Repost from the old site.
In the comments section, Uncle Milton suggests that the massive fraud perpetuated under the Bush regime (I would add under Reagan too) was antithetical to a free market system. A true free market system is supposed to make fraud illegal.
By any definition of classical economics, what happened to the real estate market was fraud on a massive scale. PS No bid contracts in Iraq as you might guess as nothing to do with free market economics. Crony capitalism and corruption are in conflict with free market economics. If you take a turd, paint it white, and call it beautiful.. it’s still a turd.
By your definition, Unc, free market economics hardly occurs anywhere. This seems to be the problem. Once these neoliberal systems are put in, they are very prone to corruption and crony capitalism. Extremely prone! Everyone wails about it, but it seems to be almost an inherent part of the system. A feature, not a bug.
And the proponents of the free market tend to be very tolerant of massive fraud to the point of not even tolerating it. The more free market the system, it seems the more fraud and cronyism.
As more socialist leaning groups come in, they tend to reign in the fraud to some extent. Europe has very low levels of fraud (it’s considered to be a safe place to do business), and it has high levels of socialism in its system.
China moving from socialism to capitalism was followed by massive fraud and cronyism. Same with Russia and to a much lesser extent Eastern Europe. The neoliberal revolution in Latin America coincided with a tremendous amount of crony capitalism and fraud as state enterprises were sold off to friends of the state in a cronyist fashion for pennies on the dollar.
The way to reduce fraud and cronyism in a capitalist system is to empower the state more (social democracy). Culture also plays a role though.
As an aside, I would point out that the free market ideologists spreading the gospel of neoliberalism had almost nothing to say about the massive cronyism, fraud, graft and out and out theft associated with their neoliberal revolution.
While the billionaires looted Russia bare and bled the country dry, the Jeffrey Sachs’ (the mastermind of the plan and yes, he is Jewish) of the world said nothing. The corporate media mostly just cheered.
The Friedmanites out of the Chicago School have for the most part been fashioning a free market vision in which fraud, graft, cheating, lying and even out of out theft seems to be legal when done by big capitalists wearing suits under a legalistic veneer. There were few persecutions for the massive fraud that occurred under Reagan and now under Bush.
If, as Unc notes above, the financial crash was predicated on massive amounts of out and out crime, it should be clear to us in the next year or so that almost no one is going to go to jail over it.
The FBI looked into investigating the financial crash and seems to have decided that there were far too many criminals committing far too many crimes for the FBI to even begin to get involved at current staff levels, especially with the needs of the War on Terror, so it looks like most of the criminals are just going to get away with it.
As I note above, increasingly, it seems as if mass cronyism, fraud and financial crime in general under neoliberalism is more of a feature than a bug.