Survival__ Structuring Prosperity for Yourself and the Nation - Charles George Smith [77]
The mortgage itself is written in such a fashion that its true costs are obscured-- the very opposite of transparency. Thus, the mortgage/leverage/derivative/ratings bubble of fraud and greed depended on obscurity and obfuscation, and indeed, market participants lost competitive advantage in terms of profit if they dared choose transparency.
This is why it is specious to claim an unregulated finance-based economy will regulate itself. Though the government is by nature attempting to expand at the expense of the citizenry, that doesn't mean there is no need for governmental regulation. It simply means the regulations must be strong yet simple: transparency in all matters, no exceptions.
The classic examination of how self-regulating markets turn everything and everyone into commodities ripe for exploitation is The Great Transformation by Karl Polanyi.
The big losers in the fantasy of self-regulating markets are the middle class; the Plutocracy buys itself exclusions. The costs of dysfunctional markets eventually end up on the backs of the middle class while the outsized profits end up in the pockets of the Elites. Profits are privatized and losses are socialized, i.e. borne by the middle class taxpayers. Like the Roman citizens granted free bread and endless public entertainments, the less productive citizens are pleased to support the status quo (simply by remaining passive) as the status quo has effectively bought them off with "bread and circuses."
Markets, The Commons and Lifecycle Costs
Just as we must be careful of government because of its inherent self-interest and vulnerability to influence/control by the Plutocracy, we must be careful not to assume that markets are effective at establishing prices in all settings just because they work in limited, short-term contexts. The reason for our caution: markets are incapable of pricing the full social, medical and environmental costs of a product's entire lifecycle. Thus coal is priced by its demand as fuel and the cost to extract it from the earth. But if coal is burned in great quantities, as in China, then the air quality becomes adverse to human health.
People breathing such particulate-polluted air are far more likely to die from respiratory diseases than those who don't breathe such toxin-laden air. So shouldn't the cost of treating millions of people and the loss of millions of man-years of productive labor be priced into the cost of mining and burning coal?
And suppose the cost of restoring strip-mined areas to some semblance of its pre-mined natural state was built into the cost of mining surface coal. What would the price per ton be then?
Markets will never price in the full lifecycle and social/environmental costs on their own; self-regulated markets are about reaping maximum short-term profits, not seeking out long-term costs which competitors might be able to shirk. Further, the full lifecycle costs of any product are often ambiguous; how do we price in the cost of restoring a landscape when we don't yet know the cost of doing so?
In both socialist/Communist nations like China and "free market" capitalist nations like the U.S., the market effectively shunts all these "common area" costs of doing business onto private individuals who had no choice in the matter (of the air they breathe or the power source they purchase electricity from) or onto the government which must then shoulder the healthcare and environmental costs via taxes on productive citizens.
Following our precept that all markets require transparency above all else, we find that the Plutocracy engineers obscure tax credits and subsidies for its industries, masking the true cost behind these government tax breaks. Thus the citizenry will find the task of sorting out the real benefits of transparent solar subsidies and obscure nuclear