecurity in the national economy. In fact, we find it historically all over the globe - check out the IMF and how it deteriorated Third World Countries’ development and policy autonomy. Look at the events that led up to the Great Depression. Look at foreign financial investment and how it makes one person wealthy by borrowing from a low interest-rate country and invest it into a high interest-rate country. Only the general public, working 40+ hours a week stand to lose. Capital controls are necessary for more reasons than one.

The recent trend of deregulation also goes hand in hand with the framework of Free Trade. This is important because many of our politicians lean towards this idea written by Adam Smith in the 1800s. Reviewing the economic history of America, its success is hardly due to Free Trade but more so with Protectionist policies. Not only does the market economy cause and fail to respond to recessions, we are now in a new era of capitalism, where we have corporations, globalization, and deficit spending. State intervention and regulation are necessary so that we ensure that everything valuable invested into this way of economic life does not go unstable.

And now here’s the article from Chomsky!

Markets have inherent and well-known inefficiencies. One factor is failure to calculate the costs to those who do not participate in transactions. These ‘externalities’ can be huge. That is particularly true for financial institutions.

Their task is to take risks, calculating potential costs for themselves. But they do not take into account the consequences of their losses for the economy as a whole.

Hence the financial market ‘under prices risk’ and is ’systematically inefficient,’ as John Eatwell and Lance Taylor wrote a decade ago, warning of the extreme dangers of financial liberalization and reviewing the substantial costs already incurred - and also proposing solutions, which have been ignored.

The threat became more severe when the Clinton administration repealed the Glass-Steagall act of 1933, thus freeing financial institutions ‘to innovate in the new economy,’ in Clinton’s words –and also ‘to self-destruct, taking down with them the general economy and international confidence in the US banking system,’ financial analyst Nomi Prins adds.

The unprecedented intervention of the Fed may be justified or not in narrow terms, but it reveals, once again, the profoundly undemocratic character of state capitalist institutions, designed in large measure to socialize cost and risk and privatize profit, without a public voice.

That is, of course, not limited to financial markets. The advanced economy as a whole relies heavily on the dynamic state sector, with much the same consequences with regard to risk, cost, profit, and decisions, crucial features of the economy and political system.

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