Last time we looked at the first fundamental flaw in the faith of Free-marketers:
- The entire idea of a capitalistic market—the sort they advocate—is only made possible by a very artificial concept of ownership: a concept which is created and enforced by government intervention.
- The kind of ownership which makes a modern market possible is created through laws and contracts and government enforcement (through force) of those laws and contracts.
- The currency which makes modern markets practical is a legal fiction, concocted and enforced by government intervention.
But let’s move on to the second fundamental flaw in their Faith.
Let’s enter into their fantasy world and pretend that it is possible to have a completely laissez-faire market: a market in which somehow contracts are enforced without any government involvement, in which the currency is put in place by divine decree.
How would such a market actually function?
It’s really a very simple thought experiment.
Some one person, or some group of people, would amass a good chunk of wealth, and they would quickly realize that money was, indeed, power.
They would find ways to leverage the wealth their money provided to gain more wealth—a process which would reinforce itself in an upward spiral.
More wealth means more power means more wealth means even more power means even more wealth... and so on.
Soon, most of the wealth, and most of the power, would end up in the hands of, oh... say the richest 1% of the populace, and after that it would be used to keep the 99% working for the top 1%.
It should, because it has happened repeatedly in human history.
It even seems to have happened some six to twelve thousand years ago, when we moved from being free hunter-gatherers to being the subjects—the property—of kings.
An unregulated market—or even one with as much regulation as we currently have—leads quickly to domination by a tiny minority.
Those “market forces” which tend to keep a free market working are all based on negative feedback of one kind or another:
- If there’s too little production, the product becomes scarce, prices rise accordingly, and it becomes more profitable to produce—leading to more production, more products on the market, greater competition, and lower prices.
- If there’s too much production, products become too plentiful, prices drop because of excess competition, and it becomes less profitable to produce—leading to lower production.
But not all situations provide negative feedback; some even provide positive feedback.
There’s no real corporate down-side to getting bigger and wealthier, especially in the setting of a laissez-faire market.
No negative feedback.
The net result of a free market—in the laissez-faire sense—is that a very small part of the society ends up controlling the market.
It ceases to be free.
Your contract with your phone company probably says you can’t sue them—no matter what they do to you.
All you can do is take them to arbitration, and they can veto your choice of arbiter.
Is this freedom? For whom?
Free markets quickly become plutocratic markets, ruled by the power of the wealthy few.
So there are two gaping holes in the dogma of free-marketers:
- It is impossible to have a modern market at all without government being intimately involved.
- Without outside constraints a free market will not remain free: it will come under the control of a tiny group of the very wealthy.
Is there any way around this?
Is our only choice between a communist dictatorship on the one hand, and a lawless banana republic on the other?
Next: Free vs. Free