Republicans Destroy Free Markets
The New York Times said on November 9, 2011, discussing the latest Republican Presidential Debate held in Michigan, "...With that brief exchange, the candidates moved back to a wide-ranging economic conversation. They drew few distinctions with one another as they embraced Republican orthodoxy — less government intervention and more reliance on markets — while addressing bank bailouts, the nation’s tax structure and declining home values...."
I agree; we need markets free from excessive government interferance and freedom from being taken over by oligopoliies and monopolies. Regrettably, The Republicans ignore the need to protect the market from oligopolies and monopolies.
“Experience should teach us to be most on guard to protect liberty when the government’s purposes are beneficial. Men born to freedom are naturally alert to repel invasion of liberty by evil-minded rulers. The greater dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.” Justice Louis Brandeis 1928
Today our focus seems to be only on the tyranny of government when it comes to free markets. We need to find the right balance. Often, when we review our present status, we forget the past. Yes, we need to control the federal debt; however, In the last 10-years, we were fighting two wars, cutting taxes to the super wealthy and borrowing to the hilt against our homes to consume. We are in a mess and we put ourselves there. I voted for George W. Bush and I remember him standing at the 911 disaster and boldly saying we should continue consuming while we prepare to fight the enemy. I could not believe someone with conservative principles was saying this; so much for the conservative principle of living within our means. I remember my Mom saying that during World War II she painted her legs because the military needed all the silk they could get for parachutes. In contrast, during this war we were encouraged to keep going to Cold Stone for some very expensive ice cream.
Some conservatives will argue for the need and appropriateness of the Bush tax cuts. They will make the claim that these tax cuts stimulated investment that resulted in the boom years between 2000 and 2007. Hindsight tells us that the housing bubble, financed by the sub prime mortgage fiasco, fueled these unsustainable years of “prosperity”. We borrowed from our future and it was very costly. The result is housing prices collapsing nearly 35% with the highest foreclosure rates in history and the economy in a near depression.
A private sector without umpires and controlled by oligopolies got us into this mess with sub prime lending. The umpire, the government, was bought with campaign contributions from oligopolies.
The federal budget was in balance at the turn of the century and if tax cuts were appropriate, we needed to address cutting the federal deficit at the same time. Instead, we conservatives chose to close our eyes to this problem. When we decided to cut revenues, we should have also cut expenses. We chose not to face that issue.
We averted a depression, thanks to both the Bush and Obama administration; however, it was not without cost. Believing that we were near a depression puts a different perspective on where we were and why we are here now. We did not over stimulate; we clearly avoided a depression. It takes time and money to come back from hell. The difference between this depression and the last one in the thirties is this time we did not wait for a total meltdown before taking action.
Every conservative I know complains about over regulation of our markets by the government. I agree. The market surely would operate more efficiently if we eliminated or cut back many existing regulations. As a fellow conservative, you agree with me on this.
However, private market conservatives never mention having any concern for other factors destroying free markets. Many industries are losing freedom because a few very large corporations are choking off competition and not allowing the market to operate efficiently. Why do most free market conservatives fail to talk about this issue?
‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices.’ (Adam Smith, The Wealth of Nations, 1776).
Adam Smith, the author of the concept of capitalism, recognized that in order for industries to remain free, government must protect it from the conspiracy he mentions in the above quote. In order for markets to be truly free there must be a sufficient number of producers so that not one producer, or a small number of producers, can control the market. This is where the greatest threat to free markets lie in our modern society.
What does the American auto industry, the health care industry, wall street firms and the banking industry all have in common; other than they were all on the brink of failure?
These are industries where the production side of the industry is no longer a free market with many producers competing head-to head to earn the business of consumers, or customers, of the industry. Instead each of these industries are controlled by a relatively small number of very large corporations that have transformed these markets into oligopolies.
These oligopolies not only result in higher prices to the consumer. They result in less innovation, a wider disparity in income distribution, egregious salaries to executives and board members of these oligopolies, lower competitiveness by U.S. companies in world-wide markets and consolidation of political power. Where are the free market conservatives? I do not see them clamoring about this issue with the same fervor they complain about over regulation of the private sector.
Adam Smith when he discussed “rational self interest” and competitive markets in his book Wealth of Nations, envisioned many consumers buying goods and services from many producers with everyone looking out for their self-interest. By keeping markets “free”, producers pursue their rational self-interest and this best meets the needs of the consumers and the citizens of our country, who are also looking out for their self-interest. Under this system, what is in the producers self interest is to provide the best product possible to the consumer, while striving to be a low cost producer for their niche.
In today’s market, the major goal of oligopolies is to pursue their self-interest of keeping the oligopoly alive. This goal is not in congruence with the citizens of this country. Why are we not demanding the enforcement of anti-trust laws? This country seems to be transforming into an Oligarch from a Republic and the defenders of free markets are doing nothing about it.
The quote below is from the book Capitalism and Freedom written by Milton and Rose Friedman. Dr. Friedman is the economist quoted most often when conservatives are praising free markets and capitalism.
“…But we cannot rely on custom or conscious alone to interpret and enforce the rules; we need an umpire. These then are the basic role of government in a free society; to provide a means where we can modify rules, to mediate differences among us on the meaning of rules, and to enforce compliance with the rules on the part of those few who otherwise would not play the game.”
We free market conservatives are always complaining about government creating excessive regulations that hold back the productivity of free markets. Why is it we never come down on government for failing as the umpire for free markets? We would never dream of not having referees at a NFL football game; and yet we fail to speak out when the government fails to do its job as the referee of free markets.
Personally, I have concluded that our “conservative” politicians ignore private tyranny because they enjoy the large campaign bribes, I meant contributions, provided to them by these oligopolies. What is the excuse for the rest of us? Why do we allow it and not speak up about the injustice?
I love capitalism and free markets. Let us make sure we keep them for the sake of our children. It will take courage to do this. If we don’t; this is the forecasts.
“Just as the cataclysm of the Second World War revealed the fundamental shift ……. In world power from Great Brittan to the USA …. So to has the financial crisis of 2008 exposed another world upheaval….a new transference of economic power from the west to the east…..” Dambisa Moyo, How The West Was Lost
This is the opinion of one economist, however it is not too late. Free markets made our nation prosperous and free markets will be the engine that restores prosperity. Our problem is free markets are being destroyed. Republicans need to take a stance of protecting free markets from both government and oligopolies. Our countries future is in the balance.
The question is whether the free market conservative movement is so heavily financed by these oligopolies that we will not truly fight for free markets; but rather for free wheeling, un umpired, oligopolies.
I chanced upon your blog while reading your comment on NYTimes (on Egan's article). I can't believe how much I agree with much of what you have to say!ReplyDelete
I will be following your blog with a lot of interest, and will hopefully be able to contribute through comments/critiques.
I think the term you are looking for is 'Fair Market' not 'Free Market'.ReplyDelete
I agree that interference by the government has created the problems that we currently have. I agree that the government should act as the umpire to insure that markets are open to everyone. That is a 'Fair' market, not a free one. A free market is where those with large amounts of cash are 'free' to bribe congress to make rules that favor them. A fair market is where congress cannot be bought and makes rules that restrain those who will try to crowd others out. A 'free' market' is where those who have a monopoly on a resource (water, as an example) that is needed by many others can strangle the market (among other things). A free market is where a business can choose to pollute the resources of others so that they are unable to participate in the market. A fair market does not allow one to have more access than the rest.
Two solutions to the problem are all we need.
Enforce anti-trust laws and overturn Citizens United. Both of these encourage the worst of the abuse in our markets.