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Free Market Rhetoric

October 29th, 2011

There is a fundamental discord between people who are nominally for “free markets”, and those against, and because there is literally no common ground between them, indeed there is often a void where common ground should be, no forward progress is made.

Fortunately, both of these positions are wrong. 

  • On the one hand, the free market’s most vocal supporters tend to ignore the finer points of free market theory, like the part about how free markets tend towards a diminution of rents, and how profits accrue to all factors of production.
  • On the other hand, opponents imagine more “freedom” only for the exploiters. They believe that “free markets” means that you are justified to do whatever you want as long as you can get away with it, and unable to imagine any alternative to the status quo, they often conclude that a free market will be worse in every way (unless you’re among that 1%).

The opponents are right to believe in this Wild West caricature because it’s exactly what will happen if you start gutting the social safety net without doing anything to fix the underlying problems. Whether unknowingly, the free market advocates ‘rhetoric is ultimately perceived as either justifying, or apologizing for, the status quo: they talk plainly about gutting social safety nets, with nary a mention of the underlying inequalities that make them necessary!

Unfortunately, it’s difficult to show people what they can’t see.

Capitalism isn't working

Another world is possible

Opponents often point to the present, and say “Look at the free market failing…”. Except, it’s not a free market. And it doesn’t become one just because you call it that. Then again, the proponents usually don’t have a response to this, other than parroting some “invisible hand” argument about how the market will magically self-regulate if only you get rid of all the regulations, first. But it also doesn’t magically become a free market if you haphazardly start stripping away regulations, either.

So both parties are working on a flawed model of what constitutes a free market.

Discourse, not Dogma

And although there is something to the “invisible hand” argument, it kinda sorta presupposes a free market in the first place. It is not a trump card and you can’t just pull it out every time someone challenges your position.  If you don’t do anything to remedy the “too big to fail”, if you don’t do anything to remedy the “captured regulators” or the “lobbyists”, etc., you’ve created a free market in name only, which is NOT a free market.

wall street bull

these guys have no place in a truly free market

It’s not sufficient to just take away those things that interfere with a free market if you intend to leave in place all of the benefits (and handicaps) accrued under the old system of exploitation. You can’t leave untouched all of the institutional inefficiencies, corruptions, cronyism, all the accrued benefits from years or decades of favoritism & protectionism, etc., and expect the market to function at all like a truly free market.

An Example

I hope to demonstrate that the removal of the immediate condition is not sufficient to cure the accumulated injustices of centuries of abuse and subjugation. Sometimes it is easy to illustrate a point by way of example; consider the aftermath of the Civil War:

The institution of chattel slavery essentially dissolves overnight but the plantation owners keep their plantations, their fancy lifestyles, their estates, acres of land and livestock. Freed slaves were left with virtually nothing (since all that was theirs had previously been denied them). So the freed slaves end up as sharecroppers or very poorly paid workers — essentially slaves — having nothing with which to bargain but their labor, they are compelled by hunger to exchange their labor for whatever pittance their former masters will offer.  Thus, injustice continues in a slightly different form

See where I’m going with this?

It is indisputably wrong for someone to argue that this outcome is the fault of the free market.

It is also indisputably wrong for a free market advocate to suggest that this is the natural result of a free market.

Yet almost every discussion of “free markets” centers around these two obviously and irrevocably incorrect assumptions.

 

 

Comments

4 Comments

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  • Jonny says on: October 31, 2011 at 10:41 am

     

    I think a society based on the non-aggression principle is one we should evolve into. A free market is called a free market to differentiate it from they one we have now that is based on coercion e.g. laws, taxation, regulations, etc.

    I don’t have all the answers and I don’t know what the future will be like but I think the best way to solve complex social problems is voluntary.

    The real question people should be asking themselves: Is the initiation of violence moral?

    • David Z says on: November 1, 2011 at 4:52 pm

       

      I tend to agree. Note that some groups will differ in their opinion of what constitutes the initiation of violence, though. :)

  • mike says on: November 2, 2011 at 7:03 am

     

    I think that’s a neat, commonsensical way of putting it, but perhaps it would benefit from clear and specific examples of the “benefits and handicaps” that would purportedly be left in place were X, Y and Z to be abolished.

    Do these “benefits and handicaps” extend beyond the State’s various institutional interventions to encompass property, and if so, is this property to be “redistributed”?

    Assuming the worst monetary and economic case over the next few years, there will already be two processes of “redistribution” of property at work. One will be the voluntary liquidation and transfer of unproductive capital via the market, whilst the other will be the State. The market may effect some just transfers of property, and it may allow some entities to survive from a position of ill-priveleged strength. On the other hand, it’s a certainty that various State institutions will attempt to steal in order to perpetuate their existence. I am skeptical that State-backed redistribution can be “managed” toward a least-unjust outcome.

    So rather than trying to imagine ways in which the State could be used against entities in ill-privileged positions to effect a more “just” distribution of property, it might be better to think of ways to restrict the State from reapplying its’ presumed authority and doing more harm than good.

    • David Z says on: November 2, 2011 at 3:29 pm

       

      I am skeptical that State-backed redistribution can be “managed” toward a least-unjust outcome.

      As am I. :)

      … examples of the “benefits and handicaps” that would purportedly be left in place were X, Y and Z to be abolished.

      Equity (or lack thereof) would be a good place to start.

      … it might be better to think of ways to restrict the State from reapplying its’ presumed authority and doing more harm than good.

      Pretty much every imaginable experiment in restricting state power, including the USA as arguably the most noble of such experiments, has been an abysmal failure.

no third solution

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