“Laissez faire is the term applied by our forefathers to denote our government’s policy on business, which means, “leave it alone”. In recent years, our government has not abided by this basic rule. Laissez-faire proponents support visions of free markets which are comprised of little or no state intervention on economic issues which include minimal regulations, minimal taxes, free circulation of labor and private ownership of property. Some proponents however support certain kinds of negative liberty as opposed to positive liberties, such as wealth redistribution which is given by the state. Others prefer negative income tax as a replacement to existing welfare system, arguing that it is simpler and has fewer of the perverse incentives of government handouts. The opposition to wealth distribution is mainly based on the belief that it takes capital from the most productive sectors of the economy and gives it to the less productive sectors which in turn reduces productivity of a country and incentive to work. When a government allows market forces to prevail freely, this form of market is called capitalism. If a government controls market forces such as prices of goods and services, we refer to this kind of market as a communist market. However a capitalist state may practice some form of communism.
- Evaluation: Energy independence
America’s government has not abided in the basic rule of free market in the recent years according to some policies put in place concerning energy independence. According to Robert Bryce 2009, America’s dependence on imported oil was only at about 30 percent. As a result of federal government’s interference in free markets and the passing of legislations that restricts the development of America’s oil fields, America today is importing more of its oil at around 60 percent, most of which is comes from other oil producing countries. Government leader have allowed America to be over dependent upon the oil production levels of other foreign nations (Robert, 2009).
The demand for oil products has risen steadily in America as a result of high population growth, but there has hardly been no efforts to improve refining capacity have been witnessed in decades. No amount of representation on price gouging will change this economic reality. In recent times the US Energy Information Administration has reported that the oil industry in the US making billions in profits after spending sizable amounts of money on researching, transporting, drilling and refining their products. On the other hand, in that same year, Federal and State governments collected $58.4 billion in taxes from the oil companies without investing a dime (Robert, 2009).
The Ethanol subsidies program is also a prime example of how US government interference in the free market has led to skyrocketing of prices. Subsidies amounting to $10 billion a year are given to corporate corn farmers, even though Ethanol is 20 to 30 percent less efficient than gasoline and it takes about 200 pounds of corn to produce enough ethanol to fill the average gas tank. It takes more than one gallon of fossil fuel to produce one gallon of ethanol because corn must be grown, fertilized, harvested and trucked to ethanol producers. It also takes 1,700 gallons of water to produce one gallon of ethanol. Ethanol is so costly to make that it wouldn’t make it in a free market without being subsidized by the government (Lars, 2001).
America has to approach the issues of energy independence much the same as the USSR which is to put up the first Sputnik satellite into orbit. In 1961, President John F. Kennedy motivated the nation and promised to put a man on the moon within 10 years which was later achieved and if this kind of success can be achieved, America can surely develop a strategic plan to become an energy independent state in the coming years by increasing the domestic production of oil and at the same time encourage development of environmentally safe alternative energy technology and sources that would free America from its overdependence on foreign oil (Michael, 2004).
III. Global Economic crisis and Mortgage crisis
The developments as to the cause and policy effects of Economic crisis are also a good example in which free markets have been tempered with in recent years. Ways in which the US government has interfered in free market economy include: Nationalisation of financial institutions in order to prevent total economic meltdown in the U.S. This intervention of the U.S government in U.S financial markets is evidenced by the takeover of mortgage giants Fannie Mae and Freddie Mac and the bailout of insurance giant American International Group to name but a few.
The mortgage crisis experienced recently in the US is also examples of ways in which free market has been interfered with. The rationale behind the argument is that the subsequent granting of credit to groups or individuals who would not ordinarily have qualified resulted in U.S financial institutions being saddled with sub prime mortgages. Furthermore, toxic mortgages into sophisticated financial instruments such as credit default swaps (CDS) and other derivatives has also largely contributed to the exposure of non U.S markets to U.S sub prime mortgages (Kevin, 2008). CDSs were created by financial gurus on Wall Street in the late 1990s as an unregulated way to insure that financial instruments such as mortgage securities and municipal bonds. CDSs are widely traded credit derivatives according to a 2008 market survey conducted by International Swaps and Derivatives Association. As a result, they have resulted in global financial markets crisis after the collapse of the U.S sub prime market.
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