Profits for me, losses for all

Today in a working meeting, somebody has defined himself as a "liberal economist" who is in favour of leaving the markets regulate themselves. The sentence, said in a quite hostile discussion, has gone almost unnoticed but I think it deserves an entry in my post today.

I am also in favour in an economy where the intervention of the State is kept to the minimum. I would certainly not like a soviet system, which has proved itself to be a ruin for the people. But, the contrary, which I would express as the current situation where market participants (banks, multinationals) take the profit for themselves and knock on the door of the taxpayer when they are in trouble, does not appeal to me either. This system is providing an implicit subsidy to the market participants to engage in very risky business, because, after all, if it goes badly, taxpayers will pay the bill.

Let me give you an example, in economic theory, a bank which goes bankrupt is closed down and the shareholders lose all their inversion as a consequence of their lack of interest and monitoring on what was going on with the bank. In the real world, a bank which must be closed down (many of them in the EU at the present moment), knocks on the door of the taxpayer and blackmail him in order to continue with "business as usual".

In economic theory, it is said that markets can work efficiently and that any intervention from the government is just an externality to it. Many can quote Henry David Thoreau or similar authors, just, in the end, to show how little they understand from these literary texts. Let me remark the work "theory" in the previous sentences. We have the society we have, which is quite far from the ideal world defined in economic models. Therefore, we cannot apply the outcome of the economic theory to the real world, because it does not work.

To sum up, I really mock those who claim to be "liberal economist", they do not really know what they are saying (they are fools) or they know and then they are liars. They are not liberal economists (most of them, I mean) but just those fighting to keep the current status quo at all cost (understanding thus that they get a generous portion of the benefits of it).