Since the 2008 ‘credit crunch’ and the subsequent recession here in the UK there has emerged a falsehood that has, like any self-respecting falsehood will do, grown big and strong in the bullshit-rich soil that is the mainstream media. This falsehood is the belief that: one of the causal factors, if not the causal factor, of the credit crisis was a lack of regulation or a loosening of restraints by governments in the years preceding it, which lead to a frothy-mouthed credit-binge on the part of bankers – because that’s what greedy bankers will always do the second you let them off the leash (obviously!).
The chart above (taken from this report) shows the number of employees in UK regulatory bodies and the finance industry over a 33 year period. The credit crunch happened in 2008. We can see from the graph that the overall trend since around 1997 is a steep increase in the number of employees in regulatory bodies, from approximately eight to nine hundred in 1997 to around two and a half thousand in 2007. It’s interesting to note that the increase in the size of the regulatory bodies is much larger than the increase in the number of employees in the finance industry itself over the same period. The size of the regulatory bodies increased over three-fold whilst the size of the finance industry nearly, but not quite, doubled.
Even though regulation has been steeply increasing for decades (in the UK at least, but broadly elsewhere in Europe and America too) and has failed to achieve its goals, it’s still widely believed that the solution is to have still more regulation, ‘better’ or more complex regulation.
As Albert Einstein pointed out: “Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius – and a lot of courage – to move in the opposite direction.”
The problem with compelling falsehoods, especially ones that rationalise prejudices, is that they slot snuggly into the space where the truth should be, and most people, believing that there’s no ‘gap’ anymore, stop looking for the truth. This suits the needs of politicians perfectly because truth is their kryptonite.
The truth is that more regulation will not stop economic bubbles inflating and bursting again in the future, because more regulation equals more government control/action, and it’s government-controlled markets, currencies, inflation rates and banks that manifests recurring instability in economies; manifests booms, busts, and sudden and gradual decreases in standards of living. It doesn’t have to be this way, the recessions and depressions we’re experiencing and have experienced in the past aren’t the ‘nature’ of capitalism or economics or ‘free-markets’, contrary to what politicians would have us believe. A permanent poverty-stricken underclass and paper money that becomes increasingly worthless are consequences of a lack of economic freedom, not too much freedom, they are the direct consequences of government-controlled economies.
If we’re at all interested in long-term economic stability and in truly equal economic opportunity (not outcome) for all Peoples, then we must be courageous. We must reject the ideology of interventionism, which has dominated Europe and America since the world wars, we must reject the premise that markets only serve the greatest good when under government control or supervision. Reason and evidence shows us that the truth is the opposite: markets under interventionism in the long-run only serve the needs of politicians and the bastard offspring of governments – corporations. When the time comes that the economic affairs of individuals are no more the business of governments than what clothes people wear, any banks that over-leverage themselves in the way governments positively insisted banks did in 2007/2008 will suffer the inexorable consequence: they will go out of business and be liquidated. Put simply, this will be a world where banks and other financial institutions that take huge risks with other people’s money and make huge losses will suffer the consequences. We don’t live in this world, but with luck, and if we are courageous, our children or our children’s children will.