The slide on the Saudi stock market has led to some members of the Shoura Council to demand government intervention. Such a call cannot be supported. How the stock market performs is not the government’s responsibility. In a free-market economy, prices can go down as well as up. Investors have always known there is a risk. They simply want someone else — the government — to pick up the tab for losses that are their own responsibility and no one else’s.
Did they complain or congratulate the government over the heady 103-percent rise last year or the even more dramatic 86 percent rise in 2004? Not a squeak was heard. On the contrary, the business community has been the most vociferous in complaining about red tape and the incompatibility of state-owned enterprises with a free market. Yet now when there is a slight problem, they run to the government like children to their mother.
The Arab News comes up with an excellent editorial discussing the recent plunge in the Saudi stock market. Every investment is a risk.
The paper applauds the government for staying out of the problem. The government didn’t create it; the government can’t solve it. Market forces, and market forces only, will determine the prices of stocks.
What happened here is exactly what happened in the past, from tulips to dotcoms: too much enthusiasm, too many investors crowding the scene, not enough common sense.
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