25 Images of Markets Regulating Themselves

8/12/2019 25 Images of Markets Regulating Themselves

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25 Images of Markets "Regulating Themselves"ByakadjianFollow

When economists talk about how a market "regulates itself," what they mean is that markets reach anequilibrium between supply and demand.

This says nothing about whether or not this equilibrium will be a good thing for society. It simply statesthat if consumers choose what to buy and producers choose what to sell and how to produce it, the

market settles on a product distribution and prices.

Lately, many people I know have argued that "free markets" mean something more. They see markets asethically right or ethically moral, meaning pursuit of profit always somehow leads to a greater good.

Unfortunately, morality isn't built into markets.

Markets were fine with child labor and slavery. Both were viewed simply as cheap sources of labor. It

wasn't until people fought against child labor and slavery that these things became unacceptable in amarket (at least in most Western countries).

This is why markets must be subject to other forces such as ethics and government if we want them towork for the benefit of the many (not just a select few).

Now you may know all this and if that's the case, you're ahead of the game.

However, many of us know people who have either bought into the claim that government is the onlything standing between us and a truly "free" market or are on the fence about the role of government.

Here are a few examples I've found that make a convincing case for regulations and good government.

2014 Oxfam report "85 people own more than the poorest 3.5 billion people on the planet"

This statistic fromOxfamis staggering. Just 85 people, the top 0.00000001 percent, own as much as the

poorest 3.5 billion people on the planet.

Oxfam's concern is not only that wealth is concentrated at the top, but that it will remain this way, passed

down from generation to generation like royalty.
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According to Nick Galasso, co-author of the report:

"High levels of inequality actually corrode democratic processes. What we have seen across the globe andwhat the report documents is how wealth concentration is used to influence the political process to createlaws and regulations that benefit the rich over everyone else."

2014 West Virginia chemical spill

Freedom Industries allowed to act freely (left alone by the EPA for 20 years) lets 7,500 gallons of MCHM(4-methylcyclohexane methanol) into the Elk River. 300,000 lose water for days.
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Montani semper liberi, Joe Manchin III, West Virginia's junior senatorsaidarguing for "freer markets" atan event sponsored by the American Coalition for Clean Coal Electricity after the spill, Mountaineersarealways free.

2013 Bangladesh garment factory collapse

1,132 people killed, 2,500 injured, 300 missingMinimum wage for garment workers = $40/month

Months later, little has changed and the South Asian countrycontinues to mourn the deaths ofworkersin other avoidable incidents.

2013 West Fertilizer Company explosion in Texas

15 killed, 160 injured.
http://www.nytimes.com/2014/01/19/us/chemical-spill-muddies-picture-in-a-state-wary-of-regulations.htmlhttp://www.nytimes.com/2014/01/19/us/chemical-spill-muddies-picture-in-a-state-wary-of-regulations.htmlhttp://www.nytimes.com/2014/01/19/us/chemical-spill-muddies-picture-in-a-state-wary-of-regulations.htmlhttp://www.cnn.com/2013/10/24/opinion/bangladesh-garment-workers/http://www.cnn.com/2013/10/24/opinion/bangladesh-garment-workers/http://www.cnn.com/2013/10/24/opinion/bangladesh-garment-workers/http://www.cnn.com/2013/10/24/opinion/bangladesh-garment-workers/http://s1350.photobucket.com/user/akadjian/media/2013-bangladesh-factory-collapse-02_zps6b7f45dc.jpg.htmlhttp://s1350.photobucket.com/user/akadjian/media/2013-bangladesh-factory-collapse-01_zpsd7923d72.jpg.htmlhttp://s1350.photobucket.com/user/akadjian/media/2013-bangladesh-factory-collapse-02_zps6b7f45dc.jpg.htmlhttp://s1350.photobucket.com/user/akadjian/media/2013-bangladesh-factory-collapse-01_zpsd7923d72.jpg.htmlhttp://www.cnn.com/2013/10/24/opinion/bangladesh-garment-workers/http://www.cnn.com/2013/10/24/opinion/bangladesh-garment-workers/http://www.nytimes.com/2014/01/19/us/chemical-spill-muddies-picture-in-a-state-wary-of-regulations.html


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Texas law allows fertilizer storage facilities to operate without any liability insurance, even when theystore hazardous materials.

2012 Libor price fixing scandal

Possibly the biggest price-fixing scandal ever affecting upwards of $500 trillion of financial instruments.

By the time litigation is through, its estimated 16 banks may face up to $35 billion in civil settlements inaddition to other regulatory fines.
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2012 Pink Slime

We find out that what we're eating in our beef looks like this:

The name used in the meat industry is lean finely textured beef (LFTB). Hmmm.

2012 HSBC launders Mexican drug cartel money

And this is only the second biggest banking scandal of 2012 because of the Libor price fixing. JP Morgan

losing $5.8 billion on a derivatives trade was a distant third.
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2011 Newscorp hacking scandal

Newscorp employees engage in phone hacking and police bribery to get stories.
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2010 Deepwater Horizon Oil Spill

11 dead. 4.9 million barrels of oil spilled into Gulf of Mexico.
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$37-90 billion in cleanup costs. Billions more estimated in economic and environmental impact.

2010 Chilean miners trapped in collapsed mine

Between 2004 and 2010, the firmaccumulated 42 finesfrom various Chilean safety bodies for failing toprotect its workers.
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"They never carried out the most fundamental adjustments needed to avoid disasters like what we're

seeing today," Vincelot Tobar, risk assessor who resigned in 2009 because the company failed to carry out

his recommendations.

2009 Queensland Oil Spill

Improperly stowed cargo dislodgedfrom the deck damaging other cargo and containers onboard

causing various substances to spill into the ocean.

Cost: $34 million (Australian dollars) cleanup, economy impact $10 million
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2008 Lehman Brothers collapse, sub-prime mortgage crisis, and global recession

8 years after Graham-Leach-Bliley legislation deregulates the financial services industry.

Cost: $475 billion authorized in TARP payment, global recession, continuing too big to fail philosophy
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2007 Aqua Dots Recall

The toy's coating contains a chemical that, once ingested, converts into the toxic "date rape" drug GHB, orgamma hydroxybutyrate causing children to become comatose, develop respiratory depression, or haveseizures.

Spin Master, the company making Aqua Dots, identified the problem on October 17, 2007 after several

reports of kids getting sick.

They continued selling the product until November 7, 2007, when the U.S. Consumer Product Safety

Commission (CPSC) contacted them after receiving reports. At this point, Spin Master issued a "voluntary"

recall.
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2006 Trafigura Dumps Toxic Waste on Ivory Coast

In 2006, the Dutch oil and shipping company Trafigura, chartered a ship called the Probo Koala, to offload

toxic waste at numerous sites around the city of Abijan, Ivory Coast. Trafigura was seeking to avoidpaying a 1,000 per cubic meter disposal charge in Amsterdam.

Gases released by these chemicals claimed the lives of 17 and injured more than 30,000. Injuries rangedfrom mild headaches to severe lung and skin burns.

2006 E. Coli outbreak from contaminated spinach
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Following the outbreak in 2006, the California Leafy Greens Handler Marketing Agreement (LGMA) wasestablished in the spring of 2007. The LGMA, operating with oversight from the California Department of

Food and Agriculture, provides a mechanism for verifying that farmers follow established food safetypractices for lettuce, spinach and other leafy greens.

2005 BP Texas City Refinery Explosion

After the accident which killed 15 and injured 170, both the BP and the Chemical Safety and HazardInvestigation Board reports identified numerous technical and organizational failings at the refinery andwithin corporate BP.

Organizational failingsincluded:

corporate cost-cutting, a failure to invest in the plant infrastructure, a lack of corporate oversight on both

safety culture and major accident prevention programs, a focus on occupational safety and not process

safety, a defective management of change process (which allowed the siting of contractor trailers tooclose to the ISOM process unit), the inadequate training of operators, a lack of competent supervision forstart-up operations, poor communications between individuals and departments and the use of outdated

and ineffective work procedures which were often not followed. Technical failings included a blowdowndrum that was of insufficient size, a lack of preventative maintenance on safety critical systems,

inoperative alarms and level sensors in the ISOM process unit and the continued use of outdated
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blowdown drum and stack technology when replacement with the safer flare option had been a feasiblealternative for many years.

It's a good thing BP learned their lesson after 2005.

2002-2004 Merck Vioxx

By the time Vioxx, approved by the FDA in 1999, was pulled off the market in 2004, nearly 25 millionAmericans had taken the drug.

InternalMerck documentsshow that the company knew about the problem at least as early as 2000,

but continued to market the product as safe. Merck even provided an obstacle handling guide to counterdoctor concerns of heart risk.

2001 Enron collapse

Enron hid failed deals and projects for years through the use of accounting loopholes and special purpose

entities.
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The collapse of Enron led to the Sarbanes-Oxley Act. This legislation increased penalties for defrauding

shareholders or tampering with records. The act also increased the accountability of auditing firms toremain unbiased and independent of their clients.

2000 Firestone recalls 6.5 million tires

March 11, 1999In response to a Ford concern about tire separations on the Explorer,

Bridgestone/Firestone sent a confidential memo to Ford claiming that less than 0.1 percent of allWilderness tires (which are used on the Explorer) had been returned under warranty for all kinds of

problems.

August 9Firestone announced that it would recall about 6.5 million tires that were then on light trucks

and SUVs because they had been implicated in more than 40 fatalities.
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What to do with this

Extensive lobbying, advertising, and education on behalf of certain business organizations is pushing the

idea that markets have a built-in morality.

Here's a great example from a site calledStudents for Liberty:

The task before us, thenif we wish to actualize the truly free social system that is laissez-fairecapitalismis to provide and defend its moral justification. We must convince fellow students that

capitalism is not just the most efficient system, but a virtuous one as well.

Anyone who questions this morality is a liberal or in the view ofsome:

I've found, however, that it's pretty easy to make the case for regulation and ethics if you illustrate

through a few examples (and keep partisanship out of it).

To start with all you have to do is ask: what's the goal of a business?

Obviously, it's to turn a profit.

What's to prevent pursuing a profit at all costs? Especially if no regulations, enforcement, or penaltiesexist.

We're frequently told: If only we could release business from the shackles of government and stop"forcing" them to obey regulations and laws, then the market would magically make everything better for

people.

However, when government deregulates or fails to properly enforce regulations, evidence overwhelminglysuggests that pursuit of profits trumps ethics, morality and the greater good. Not surprising given that this

is the #1 stated priority.

We simply need to recognize that markets have no implicit moral authority.

We need to have adebate about the moral limits of markets.And we need to recognize that

appropriate regulation, enforcement and good government are all components of aworking capitalism.

Read the fullOxfam report(or summary of recommendationshere)for other recommendations on how

to create a working capitalism including progressive taxation, cracking down on financial secrecy and tax

dodging, and curbing the power of the wealthy to influence elections.
http://studentsforliberty.org/morality-of-capitalism/http://studentsforliberty.org/morality-of-capitalism/http://studentsforliberty.org/morality-of-capitalism/http://www.foxbusiness.com/topics/the-government-is-killing-my-business.htmhttp://www.foxbusiness.com/topics/the-government-is-killing-my-business.htmhttp://www.foxbusiness.com/topics/the-government-is-killing-my-business.htmhttp://www.theatlantic.com/magazine/archive/2012/04/what-isnt-for-sale/308902/http://www.theatlantic.com/magazine/archive/2012/04/what-isnt-for-sale/308902/http://www.theatlantic.com/magazine/archive/2012/04/what-isnt-for-sale/308902/http://washingtonspectator.org/index.php/Politics/fairer-distribution-the-case-for-a-working-capitalism.htmlhttp://washingtonspectator.org/index.php/Politics/fairer-distribution-the-case-for-a-working-capitalism.htmlhttp://washingtonspectator.org/index.php/Politics/fairer-distribution-the-case-for-a-working-capitalism.htmlhttp://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-en.pdfhttp://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-en.pdfhttp://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-en.pdfhttp://www.dailykos.com/story/2014/01/22/1271695/-Now-that-you-know-85-people-own-more-than-half-the-world-here-s-what-to-do-about-ithttp://www.dailykos.com/story/2014/01/22/1271695/-Now-that-you-know-85-people-own-more-than-half-the-world-here-s-what-to-do-about-ithttp://www.dailykos.com/story/2014/01/22/1271695/-Now-that-you-know-85-people-own-more-than-half-the-world-here-s-what-to-do-about-ithttp://s1350.photobucket.com/user/akadjian/media/gov_killing_my_business_640x360_zps82ffef8d.jpg.htmlhttp://www.dailykos.com/story/2014/01/22/1271695/-Now-that-you-know-85-people-own-more-than-half-the-world-here-s-what-to-do-about-ithttp://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-en.pdfhttp://washingtonspectator.org/index.php/Politics/fairer-distribution-the-case-for-a-working-capitalism.htmlhttp://www.theatlantic.com/magazine/archive/2012/04/what-isnt-for-sale/308902/http://www.foxbusiness.com/topics/the-government-is-killing-my-business.htmhttp://studentsforliberty.org/morality-of-capitalism/

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25 Images of Markets Regulating Themselves