The media likes to talk about markets as if they were just a force of nature. In fact, markets and their outcomes are largely shaped by political power. In a capitalist system like ours, that power is largely used to advance the interests of those who own and run our dominant corporations.
The Fed secretly provided selected banks, brokerage houses, and even non-financial firms with at least $1.2 trillion in loans, often with minimal collateral required and at below market interest rates. These loans are also a key reason that our post-Great Recession economy remains largely unchanged in structure. In other words, it was the exercise of political power, rather than so-called market dynamics or efficiencies, that explains the financial industry’s continuing profitability and economic dominance.
Now imagine if we had a state that engaged in transparent planning and was committed to using our significant public resources to reshape our economy in the public interest. As we have seen, state planning and intervention in economic activity already goes on. Unfortunately, it happens behind closed doors and for the benefit of a small minority. It doesn’t have to be that way.