I often find the radical centrist point of view refreshing after witnessing the shenanigans of the far Left and the far Right, although I think it’s primary limitation has to do with questions of scale. Radical centrists could perhaps use a good dose of Kirkpatrick Sale, Leopold Kohr, or E.F. Schumacher.
( 1 ) A laissez faire economic system works remarkably well at the beginning stage of almost any business, for example computers, but in the past such things as fast food, automobiles, and movies. Freedom to innovate and build business ventures is a great strength of laissez faire.
( 2 ) In mature industries / businesses, laissez faire has an overwhelming tendency toward monopoly formation and the rise of super-corporations that make it impossible for smaller firms to compete. Hence the dozens of car manufacturers of the early 20th century eventually became just 3, and hundreds of TV enterprises have become just 9 giant businesses today. This happens in every mature industry except businesses that are strictly focused on local markets like restaurants and beauty salons.
( 3 ) A mythology of laissez faire distorts the reality of this system. Proponents of laissez faire tell us , for example, that the Free Market is always fair to all businesses and always self regulates for the common good.
often are false and deceptive. Corollary: According to this mythology, regulations always –maybe a few exceptions are allowed– are harmful to the economy and almost always are motivated by ideology-driven politics that serve the interests of special interest groups, especially labor unions.
As well, because of corporate size differentials, and economies of scale, any market in any established industry, is like going to a butcher shop where the butcher has his thumb on the scale. Small size businesses simply cannot compete –in terms of rates for shipping of lower volume goods, available legal counsel, and many other things.
Corollary: Because of worship of the bottom line intrinsic to the laissez faire system even national security may be sacrificed for the sake of quarterly earnings. Hence massive technology transfer to America’s detriment. Hence willingness to agree to business contracts with nations like Saudi Arabia and China which, different as these particular states may be, are alike is seeking advantage in obtaining sensitive military hardware, as in the case of the Saudis, or such things as commercial jet basic assemblies, on the part of the Chinese. Laissez faire economic policy, in other words, can easily result in national disadvantage, which we can now see more clearly than before in the case of auto parts shortages etc, that were the result of the tsunami some months ago. It may be that there is much money to be made through usual laissez faire practices but when this results in national military security or national economic security vulnerabilities, then laissez faire can be seen for what it is, excellent in some ways, terrible in others.
( 4 ) The market simply cannot or will not do some things that are very useful to society. In such cases government may decide to act. Hence, the Interstate highway system, the Intercoastal waterway –the canal system used by Atlantic seaboard states– and Boulder Dam and other hydroelectric projects.
( 5 ) Because a functional market with laissez faire characteristics is an economic good, the Government has the responsibility to see to it that sufficient regulations are in place at all times such that some approximation of a “pure” laissez faire system operates for the national interest. This policy of necessary regulations is essential because of the built-in limitations and flaws in the laissez faire system itself. However, this also means all necessary regulations only, and the fewer the better. But enforcement of such regulations must be rigorous and the penalties should be such that no investor would even think about violating the rules.
Corollary: Regulation is a two-edged sword, both due to regulatory capture by industry, and also because regulation can create barriers to entry which prevents innovation. The cost isn’t infinite –sometimes it is worth it– but it isn’t zero either. Therefore it is vitally important to limit the number of regulations as much as possible, consistent with legitimate social or other needs. We also need some reliable, non-partisan means to evaluate the effects of regulation such that any problems with rules can be remedied with minimum delay and to good effect without significant burden to industry.
We need to give laissez faire full credit where it is deserved, it can deliver wealth to multitudes and create economic growth that benefits the entire nation. However, his is not all it does and sometimes this system is responsible for serious problems that demand redress.
Above all, we need to think about laissez faire in objective terms and never attribute virtues to it that are false to the facts.