Free Market Capitalism
I review the Laissez-Faire Capitalist myth, its pernicious effect on modern discourse, bash Adam Smith and explain why being pro-wolf in Little Red Riding Hood isn't ideal.
We've all heard of free-market capitalism, right? It animates business leaders, politicians, pundits and essayists alike. It is the bête noire of socialists and a foundation of Libertarianism. So what is it? Where did it come from? Who practices it? How does it work, and is it any good?
In this Sneer Review I shall cover the history of free markets, discuss the good and bad of a market system and examine who benefits from laissez-faire capitalism. The purpose of this essay is solely to review FREE MARKET CAPITALISM, nothing more. As Ben Shapiro says, “Facts don’t care about your feelings”, so buckle up and let’s dive in.
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What is a Market
A market is a physical or notional edifice where goods and services are traded. Markets are more than a single trade between two parties is merely a trade- a market is a system that allows for more sophistication within a trade, such as choice of item, choice of trader, shopping around for the best price and/or exchange value and so on. Standard economic dogma posits that markets are efficient, provide maximum choice of goods and services, and, due to flexibility in meeting demand, can more fairly allow prosperity and wealth accumulation whilst stimulating innovation and reducing prices. However, the veracity of these claims is often subjective, as we shall explore in this essay. Terms such as efficiency within economics are rather malleable, and claims such as the provision of maximum choice are hard to test and only seem to bear fruit when measured against economic basket cases such as the 1980s Soviet Union or pre-industrial agrarian economies of the past.
The formation of a physical or notional structure in which trade is only facilitated by the market exchange is also not fully supported by reference to anthropological research1. Whilst the propensity for trade is undeniably human, using a market to facilitate this trade is almost always a function of some form of governance.
“Our freedom of choice in a competitive society rests on the
fact that, if one person refuses to satisfy our wishes, we can turn to another.”
Friedrich Hayek, The Road to Serfdom
What is a Free Market
Take the market system described above and ensure the following:
Prices are only determined between private buyers and sellers
Government intervention/regulations in trade are bad and should be removed or limited as the market should self-regulate
Competition allows for maximal freedom of choice2
Resources are privately owned, allowing the owners to freely engage in the trade of those resources
Participation in the market is unrestricted
Does any of this enhance a market system? Is there an example of a free market from which to test this hypothesis? Can markets be entirely decoupled from governments? Can trade within a market system truly be…free?
Perhaps we should start by looking at where markets come from and how free they have been.
Once Upon a Time…
In the beginning, there were no markets or regulations, and folk did what they wanted. It was a utopia of sorts, one without caramel lattes, aeroplanes, Bluetooth headphones and Japanese toilets that clean your bum. So when did the first market appear? And why?
There is no clear consensus on the origination of markets or even whether those of the past viewed them as we do today. There is much evidence that what we would now term a market grew from the requirement to trade agricultural surplus—waste not want not, and all that. Adam Smith did much to muddy the waters here. In his seminal text, The Wealth of Nations, he reduces human prosperity and behaviour to something as simple as reciprical trade. It is from The Wealth of Nations the famous metaphor about the invisible hand3 comes. This metaphor is based on two simple premises:
Human self-interest will naturally regulate trade.
Markets come from the division of labour.
Firstly, Smith makes a large, sweeping generalisation that humans are only self-interested and that self-interest manifests in the same way across a diverse group of humans. We need only examine our experiences of why we do things or how others have acted to know this assertion is false. A fireman can leap into a burning building to save a child from the flames because he is paid to; he feels a sense of duty and to look cool; all can be true at the same time. A parent will forgo luxuries to provide their children with necessities out of love, not because it enhances the parent's reputation, however much this may also be true. This is not to say self-interest has no place in the grand scheme of things, but rather, it is wrong to assume that it is the sole motivation for human action, especially one as complex as trade.
The human propensity to trade is one trait that distinguishes us from any other organism on this planet. However, we must be careful not to view all trade through the lens of our own culture or modernity. We live in a culture based upon ideas of private property and contracts as defined in Roman law4. Other civilisations had different views of ownership, such as the Aztecs' Calpulli5 land management system, which was egalitarian in nature and centred around a clan system. Using this example from Mesoamerica, we can challenge Smith’s second premise regarding markets.
Whilst there was undoubtedly some division of labour in Aztec society (notably between men and women6), their markets grew from need, based upon the distribution of raw materials to manufacture goods such as tools. The merchants or Pochteca7 also served a secondary function as a means of information distribution. Smith’s myopia around markets can also be traced to his view of history. Smith proposed that barter existed before the invention of money8, a throwaway claim which has since been thoroughly disproven9. Markets, in this context then, are a feature of civilisation itself10.
“To be ignorant of what occurred before you were born is to remain always as a child”
Marcus Tullius Cicero
Regulate
The human propensity to trade necessitates a place to trade. In the most basic form, that place is a market, typical of medieval ones or their open-air relatives today. Though the trade may be one-to-one, the market is a system. With rules. These rules can be basic, ranging from NO STEALING all the way through to determining what size a stall can be, how much it costs to rent a space or what the permissible opening times are. Even if such a system is largely notional, such as banks, securities, stocks, etc, the system requires rules, or to put it another way, it needs to be regulated. One cannot successfully trade if one’s stall is blocked by that of another trader or if banks are allowed to charge 100% interest on every transaction one makes (i.e. theft). Not all regulations are good, however. If a government decides that everyone with a certain colour of skin is not allowed to sell things, then that would hardly be free, fair or even desirable. So, it seems that, on some level, we gotta regulate.
This is where we must return to Adam Smith bashing, only it is not entirely his fault this time. Smith wrote Wealth of Nations in the 18th century at a time when there were few factories and industry did not look like it does today with gangs of robots building fleets of cars in massive buildings or armies of skilled Chinese hands throwing together more disposable vapes than the entire planet’s lung capacity can handle. Smith called the period in which he lived the “Age of Oligarchy”11. In his book Free Market, Jacob Soll says of Smith, “It was a time of expanding empire and commerce, slavery, constitutional monarchy, elite parliamentarianism, and landowning oligarchy - all, it should be noted, that he embraced with enthusiasm”12.
Smith wrote, “In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so”13. As Smith wrote these words, The East India Trading Company (EIC) accounted for half of global trade14. Much of what Smith wrote regarding freedom of trade centres around his contempt for the EIC, who, under a royal charter, dominated British trade. Smith advocated freedom from “the danger of cabals or monopolies, which would appeal to businessmen wishing to fix and impose the highest prices”15, such as the EIC, which he would have liked the “oligarchs” running the government of his day to change.
The modern interpretation of Smith’s sentiment regarding the regulation of markets owes as much to a lack of historical context as it does to politically motivated, willful misunderstanding1617. Think tanks like the Cato Institute and The Heritage Foundation, funded by industrialists and other parties with clear motives for diluting government influence (and, therefore, the ability of buyers to influence suppliers), frequently distort Smith’s writing for their own ends18. After all, Adam Smith wrote, “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind”19, a sentiment rather at odds with the practices of the Koch Brothers or Joesph Coors, to whom many thinktanks owe their existence. Other economists have also sought to contort the works of Adam Smith to their own views, such as Milton Friedman, but we’ll get to him later.
An Invisible Hand Tipping the Scales
Smith believed in natural law20 and saw the state-licensed monopoly of the EIC as a corruption of said law.
“Such exclusive companies, therefore, are nuisances in every respect; always more or less inconvenient to the countries in which they are established, and destructive to those which have the misfortune to fall under their government”
-Adam Smith on the EIC, Wealth of Nations (Pg.641)
His mechanist view of the world positioned markets as natural and should function with the order of celestial bodies. However, this idea of self-regulation did not originate with Smith.
Like his contemporary David Hume, Smith was a keen student of the Roman politician Marcus Tullius Cicero21. Cicero posited that a market of exchange is based on an ethical exchange that's disinterested and on a search for the common good22. His view was that, provided the exchange was disinterested, markets would be self-sustaining. This, in turn, informed Smith’s notion of a self-regulating market, viewing those who funded his academic work, such as the Earl of Buccleuch23, as an enlightened and disinterested party, such as those Cicero idealised. Buccleuch was far from disinterested, however, since he not only was the governor of the Royal Bank of Scotland (1777-1812) but also profited greatly from land reforms24 similar to those that enabled the Highland Clearances, which by any measure was a radical market intervention. This example makes it clear that even in Smith’s time, the freedom from regulation afforded proto-capitalists was abused, and the market was not self-regulating but, rather, tilted frequently in favour of those with the largest buying power and greatest proximity to lawmakers. It should be noted that whilst the EIC operated under a royal charter, it was not regulated by the government until its collapse, whereby the British Government was obligated to operate the corporation until it expired in 187425. It can be argued that had the government or an external body tasked with protecting trade from being tipped in favour of the supply side, the excesses and price gouging of land-owning gentry and the EIC would not have made trade so inequitable.
Whilst Smith may have envisioned a Ciceronian ideal, operating with the grace and repeatability of celestial mechanics, the history of markets has not reflected this ideal. From the Dutch Tulip Bulb Bubble to the Dotcom Crash, The Great Depression and the fall of Roman trade, history shows that markets can frequently be unstable and prone to crashing. Far from operating like a planet’s orbit without interference from an asteroid or other giant astronomical body, markets typically fall with the whims of the largest or most various hands pulling at them. This tug-of-war, whether between supplier or buyer sides, labour or capital, is seldom symmetrical in force and typically, the most powerful often wins, to the detriment of all others in the market. In this, we see that the Ciceronian ideal upon which Smith builds is far from solid and can only retain structural rigidity when the full stochasticity of human behaviour is removed. Unfortunately, the market must no longer contain people for this line of thought to be true, and even if all that was left were rational actors acting in their own self interest, it would hardly be rational not to use any advantage one would hold in purchasing power or supply dominance to ensure prices were more favourable come the next trade. The Prisoner’s Dilemma rather puts paid to the theory an invisible hand will make everything in the market right; it’s typically a very visible hand that seeks to keep things off kilter.
Never Really Free
“Regulation and markets, in effect, grew up together”
-Karl Polanyi, The Great Transformation (Pg.71)
Babylonia was one of the earliest recorded examples of something resembling a market economy. King Hammurabi of Babylon (1810 BC - 1750 BC) recorded his laws (The Code of Hammurabi) on large stone tablets or Steles. The Code covers topics as diverse as murder, theft and contract law. Of the 282 laws26, many relate to finance and market rules. Here are a few examples:
No.7. If anyone buys from the son or the slave of another silver or gold, a male or female slave, an ox or a sheep, an ass or anything (without witnesses or a contract)... or if he agrees to take charge of stolen property, he is considered a thief and shall be put to death.
No108. If a woman wine seller/tavern-keeper (feminine) does not accept grain according to gross weight in payment of drink but takes money so that the price of the drink is less than that of the grain, she shall be convicted and thrown into the water.
It would be pure speculation to divine why Hammurabi saw fit to regulate Babylonian trade. However, it should be noted that the history of markets and trading cannot be separated from regulation; they are hand in glove. Indeed, it was implicit that unregulated trade could lead to bad outcomes. For all that Cicero championed his notion of disinterested trade leading a sustainable self-regulating market, the Romans still saw fit to regulate vital components within their market system27. In proto-markets such as those in Aztec Mesoamerica, the Pochteca (merchants) were subject to the trade laws of Capulli28.
In ancient Celtic cultures, such as Ireland in AD 600, trade was regulated by feudal lords. Extensive codes were written to ensure debtors' recompense, while the cost of commodities was fixed in line with the value assigned by the feudal lord. What marks Celtic laws on trade out is that even honour could be quantified. Every free person had their “honour price”. These prices, quantifications and how trade could be executed came from a king, lord or council; nothing was free from an all-pervasive regulatory framework29.
“The honour price of a king, for instance, was seven cumals, or seven slave girls - this was the standard honour price for any sacred being, the same as a bishop or master poet.”
-David Graeber, Debt: The First 5000 Years (Pg.173)
In the early dynastic period of Egypt, exchange was regulated by a weight system, with a uniform weight, defined by pharonic rulers and their proxies, in Debens. A Juridical Stela from the reign of Nebiryraw I30 defines prices of goods and exchange values of commodities and services within a market, for example “a slave girl priced four deben and one kite of silver was paid for with various goods: 6 bronze vessels, 10 deben of copper, 15 linen garments, a shroud, a blanket, and a pot of honey”31.
I shall not endlessly list every culture in history; suffice to say that no matter where one looks, one finds no evidence that free markets exist. Simply put, without a structure of governance divorced from both buyer and seller, no market can exist. The market itself is an extension of governance. Without a governing structure, a market is water without a cup from which buyers and sellers can drink. So, if free markets have never existed in the format championed by free market ideologues, why is the idea so potent?
“If you told a member of Parliament in seventeenth-century England that, as Milton Friedman said in 1970, the purpose of a corporation is to ‘make as much money as possible’, he would have been shocked”
William Magnusson, For Profit: a History of Corporations (Pg. 302)
Free Markets vs Market Freedoms
Freedom means so many things to so many people. My daughter may view freedom as deciding on her own when to go to bed and not having to go to school, whereas I view freedom as derived from what she can achieve with a stable and early bedtime and successful results from a completed education. Indeed Elon Musk sees freedom as nobody poking their nose in when he extracts $55bn from a company he didn’t create or even contribute significantly to32. Freedom from socialised healthcare payments is the tyranny of private health charges or the freedom for private insurers to charge what they will. As we can see, freedom is not universal nor desirable in all cases - freedom from life, after all, is death.
So, is a free market even a good thing? It depends on what freedoms we are talking about specifically. Freedom of entry into a market without prejudice based upon who or what you are? Absolutely, this is a noble aim. Freedom to take as much risk as you personally wish to without injuring anyone else? Sure, that seems okay so long as no one else or the market is impacted. What about the freedom to collapse the market? Or the freedom to buy all of it? Or the freedom to dominate it entirely?
The endeavour to allow freedoms within trade is admirable. But this has to be tempered with protections against systemic risks such as collapsing the financial system or externalities such as environmental damage. A market free from morality will not serve what Cicero called the “summum bonum” (highest or ultimate good)33. Even Hayek noted that “some provision for those threatened by the extremes of indigence and starvation due to circumstances beyond their control”34 had to be made. This contradiction in Hayek’s thinking that, in many cases, rebalancing and redressing the problems caused by free market-based capitalism is not something he adequately corrects for in his writing.
This is where Karl Polanyi’s insight comes to the fore. Polanyi noted in The Great Transformation that a double movement35 comes into play in any market-based economy. As things such as land, labour and money become commodified in the manner championed by Hayek, Polanyi’s double movement would snap into action; namely that society itself would react to this commodification by demanding measures such as laws, tariffs and regulations be brought in. How can one have a stable community if the very land upon which it rests is a tradable commodity, with the community itself having its say subordinated to the whims of a self-regulating market? If someone studies hard to become part of the labour market, plays by the rules and follows all guidance, and then the market dictates that their skill and investment in time is no longer valuable, how can it be expected they would not seek some form of justice? How can those within finance not express a desire for balance in a trade system in which buying parity skews all notions of fairness? Will these individuals not seek collective action to protect themselves from the vicissitudes of an unregulated trade system? People, therefore, have rights beyond just those attached to property. And no amount of belief that they should not cannot bring a truly free market into being.
This dynamic tension between capital, labour and land can only be regulated by a body that each of its constituent parts is made of: government. Now, this is not to say that all government is perfect and shouold be left alone, far from it. Many governments, notably those in Western countries, are entirely captured by large business and money interests (i.e. capital). The idea that removing the middle man and allowing wealthy interests, the “men of best character”, as Smith called them, to run things is just another shortcut to reaching the type of autocratic and decidedly un-free system under which peasants toiled during the Middle Ages in service to unaccountable tyrannies, often composed of what Smith referred to as “the men of best quality”.
To allow freedoms within a market, the regulations must protect the interests of those involved and not pitch hopelessly toward monied interests. The admirable requirement to allow equal representation in a market system requires that the powers of the state regulating it be used to ensure buyer or supply side dominance is not allowed to dictate terms to other users in the market. This can be achieved by the removal of monopoly, monopsony, price gouging, poor labour conditions, maximisation of rent-seeking, making dangerous products or the engagement in dangerous working practices whilst protecting the vulnerable and ensuring that poor regulation is not put in place to deprive those that work hard and play fair of a deserved profit. The balance each party in the market seeks is not a function of a divine whim manifest by an invisible hand but rather the hard work and agreement of all those involved in a fair and equitable manner. Capital has a right to expect a return, but not when that right impinges upon labour to seek fair recompense or at the expense of those in the market to be free from unfair regulation. Balance and good order, therefore, come when all those involved in trade can ensure the trade is not skewed in any one direction. This requires work, negotiation, vigilence and the ability of all, not just those in any one domain, to make free, fair and equal representations to a law not governed by an autocratic structure. If a government forms such a structure, then it is logical to reform it, not to remove or invalidate it, because without anything but recourse to divine or magical power, the weak suffer what they must as the strong do what they can, and tyranny abounds. Something perhaps that didn’t occur to Milton Friedman.
Don’t Forget Friedman
Remember the bold Milton I touched on briefly before? That bold narrative-twisting economist so beloved of Regan and Thatcher? Well, we cannot let this section on market freedoms drift off without a word on him.
“One of the great mistakes is to judge policies and programs by their intentions rather than their results.”
― Milton Friedman
Friedman spent much of his career championing the works of Friedrich Hayek36 and other notables of the Chicago School. Friedman won a Nobel Prize in 1976 for his work on consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilisation policy37. Today, much of his monetarist theory has been proven to be entirely wrong. This is chiefly because measuring how much money there is in an economy is extremely difficult, and secondly, there is no demonstrable link between money supply and prices38. Friedman’s belief was that “the markets do not fail but could only be failed”39. This is a manifestly ridiculous claim in 2024, but one that captured many imaginations as Stagflation reared its ugly head in the 1970s. Friedman turbocharged Smith’s Ciceronian invocation to divine or magic forces to balance the market and frequently evangelised that things would be ok if only the government stopped meddling in these natural processes. As I have demonstrated, however, some universal force does not pervade the affairs of humans trading. When self-interest is left to reign free, all those in the market dance to the tune of the loudest fiddle, typically the one played by those who can afford an orchestra. Friedman used his 1980 TV Show, Free to Choose, to extol the virtues of a market unfettered by regulation and dominated entirely by supply-side interests, thus eradicating any specious claims about competition. One could only imagine what Adam Smith’s reaction to this would have been, given that Friedman was effectively cheerleading for the type of endeavours the EIC was engaged in, ones that animated Smith sufficiently to write Wealth of Nations.
Friedman did more than Adam Smith to misrepresent the formation of markets, not even bothering to reference anthropology (a field that didn’t exist in Smith’s day) or history in his multiple assertions on how rich countries became wealthy40. Friedman was a darling of The Institute of Economic Affairs (IEA), a British Think Tank (more on these eedjits coming up). The CATO Institute described his book The Great Contraction as “one of the greatest economics books of the 20th century”41.
Noticing a pattern in who praises free market ideology yet?
Friedman is one of a long line of economists who claim their personal politics, when entwined with questionable mathematics, is “science”42. More than any other contemporary economist, Milton Friedman has pushed the myth of free markets, claiming they represent the pinnacle of “freedom” even when we see how pernicious this myth and its rhetoric have become.
The Pernicious Myth Explored
1. Alan Greenspan
Greenspan was born in 1926 in New York. His father was a stockbroker, and Alan followed in his father’s footsteps by studying economics at New York University’s Stern Business School, graduating with an M.A. in 1950. His first wife introduced Greenspan to Ayn Rand in 195343. He quickly became part of Rand’s inner circle, The Collective, and went on to endorse Rand’s ideas in a series of essays for her book Capitalism: The Unknown Ideal. In 1974, Greenspan was sworn in as the chairman of the Council of Economic Advisors with Ayn Rand by his side44. When he became chairman of The Federal Reserve, Greenspan continued to promote views he gleaned from Rand that “capitalism is not only efficient and practical, but also moral”. The specific type of capitalism he so admired was laissez-faire or free market capitalism. This devotion to Rand’s philosophy manifested itself in many destructive ways, most notably in his efforts to repeal the Glass Steagall, leading to the deregulation of banks, which handed us the 2008 financial crash from which we are yet to recover. Think Tanks such as the Cato Institute seek to downplay the role of Glass-Steagall in the crash45, but their analysis rests on pointing solely to market externalities whilst downplaying the direct impact of the repeal. Of course, their analysis makes little mention of the profit the institute’s funders and directors gained from the repeal itself - less a case of enlightened self-interest and more of deluded self-interest46. Looking for a single root cause of such a systemic failure is a fool’s errand, but then so is dismissing a large causal element.
“Follow the money”
-From All The President’s Men, by William Goldman
Greenspan’s ardent adherence to free market ideology blinded him to the $8tn housing bubble47 that burst on his watch as Fed chair. Arguably, he could and should have intervened, but his beliefs held him back to the detriment of millions of people. He had form in turning an ideologically blind eye to bad practices, however. Greenspan worked for Charles Keating Jr, a notorious market manipulator responsible for the Savings and Loans crisis in the 1980s48. Greenspan lobbied for greater deregulation of this industry, a precursor to the crash of 200849. Between 1973 and 2006, Greenspan had the ear of many presidents. This period saw massive deregulation, often with Greenspan’s blessing, resulting in greater labour precarity than had been seen for almost a century.
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2. A Precarious World
Greenspan’s praise of labour market precarity as a motor for economic progress followed the same tune as Milton Friedman’s supply-side policy suggestions. The merry ditty happily promises that wealth poured into the rarefied cups of those already overflowing with capital would happily drizzle down to all, and prosperity would abound. Both men saw the enrichment of the investor class, capital holders, as what Cicero would term the summum bonum. If only some German guy with a big beard had seen this coming over 150 years ago.
“Atypical restraint on compensation increases has been evident for a few years now, and appears to be mainly the consequence of greater worker insecurity”
-Alan Greenspan, Testimony to Congress (Feb. 26, 1997)
Today, we live in a world of the gig economy, zero-hours contracts, and a labour pool that forever casts a nervous eye to an ever-fluctuating market for fear that their livelihoods will evaporate and condense elsewhere, where wages are cheaper and safety standards more lax. This is a direct consequence of liberalising markets favoured by champions of laissez-faire50. In order for capital to seek better returns on investment, the lives of the majority must live precariously since the sole responsibility of a business is to profit shareholders, nobody else - so sayeth Milton.51
The Uberfication of work is the latest way to trim the share of profits workers receive for their efforts. Can someone toiling for long hours for below-living-standard wages be said to be luxuriating in the spoils of a free market? Are they enjoying the bountiful freedom from their right to truly participate in society whilst the investors and shareholders grow fat on their labour, regulation and censure-free? Perhaps the bold Milton should have clung to his mortal coil long enough to have ordered an Uber Eats or Deliveroo. Precarity doesn’t just impact the money in our wallets, it also negatively shapes the very societies we live in, stratifying cities and rearranging our communities, often to the detriment of those living in them52. Some economists, such as Albena Amanova, make the case that precarity is more harmful than inequality53, showing that precarity also impacts the wealthy and destabilises the economic system. Markets thrive on a degree of certainty, and if both labour and capital don’t feel it, nobody feels good or confident54.
This destabilisation of capitalism can be traced directly to the very narratives underpinning free market ideology55. Precarity is championed by those who espouse the free market myth56, and these people continue to be welcomed into positions of power, often hastening discontent with the governments they disastrousloy helm.
“So that the record of history is absolutely crystal clear. That there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”
-Milton Friedman
2. Trussenomics: How to Tank a National Economy in Under Fifty Days
Remember the IEA? The billionaire-funded free market ideologues of choice on this side of the pond? The disastrous Liz Truss premiership saw the UK’s third female PM become its shortest-serving one, with a lettuce famously outlasting her57. Truss was one of seventy-five MPs the IEA identified as having on their books58. She began her association with the Tufton Street think tank in 201059 and continued to take their policies on board, often repeating them verbatim, even once in office.
“Influence Groups in the Tufton Street network have exerted a huge influence on British politics in recent years, especially since Brexit - which most of them backed.”
-Peter Geoghegan, Democracy for Sale (June 12th 2024)
Truss’ car crash mini-budget was a direct copy and paste of free marketeer policies fed to her by the IEA60. Ignoring the Office for Budget Responsibility (OBR), money managers, and even those within her own party, Truss and Kwarteng blundered forward and crashed the Pound to an all-time low, spooked markets, and cost British mortgage payers hundreds of millions whilst blowing a £30bn hole in the government budget61.
This calamitous policy blunder can be traced to a group of think tanks that continually promote the free market myth. Stooges such as Kate Andrews of the IEA laid the ground in media outlets for this stunningly misguided set of policies. She and many other media mouthpieces promulgate the pernicious myth that if left to its own devices, the magical market mechanism will spring into life and restore order and equilibrium. All of this is childish magical thinking, akin to believing in God’s will to fix a disaster or wishing hard enough to purge your body of an infectious disease. unfortunately, this magical thinking pervades almost every area of our world.
“Free-market arguments can be tricky to make, because they’re often counterintuitive. Lower tax rates, for example, can actually increase the tax take. Using the private sector can often deliver better, more extensive coverage for what we consider to be ‘public services’. Tolerating the rich can be the price you pay for helping the poor. These are ideas easily caricatured by the left as voodoo economics, or just outright venality – which makes it all the more important that they are explained and implemented thoughtfully.”
Kate Andrews (IEA), The Spectator (8th October 2022)
3. Purdue Pharma and the Human Cost of No Regulation
America is a world leader in espousing free market ideology. However, the damage this narrative causes is not solely restricted to bank accounts and purses - the costs are very real and often tragic. It is estimated that between 1999 to 2019, 500,000 Americans died of opioid overdoses62. In a similar period in Europe, with its heavily regulated opioid market, deaths per annum were a fraction of those in the US63. The United States limpet-like death grip on the free market myth allows major pharmaceutical firms to completely de-fang the FDA or any other regulatory body, resulting in a free-for-all of false advertising, wild claims and ultimately, deaths from overdoses that arguably could have been prevented had more regulation been put in place.
“Pharmaceutical companies spend far more than any other industry to influence politicians. Drugmakers have poured close to $2.5bn into lobbying and funding members of Congress over the past decade.”
-Chris McGreal, The Guardian (19th October 2017)
Would the ability of a company such as Purdue to shape the market change had there been no one to lobby? Purdue’s decision to market their semi-synthetic opioid OxyContin was a purely financial one. Purdue knew the impact their drug would have64 and went ahead to release it. Had there been no regulator to bribe or government palms to grease, they would simply have been able to do as that had, but for less money.
Companies such as Purdue hide behind the free market rhetoric to do harm and lobby governments that any regulation is impeding their ability to make profits, the summum bonum of Milton Friedman. Unfortunately, this is not the only area of American life into which the toxicity of free-market magic thinking is spilt.
“In Europe, where these drugs are better regulated—and there is generally greater state support for injured or addicted individuals—there is no opioid crisis.”
-Time Magazine, The True Cost of Free Markets
4. East Palestine Rail Disaster
On February 3rd 2023, a freight train carrying a cargo of hazardous chemicals was derailed in East Palestine, Ohio. Thirty-eight cars derailed, resulting in a massive spill of toxic chemicals such as vinyl chloride and benzene. Tens of thousands of litres of harmful and flammable chemicals spilt near the small town, poisoning the ground, water and wildlife nearby, forcing residents within a one-mile radius to evacuate. Norfolk-Southern, the private operator of the derailed train, was one of several privately held rail operators lobbying the US government to remove safety regulations in their industry. The rail lobby overwhelmingly donated to Republicans65 to roll back safety measures such as electronic braking systems on hazardous chemical tankers. Norfolk-Southern directly requested the removal of the electronic braking system66, claiming that the safety system would "impose tremendous costs without providing offsetting safety benefits."67. Can the citizens of East Palestine be said to be reaping the rewards of free-market ideology when they tread on poisoned soil or dare to use their polluted groundwater? Only a month after this disaster, attendees at CPAC 2023 were chanting for deregulation.
“For every one new regulation issued, we pledged that two federal regulations would be permanently removed. We not only met that ambitious goal — which, at the time, people said was impossible — we vastly exceeded it. For every one new regulation added, nearly eight federal regulations have been terminated. (Applause.)”
Donald Trump, Whitehouse Speech (July 16th 2020)
“The more the division of labor and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together.”
-Karl Marx
What Now for Utopia?
So, how many stars? Well, I’ll give it two out of ten, and here is why. Firstly, though, the purpose of this essay is not to convince you that boo capitalism is bad and, yay, socialism, communism or some other ism is great. If that’s what you took away from this, please go kick your own fucking head in and save me a job. For all the issues with a capitalist system, it has inarguably created more wealth and prosperity than any other system our species has employed. The success of this system is in its flexibility and responsiveness and greater distribution of power and money than other economic systems of the past. The free-market myth is a radical alteration to this imperfect success, however. Far from enhancing capitalism, it seeks to eat it by creating unaccountable monopolies and monopsonies that concentrate power and wealth into fewer and fewer hands.
Looking at our food supply, we see an example of this consolidation. These corporations are often called crony capitalists, with their detractors claiming that all of this is possible because of government. But if left to let do, minus the chocolate fireguard of current, captured governments, would these same corporations behave differently? Could there be a magical place where celestial balance kicks in, and we can all vote with our dollars and pounds? Put simply, no.
Capital shall seek to do what it has since before Adam Smith lifted a quill: “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”68
This essay points out that free-market capitalism is a myth born out of an inbuilt human propensity to let natural systems be, an invocation of the divine to balance nature. Of course, free markets or any other type of market are not natural but manifestations of our wholly natural desire to trade. Therefore, they are as open as any other human endeavour to manipulation, tampering, interference, and disruption. Good order cannot spring from letting our worst tendencies run rampant.
The Verdict
So, 2/10? Well, essentially, it boils down to who and what is free and what even freedom means. As an individual with limited resources and even more scarce intellect, I am highly unlikely to crash a market system. My reach is limited, my scope to create systemic shock is low, and the amount of externalities I can create is limited. Me doing doughnuts in the Sainsbury’s car park whilst littering and pissing out the window is unlikely to move the needle much on environmental damage. My buying power is pretty low. I can’t impact prices greatly. I can’t mass-manufacture goods - I can’t even afford to get the Chinese to do it if I spent all my life savings and pension pot. But I am not Elon Musk. I am not the bold Bezos. I am not Exxon-Mobil. I am not Blackrock. I do not fund groups such as the CATO Institute or the IEA. My free entry into the market is wonderful. My ability to buy and sell goods with relatively few restrictions and sensible legislation is a good thing. But I cannot cause the damage these large organisations or extremely rich individuals can.
The free market myth is a greenhouse whose glass panes have long since been shattered by many rocks of reality. Political rhetoric continues to grow there, but it never needed the heat and protection of an unbroken idea to flourish. The conceit of utopian ideas is typically in their ignorance of the great diversity of human psychology. The utopia hinges on an if only this would occur style of thinking almost immune to evidence. In 1866, Mikhail Bakunin adroitly warned that Marxist utopian thought would likely lead to a “red bureaucracy” that would be “the vilest and most dangerous lie of our century”69. Just as sixty years later, Lenin ignored this warning, today, free-market advocates ignore an even greater amount of contrary data. From the continued human cost of the opioid epidemic to the US healthcare system, the scandal of English water companies and the ongoing decline caused by the 2008 crash, the free-market myth invites us to double down, use the same style of blind faith common in Catholic catechism and deploy feeble arguments such as those of French Communists in the 70s when details of gulags and state terrorism in the USSR emerged. There is a constant drumbeat of bad-faith argumentation70 designed to bolster the free-market myth. Here is an example:
In this essay, I do not fast-talk, conflate, or infer. That is what those in the service of this myth constantly must do to prop it up. This incessant myth-making is solely for the benefit of the rich, to remove any barriers to further enrichment, often to the detriment of the majority and seldom to our benefit.
The power of the free market myth lies in its simplicity. An economy, or, for that matter, a market, is a complex system composed of many moving parts, and those components often do not behave rationally. Much of a market is hidden and externalised, whilst what can be measured is lionised. When all of our lives are enmeshed and entangled in such a complex web, and the success of politicians, business leaders, and pundits rests on easy-to-swallow analyses, then the allure of blaming an often faulty system of governance for the failure of a frequently unstable system is enticing. This siren’s song can be boiled down to just letting those in charge of the market do as they want, and all will be fine, eschews the true complexity of the system and offers a ready-made enemy. Bayesian probabilities need not apply here, no matter how welcome. The rhetoric has since been spun by think tanks and talking heads (often on retainers) to a beautiful tapestry of conveniences and half-truths. When rolled out, this tapestry shows a simple tale of good versus evil: the unwanted bureaucrat slaying the natural industry of intrepid entrepreneurs who only want to make the world better through their greed. Unfortunately, history has shown us that the real world seldom fits into the fairytale format. Had the free market myth been told as a fairytale, the heroes would never have saved the princess since it was not in their self-interest to slay the dragon. Instead, they would tell heroic tales of how they let they left her to be since a magic force would just save her in the end anyway. They might also throw in an anecdote about how it was good that the wolf ate Little Red Riding Hood since that was just nature; the wolf sleeping in grandma’s bed was an equilibrium being achieved. Perhaps there is a greater narrative around human behaviour and a need for simplicity that conforms to our dogmas, but that is beyond me to write; I know little of psychology and even less about when it would apply. What I do know is that we live within this maddeningly complex system governed by an imperfect structure that allows us to “truck, barter and trade”71. Far from letting it go and doing what it wants, I prefer that we do what we can to stop the most destructive tendencies within us from ensuring that we all lose out on that most complex and innate of all human traits: trade.
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