News & Analysis
Is the Free Market Hopeless?
Why free-market economics is a fraud ... If there's one thing everyone in America knows, it's that free-market economics is true and free markets are best. After all, we're not communists, are we? They starved and lost the Cold War because they believed otherwise. And their watered-down European cousins the socialists? More of the same, only less so. Even liberals get this nowadays. All hail the free market! Trouble is, things "everyone" knows are often wrong. And this is no exception. It's time to start getting honest about a very simple fact: Nobody, but nobody, really believes in free markets. That's right. Not the Republican Party, not the libertarians, not the "Wall Street Journal," nobody. Here's why: a truly free market is a perfectly competitive market. Which means that whatever you have to sell in that market, so does your competition. Which means price war. Which means your price gets driven down. Which means little or no profit for you. Oops! – World Net Daily
Dominant Social Theme: All this talk about the free-market makes us sick.
Free-Market Analysis: We have been watching what we call the Internet Reformation unfold for about a decade now – and as people begin to understand the Way the World REALLY Works, attacks on the concept of a free market have escalated.
As people in the West used the Internet to discover the one-world goals of the Anglosphere elites, all the regular tricks and tropes of those who seek a New World Order were triggered in the US, where the controversy is especially contentious.
At the beginning of the decade, free-market arguments were routinely ignored and when they could not be ignored they were engaged by Socialist Democrats in the US and plain-old socialists around the world.
Later on, establishment free-market types began to endorse free-market arguments on the Internet. But this ended when conservatives came to power – especially in America. George Bush's militarism was the defining point.
After Bush's serial warfare, the schism between the free-market thinking on the Internet and the free-market orientations of the larger conservative media became clear.
Free-market types wanted to minimize government. Turns out that conservatives only want to minimize CERTAIN PARTS of government – mostly in the area of social services. But when it comes to the military-industrial complex and even the penitentiary-industrial complex, conservatives (pro law-and-order ones) are surprisingly sympathetic.
The latest manifestations of this schism centers around libertarian/Republican presidential candidate Ron Paul. As Ron Paul has widened his political success in America, the schism between the establishment – both Democratic and Republican – has widened as well.
Turns out that American libertarians were right all along, from our point of view. There is only one party in America: the Demo-publicans. In aggregate, this establishment facility believes in big government activism – either in terms of militarism, social activism or both.
In fact, as the freedom dialogue has matured, it has become evident that there is even less difference between the two positions than one might think. Many supposed free-market oriented Republicans turn out to be surprisingly accommodative to big state social programs. Many socialist-oriented Democrats are sympathetic when it comes to the military expansiveness of the American Empire.
The polarization fostered by the Internet continually reveals the falsity of last century's conversation. And it shows more clearly every day the starkness of the divide that separates those who really believe in free markets and free-market thinking from those who don't.
Rush Limbaugh, for instance – supposedly the scourge of the Left – turns out to be a big government person when it comes to numerous parts of the Fedgov's role in civil society and policing in America. Michael Savage, another popular "free-market" radio host, just called for the election of Mitt Romney.
A whole slew of supposedly free-market oriented broadcasters at Fox including popular hosts such as Sean Hannity and Mark Levine turn out to be boosters of aggressive American military adventurism. Ann Coulter is anti-socialist but supportive of what is often referred to as the American Empire.
And then there is the alternative Internet media itself. Alternative media was mostly free-market oriented initially. But as Western Intel and its apologists and associates began to penetrate the Internet, it changed.
Many so-called alternative media sites are openly anti-American Empire (and its domestic oppression) but have radically different viewpoints when it comes to solutions. Many of these positions end up being socialist.
Facilities offered by the Democratic Underground, Lyndon LaRouche and Webster Tarpley are just among a few that offer cogent criticism but then call for MORE government as the solution to what ails America and the West.
Recently, World Net Daily, another putatively free-market oriented website, released a broadside against free markets authored by Ian Fletcher, Senior Economist of the Coalition for a Prosperous America. (See excerpt at the beginning of this article.) He is the author of Free Trade Doesn't Work: What Should Replace It and Why. Here's some more from the article:
Naturally, businesses flee perfectly competitive markets like the plague. In fact, the fine art of doing so is a big part of what they teach in business schools. That's why businesses use strategies like product differentiation, so their competition is no longer selling the exact same product they are. That's why they use strategies like branding, so their buyers don't think the products are the same ...
The reality is that the past prosperity of America has never been based on pure free markets – starting with the fact that we had the highest average income in the world in 1776 because the colonies had structurally tight labor markets due to the open frontier. (Europeans and other Old World peoples were trapped by the iron law of wages because they had nowhere to go.)
Free, or nearly free, markets do have their rightful place in many parts of the economy, and it would be foolish to sabotage them. But in other areas – above all, in labor markets – our prosperity was based on pricing power.
A number of areas other than labor also worked better thanks to a healthy dose of pricing power. Try advanced technology, for a start. The patent system, which is not natural, is a fairly recent invention, and does not de facto exist even today in much of the world, is one. Innovation doesn't come cheap, and without pricing power for innovators, few companies could afford it.
Even the existence of scale economies, which are intrinsic to modern, large-scale, capital-intensive industry, implies markets that are less than free. Why? Because scale economies intrinsically imply a small number of large producers and thus give rise to oligopoly, with the consequences mentioned earlier.
This is why most other industrialized nations aren't romantics about free markets, are honest about their frequent nonexistence, and focus their policies on taming the negative effects of oligopoly while capturing the positive ones. They understand, for one thing, that big corporations are necessary but often pirates, and focus on making them share their loot with their crews.
We, on the other hand, live in a state of denial about the piracy. So the next time someone tells you to believe in "free" markets, just tell them you'll believe as soon as they do. When pigs fly.
Fletcher is making an argument for government in a variety of guises. He believes that government can be good to protect people from "piracy" (copyright violations) and can protect people's business ventures. We would argue that the free-market can do a better job than government.
Not only that but, as we have mentioned before, every interference with the marketplace via law or regulation ends up being a price fix (distortive of the market). Price fixes inevitably transfer wealth from one group of people (who are creating the prosperity) to those who have not and are not apt to properly utilize the windfall.
in order to justify government in any guise, one needs to justify price fixing and make an argument that price fixing can be an effective socio-civic methodology of wealth building. Fletcher would no doubt argue that tariffs are a good example of positive price fixing because they transfer wealth from those trying to import to those who are exporting.
But what about those who are neither importing or exporting? is it fair to them to lose out by being saddled with higher prices and less economical and efficients goods and services? There is a price for everything in the marketplace, even if it is an invisible one. Those who advocate that government can provide "solutions" are usually leaving out the problems that the additional solutions generate.
Conclusion: Government, especially big government, causes problems: endless, ongoing and increasing ones. There are only two solutions to such problems. USE government to make the troubles of government go away. Or SHRINK government so that it causes fewer troubles to begin with. Libertarians come down on the side of the latter argument. The idea of using the locus of the problem to SOLVE the problem seems illogical to us.
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Posted by Bischoff on 01/02/12 11:05 PM
Praxeologically speaking though, humans are by basic nature non-aggressive and non-lethal. If they live in an environment which is non-threatening, humans are naturally peaceful.
The aggressive attitude acquired during the "hunt period" stage in the development of humans is absent, if the environment in which humans exist is peaceful and non-threatening. To achieve this, habituation is needed. It is the function of religions to help in the habituation process.
I exclude from religions that "religion" which advocates the killing of apostates.
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Posted by LloydMiller on 01/02/12 03:12 PM
Aggression, plunder, theft is "human action" as well as is production and trade.
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Posted by LloydMiller on 01/02/12 03:06 PM
"Is a state necessary to have land, labor and capital contribute to the production of wealth? No. Is a state necessary to distribute wealth? No."
There has to be relative peace and law and order to have land, labor, and capital contribute to the production of wealth in the robust style and scale to which we are accustomed. . .
Based on wanting to carry the "non-aggression" principal to the extreme, I to theorized how a free market might provide enough peace and law and order without a reformed State, but it's never happened to any significant extent which ought to tell us something.
Unfortunately, Ludwig von Mises confined his praxeology primarily to the case of law and order. There is a praxeology of aggression also which explains ALL of the human experience.
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Posted by Bischoff on 01/02/12 11:55 AM
"A market is free for one second. Then it is grabbed." If you examine this statement, then peaceful cooperation and private, voluntary exchange of wealth is not possible without government and laws. Given human nature, there is a point that can be made for this argument.
The answer, however is voluntary habituation to counter certain aspects of human nature, rather that to leave the restraint of detrimental basic human instincts to the force of government.
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Posted by Anthony Migchels on 01/02/12 07:20 AM
I actually agree with this!
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Posted by Anthony Migchels on 01/02/12 07:18 AM
The problem with this reasoning is, that if the State does not control the market, private interests will.
A market is free for one second. Then it is grabbed.
The question is: by whom?
History shows it's usually the most brutally violent and most devious liar.
The lies help to sucker the less bright market players, violence to get rid of competition.
This certainly can be a Government.
But let's not rule out the Money Power. It uses Government, but it does not need it: when there is no Government they will either recreate it or rule through goon squads.
So free markets are unlikely. The question is more: who is in control and is there equitable access for all players.
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Posted by Bischoff on 01/02/12 05:14 AM
By the term "Free Market" is meant the concept which attaches to the distribution of wealth in relation to the contribution provided by each of the factors in the production of wealth. Distribution in a "Free Market" is accomplished by private, voluntary transactions.
Is a state necessary to have land, labor and capital contribute to the production of wealth? No. Is a state necessary to distribute wealth? No.
Therefore, "Free Markets" can exist prior to the existence of a state.
The other wealth distribution system is "Socialism". The minute you vary from private ownership rights and voluntary transactions in regards to the production and distribution of wealth, you are on the road to "Socialism". Only the state can introduce "Socialism". If the state is involved in the distribution of wealth, it lessens the concept of "Free Markets".
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Posted by Bischoff on 01/02/12 04:49 AM
Quite perceptive. How to have liberty? The short answer is law. The question of how to keep law just requires more than law.
Law is government. To have liberty, you have to have government. Yet, government is the greatest threat to liberty.
It is the quality of the administrators of government which counts. Government should be most powerful at the level where people can best assure quality in the administration of the government.
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Posted by LloydMiller on 01/01/12 03:40 PM
Though it is certainly not uniformly true, the British Empire often spread a decent version of the "rule of law" in support of the "free market". If I recall correctly, Herbert Spencer argued against this interpretation. . . but such megatrends are difficult to perceive.
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Posted by LloydMiller on 01/01/12 03:38 PM
If the "free market" is created by reform of the initially oppressive State, originally based on military victory, it is not surprising that the reformers have different estimates of the way forward. Why is it out of the realm of possibility that a relatively reformed State should war against less reformed States to spread the beneficial reforms?
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Posted by LloydMiller on 01/01/12 03:34 PM
"Free market" on the internet is a vacuous concept. Any number of free market advocates, in all their variety, may choose to express themselves on the internet. The internet is a medium, not the message.
Free market advocates differ on whether the State is prior to the free market or completely unnecessary. If the State is prior to the free market, then only by reforming a State, can the conditions for a relatively free market be established. I can no longer imagine how I, along with Murray Rothbard and other anarcho-capitalists, believed for so long that the free market was or could be prior to or even exist without the State.
The State comes into existence when an armed band of men win a resouding military victory in a local which enables them to rule. Prior to that victory we have the "normal" "tooth and claw" conflict of individuals, bands, tribes, etc.
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Posted by LloydMiller on 01/01/12 03:23 PM
A free market does not require "pure and perfect" competition. "Pure and perfect" compettiion was invented to rationalize government control, specifically anti-trust laws which are used to pick winners and loser, the winners being those firms with the most political pull.
Product differentiation is not a violation of the free market. Only legal barriers to entry imposed by government, regulations designed by government, etc. etc. violate the free market.
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Posted by Publius on 01/01/12 12:30 PM
The world is imperfect. In a Christian sense it is a fallen world. Men prey on other men at all times. History is a chronicle of slaughter, civilization a chronicle of the survivors of the slaughter. Anatole France very wittily dismembered the pious tradition of private property and government in his novel Penguin Island where a near sighted priest consecrates a murder by christening the killer "Great Auk, Duke of Skull" and then informs him that all around the murder site the land is now his and his children's. Into this system of organized murder and cunning arose the concept of positive law-but again-men are mixed and magistrates can be corrupted. Even so, governments of men can be contained and constrained by law, if the magistrates are people of character and if the populace also has character. If either is lacking, any Republic fails. As to savage wealth inequality based on historical tradition of winners and losers, here the wealth redistribution game begins. Typically it is rigged to redistribute more wealth to the top tiers of the class order and no commonwealth truly exists. Lastly, in a world of total war-engineered or not-government tends to fous on warfare instead of justice. It is a conundrum. How can unfree people have freedom? The short answer is law. The question ofhow to keep law just requires more than law.
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Posted by Bischoff on 01/01/12 03:32 AM
I don't think I could have said it any better... ..
Happy New Year !!! BTW, do they celebrate New Years on Mars... .?????
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Posted by amanfromMars on 01/01/12 02:14 AM
... and the matters which are known and unknown and will forever be with the people against the elite today and forever in the past are the best things and the worst which ever could have happend given these excellerating circumstances, but the joys of war everlasting.
I am sure you agree with me, don't you "man from mars"?
Well, all that I know of today, is that of the unknown which is known and shared freely for the express purpose of rapid progress delivering greater beneficial mutual advantage to all, would be a future elite and virtual collective unburdened of the past and its corrupt and conflicted memory/intelligence cells.
Methinks the joys of war everlasting are a catastrophic self-destructive problem which past elite systems administrations failed to address and remove from BIOS Programming, ignoring in their arrogance the simplest of natural cosmic rules ……. Garbage In/Garbage Out. And thus was their demise and departure hosting and pimping such psychotic sub-prime only a matter of time and always inevitable in the light of advanced intelligence globally sharing simple information revealing old secrets/power control levers/blunt executive office instruments to be used as primitive virtual clubs for imposition of suppression whenever provision of future needs is always the seed and feed desired, and most gratefully and graciously received and appreciated by all.
Obviously in such cases in the intellectual wiring somewhat awry and short circuiting and preventing proper network connections to necessary advanced nodes of future intellectual property supply. ……… Core NEUKlearer HyperRadioProActive IT Source.
To be sure, would I love to agree with you regarding the text that you have shared but it message is too garbled to unambiguously compute, and thus is agreement reserved …….. and yes, that may be a touch "the kettle calling the plot black" but hey, it is just a simple matter of further text rearrangement to make sense in any number of directions, to remove the disagreeable block on concordat.
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Posted by Bischoff on 12/31/11 10:04 PM
... and the matters which are known and unknown and will forever be with the people against the elite today and forever in the past are the best things and the worst which ever could have happend given these excellerating circumstances, but the joys of war everlasting.
I am sure you agree with me, don't you "man from mars"?
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Posted by amanfromMars on 12/31/11 11:53 AM
"That time is coming. People will have to learn about "Money", and "Currency", and Banks and how they work, soon enough." ... . Posted by Bischoff on 12/30/11 12:00 PM
In some/many parts is the time come, Bischoff, and how things are worked are well known ... .. and that makes for some interesting opportunities/exploits.
Oh, and now that such matters are known outside of those sequestered power elite circles, and known to be known within such circles, which are all bound to be incestuously linked and networking, are principal actions/non-actions bound to be considered in future deliberations on appropriate reward and/or sanction, gratitude or revenge.
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Posted by Bischoff on 12/30/11 12:00 PM
@ pipefighter
"For 317 years now, except for a few exceptions money has all been created by corporations known as banks and injected into the currency stream solely by a debt/usury process."
You are wrong. However, I fully and completely understand your frustration.
Once you understand "Money", and once you understand "Currency", and once you understand the difference between the two, you understand that banks can create "Currency", but they cannot create "Money".
Each generation has to learn how the world works. This is a process that must happen over and over again, if human civilization is to survive. We naturally accept that everything we know and we understand is the result of greater wisdom and enlightenment gone on before.
Nothing could be further from the truth. That's why it is so necessary to study history.
Let me just say this, when the "currency creators" control the media and the education system, they control you. They will try like hell to never let you catch on. If by chance you do, and you want to let other people know, the paradigm which has been fostered on the people, will not let them take you for real. They'll fight your explanation tooth to nail, unless of course they finally get hit "upide the head with a big 2 x 4".
That time is coming. People will have to learn about "Money", and "Currency", and Banks and how they work, soon enough.
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Posted by pipefighter2 on 12/30/11 11:15 AM
You, as all other purported experts, never delve into the heart of economics so that we can know which beast to slay. Who gets to create money and how is it introduced into the currency stream are the crux in money creation. For 317 years now, except for a few exceptions money has all been created by corporations known as banks and injected into the currency stream solely by a debt/usury process.
As an aside, if the money creators - using gold backed or not - provide nothing useful in return for their accounting service, how is it that they deserved to charge the US Government $413 Billion in interest last year. I'm beginning to think all you econ authorities have never developed a moral compass.
Daniel Krynicki
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Posted by Adam on 12/30/11 10:29 AM
Not my article! (Snip:)
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