View from abroad: 'Faith no more as market revealed to be false idol'

From The Sydney Morning Herald here (emphasis added).

AS THE American authorities made the biggest bank seizure in US history yesterday, the President of France declared that "laissez-faire is over".

Nicolas Sarkozy continued: "The idea that the market is always right is a crazy idea."

He is a right-wing, pro-American leader, so it's not entirely a French socialist reflex.

Besides, he is in good company. The German Chancellor, the conservative Angela Merkel, said: "It was said for a long time, 'Let the markets take care of themselves'." But now "even America and Britain are saying, 'Yes, we need more transparency, we need better standards"'.

With a run on the Washington Mutual bank - assets $US307 billion ($372 billion) - leading to its seizure and auction to JPMorgan Chase yesterday, there was not much argument.

The Archbishop of Canterbury, Rowan Williams, added a liturgical flavour by saying that an excess of faith in the market had become a kind of "idolatry".

And all of them were really just repeating something that the American financier and philanthropist George Soros has been saying for years.

As he said in May: "Unfortunately, we have an idea of market fundamentalism, which is now the dominant ideology, holding that markets are self-correcting, and this is false."

And so surely Australia, as part of the Anglo-Saxon free market fetish, is also reconsidering the era of market fundamentalism?

No, it's not, chiefly because Australia has never truly participated in it as the US practised it.

Over the last 25 years Australia has allowed market forces a much greater play in our markets and in our lives.

But it has never been seduced by the notion that the authorities have no legitimate role in controlling the market impulse.

Under Labor and Liberal governments, Australia has pursued a pragmatic balance. The Liberals have avoided the deregulatory extremes.

In discussing the contrast between the US collapse and Australia's stability this week, Peter Costello pointed that one "extremely big difference between us and the United States, in 1997 we set up a body called the Australian Prudential Regulation Authority. There was no regulator for non-bank financial institutions of anything like that sophistication before, and that institution has served us well".

And nor will Labor overreact and overregulate in response to the market trauma. As the Treasurer, Wayne Swan, told the Herald yesterday: "Blind faith in markets is not a substitute for being hard-headed. On the other hand, blind faith in complete regulation all the time is not a substitute for being hard-headed. There are two extremes in this debate. I think it's just a question of better regulation, not more regulation."

Australia's genius has been in finding a judicious balance between market forces and sensible regulation.