Monbiot On The "Free" Market

George Monbiot bloviating on some dickhead who used to run Northern Rock:

A couple of weeks ago, I wrote a column for the Guardian exploring the contrast between Matt Ridley's assertions in his new book The Rational Optimist and his own experience. In the book, Ridley attacks the "parasitic bureaucracy", which stifles free enterprise and excoriates governments for, among other sins, bailing out big corporations. If only the market is left to its own devices, he insists, and not stymied by regulations, the outcome will be wonderful for everybody.

What Ridley glosses over is that before he wrote this book he had an opportunity to put his theories into practice. As chairman of Northern Rock, he was responsible, according to parliament's Treasury select committee, for a "high-risk, reckless business strategy". Northern Rock was able to pursue this strategy as a result of a "substantial failure of regulation" by the state. The wonderful outcome of this experiment was the first run on a British bank since 1878, and a £27bn government bail-out.

It seems curious to me to be making a case against the free market by discussing a market that was not free. But that is precisely what Monbiot is trying to do. He's arguing that because the market was free, Northern Rock was able to follow a dumb-as-fuck business strategy and ended up having to be bailed out by the government. The problem with this "logic" is given away by those final five words: "bailed out by the government". Fundamentally, if the government is intervening in failing companies, then the market is not free.

Both now and when Northern Rock went tits up, we had a mixed economy. The government regulates and regularly intervenes in that economy - even in the banking sector. Had the market actually been left to its own devices, then Northern Rock would have gone under and the government could have saved billions. Furthermore, other businesses would have seen the result of pursuing a dumb-as-fuck business strategy, and might well have decided to change their business plans accordingly.

That's what would happen in a free market - business could take risks, but if those risks don't pay off, then the business itself has to take responsibility for that.

Now, I can certainly understand a certain indignation here: a man who used to run a business that ended costing the taxpayer billions writing a book on best business practice might be a little hard to digest. But the reason why that business cost us billions is because the government decided to bail that bank out. Gordon Brown is just as responsible for the Northern Rock bailout as Matt Ridley. He made the choice to spend that money; not Ridley, and certainly not an unregulated market.

By all means make your case against the free market - there's certainly one to be made. But if you want it to stand up to even the most basic scrutiny, you need to discuss the free market. Not a mixed economy.