Is more Government Control good or bad?

With demise of Soviet style Socialism in the 1980s most people believed that Government control of affairs of the society will become less and less and Laissez-faire Capitalism will rule the World.But it did not happen.Governments in most of the Western World is trying to control their economies more than before. Is more Government control good or bad?

Let me try to define Laissez-faire Capitalism.
Ayn Rand the Russian-American writer,a staunch supporter of Capitalism said

When I say “capitalism,” I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.

Actually no country followed Laissez-faire economic system. But most of the Western European countries and USA had a relatively free market economy though with varying degree of Government control.
But after the  economic crisis of 2008-09 the Governments are thinking about controlling their economies more and more.
 In USA, President Barack Obama’s Democratic Party is trying to pass an economy regulation legislation which will increase the control of Government on the financial system.
In a speech today in New York Obama said:

I believe in the power of the free market. I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings. But a free market was never meant to be a free license to take whatever you can get, however you can get it. That is what happened too often in the years leading up to the crisis. Some on Wall Street forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business, or save for retirement.

I have also spoken before about the need to build a new foundation for economic growth in the 21st century. And, given the importance of the financial sector, Wall Street reform is an absolutely essential part of that foundation. Without it, our house will continue to sit on shifting sands, leaving our families, businesses and the global economy vulnerable to future crises. That is why I feel so strongly that we need to enact a set of updated, common-sense rules to ensure accountability on Wall Street and to protect consumers in our financial system.

It is widely agreed that the economic recession of 2008 could have been avoided if the Government had intervened to control unbridled sub prime lending and Mortgage frauds. It is also now clear that it was the bailout by Government using tax payers money that helped to prevent bankruptcy of many Companies.

Recent revelations that Goldman Sachs duped its own customers and made big profits raises the need for more Government regulation in Banking sector.
“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

Let me quote Obama again:

“It is for this reason that we need a system to shut these firms down with the least amount of collateral damage to innocent people and businesses. And from the start, I’ve insisted that the financial industry — and not taxpayers — shoulder the costs in the event that a large financial company should falter. The goal is to make certain that taxpayers are never again on the hook because a firm is deemed “too big to fail.

“In the end, our system only works — our markets are only free — when there are basic safeguards that prevent abuse, that check excess, that ensure that it is more profitable to play by the rules than to game the system. And that is what these reforms are designed to achieve: no more, no less. Because that is how we will ensure that our economy works for consumers, that it works for investors, that it works for financial institutions — that it works for all of us.

I agree with Obama here. More Government controls,safeguards and regulation will only help the economy.

As the Nobel Prize winning economist and a strong supporter of economic regulations by the State, Paul Krugman said:

For the fact is that much of the financial industry has become a racket — a game in which a handful of people are lavishly paid to mislead and exploit consumers and investors. And if we don’t lower the boom on these practices, the racket will just go on.


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