President Barack Obama has once again stated his belief that an economic recovery for this nation - and by extension the world - must be driven primarily by the private sector.

This is incorrect.

One only needs to look at the history of world economies both in the USA and elsewhere to see that economies driven solely by private enterprise without public regulation - whether communal or some fairly chosen government - will always lead to chaos.

Even the recent winners of the Nobel Prize in economics are an acknowledgement that an economy is not a perpetual motion machine that once set into action will run forever in the direction initially intended. It has to be managed by the manufacturers - both figuratively and literally.

We have to confront some fundamental economic facts: 1 - Private follies have always been corrected by public action. We are a community of individuals who have to work together. 2 - An economy is most efficient when it has a single means of communication. Not only do all the participants have to have an agreed common set of rules. They work best with a common language. That language is computers. And IT must be regulated. Not censored, but required to speak a commong language. 3 - We have to recognize that all participants in the human economic family must be given an equal value.

The House makes a bid to regulate the market. One blog summarizes the effort as follows:Which begs the questions 1-Who is "large"? 2-Why was a non-government entity ever empowered to write law, which is what the Constitution empowers Congress to do? 3-What prevents executives from buying votes? 4-Will this CPA be monitored by Congress? 5-Yeah right. Pardon my scepticism but it's warranted.

Of course recovery is only going to come from the private sector. Obama did not count out government regulation and safeguards, but he and others know that the private sector drives the economy.

To argue otherwise is a "fundamental and fatal economic error." One only has to look to the example of government-controlled, state-run economies, for example, the Soviet Union and its satellites in Eastern Europe.

People want goods and services, not combines and tractors!

Apparently, they also want their illegal drugs. Reports are now out that it was the illegal drug market that kept smaller banks afloat during the recent banking crisis.

To say that an economy must be driven by the private sector is like saying that a game can be primarily driven by forming two teams.

The teams cannot play until the game is defined by rules. That definition must come from the public sector. After the game is defined, the players can be chosen by whoever wants to follow the rules that define the game.

Once the game is started there must be a referee (regulatory authority) to enforce the rules.

Teams that take unreasonable risks will not win games that are refereed. If a team decides to play all offense and never play defense - or vice versa - that is their choice. But they will pay a price.

In economic systems you don't have a choice in whether or not you play the game.

But you can have a choice in how the game is defined and how it is refereed in a democratic system.

In the USSR a small minority decided what the game was and who set the rules. In our democratic capitalist system we have the opportunity to define the game and enforce the rules - until that right is removed by certain capitalists who manage to buy the system and set their own rules. Private companies need the rules.

In the global economic system the only rule that truly matters is the Law of Supply and Demand.

That only works if the demand is controlled by the consumer. In a marketing-based economy such as those in most current capitalist countries the demand is determined by the marketers. Advertisers tell you what you want. "Buyer beware" does not work if there are no good options because monopolists have croweded out diversity or - as in the case of the USA - large companies have crowded out small ones; large financiers (TBTFs) have dominated Wall Street; large insurance companies have reduced choice both nationally and state by state.

Invevitably if these companies can purchase politicians - and they do - they can adjust laws to allow them to effectively dominate a captive market (such as insurance companies in states) or they can make one of the entire nation (as credit card companies have, thus they can loan us money borrowed from overseas to buy porducts purchased from overseas and take their cut off the top).

Gambling is the worse perversion of the markets. Not only that done for "pleasure" - though that destroys economies as well eventually - but that done by large companies that are not only TBTF but "TBTC" (To Big To Care whether they lose a million here or there). They just pass the loses on to the "consumers" of their products purchased cheaply from overseas and sold just cheaply enough to destroy domestic markets, all the while taking their cut. There is a solution to such a cycle in a democratically elected society. But perversions of democracy such as the buying of politicians or misuse of supermajorities have thwarted them.

First, I do not believe that any company is Too Big To Fail. The car industry is one, for instance. There is still a market for cars. GM or Ford would have come back in other, smaller companies.

Second, regulations and rules are necessary, but in the end it is the market that adjusts the rules. Government money would be better spent educating, and if necessary retraining, workers to adjust to changing markets.

Third, as for "buying" politicians, it is not only big corporations that do so. Trade Unions and advocacy groups do it, too.

I agree that unions and advocacy groups have some influence. Of course there are advocacy groups on all sides of issues.

But if unions have such influence why has Congress limited what unions can do? Why aren't there stronger labor laws? Why aren't pensions really protected? Why have we gone away from pensions to a flimsy market based "retirement" system, where the only people really benefiting are the investment banks? I'd say the answer is that corporations have more power and therefore get what they want.

So should the solution be the same for both inudustries? The car industry is heavily regulated both for safety reasons and because the anti-union forces have managed to "buy" laws that restrict them. Wealth distribution in that industry is arguably higher than in financial companies, largely because of the remaining strength of unions.
That is like saying that games would be better regulated if one of the teams "adjusts" the rules rather than a regulatory authority independent of excessive influence by one team or another.
That is accurate. And all special interests should have limited say in the setting of rules that regulate both them and other individuals. However that is not the case. Our constitutional mandate of one vote per person is repeatedly and systematically corrupted by "organizations" of individuals that claim to have the same "rights" as each of the individuals that make up the organization - thus theoretically giving them more rights than any individual. The fundamental concept is erroneous IMO, and the best argument for reform of the political process which should be the first order of business for our next president as I have said it should have been for the current one; and previous ones BTW. Organizations have more power than voters.

President Obama's comments are prime examples of NEOLIBERALISM. This is the ideology that has taken hold of the Democratic Party and, to some extent, of the GOP. (Libertarianism, Corporatism, Neoconservatism, and other more extreme ideologies to the right of Conservatism have taken hold of the GOP as well.)

The private marketplace cannot be the only answer to every problem, but this has been promulgated for over 40 years now, and President Clinton was the first Democrat to strongly follow this ideology. There are numerous problems which only government policy and intervention can resolve, as the recent global economic collapse has demonstrated, and as the Hurricane Katrina disaster, environmental degradation, etc., all demonstrate. This is NOT to say that we do not need private industry or that corporations or capitalism are always bad or wrong, but unfettered, laissez-faire capitalism, with the market as the ultimately solution to every issue, is a highly destructive approach to human affairs, and we've seen the results again and again, yet refuse to learn from them.

It's amazing to me that many in the GOP keep calling Obama a socialist, because he's proving--perhaps to defy them, who knows?--that he's anything but. If he were, he would have socialized the failing banks and pushed for a return to the Glass-Steagall divisions that existed up to 1999, he would pushed for a single-payer health plan or at least a very robust public option, he would have instituted government-funded direct payment work programs, and so much more. Instead, he has taken failed neoliberal approaches that have done little but enrich the economic and social elites at the expense of everyone else, AND he's still pursuing Bush's warmongering. It's sickening, but we went through the same crap with Clinton. We really do need a vigorous new Left party; the Democrats sold off their souls a long time ago, and the health care "reform" bill, a gross giveaway to private insurance corporations, hospital companies, and Big Pharma, is yet more proof of this.

It is true that a lot of the policy tracts Obama is following are piecemeal reform. But I think he has played the art of politics - which is the art of the possible - uncannily well.

My admiration for what he has accomplished as an individual - especially given the albatross of being the "First Black President" - grows daily.

And as for neoliberalism, the fundamentals of economics are now being questioned at the highest levels and deepest depths of traditional thought on the subject. It may only continue to lead to retrenchment as the economy makes a superficial (Wall Street) recovery. But there is an ideological foundation developing that may bear fruit after another depression or with the election of a president who has more moral authority within the business community and economic thought.

I am not being a wild-eyed optimist. I've been reading both British and USA publications about socio-economic issues. The groundwork is there. It only needs the right champions in the right places to evolve before a catastrophe to the world economy and the enviroment.

One problem preventing that is that neither Britain, the USA nor the rest of the West are the critical players now. China and India have developed copy-cat neo-capitalist sytems imposed over democracy (India) or communism (China). Both are acting in their own immediate material interest at the expense of future good.

Of course both the Democratic and Republican parties are liberal parties. Both uphold the principles of free trade and individual rights and freedoms. Where they differ is how much government can allow the former to operate on its own and how best to achieve the latter.

The US economy is still the most important critical player in the global economic system. China may overtake the US as the largest economy very soon. But will it adopt other aspects of the West's modernization process, i.e. liberal democracy? If China does not, I worry about the future.

Agreed. And there is a lot to worry about.

But it is our own economy that we have the more control over. And it was here that the recent melt-down in the western economy began. It has had far less effect in the east - which in this case would include Japan and Australia to some extent.