The Myth Of The Free Market Outside Of Government

The libertarian movement and portions of the conservative movement have a highly successful con going. They appeal to the common desire for freedom and translate this into a bogus economic philosophy which pretends that markets are a force outside of the rest of society. They then argue that government regulation of the economy is an intrusion on freedom, and that any government interference in them will do great economic  harm. Libertarians accept this without question, while naively denying that libertarianism is more like a fundamentalist religion than a serious political or economic theory. This blind faith works well for its major proponents, such as the Koch brothers who fight any regulation on such quasi-religious grounds while quietly taking advantage of government to amass their fortunes.

In discussion of this subject, I have often pointed out that markets are creations of people, and that regulations are necessary for them to function. Robert Reich addressed this topic today:

One of the most deceptive ideas continuously sounded by the Right (and its fathomless think tanks and media outlets) is that the “free market” is natural and inevitable, existing outside and beyond government. So whatever inequality or insecurity it generates is beyond our control. And whatever ways we might seek to reduce inequality or insecurity — to make the economy work for us — are unwarranted constraints on the market’s freedom, and will inevitably go wrong.

By this view, if some people aren’t paid enough to live on, the market has determined they aren’t worth enough. If others rake in billions, they must be worth it. If millions of Americans remain unemployed or their paychecks are shrinking or they work two or three part-time jobs with no idea what they’ll earn next month or next week, that’s too bad; it’s just the outcome of the market.

According to this logic, government shouldn’t intrude through minimum wages, high taxes on top earners, public spending to get people back to work, regulations on business, or anything else, because the “free market” knows best.

In reality, the “free market” is a bunch of rules about (1) what can be owned and traded (the genome? slaves? nuclear materials? babies? votes?); (2) on what terms (equal access to the internet? the right to organize unions? corporate monopolies? the length of patent protections?); (3) under what conditions (poisonous drugs? unsafe foods? deceptive Ponzi schemes? uninsured derivatives? dangerous workplaces?) (4) what’s private and what’s public (police? roads? clean air and clean water? healthcare? good schools? parks and playgrounds?); (5) how to pay for what (taxes, user fees, individual pricing?). And so on.

These rules don’t exist in nature; they are human creations. Governments don’t “intrude” on free markets; governments organize and maintain them. Markets aren’t “free” of rules; the rules define them.

Reich went on to further discuss the types and goal of rules which might be made to regulate markets, and finally who makes the rules:

…the rules are being made mainly by those with the power and resources to buy the politicians, regulatory heads, and even the courts (and the lawyers who appear before them). As income and wealth have concentrated at the top, so has political clout. And the most important clout is determining the rules of the game.

Not incidentally, these are the same people who want you and most others to believe in the fiction of an immutable “free market.”

If we want to reduce the savage inequalities and insecurities that are now undermining our economy and democracy, we shouldn’t be deterred by the myth of the “free market.” We can make the economy work for us, rather than for only a few at the top. But in order to change the rules, we must exert the power that is supposed to be ours.

I certainly would prefer a situation where regulatory burdens are diminished, especially on small businesses which have more difficulty in dealing with this, and there are undoubtedly a number of bad economic regulations which should be repealed. That said, there is a relationship between regulations on the economy and freedom, but libertarians and conservatives get it wrong. In a free society, economic regulations should be developed by a democratic government, not by an oligarchy as promoted by conservative policies.

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