Saturday, November 22, 2008

We've Never Had Free Markets

There is no such thing, and never has been such a thing, as a free market - it's just a question of where the government, or ruling class, will intervene, and for what purpose.

A person could argue that we had free market capitalism in say 1790 when -
"Samuel Slater's factory opened by hiring 7 boys and 2 girls between the ages of 7 and 12 to run his spinning machines. They could be hired much cheaper than men. They received between 33 and 67 cents per week, while adult workers in Rhode Island were earning between $2 and $3 a week. By 1820 1/2 of Rhode Island's factory workers were children."
In 1790 we had a government with some degree (granted limited) of intervention in the so-called free market. Looking further back - in tribal societies, once they have developed an agricultural based economy, their markets are controlled by the people with the most power - obtained by force or inherent in the tribe's aristocracy.

If we actually had markets solely based on supply and demand and combined them with capitalism - we would end up with a survival of the fittest society where ethical ideas, such as the golden rule, treating people as an end and not a means to an end - not exploiting people, become meaningless because they do not support our end - accumulating wealth.

Even an unregulated market is not free since there are macro forces controlling the law of supply and demand - so we can say not only is there no such thing as free markets there is also no such thing as an unregulated market. For example a large pool of unemployed workers causes a decrease in the value of labor. Cheap labor is good for capitalists, and if they can keep a large reserve labor pool (without a revolution) so be it. Humanitarians on the other hand would like for everyone who wants to work to have the opportunity. From a purely pragmatic point of view an unregulated market wouldn't work - we need some rules for accounting, controlling money supply and enforcing contracts.

Many people for humanitarian reasons cannot accept free market unregulated capitalism where profit is the sole mark of success. Many people can't stand to see the consequences of even semi-free market regulated capitalism if it means widespread unemployment, poverty, hunger, class disparity and exploitation. That's a good thing. The hard part is finding a balance between government piecemeal intervention (no grand plans for utopia) and stifling controls that cause a decline in the standard of living.

If there's a lesson it's that when someone says they believe in "free markets" you know that probably is not true. As we have seen with privatization of profit and socialization of losses with AIG and so many others the term "free markets" is almost meaningless and at best is a relative term with the real question being "free" for who's benefit?