On Free Market Economics: History, Morality and Background

On Free Market Economics: History, Morality and Background May 9, 2018

Buckle up; we’re in for a long ride over this series, for those who have not yet read it.

Free market economics seems to be the cornerstone of both right-wing and libertarian political ideology, broadly espousing that the companies and corporations and consumers of the world arbitrate supply, price and, in some way it is hoped, moral dimensions of product manufacture and consumption. In this article, I would like to dispel some of the myths perpetuated by libertarians and free marketeers, whilst rebutting some points made against me in a discussion on this topic elsewhere on the web (in part 2).

Before I do so, let us find a working definition of free market economics.

A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.

In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability.

In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency…

In simple terms, a free market is a summary term for an array of exchanges that take place in society. Each exchange is a voluntary agreement between two parties who trade in the form of goods and services…. Just like supply-side economics, free market is a term used to describe a political or ideological viewpoint on policy and is not a field within economics.

Essentially, it is a move towards small government, no taxes or small taxes and regulations such that the companies in some manner self-regulate.

The Problems With Defining It

The first problem we come across is the definition of the term. This is because different people have different ideas of what “free” in the free market refers to, as well, indeed, as the “market” part! What is forming the foundations to this issue is the good old Sorites Paradox, my ubiquitous philosophical friend. Or enemy.

So, what is this Sorites Paradox? Well, it is also known as the theory of the beard/moustache/sand dune in that it represents problems with digitally labelling things which sit along a continuum. If I were to add one grain of sand to another and repeat this ad infinitum, when would the pile become a sand dune? Likewise, in removing them, at what point would it stop being so? Just removing one grain would never leave you thinking “now that is no longer a dune” to the point that you end up with only one grain, and still the label of dune. This is often seen in terms of labels applied to time. There are technically no such things as species (the species problem) as each branch of organism changes minutia by minutia, slowly over time, such that at no particular point can you say that the new baby animal becomes a new species where the parents belong to the old species. Again for voting age. Again for any number of things.

The idea of “free”, then, becomes an abstract label applied to a continuum of freedoms, and a number of different fields (supply/demand of products, stock markets, share trading, international trade etc). One person’s “free” is another’s “regulated”.

As economist Ha-Joon Chang writes in 23 Things They Don’t Tell You About Capitalism:

The free market doesn’t exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How ‘free’ a market is cannot be objectively defined. It is a political definition. The usual claim by free-market economists that they are trying to defend the market from politically motivated interference by the government is false. Government is always involved and those free-marketeers are as politically motivated as anyone. Overcoming the myth that there is such a thing as an objectively defined ‘free market’ is the first step towards understanding capitalism.

This understanding that market objectivity is an illusion, as Chang states, is the first step to understanding capitalism.

All that we end up arguing is how far along the continua we should place our markers for where we should have our economies.

And there it is. The word should. Those who know me well will know the next phrase: as soon as we have a should or an ought we have a question of morality. The argument now has a moral dimension.

And economists and politicians fail to ever take on the next step. They argue, without reservation, and with no thought to the idea that they have built a castle in the air, that free market economics is good. It is the best way to set up countries, economies and trade networks. But to have any moral ought, you need to have the first part of the equation. In logic and grammar, this is known as the protasis and the apodosis:

If I want my car to work properly (protasis)

then I should fill it up with oil (apodosis)

What such free marketeers do is one of two things: either they establish their apodosis in a vacuum, as a mere assertion (i.e., we should strive for a free market) or they claim a hidden or explicit protasis solely within the paradigm of growth and economics (i.e., we should strive for a free market because that is the best way to achieve economic growth). Both approaches are problematic. The first, because it does no work at all; the second, because it looks rather circular, or at least only deals with an economic goal as if that is the only, singularly important thing to humanity and all societies.

In order to set out that free market economics is what we should strive towards, you would actually need to set out a goal that constructs the protasis: if we want the world to look like this… then we need to do this…. However, this requires setting out a clear vision of the world in its entirety. This means saying, in terms of humanity, the environment and biodiversity, wellbeing, happiness, social cohesion, knowledge, human flourishing, etc. etc., what we want the world to exactly look like in any given time frame. Only then can you set out the full equation. But no economist seeks to do this. Economics is politics is philosophy. You can’t just do the first bit and then give up!

What prompted this series of posts is a ‘discussion’ I was having with a rabid libertarian on YouTube, whose claims I will expose later. He made many hugely insulting claims, and many erroneous or nonsensical ones:

Talk about being clueless, because Hong Kong is a free market. The term free market is not defined in black and white, it’s like a scale, it’s how free your market economy is, one which typically has strong business freedom where the market sets the prices of everything. That is Hong Kong and Chile.

I will look at the details to this in later posts, but you can see in that one comment that flat-out contradiction in what he says. This thing A is definitely B. But B is non-definable as it is a sliding scale, so nothing can be objectively defined as B. This beautifully exposes the definitional problem in his own words. Until he can sort out that problem there, pretty much every other point he ever makes about free market economics unravels.

The Moral Dimension

The is so much to say in this section, so bear with me.

One of the opening issues is that for free market economics to work properly and fairly, if such a thing can do such, the consumers need full knowledge of the products on offer. But this is impossible. If we all knew the ins and outs of the production of every good, we could make our consumer choices based on much greater ethical knowledge. Companies that are screwing over workers and needlessly polluting would come under the consumer microscope.

But the only way this could be achieved would be through regulation! As such, consumers have no real idea what goes on behind the scenes, and what the production of most of the products they buy entails. Therefore, before we even get off the ground here, the free market model is victim to being taken advantage of by unscrupulous companies (or, in fact, virtually every company in some way). Since consumers define the supply and demand of goods, then if they are disadvantaged in knowledge of that system and of those goods, we have a problem.

One big economic term to bring into play here is negative externality. A negative externality is a cost borne out in the production (and thus consumption) of a good which is external to the company and consumer producing and consuming. This cost is borne out by a third party. The most obvious ones are environmental. For example, an oil company may produces billions of barrels of oil, which gets used for any number of things. The extraction and consumption leads to pollution which contributes to global warming (and maybe biodiversity loss from oil seepage and deforestation), which in turn causes costs to other countries and societies in any number of other ways. This is then sorted out by the governments, paid for by the taxpayer. In other words, third-party taxpayers and individuals are subsidising the production and consumption of that oil by others.

It may also be health. Asthma costs healthcare systems (and lives) and is a silent, invisible problem. We know much of it comes from poor air quality. We may have someone who is unable to work, costs the NHS (or similar) lots of money for their illness (or indeed, is merely a cost to themselves), and yet does not drive or consume the products causing the illness. And yet they and third-party taxpayers are paying to support the healthcare provision and congestion and air quality issues on the roads.

Or perhaps the idea that roads are being used predominantly by haulage companies which move products; and these roads are built and maintained by taxpayers, many of whom do not use the products being transported. The free market does not do negative externalities. Some of this revenue might come from corporate taxes, but there are some companies who pay equal such taxes but do not use the roads at all.

These are fairly simple and basic problems but there are so many, and I could talk about negative externalities for a long time. Suffice it to say that the free market struggles to be able to account for such costs at all. Corporations will seek to minimise costs and maximise profits, so offering out of the goodness of their hearts to pay for what they are costing in their production will simply never happen, without regulation.

In fact, if we look through history, we see that government regulation had to be enforced to end terrible working scenarios. Without regulation, of course, we could or would have these things, as a tiny example:

  • drugs being able to be sold
  • drugs being able to be sold to children as young as a day old
  • children working
  • no such thing as maternity leave
  • massive gender inequality
  • slave trade
  • unregulated and unqualified stocks and share market trading
  • unhindered pollution of the world
  • sweat shops
  • unsafe products

So on and so forth. The simple fact of the matter is that the free market is a collection of disparate entities and systems – it is a mechanism – and, as such, it has no jurisdiction in the world of morality. It cannot arbitrate moral disputes. It cannot stop moral misdemeanours from happening. The best it can hope for is that consumers take an ethical stance in their consumption, that they become ethical consumers. But this can take decades, centuries or may never happen. Slavery went on for how long before the government had to step in? The US went to civil war over it! What chance would a free market, un-regulated set of corporations have in sorting it out? How much pain would have to be sustained by the world or consumers until they consumed their way to an ethical equilibrium?

Free marketeers in Britain in the Victorian period, such as coal mine proprietors, argued for the maintenance of child labour, that anyone of any age could work to provide for low cost, low skilled workforce which kept the product cheap, since that was the wish of the consumer. It took rafts of government regulation over many decades to bring an end to child labour, which then (through further regulation) allowed children to get an education, and improve the general workforce for greater economic gain!

These regulations which prop up our economies are effectively invisible wires of regulation which allow the free market or economies to operate soundly.

Back to Chang:

Thus seen, the ‘freedom’ of a market is, like beauty, in the eyes of the beholder. If you believe that the right of children not to have to work is more important than the right of factory owners to be able to hire whoever they find most profitable, you will not see a ban on child labour as an infringement on the freedom of the labour market. If you believe the opposite, you will see an ‘unfree’ market, shackled by a misguided government regulation.

We don’t have to go back two centuries to see regulations we take for granted (and accept as the ‘ambient noise’ within the free market) that were seriously challenged as undermining the free market, when first introduced. When environmental regulations (e.g., regulations on car and factory emissions) appeared a few decades ago, they were opposed by many as serious infringements on our freedom to choose. Their opponents asked: if people want to drive in more polluting cars or if factories find more polluting production methods more profitable, why should the government prevent them from making such choices? Today, most people accept these regulations as ‘natural’. They believe that actions that harm others, however unintentionally (such as pollution), need to be restricted. They also understand that it is sensible to make careful use of our energy resources, when many of them are non-renewable. They may believe that reducing human impact on climate change makes sense too…

We see a regulation when we don’t endorse the moral values behind it. The nineteenth-century high-tariff restriction on free trade by the US federal government outraged slave-owners, who at the same time saw nothing wrong with trading people in a free market. To those who believed that people can be owned, banning trade in slaves was objectionable in the same way as restricting trade in manufactured goods. Korean shopkeepers of the 1980s would probably have thought the requirement for ‘unconditional return’ to be an unfairly burdensome government regulation restricting market freedom.

This clash of values also lies behind the contemporary debate on free trade vs. fair trade. Many Americans believe that China is engaged in international trade that may be free but is not fair. In their view, by paying workers unacceptably low wages and making them work in inhumane conditions, China competes unfairly. The Chinese, in turn, can riposte that it is unacceptable that rich countries, while advocating free trade, try to impose artificial barriers to China’s exports by attempting to restrict the import of ‘sweatshop’ products. They find it unjust to be prevented from exploiting the only resource they have in greatest abundance – cheap labour.

Of course, the difficulty here is that there is no objective way to define ‘unacceptably low wages’ or ‘inhumane working conditions’. With the huge international gaps that exist in the level of economic development and living standards, it is natural that what is a starvation wage in the US is a handsome wage in China (the average being 10 per cent that of the US) and a fortune in India (the average being 2 per cent that of the US). Indeed, most fair-trade-minded Americans would not have bought things made by their own grandfathers, who worked extremely long hours under inhumane conditions. Until the beginning of the twenti- eth century, the average work week in the US was around sixty hours. At the time (in 1905, to be more precise), it was a country in which the Supreme Court declared unconstitutional a New York state law limiting the working days of bakers to ten hours, on the grounds that it ‘deprived the baker of the liberty of working as long as he wished’.

Thus seen, the debate about fair trade is essentially about moral values and political decisions, and not economics in the usual sense. Even though it is about an economic issue, it is not something economists with their technical tool kits are particularly well equipped to rule on.

All this does not mean that we need to take a relativist position and fail to criticize anyone because anything goes. We can (and I do) have a view on the acceptability of prevailing labour standards in China (or any other country, for that matter) and try to do something about it, without believing that those who have a different view are wrong in some absolute sense. Even though China cannot afford American wages or Swedish working conditions, it certainly can improve the wages and the working conditions of its workers. Indeed, many Chinese don’t accept the prevailing conditions and demand tougher regulations. But economic theory (at least free-market economics) cannot tell us what the ‘right’ wages and working conditions should be in China.

Thus to sort out any moral dilemmas, any moral problems, within the confines of economics, one has to get political, one has to evoke some kind of government regulation.

Do As I Say, Not As I Have Done

Free marketeers would have you believe that the free market has been responsible for where we are now. By we, I mean the position of luxury and economic superiority enjoyed by, say, the UK and the US. However, the facts of history would present a very different case. The periods of the highest economic growth for these two countries, for example, actually happened when they harboured the most protectionist governments. Protectionism is where governments have regulations and taxes which protect and favour home grown businesses and trade at the expense of foreign imports. There is some kind of hypocrisy when free market, capitalist economists and think-tanks are telling developing nations that they must de-regulate and allow the free market to promote growth and wealth generation in their economies (often meaning large multi-nationals or companies, from whence those think-tanks came, benefit).

As Chang notes:

When reminded of the protectionist past of the US, free-market economists usually retort that the country succeeded despite, rather than because of, protectionism. They say that the country was destined to grow fast anyway, because it had been exceptionally well endowed with natural resources and received a lot of highly motivated and hard-working immigrants. It is also said that the country’s large internal market somewhat mitigated the negative effects of protectionism, by allowing a degree of competition among domestic firms.

But the problem with this response is that, dramatic as it may be, the US is not the only country that has succeeded with policies that go against the free-market doctrine. In fact, as I shall elaborate below, most of today’s rich countries have succeeded with such policies.2 And, when they are countries with very different conditions, it is not possible to say that they all shared some special conditions that cancelled out the negative impacts of protectionism and other ‘wrong’ policies. The US may have benefited from a large domestic market, but then how about tiny Finland or Denmark? If you think the US benefited from abundance of natural resources, how do you explain the success of countries such as Korea and Switzerland that had virtually no natural resources to speak of? If immigration was a positive factor for the US, how about all those other countries – from Germany to Taiwan – that lost some of their best people to the US and other New World countries? The ‘special conditions’ argument simply does not work.

Britain, the country which many people think invented free trade, built its prosperity on the basis of policies similar to those that Hamilton promoted. This was not a coincidence. Although Hamilton was the first person to theorize the ‘infant industry’ argument, many of his policies were copied from Robert Walpole, the so-called first British Prime Minister, who ran the country between 1721 and 1742.

During the mid eighteenth century, Britain moved into the woollen manufacturing industry, the high-tech industry of the time that had been dominated by the Low Countries (what are Belgium and the Netherlands today), with the help of tariff protection, subsidies, and other supports that Walpole and his successors provided to the domestic woollen manufacturers. The industry soon provided Britain’s main source of export earnings, which enabled the country to import the food and raw materials that it needed to launch the Industrial Revolution in the late eighteenth and the early nineteenth centuries. Britain adopted free trade only in the 1860s, when its industrial dominance was absolute. In the same way in which the US was the most protectionist country in the world during most of its phase of ascendancy (from the 1830s to the 1940s), Britain was one of the world’s most protectionist countries during much of its own economic rise (from the 1720s to the 1850s).

Virtually all of today’s rich countries used protectionism and subsidies to promote their infant industries. Many of them (especially Japan, Finland and Korea) also severely restricted foreign investment. Between the 1930s and the 1980s, Finland used to classify all enterprises with more than 20 per cent foreign ownership officially as ‘dangerous enterprises’. Several of them (especially France, Austria, Finland, Singapore and Taiwan) used state-owned enterprises to promote key industries. Singapore, which is famous for its free-trade policies and welcoming attitudes towards foreign investors, produces over 20 per cent of its output through state-owned enterprises, when the international average is around 10 per cent. Nor did today’s rich countries protect foreigners’ intellectual property rights very well, if at all – in many of them it was legal to patent someone else’s invention as long as that someone else was a foreigner.

There were exceptions of course. The Netherlands, Switzerland (until the First World War) and Hong Kong used little protectionism, but even these countries did not follow today’s orthodox doctrines. Arguing that patents are artificial monopolies that go against the principle of free trade (a point which is strangely lost on most of today’s free-trade economists), the Netherlands and Switzerland refused to protect patents until the early twentieth century. Even though it did not do it on such principled grounds, Hong Kong was until recently even more notorious for its violation of intellectual property rights than the former countries. I bet you know someone – or at least have a friend who knows someone – who has bought pirated computer software, a fake Rolex watch or an ‘unofficial’ Calvin & Hobbes T-shirt from Hong Kong.

Most readers may find my historical account counter-intuitive. Having been repeatedly told that free-market policies are the best for economic development, they would find it mysterious how most of today’s countries could use all those supposedly bad policies – such as protectionism, subsidies, regulation and state ownership of industry – and still become rich.

The answer lies in the fact that those bad policies were in fact good policies, given the stage of economic development in which those countries were at the time, for a number of reasons. First is Hamilton’s infant industry argument, which I explain in greater detail in the chapter ‘My six-year-old son should get a job’ in my earlier book Bad Samaritans. For the same reason why we send our children to school rather than making them compete with adults in the labour market, developing countries need to protect and nurture their producers before they acquire the capabilities to compete in the world market unassisted. Second, in the earlier stages of development, markets do not function very well for various reasons – poor transport, poor flow of information, the small size of the market that makes manipulation by big actors easier, and so on. This means that the government needs to regulate the market more actively and sometimes even deliberately create some markets. Third, in those stages, the government needs to do many things itself through state-owned enterprises because there are simply not enough capable private sector firms that can take up large-scale, high-risk projects (see Thing 12).

Despite their own history, the rich countries make developing countries open their borders and expose their economies to the full forces of global competition, using the conditions attached to their bilateral foreign aid and to the loans from international financial institutions that they control (such as the IMF and the World Bank) as well as the ideological influence that they exercise through intellectual dominance. In promoting policies that they did not use when they were developing countries themselves, they are saying to the developing countries, ‘Do as I say, not as I did.’

In fact, the founding fathers upon which the great capitalist country of America was built, and whom sit privileged upon its banknotes, were themselves rather regulatory: Franklin, Hamilton, Lincoln, Grant, Jefferson and Jackson. They used protectionist policies to promote US trade and economy in order that it could flourish.

That Was History, But What About Now?

History has told us that economies which are thriving now did so not on account of free market economics, but on account of government regulation and protectionism. But that was then, what about current economic scenarios? Well, it is not so obvious as free market economics taking over as growth promoting successor to government-oriented regulated economics and ringing about success. As Chang continues:

When the historical hypocrisy of the rich countries is pointed out, some defenders of the free market come back and say: ‘Well, protectionism and other interventionist policies may have worked in nineteenth-century America or mid twentieth-century Japan, but haven’t the developing countries monumentally screwed up when they tried such policies in the 1960s and 70s?’ What may have worked in the past, they say, is not necessarily going to work today.

The truth is that developing countries did not do badly at all during the ‘bad old days’ of protectionism and state intervention in the 1960s and 70s. In fact, their economic growth performance during the period was far superior to that achieved since the 1980s under greater opening and deregulation.

Since the 1980s, in addition to rising inequality (which was to be expected from the pro-rich nature of the reforms – see Thing 13), most developing countries have experienced a significant deceleration in economic growth. Per capita income growth in the developing world fell from 3 per cent per year in the 1960s and 70s to 1.7 per cent during the 1980–2000 period, when there was the greatest number of free-market reforms. During the 2000s, there was a pick-up in the growth of the developing world, bringing the growth rate up to 2.6 per cent for the 1980–2009 period, but this was largely due to the rapid growth of China and India – two giants that, while liberalizing, did not embrace neo-liberal policies.

Growth performances in regions that have faithfully followed the neo-liberal recipe – Latin America and Sub-Saharan Africa – have been much inferior to what they had in the ‘bad old days’. In the 1960s and 70s, Latin America grew at 3.1 per cent in per capita terms. Between 1980 and 2009, it grew at a rate just above one-third that – 1.1 per cent. And even that rate was partly due to the rapid growth of countries in the region that had explicitly rejected neo-liberal policies sometime earlier in the 2000s – Argentina, Ecuador, Uruguay and Venezuela. Sub-Saharan Africa grew at 1.6 per cent in per capita terms during the ‘bad old days’, but its growth rate was only 0.2 per cent between 1980 and 2009 (see Thing 11).

To sum up, the free-trade, free-market policies are policies that have rarely, if ever, worked. Most of the rich countries did not use such policies when they were developing countries themselves, while these policies have slowed down growth and increased income inequality in the developing countries in the last three decades. Few countries have become rich through free-trade, free-market policies and few ever will.

The free market also fails to solve the problem of income inequality, as I have shown elsewhere. For example, income inequality between blacks and whites is greater in the US now than in apartheid South Africa.

This income inequality is not improving under deregulated economies, as the Atlantic reports in “Income Inequality Around the World Is a Failure of Capitalism”:

A new OECD report concludes that income inequality is rising in most developed countries. Here’s the OECD’s graph of Gini coefficients by country. Gini coefficients can theoretically range from 0.0 to 1.0, with higher values indicating greater inequality.

Gini coefficients OECD.bmp

The relative rankings of inequality haven’t changed much over two decades, with the United States leading the trend. But inequality is rising in most developed countries, literally upending the Kuznets curve – one of market fundamentalists’ most cherished ideas.

The Kuznets Curve, named after Nobel Laureate Simon Kuznets, predicts that as nations become wealthier, inequality initially rises and then declines, like a single squeeze of an accordion. Economists hypothesized inequality would rise as workers transitioned from low-paying agricultural work to higher-pay industrial work, but that the lower classes would catch up once the industrial revolution completed. Kuznets himself thought that as a country grew wealthier, it would also implement more redistributive policy. Kuznets, who died in 1985, was more or less right, but only for his lifetime.

Recently, in the last few decades, income inequality has been on the rise again. The Atlantic continues:

Though the report never puts it this way, one interpretation of the data is that inequality naturally grows from unfettered capitalism. Marxists won’t be surprised, but the report should be disturbing for centrists who believe both in free markets and social equality. If free-market capitalism works so well for every income level, why have so many people seen income pass them by with capitalism working more efficiently than ever before?

One possible problem is the moral foundation that underlies capitalism: meritocracy. Our faith in meritocracy is deeply held and hardly questioned. After all, rewarding people according to merit is superior to corruption or nepotism.

But a system superior to corruption and nepotism is not necessarily the best possible system. What we consider “merit” is the result of education, and greater education requires greater income. Meritocracy, therefore, is a kind a social divider. As I wrote earlier, the idea of the “self-made person” is at odds with its moral connotations.

Until we come up with a better system, the best solution is in the OECD’s conclusion: “Policies that promote the up-skilling of the workforce are therefore key factors to reverse the trend to further growing inequality.” The only way to achieve fairness in a meritocracy is to provide more equal opportunities for everyone to attain merit.

In a world where China, Russia, India, Saudi Arabia and other such countries wield enormous power, it seems rather short-sighted to claim that free market economics is the holy grail. These are state-centric economies which operate on versions of command or planned economics. In a TIME article admitting that free market economics has fallen on “hard times”, the author states:

In emerging markets, however, a significant state hand in economic development is far less controversial. Many of today’s up-and-coming economies either have had their state-led development period, or are still very much in the midst of that experiment – most of all, China. And it has not gone unnoticed among some analysts in the West that many of these same emerging markets have also generally maintained their growth despite the devastating global downturn. So as the market economies of the West falter, some have asked if “state capitalism,” that mix of market forces and state control, can produce better economic results than the laissez faire economic models favored in the U.S.

whilst also admitting that state capitalism isn’t necessarily the solution. In simple terms, though, we cannot hang on to principle that free market economics is the be-all and end-all.

What The Government Can Do

Whilst not being an apologetic for governmental interference, it is important to note that capitalism appears to need government intervention to oil the cogs. Here is a list of things that governments can and do do, and which the free market with its lack of regulation, cannot do (prepared by Douglas J. Amy, Professor of Politics at Mount Holyoke College – read the link for further explanation of each):

  • Limited Liability Laws
  • Property Rights
  • Law and Order
  • Bankruptcy Protection
  • A Stable Money Supply
  • Patents and Copyrights
  • Banking Regulation and Insurance
  • Corporate Charters
  • Commercial Transaction Laws
  • International Trade Law
  • Enforcement of Laws

And here is what free markets struggle with:

  • Economic Bubbles
  • Environmental Pollution
  • Exploitation of Workers
  • Unsafe and Ineffective Products
  • Marketing Bads
  • Resource Depletion
  • Corporate Fraud and Theft
  • Neglect of Public Goods
  • Neglect of Social and Public Investments
  • Hidden Information
  • Inability to Plan
  • Boom and Bust Cycles
  • Lack of Markets
  • Monopoly
  • Ignoring Needs
  • Devaluing the Future
  • Poverty and Economic Inequality
  • Lack of Opportunity and Economic Mobility

Each of these requires a post of its own, so I will not expand. But it should be obvious that a belief in an ideologically free world, free of taxation, free of government intervention, free of intervention for moral goods is an insane world and one in which I would certainly not want to live. I am a centrist who believes that capitalism is the best mechanism we presently have for continued growth, but that it has problems (not least this idea of sustained growth ad infinitum). Living in the communist world, or the libertarian world is a reductio ad absurdum, and advocates of both are themselves absurd.

In my next post, I will look at further arguments proposed by libertarians, including examples of so-called successful free market economies (which are not, indeed, free market economies!).

[I am re-running this series as, since writing the posts, I have a host of new readers and this subject has popped up recently in the context of political libertarianism.]

NOTES

Chang, Ha-Joon, 23 Things They Don’t Tell You About Capitalism, Penguin (2011) – various pages quoted

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