The “Free Market” Fantasy

Since Saint Regan was elected in 1980, an incredible fiction has been perpetrated on the public that needs to be addressed. That fiction comes with the simplistic notion that there is such a thing as a “free market.” They actually hold this belief closer than they hold their expressed belief in God, and there are equal levels of evidence for both.

Let’s be clear; there is no such thing as a “free market” in a capitalist system, wherein everyone who wants to make money simply has to produce it and put it on the market to make a living. And that’s a good thing. In the “free market” modern Republicans and Libertarians envision, Joe Blow creates a product, manufactures and sells it, and makes a profit. Of course, then someone else could copy that product, using cheaper materials and sell it cheaper, thus putting Joe Blow out of business. Someone with a lot of money could conceivably build the product, sell them for a penny, put everyone else out of business, and control the market and the price.

That’s not a “free market.” To believe a free market is possible requires one to believe that no economic predators, cheats or charlatans exist, and we all know that’s not the case. The ultimate aim of every player in a purely capitalist system is to eliminate competition and become the only seller in their catagory, in order to increase profits every year. And ultimately, in an unencumbered system, one company would take over every category and freeze everyone else out.

Modern day Republicans claim to be “strict consitutionalists,” but they don’t seem to realize the Founding Fathers understood this more than 200 years ago, when capitalism in its current form was an experiment. That’s why they mandated government to “regulate commerce” with the Constitution. It’s called the Commerce Clause, Republicans; look it up.

They make the claim that government is forbidden from over-regulating (they shouldn’t, but they can, and that’s for us to keep an eye on), and they claim a  “free market” exists. To make it a trifecta, they also claim that all socialism is antithetical to a strong capitalist system. This despite the fact that the strongest capitalist systems in the world recognize that not everything should be subject to whims of markets.

Some aspects of a free society have to be socialized for the betterment of society. Take health care. Health care is a right, and a person’s health should never be subject to market forces. of the market. Should someone die because they need health care and don’t have the money to pay for it? Of course not. Should a ;large company be able to deny you the health care you need because they’re more concerned with preserving their bottom line? No. This concept also applies to other areas, as well. There’s a reason why you have one phone line, one cable line and one electrical line into your home. Would it make sense to have 20 electric companies each with their own line into your home? Of course not. So you have one electric company’s line, and you get to choose which supplier can provide you with electricity. Same with cable and gas and a few other things. Imagine

This concept also applies to other areas of commerce, as well. There’s a reason why you have one phone line, one cable line and one electrical line into your home. Would it make sense to have 20 electric companies each with their own line into your home? Of course not. So you have one electric company’s line, and you get to choose which supplier can provide you with electricity. Same with cable and gas and a few other things. Imagine the chaos if there were ten natural gas suppliers in your neighborhood and they all had to have their own pipes.

Ironically, the “constitutional purists in the GOP deregulate absolutely everything, and in doing so actually undermine the health of the capitaism they claim to love so much. The Commerce Clause exists because the Founders had just fallen victim to a system in which their ability to make money was based on which companies paid off the Crown. They wanted to create a society wherein economic opportunity was a available to everyone. The absolutely free market they envision would eliminate opportunities, not enhance them.

Successful capitalist systems always use government to regulate their markets, because that’s how success happens. Through education, government provides prospective employees with productive employees, and they provide highways and transportation corridors, so that commercial enterprises can maximize revenue. And they also put rules in place to ensure that companies with deep pockets can’t close off a market to more innovative players or drive everyone else out of business. And they make sure all rules apply equally to everyone, regardless of size, so that no company is at a competitive disadvantage. Also, they protect the public from market players who might cut corners and put them in danger.

We used to have a solid capitalist foundation and the healthiest economy in the world. Those of us over 50 remember a time when we could walk around our neighborhoods and see small little mom and pop stores all over the place. Every neighborhood had its own character, and behind each one of those stores was just a regular person, trying to grab his share of the American dream. With th Republicanization of America, most of those stores have been replaced by national chains, with low prices and quality to match. Our manufacturing base, once the envy of the world, is struggling to continue to exist, and true entrepreneurship has been all but stifled, with the lone exception being the technology sector.

A market is NEVER “free.” The only real difference between various markets is who controls each one. Think; is there a free market for oil? Of course not; the base price of oil is set by a series of cartels and speculators. It has a little to do with supply and demand, but they control the supply. If you think the current low prices will last, think again. The market is so volatile, OPEC could reduce production for a few months and drive the price anytime they want. How uis that good for anyone?

Another glaring example of the danger of “free market” thinking is, consider Wal-Mart. Before the modern GOP deregulation frenzy, Wal-Mart could never have gotten away with their core business model. For years, they built huge stores in rural areas, and used their market clout to undercut local dealers’ prices, to drive the locals out of business before they would either raise the price or stop carrying the product altogether. If you don’t think there was a change in our economy post-Saint Reagan, consider that Wal-Mart opened its first store in 1950, had 78 stores in 1974 and 330 stores in 1980. However, by 1985 they had 1114 stores. Four years of Reaganomics and deregulation, and Wal-Mart was able to wipe out the economic fortunes of hundreds of small towns with its predatory pricing practices. That is what happens with the “free market” Republicans envision takes over and Republicans running the government cede their constitutional duty to regulate commerce. Capitalism is not natural and organic; it’s quite brutal. Regulation is needed to keep a market “free,” so that most people can operate under it. Without a minimum wage, employers would pay $1 an hour, regardless of the cost of living. If they lose customers, they’ll just make less and charge more.

Has the government over-regulated at times? Absolutely. Some regulations are downright onerous. But just because some government regulations are absurd, it doesn’t follow that all government regulation is bad.

Republicans swear to us that everything government does is wrong and that privatizing everything is better for everyone. However, there has never been an economic collapse due to government. In fact, the Bush Recession was the result of Republicans running the government failing to regulate, even when it was clear the economy was being held up by a bubble. It’s always government who bails out private concerns, not the other way around. The Bush Recession bailouts were necessary because private players were playing with Monopoly money, and pretending it was real. What Republicans fail to mention is that Bush asked the Federal Reserve for nearly $2 trillion in the two years before the bailout, to prevent the collapse. What he did not do was address the excesses of the companies that were causing the collapse in the first place. Given reality, the concept that our health and safety should be in the hands of “market forces” doesn’t pass a smell test. And there’s a good reason for that. Government is accountabe to us, while private companies are only accountable to their owners and stockholders.

Deregulation and reduced government control also stifle innovation. The “hands off” routine pushed by modern Republicans reduces our competitiveness in the global marketplace, primarily because innovation requires a referee. There are many examples, but probably the best one is how we lag behind on technology these days.

I know. You don’t think we’re behind, but we are. In the 1940s, when television was brand new, the Democratic-led government consulted with the industry, and they settled on a standard for TVs. As a result, the technology exploded. But 40 years later, the modern GOP-led government took a hands-off approach to the development of HDTV, which delayed the proliferation of the technology by about 20 years. I saw my first HDTV in 1985, but it was the early 2000s before they finally started to take over from heavy, bulky and inferior CRT televisions.

The same is true of cell phones. Instead of stepping in and asking the industry to develop a single standard, companies were allowed to develop their own. As a result, for many years, if you wanted to change cell phone carriers, you were forced to buy a new cell phone. And what about the Internet? We are way behind other countries in broadband speed and adoption, primarily because the Republican “hands-off” approach has allowed a scant few companies to run the entire business with an eye to profit over innovation. There are now four wireless companies, and the only other choices for Internet service in most areas of the country are the cable company and the phone company, both of which are essentially monopolies.

We are the richest country in the world primarily based on the post-war era. However, the asining notion of “the free market,” which means rejecting the duty of the government to regulate commerce is killing us. We tried capitalism with no regulation in the 19th and early 20th Centuries, and we suffered depressions nearly every decade. Since the Great Depression of the 1930s, with government establishing guidance and regulation, we have yet to see a depression. We missed one by a hair in 2008-2009, only because of the regulations that were still in place. Markets need regulation. Without it, markets are guided by crooks, and crooks spoil the economy, they don’t make it better.

There is no such thing as a “free market.” Every market is run by someone, and that someone should always be us. Republicans need to join the reality-based community. Congress must do its job. We are supposed to run the market, not a few select large corporations or individuals. We are the government.


The “Free Market” Fantasy — 2 Comments

  1. One has only to look back a little over a century ago to the so-called “Gilded Age,” to see what happens in an “unfettered free market” so beloved of the Right. Monopolies, “Trusts,” and an extraordinary concentration of wealth in the hands of a few. Regular market crashes, deep and long-lasting depressions, panics, and bank failures. It was great if you were one of the wealthy, terrible if you weren’t.

    We’re seeing that again. “Deregulation” only “worked” for a very short time frame, before the market once again left us with virtual monopolies and worse service.

  2. This is excellent historical and political analyis, Milt. Thank you. The Founding Fathers came out of a colonial economy that was based in the towns and cities rather than a central administration. The colonial legislature did very little, and what they regulated – e.g., the protection of white pines for the Crown’s naval fleet masts – was pretty minimal. But the towns regulated everything – who would get access to the market, what quality of goods was demanded for sale, what PRICE could be asked, weights and measures required for honorable and legal purveying. Millers and other producers had ‘privileges’ – they were pre-approved by the Town Meeting to do this work at the standards and annual prices the town required. Failure to comply could cost them access to that production and right to sell. All of which was for one thing: to protect one another from predators and create a ‘moral economy’.

    This is the context into which the new nation and the Constitution was set so that the first steps of deregulation were cautious and careful – even those embracing individualism and personal accumulation still wished to avoid the exploitations of so-called free markets that they could observe were happening in Europe.

    It was not until much later as you note – post Civil War – that general whoopee occurred, the unleashing of unfettered accumulation by the crass and powerful, and it was the darkest part of our history outside of slavery. Massive exploitation, danger, and death visited working people who had become mere commodities, and yes, Depressions were a fact of life every 3-8 years. Not recessions – depressions. When the current GOP under Bush talked about returning to the days ‘before Roosevelt’ – they were talking about TEDDY, not Franklin. The rush to the Gilded Age benefits only the super rich not the rest of us, and the idea of national stability through shared economic benefits has been abandoned by too many in favor of quick returns for the honored few. That is the stuff of European absolute monarchs from a time of massive instability, and embracing it as a good thing is jaw-droppingly ignorant and dangerous. A little more embrace of the ‘moral economy’ would make us far stronger as a nation, as a people, as an economy.