Free Market and Social Responsibility

This note was prompted by an article that my dad sent me that was written by Ulrich Beck titled "The Free market farce - shows how badly we need the state" http://www.guardian.co.uk/business/2008/apr/10/creditcrunch.economics In the title he seems to make a case for the "State" but the in the article itself he does not clearly articulate this. I continue to believe that globalization, free market economics, and education will lead to overall reduction in poverty, good governance, justice, etc. However a major caveat is social responsibility and education of the free marketers. The financial industry with the current credit crises, the accounting industry in the early part of this decade with Enron etc., have already shown that the lure of short term profits and individual wealth accumulation take precedence over honesty, ethics, and true long-term success. But if you look at the performance of states - really, the scenario is no better. We have had states for thousands of years and they have not helped eradicate poverty, war, injustice, corruption etc. So the answer is not that the "State" can do the job better than the free market. Today, the traditional notion of power is very different. In the past the political figures were primarily the influencers. However, today the influencers in the world are not necessarily the statesman. Business leaders, Media personalities, sports professionals and a slew of others influence the world in addition to politicians. This changing mix of personalities makes it possible to recognize problems easily, but solve problems more difficult. However this mix of what I call free market influencers makes it more probable that people who society wrong will be more likely held accountable. I am still of the view that good educated citizens of the world in conjunction with the free market will lead to a better world. For instance the current credit crises was due to the fact that complex financial instruments that were unsound were bought and sold. But the fact that there was a market for these instruments is a affirmation of the general greed of our society, and the fact that the bankers fed on the greed to grow wealth exponentially in a short time. Old fashioned concepts of financial prudence and common sense still rule the roost, however old fashioned ideas that our politicians can run things better is a fallacy. Let the market correct itself with some rational intervention. People will suffer in the short term, but we will be forced to invest in instruments that they understand. If we leave it to the state, we will have a slew of legislation that will require a number of finance professionals to police the implementation and again lead to a large opportunity for wealth creation to the professionals that got us in this mess in the first place - remember Sarbanes Oxley!!!!