Free Market Myth

[mash107]

"To be fair, rarely does either side argue against regulation as such. The real issue is the structure of regulation and its impact on economic outcomes, especially income distribution."

Regulation is everywhere. Let’s choose who benefits.

by Dean Baker

"The extraordinary financial collapse of recent months has been commonly described as a testament to the failure of deregulation. The events are indeed testament to a failure—a failure of public policy. Blaming deregulation is misleading.

In general, political debates over regulation have been wrongly cast as disputes over the extent of regulation, with conservatives assumed to prefer less regulation, while liberals prefer more. In fact conservatives do not necessarily desire less regulation, nor do liberals necessarily desire more. Conservatives support regulatory structures that cause income to flow upward, while liberals support regulatory structures that promote equality. “Less” regulation does not imply greater inequality, nor is the reverse true."

Boston Review — Dean Baker: Free Market Myth

I know I'm responding to the article, but the essence of free market capitalism is that there is no flow anywhere to a place undeserving; neither up or down. The rich and powerful get immense help from the government regulations, many supported by both parties, that limit or bar entry into marketplaces creating many monopolies, give preference to certain players in certain industries over others (GM, Chrysler, etc in the auto industry), subsidizes the industries completely which royally harms the consumer (ethanol), etc. Those regulations are the ones that laissez-faire capitalists are whole-heartily opposed to, as well as regulations that punish companies for being very productive and delivering a quality, cheap product.

I don't know who this article is referring to as "conservative" but the batch we've seen for the last 8 years hardly count. They vote for Keynesian stimulus packages when the WH is ran by a Republican, but finally abide by their moral convictions when it's not? That's bullshit, and we all know it. Conservatives are those that stand by the people over government prowess, and do so no matter what political circumstances arises.

 

[sealybobo]

One wonders if this matters, considering that both liberals and conservatives effectively support mixed-market capitalism, simply to different extents.

True but there is nothing inherently wrong with free market capitalism - although I would remove the word free and call it simply a market system. It is what people do with it that matters. There is a curious paradox in the fact capitalism leads to a rich elitist corporate group and communism ends with a elitist party group. Privilege rarely leads to egalitarianism, it usually leads to the leaders assuming they know best.

. There is no such thing as a "free market."

2. The "middle class" is the creation of government intervention in the marketplace, and won't exist without it (as millions of Americans and Europeans are discovering).

The conservative belief in "free markets" is a bit like the Catholic Church's insistence that the Earth was at the center of the Solar System in the Twelfth Century. It's widely believed by those in power, those who challenge it are branded heretics and ridiculed, and it is wrong.

In actual fact, there is no such thing as a "free market." Markets are the creation of government.

Governments provide a stable currency to make markets possible. They provide a legal infrastructure and court systems to enforce the contracts that make markets possible. They provide educated workforces through public education, and those workers show up at their places of business after traveling on public roads, rails, or airways provided by government. Businesses that use the "free market" are protected by police and fire departments provided by government, and send their communications - from phone to fax to internet - over lines that follow public rights-of-way maintained and protected by government.

And, most important, the rules of the game of business are defined by government. Any sports fan can tell you that football, baseball, or hockey without rules and referees would be a mess. Similarly, business without rules won't work.

ThomHartmann.com - Democracy - Not "The Free Market" - Will Save America's Middle Class

The conservative mantra is "let the market decide." But there is no market independent of government, so what they're really saying is, "Stop corporations from defending workers and building a middle class, and let the corporations decide how much to pay for labor and how to trade." This is, at best, destructive to national and international economies, and, at worst, destructive to democracy itself.

Markets are a creation of government, just as corporations exist only by authorization of government. Governments set the rules of the market. And, since our government is of, by, and for We The People, those rules have historically been set to first maximize the public good resulting from people doing business.

If you want to play the game of business, we've said in the US since 1784 (when Tench Coxe got the first tariffs passed "to protect domestic industries") then you have to play in a way that both makes you money AND serves the public interest.

Which requires us to puncture the second balloon of popular belief. The "middle class" is not the natural result of freeing business to do whatever it wants, of "free and open markets," or of "free trade." The "middle class" is not a normal result of "free markets." Those policies will produce a small but powerful wealthy class, a small "middle" mercantilist class, and a huge and terrified worker class which have traditionally been called "serfs."

The middle class is a new invention of liberal democracies, the direct result of governments defining the rules of the game of business. It is, quite simply, an artifact of government regulation of markets and tax laws.

When government sets the rules of the game of business in such a way that working people must receive a living wage, labor has the power to organize into unions just as capital can organize into corporations, and domestic industries are protected from overseas competition, a middle class will emerge. When government gives up these functions, the middle class vanishes and we return to the Dickens-era "normal" form of totally free market conservative economics where the rich get richer while the working poor are kept in a constant state of fear and anxiety so the cost of their labor will always be cheap.