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 speedygonzales on 12/30/11 12:50 AM
Who Killed the Soviet Union?
The Soviet Union did not die from old age. It was killed by a group of opportunists - some of whom were deceived and driven by naive hopes of a better future, while others were driven by a craving for power and a greedy desire to distribute government property into private hands.
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20th anniversary of the Soviet Union's demolition. The anniversary is no time for celebration, except for the minority that has profited from it. For the bulk of us it ought to be an occasion to reflect on what the bottom 99 percent of humanity was able to achieve for ourselves outside the strictures, instabilities and unnecessary cruelties of capitalism.
Naively, blindly, stupidly, some expected Gorbachev's demolition project to lead the way to a prosperous consumer society, in which Soviet citizens, their bank accounts bulging with incomes earned from new jobs landed in a robust market economy, would file into colorful, luxurious shopping malls, to pick clean store shelves bursting with consumer goods. Others imagined a new era of a flowering multiparty democracy and expanded civil liberties, coexisting with public ownership of the commanding heights of the economy, a model that seemed to owe more to utopian blueprints than hard-headed reality.
Of course, none of the great promises of the counterrevolution were kept. While at the time the demise of socialism in the Soviet Union and Eastern Europe was proclaimed as a great victory for humanity, not least by leftist intellectuals in the United States, two decades later there's little to Click to view linkowing competition for jobs and industry has forced workers in Western Europe to accept less. They work longer hours, and in some cases, for less pay and without increases in benefits, to keep jobs from moving to the Czech Republic, Slovakia and other former socialist countries - which, under the rule of the Reds, once provided jobs for all. More work for less money is a pleasing outcome for the corporate class, and turns out to be exactly the outcome fascists engineered for their countries' capitalists in the 1930s.
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But the outcome is ultimately traceable to what history surely reveals to be a bankrupt strategy: trying to arrive at socialism, or at least, at a set of robust measures congenial to the interests of the bottom 99 percent, within the hostile framework of a system that is dominated by the top one percent.
Myths work both ways. While they can turn successes into what appear to be failures, then can also turn failures into what appear to be successes.
So it is with capitalism. With a major bank bailout needed to rescue it, the US economy in recession on Main Street, European economies falling like dominoes under the weight of stagnation and mounting debt, and long-term unemployment stuck at alarmingly high levels with no sign of improvement, few people are pointing out the obvious: capitalism isn't working.
The Occupy Wall Street movement, and anti-austerity agitations in Europe, are early signals of a possible reversal of tide.
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This sweeping book is a systematic treatment of the historic transformation of the West from limited monarchy to unlimited democracy. Revisionist in nature, it reaches the conclusion that monarchy, with all its failings, is a lesser evil than mass democracy, but outlines deficiencies in both as systems of guarding liberty. By focusing on this transformation from private to public government, the author is able to interpret many historical phenomena, such as rising levels of crime, degeneration of standards of conduct and morality, the decline in security and freedom, and the growth of the mega-state.
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With the colossal wealth they amassed in the decades prior to World War I, two boards of trustees were created, the General Education Fund (GEB), by Rockefeller, and the carnegie Endowment for Advanced Education (CFAT). Through a massive infusion of funds, they entirely reorganized the American university system, dismissing undesirable professors, and erecting facilities to concentrate on research into the physical and social sciences. Scientific research has been largely exploited to build up the military-industrial-complex, while social science has served to study human behavior, with the aim of discovering methods of coercion, and to discern and address subversive tendencies.
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"War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes."
I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.
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Though Butler was not a member of the American Communist Party he did give speeches at Communist Party meetings in the 1930s as well as many speeches for the League Against War and Fascism. When asked about the company he was keeping he noted, 'They told me I'd find a nest of communists here. I told them 'What the hell of it!'
Maybe days are commin when GW Bush, Tony Blair or Niki Sharkie will talk at commies meetingx. If aristocratic Thule society could found Deutsche Arbeit Party then Skul and Bones can found American Workers Party.
All what we can see elites are preparing for grand stand inside and outside as their expanzionism is limited by BRIC. They suspended US consti and rules of law, and surroundin Iran. That will most likelly skyraketin oil prices.
Just lotta gr8 ideas. Good bless Y'LL
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Posted by Agent Weebley on 12/30/11 12:07 AM
Oops, sorry Ingo. I meant Newt, as in Gingrich.
Also, that clip was about a Medieval land grab from widows accused of being witches, so it has a special meaning, doesn't it?
Glad to have you on board.
Driver, brother.
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Posted by speedygonzales on 12/30/11 12:04 AM
All this is natural for elites and empires. Militarilly took territory under control means profit by brutal exploitation and taxation. It was taken to ad absurdum by Vatican and christianity. They claimed murdered oponent as their god by whom they expanded their power. In modern days it is freedom, democracy and capitalism.
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If You R Yeshu, would You like 2B their god?
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Posted by Agent Weebley on 12/30/11 12:00 AM
Hi Ingo,
You are becoming an anarchist. Magic!
Glad to see you got better, after being turned into a newt.
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Posted by Bischoff on 12/29/11 11:52 PM
@ DB
"The idea of using the locus of the problem to SOLVE the problem seems illogical to us."
It may seem illogical to you. It didn't seem illogical to the founders.
Besides, how do you define a "free market"... ??? Is it an ideological thing... ??? Is it an economic thing... ??? Is it a political thing... ??? I can't figure out what it is by reading this article.
To me, the "free market" is one type of system to distribute wealth. The other type of system to distribute wealth is "socialism". In the "free market", wealth is distributed in relation to the contribution made by each of the factors in the production of the wealth. This is done through mutual agreement by the market participants.
In contrast stands the wealth distribution system known as "socialism". Under "socialism" wealth is distributed by government decision. This can only be done, if the factors of production are partially or fully controlled by government.
The original U.S. Constitution created a government under which the existence of "socialism", as a wealth distribution system, is impossible.
Therefore, to introduce "socialism" into America, the U.S. Constitution has be destroyed.
The refugees from the 1848 workers revolutions in Europe brought the socialist ideas with them to America. The first big success of those ideas in destroying the intent of the U.S. can be found in the ratification of the 16th, 17th and 18th Amendments to the Constitution. These installation of those ideas are further found in the FDR New Deal legislation and the U.S. Supreme Court decisions issed by a U.S. Supreme court packed by FDR with liberal or socialist justices.
The attack on the U.S. Constitution by socialists and communists has gone on for over a hundred years. As the Constitution was being neutered little by little, so was the "free market". We are now at a very crucial turning point at which the American people have to chose to either return to a "free market", i.e. restore the original Constitution and the American Republic it created, or the subcome to the European style socialism peddled by President Obama and his fellow socialists.
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Posted by speedygonzales on 12/29/11 11:51 PM
Capitalism and democracy as religion cover expanzionism. Without expanzionism capitalism and democracy colapse. Expanzionism walk hand by hand with centralization, what is expanzionism on home soil. Also colonialism or neo-colonialism. Ponzi scheme. New slaves are needed for old colaterals.
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Posted by Agent Weebley on 12/29/11 11:41 PM
Hi NAPpy,
Your bedside manner is not so unique. You beat your patients as you help them get better?
Your knee jerk prescription was a quick shot . . but you missed the vein repeatedly, as you finally said what the hey and just fired it in . . . but you sent an inadvertent MisesLogic embolism straight to Chad2's limbic system, which was rather impulsive and dangerous, causing a possible kick in the coconuts from the patient, don't you think?
All he was complaining about was why he and so, so many others have an internal contradiction, presenting as 'WHY, WHY, WHY', commonly referred to in the profession, as a 'belly ache."
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Hi Chad2,
Further to what NAPpy was experimenting on with you . . . the problem is merely a trust issue. People trust their world view is intact and cohesive, but we all ache inside because we are being controlled and negatively affected by the money supply, or lack thereof.
Make that inadvertent embolism travel to the prefrontal cortex, which is your logic and also luckily, your dream centre, which will give your mind a refreshing coconut and lime shake, then call Doctor Sternum in the morning; he'll tell you what to do.
I hope sites like the DB will help create a large enough population of people who walk the walk, not just talk the talk.
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Posted by bionic mosquito on 12/29/11 09:49 PM
NAPpy
I can only say... good post. There is too much misunderstanding about the term deflation (and inflation). I like your term "biflation." This is certainly correct, as we will likely see deflation in places that have been propped up by the helicopter (real estate for one, as you suggest). But in the world of CPI, we will only see inflation. As long as this (completely manipulated) statistic shows a hint of stability (let alone deflation) the Fed will print.
There will be no price deflation, as measured by the CPI. Central bankers have set up the rules of the game to ensure that this isn't so - most people are tricked into looking at the wrong walnut shell. They watch CPI when they should be watching the manipulations of money.
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Posted by NAPpy on 12/29/11 09:02 PM
"One dude realized we are in deflation (vice inflation)"
Wrong. The correct term is biflation. Some asset classes deflate (real estate), while other assets inflate (stock market, food, energy). Worse, you incorrectly defined what inflation is. Inflation is an increase in the money supply. Price inflation follows, but not symmetrically. Human action drives price inflation like it drives every other market choice. There is a matrix of exchanges, starting from the point of monetary insertion, that flows outward into the economy based on the self-interest of every exchange agent. Those exchange agents that can afford to save, bid up asset prices. Those exchange agents that need to spend, bid up consumer good prices. Purchasing power is stolen by the first spenders from the late spenders. Concurrently, businesses affected by the malinvestment of the boom, go out of business, causing deflation.
"... this one points out the fraud of free-markets!"
Free markets are free to the extent there is voluntary exchange. Free markets may be fraudulent, in a sense, to the extent there is involuntary exchange. A term such as coercive is more accurate than fraudulent to describe the affects of government interference in voluntary exchanges.
Your comments betray ignorance about the science of praxeology, and its best known subdiscipline economics. Please educate yourself before leading other truth seekers astray with comments like the above. I recommend starting your education here:
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The reason why we are moving towards centralization is because a large percentage of people don't understand or ignore the contradiction between wanting freedom in their individual life, while wanting to use force against others (taxation of people who aren't paying their fair share, hitting kids while "raising" them, supporting military intervention against people in other countries they've never been harmed by, and supporting any law that goes beyond defense against aggression like drug laws). Until a large minority of individuals work out these internal contradictions, the world will continue to centralize.
I hope sites like the DB will help create a large enough population of freedom lovers.
Reply from The Daily Bell
The correct term is biflation.
Excellent. Thank you! From what we can gather the Great Depression was in no way entirely deflationary, either via price or money volume. And Murray Rothbard was correct. There is no way to manipulate a Depression. One needs to let the sickness abate in its own time.
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Posted by chad2 on 12/29/11 04:25 PM
God Bless You! Man it's a good day for 'the daily bell.' One dude realized we are in deflation (vice inflation) and now this one points out the fraud of free-markets! Wow! Impressive! Keep going, you are getting there! Hint for the next realization:
Daily bell already knows we are moving to world government (i.e. reason for the crisis/deflation/failed markets), BUT WHY WHY WHY?? This is the key to the entire matter! Be brave and start writing about the WHY!
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Posted by bionic mosquito on 12/29/11 03:30 PM
Gpond, this one is for you.
WND: Nobody, but nobody, really believes in free markets... .Here's why: a truly free market is a perfectly competitive market.
BM: Right off the bat, the author displays his ignorance - or more accurately, stupidity. Or perhaps just framing the dialogue in an acceptable manner.
A free market is not one that the author describes (what does "a perfectly competitive market" mean in the way the author tries to use the term, anyway?). A free market is one that is (wait, hold your breath)... free. In other words, absent from coercion, absent from initiation of force.
By definition government is coercion, government is initiation of force. Therefore to the extent there is ANY government involvement, the market is less free.
DB: Turns out that conservatives only want to minimize CERTAIN PARTS of government - mostly in the area of social services.
BM: Sadly, while this is the conservative rhetoric, it is not the reality. Conservatives in the USA talk a good game on this one, but have not delivered. While there have been minor episodes of a (temporary) reduction in official military expenditures, I am not familiar with ANY episodes of a shrinking (temporary or otherwise) of the welfare state.
WND: 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 ...
BM: What the author describes is in fact the actions any business would take in a free market. What is un-free about trying to differentiate one product from that of a competitor?
However, there is a germ of truth in this statement: Businesses (especially large corporations) do "flee perfectly competitive markets like the plague." They run to government for regulations that are designed to reduce competition and offer protection.
Reply from The Daily Bell
"BM: What the author describes is in fact the actions any business would take in a free market. What is un-free about trying to differentiate one product from that of a competitor?"
Very good point!
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Posted by Adam on 12/29/11 02:23 PM
The Rational Optimist - The market as the antidote to capitalism
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Snip: 'Here's an article I wrote, published by The Times this week [The Times - Yes, capitalism has failed, Dec 2011]:
The political divide between the champions of the public sector and the private sector misses the point; the key divide is between those who support the monopolistic tendencies of both capitalism and government, and those who support the competitive effects of markets. As Adam Smith, who championed the market but not capitalism, put it: 'People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.' The market is where these conspiracies get exposed. To win in it, you don't lobby, you innovate. Wherever free markets have been even tentatively tried, from Ancient Greece to modern Hong Kong, they have produced not just rising living standards, but net moves towards peace, tolerance, freedom and equality. Capitalism represents the interests of the rich, whereas the market represents the interests of the poor. Let's hear it for the market as the antidote to capitalism.'
Reply from The Daily Bell
Congratulations.
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