Thursday, July 2, 2015

American Mythology: The Free Market

What is the Free Market? By definition it is an economic system in which prices are determined by unrestricted competition between privately owned businesses.  To achieve this a special form of Capitalism it requires: Laissez-Faire Capitalism.  With Laissez-Faire, the government does not regulate business, or does so in the most minimalist of ways.  Belief in the free market is a litmus test in the United States used to determine one's patriotism.  Yet, towards whom are we being patriotic? A look at Laissez-Faire Capitalism in American history and analysis of the problems with a free market will answer who is demanding our loyalty.

There are three main problems to the myth of the Free Market.  Below I will address each one in turn.

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The idea of the Free Market rests in part on the assumption that the buyer knows everything about the product.  Under Free Market theory, if a vendor is dishonest in its representation of the item, then future buyers will go to different vendors.  However, this is not always the case.  In cases of Monopoly, like having only one cable company in the service area, there may not be an alternative. Previous to the industrial age, this may not have been a huge problem.  People bought mostly raw goods and manufactured their own usable goods.  Simply put, there were not that many goods to know about.  In today's world that is not the case.

Most people don't know how the majority of their usable goods work.  Without devoting your life to learning how cars, computers, cell phones, the Internet, etc. all work, one won't know, meaning that endeavors like teaching and plumbing become side jobs.  At best, we can educate ourselves on how things work in a general sense, but there is not enough time in our lives to learn the particulars of every good and service available to us.  As such, the vendor, not the buyer has the power.


Gordon Gekko "Greed is Good"The world is full of professions that are absolutely essential to modern society: farmers, teachers, plumbers, construction workers, firemen, just to name a few.  None of these professions make their practitioners rich though.  To become rich, one must either be born into money, or enter into a profession whose primary purpose is to make money.  The people who do this have only one interest in mind: their own wealth.

Those with the deplorable disease of greed care not about their fellow man, the planet, nor future generations outside of their own genetic legacy. In a Free Market system, the greedy do all they can to capture the market for themselves.  In other words, they want the freedom to economically enslave others.  The US is experiencing an era of greed that began under Reagan in the 1980s.  But this is not the first time greed has corrupted America.

The Gilded Age

The Gilded Age is empirical evidence on why Laissez-Faire Capitalism cannot work in a modern economy, and why the Free Market is a myth.

The post Civil War era is known as the Gilded Age.  It got this name because that is when the fruits of industrialization took off, enriching business owners more fantastically than any time in history. During the Gilded Age, there was no restrictions on collusion, monopolies, trusts, or any other form of business dealings.  Prices weren't determined by supply and demand alone, but through boardroom negotiations with the purpose of stifling any competition.

Simultaneously, they kept worker wages low enough that the workers could not get an education and their whole family had to work (including children), but high enough that the workers could eat. There was no health care benefits, no unemployment, no FDA, no USDA, no such concept as sexual harassment.  Work conditions were deplorable and if you got sick or hurt, you lost your job, often permanently. There was no welfare system for the disadvantaged, but Corporations often enjoyed welfare from the Government, like using eminent domain to buy property for Corporate use, or giving huge tracts of land to the railroads.

Then the government gets involved.  In the latter part of the 19th the Armed forces of the US spent most of its time "protecting US interests" in Latin America.  In other words, we toppled governments and invaded countries to protect US business assets in those countries. This trend continued into the 20th Century with the Banana Wars in Central America.  Not only was the US military used on foreign soil to enforce corporate will, but in the US as well.  The Pullman Strike of 1894, and the Homestead Strike of 1892 are prime examples where the Government Military was in the employ of a Corporation.

Before industrialization, pre-capitalist societies were ran by guilds at the authorization of the Crown. Before then, in the agoras of ancient Greece, and the dealings between hunter-gatherer tribes the Free Market may have been a reality.  The opportunity for one person to dominate a commodity or good was almost nil.  Wealth was not generated that fast.  That would change when labor became mechanized.

As labor was mechanized, wealth could be generated faster than ever before in human history. Around this time, improvements in communication transformed the finance market as well, adding to and compounding the wealth generation.  What this means is that once one person, one company begins buying out his competitors, the wealth generation increases, allowing more capital to buy more shares of the market.  In doing so, competition is stifled and the market is no longer free: it is ruled autocratically.

After acquiring a sizable share of the market on a good, the company becomes a monopoly. Through this tactic,among others, companies are able to keep their monopoly, but to what end? To prohibit upstart companies by pricing its goods at a loss.  This forces the smaller competitor to either take the loss and match prices, or lose business to the larger corporation.  Either way, this forces the new business, which may have a superior product, to go out of business.

With great wealth comes great power.  What power the rich lack they can purchase in the form of politicians.  Political power and economic power then gets further concentrated in the hands of the few.  In a democratic society, officials may be elected, but money then buys the official's vote.  At that point, the government is run not by the people, but by the corporations.

At that point, democracy becomes plutocracy.  Liberty dies not with a cry, but with the bell of a cash register.  And the free enterprise of the market becomes the sovereign domain of the privileged few.


"There are laws that enslave men, and laws that set them free."  That sounds like something Thomas Jefferson or Abraham Lincoln would say, but it is actually from the King Arthur movie, First Knight. Despite being an unmemorable movie, I have always remembered that line, and how true it rings. Slavery was the law of the land in the South before the Civil War.  The 13th Amendment set them free.

Government regulation is to free the consumer, and the entrepreneur from the tyranny of the plutocracy.  Theodore Roosevelt realized this when he went on his anti-trust crusade, and formed the FDA and USDA.  Franklin Roosevelt also realized this when his New Deal took up the task of rebuilding the America that the corporations ruined.  FDR also legislated in bargaining rights for workers, increasing working conditions and wages for millions of Americans.  The result of which was three decades of prosperity brought to an end by the resurgence of corporate greed and influence.

The free market litmus test does not test ones patriotism to the country, to mom and apple pie.  It tests the loyalty to the corporate oligarchs bent on using our great nation as their personal, exploitable resource.

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