On Free Markets
I've been reading, and thinking about, an excellent post made by Larry Beinhart, on The Huffington Post a couple of days ago, titled Capitalism 104.
He outlines a short history of our thinking about economics, and about the strengths and weaknesses of capitalism as a system. Along the way he makes some comments that sparked some thoughts of my own.
The first of these is that we could do some careful thinking about the meaning of the phrase "free market".
All too often, this phrase is taken to mean a market without any government regulation, but that is absurd, in a couple of ways.
First of all, it is not possible.
In order to have a market at all, we have to have laws. Corporations are legal entities, and only exist because laws govern them. Property is a legal thing, and property rights would not exist without government regulation of those rights.
The list could go on, but the fact is that it is not possible for there to be a market without government regulation.
Furthermore, it is not possible for a market to be free without even further regulation, any more than it is possible for a country to be free without laws.
When we say this is a free country, one of the things we mean is that there are laws which keep those of us with bigger sticks from violating the rights of the rest of us. It doesn't matter whether the sticks are physical or economic, we can't have freedom without government regulation of that freedom.
But the problem goes beyond this, because it so happens that money is a particularly concentrated form of power.
This is not a bad thing, in itself. A little cash in my pocket gives me the power to go to a restaurant and order a nice meal, or to drive around in a nice car, and in the process, it gives the waiter and the mechanic and the chef and the car salesman power as well.
That's the good side of a free market.
But the flip side is that when the money pools, as all power tends to do, those with lots of it can use it to corrupt the system in their favor. They can get government to deregulate business, or to regulate the world in ways that favor business.
The problem at this point is not regulation, or deregulation so much as the pooling of wealth and power.
One of the comments (by "ProudNeoCon") following Larry Beinhart's post charges him with confusing regulation and social welfare. It claims that "progressive taxes have nothing to do with market regulation".
This is a mistake, in three ways.
First of all, progressive taxation is a form of market regulation. By making it more expensive to pool wealth, progressive taxation helps us to avoid many of the problems which only occur because of pooled wealth, and it helps to keep the wealth distributed, which keeps the entire economy much healthier.
Secondly, when it is difficult to pool wealth—and its attendant power—it is more difficult for that power to corrupt the system that guarantees a free market.
Finally, the less pooling of wealth and power there is, the less need there is for other, more meddlesome and less efficient forms of regulation, and the freer the market becomes.
Considering all of the above, it might well be that a very progressive tax system would not only address injustice, but guarantee a freer market place.
At least, that's what I think today.