Chinese farmers slaughtered their chickens for people have realized how widely melamine is used as a supplement in feeding their chickens. This market failure of providing safe food supply is a good example why effective government oversight is needed for the market to operate. Markets cannot provide good solutions from time to time. According to my father, the Chinese Communist Party started the nationalization process after they found that the military supply provided by Shanghai capitalists were of perverse quality that the dirty raw materials led to the death of wounded soldiers in the battle fields in Korea.
It is possible that market can work if trusted quality check can be purchased. However, when the Republicans simply propagate the idea that market works like magic and people simply believe that idea, there may be no demand for quality checking service and then the markets fail. This Republican belief is like Melamine for food as to the market economy. The second Bush administration also abolished many needed services provided by the government for preventing market failure (Midnight Regulations on the Diane Rehm Show). To some extend, the lack of a well-functioning government will lead to the lack of a well-functioning market.
Magnus: China Must Reform or Bust - China's debt markets are looking more and more like the West, circa 2007. And it's not clear the government can intervene as successfully.
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