Wednesday, August 24, 2011

Things They Don't Tell You About Capitalism, 2

Thing 1: There Is No Such Thing As a Free Market

(Italics indicate direct quotes from the author)

The free market doesn't exist. Every market has some rules and boundaries that restrict freedom of choice. This "free" is a political definition. It cannot be objectively defined. Government is always involved and those free-marketeers are as politically motivated as anyone.

In 1819 new legislation to regulate child labour, the Cotton Factory Regulation Act, was tabled in the British Parliament. This bill would ban the use of children under nine in these factories. It was quite controversial. Those opposing the proposed legislation saw it as the sanctity of freedom of contract and thus destroying the very foundation of the free market. They argued that children under nine should be allowed to work in the very unhealthy environment of the cotton factory  -- if this is what they wanted to do. Laborers should have freedom to work or not to work. Thus seen, the freedom of a market, is like beauty, in the eyes of the beholder.

The same arguments used in 1819 were used when regulations on automobile and factories were considered in the past century.  The opponents are argued that people should be "free" to drive polluting cars if they wanted to. The same with factory owners. They had the freedom to operate their plants in the way they chose. It was their private property. If they felt like reducing harmful decisions  -- that should be their choice. Once again the government (the people acting through their government) were interfering with individuals who simply wanted to act in their own "self interest".

People began thinking: Should morality enter into the ability for individuals or corporations (now considered "persons" by a recent misguided Supreme Court decision) to do whatever they wanted?  And, should the common good of the people as a whole have any influence on individual freedom, including the "free" market? Electoral votes, government jobs and legal documents are not for sale. Neither are human organs or narcotic drugs.  ... just as the ban on selling human beings ( the slave trade) and half centuries ago.

In addition, when examined the so-called "free" market itself has built-in restrictions governing its operations. No one can just show up at the New York Stock Exchange and say, "Hi, I've got some shares I would like to enter on the exchange." Companies have to be registered on the NYSE; follow certain procedures while active; use licensed brokers and traders and on and on. I.e,
the NTSE knows it can't be "free" in the way it functions or "all hell would break loose".

The market is not "free" in that product guarantees must be honored, list of ingredients on packaged food be accurate; there are zoning laws in residential areas, restrictions on street vending; rent controls, etc.

Interest rates are set by the central bank in most countries. Another example of part of the market that is not free and is greatly influenced by political considerations.

We see a regulation when we don't endorse the moral values behind it.  Milton Friedman the father of extreme free-market capitalism is remembered for saying that the economic system, the free market, should be amoral. Think of the implications of his belief. Thankfully, we can see that in practice the operations of the economic system is not and should not be free of the needs, opinions, desires and ideals of the people. Or  -- what's a democracy all about? For every freedom there is a responsibility, and this is true in the operations of corporations too -- at least it should be in a democracy. The purpose of a democracy is to fulfill the common good -- to foster the health, the values,  the personal growth of its citizens. Fostering the production  of wealth is not at the top of the list. And wealth should be fostered in a way that is not too "costly" i.e. that does not, e.g. damage the environment; lead to an unfair and irrational distribution of wealth; destroy the moral and social fabric of society, and so on. The author puts it this way: Thus seen, the debate about fair trade is essentially about moral values and political decisions, and not economics in the usual sense.

In the U.S. government's bailout of Wall Street to the tune of 700 billion, President George W. Bush said that he was saving our economic system from "socialism". (??) Apparently, state intervention into the economyin the hope of saving the so-called free market from itself ---is certainly nothing close to socialism. The author argues that there is no scientifically defined boundary for free market. Our Civil War was in a in part over a disagreement over free trade  --- the free trade in slaves by the South.

Free-market economists may want you to believe that the correct boundaries of the market can be scientifically determined, but this is incorrect. .... economics is not a science like physics or chemistry, but a political exercise.

Their (free-market economists) ideological cloak is to pretend that their politics is really not political, but rather is an objective economic truth, while other people's politics is political. However, they are as politically motivated as their opponents.

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