Part of the debate "The current financial crisis sounds the death knell for laissez-faire capitalism"
Proposer: Professor Jonathan Michie
Laissez-faire capitalism has been pronounced dead by world leaders and commentators. Gordon Brown acknowledges 'the collapse of a failed laissez-faire dogma'. George Bush was elected a social conservative and leaves office a socialist conservative. Laissez-faire capitalism is deceased. It is bereft of life. It is an ex-policy.
The question is, will it make a comeback once the mess it created has been cleared up? The answer is that if we let it, yes it will. There are vast private fortunes to be had. We must ensure that the lessons learned from the global banking crisis are not lost. We need a sustainable future in economic as well as environmental terms. Laissez-faire capitalism would endanger both – unleashing another era of unsustainable speculative activity, while ignoring the environmental consequences.
Regulation can ensure environmental effects are factored into decision making. This need not be a cost – on the contrary, it can act as a spur for industry to invest in green growth, knowing that the alternatives will be increasingly outlawed. That way, directors can justify long-term investments in green technologies to their shareholders – because regulation will make this the only way of enjoying sustainable profits in the future. Otherwise, their fiduciary duty is to make short-term financial returns by speculating on the markets along with everyone else. It is a question of what sort of system we design and maintain – one of laissez-faire capitalism, where short-term financial returns are maximised, or one where activities are regulated to take account of the environmental and economic costs that society would otherwise have to bear.
Following 9/11, the UK Government announced we would no longer launder terrorist funds through the City of London. One had to applaud the intent, but also question why we had been doing it in the first place? Likewise with the reaction to the mess that the laissez-faire approach of the past 20 years has landed us in. Laissez-faire capitalism has been banished, and appropriate regulation promised. Excellent. No sense quibbling about why we couldn't have had it in time. The important thing is to ensure that such regulation remains in place, along with government intervention to promote environmentally sustainable growth.
A useful first step would be to vote for this motion – that the current financial crisis sounds the death knell for laissez-faire capitalism. That will send a clear message that there should be no return to 'greed is good' market rule.