Re: Ok, so...
Graham Marsden,
Your argument is a total straw man. Which I keep seeing repeated. No one sane believes in completly unfettered markets.
Firstly it's probably impossible to have a totally free, efficient and perfect market. The foreign exchange market has been cited for ages as one of the "best" markets around for all those things - and even that turns out to have had a cartel operating for years undetected. On the other hand, they probably only had a tiny effect, becuase one of the things that made the market so hard to monopolise/dominate/rig was the sheer volume of daily transactions, and number of participants. And I can't see how information can be perfectly distributed when even though much of the data is published globally, governments know their own data in advance and are themselves actors in the market.
One of the big arguments that free market advocates make is that you can't have a free market without property rights. Property rights by definition require government to intervene in the market. One of the reasons the Russian economy is so screwed is that they don't have good property rights. It's also one of the major risks to China's continued development, as some corrupt local party boss can just steal your business and chuck you in prison, or buldoze your house without compensation. It may be possible to have a working market economy without democracy, but it's not possible to sustain one without a mostly impartial legal system, in which it's possible to sue the government and win. And that requires at least a responsive, mostly honest and non-corrupt government, all things that dictatorships are notoriously bad at. That's why even before the Rouble crisis the Russian government was having to pay 11% interest to borrow money (with very little debt) even though the bankrupt Greek government were only paying about 7%.
Equally governments have to regulate for externalities (such as pollution and environmental damage), otherwise someone's short-term profit motive will end up trumping everyone's long-term interests.
In order to have properly working markets you also need government to regulate for safety standards (to stop the scumbags from undercutting the honest), minimum working conditions (ditto), and to deal with monopolies and cartels.
None of this is controversial with almost anyone that I've read from the right of politics, or in the free-market end of economics.
There are matters of degree of course. One man's government regulation to require minimum safety standards can be another man's deliberate attempt to block imports from their market. This is a game that is often played.
Government is a requirement of a 'free' market. The argument is over how much intervention is needed to make society more fair, and also operate more efficiently. For example, China's economy suffers from not having social security. Because people are scared of illness and unemployment, they save more than people have to do in the West, because we can rely to varying extents on the welfare state. Thus China's domestic consumption is too low to support its industry, forcing them to rely on exports, and there's too much money sloshing round the system meanning that money is being wasted in bad investments, hence China was previously destabilising our economies and helping to cause the global crash, and is now in the middle of its own unsustainable credit boom. Hence their government is now desperately trying to deflate their shadow-banking bubble, house price bubble and local government debt to regional banks without collapsing the economy.