Sunday, November 30, 2008

Free Markets Good, Socialism and Government Regulation Bad

This article was originally published in on Nov. 25th, 2008

I´m tired of hearing politicians and the media blaming our current economic downturn we´re in, i.e. the recession, on the free market. There is so much that is wrong with that characterization that I hardly know where to begin with my objections. I guess I could start by stating the obvious, that there hasn´t been any truly free market in this or any other nation for at least as long as I´ve been around. I don´t think human kind has seen a truly free market since before government figured out they could extort money from business owners in exchange for protection or other services, and that was a long, long time ago and perhaps in a galaxy far, far away. How can something that doesn´t exist be blamed for our modern monetary problems?

There are many problems inherent in our current systems of trade and government, that much should be obvious simply by looking at the current state of the economy. We entrust our system of trade and governance to corrupt officials who continually prove they are interested in no one except themselves and their friends, and yet we still somehow expect that they will use their power to regulate to benefit the common man?

I hear so many of my friends and acquaintances, so many of my fellow commoners, talk about how without government regulation chaos would rule the day and we´d all be in a world of hurt. They talk about greed and robber barons and monopolies and people being ripped off and living in squalor if regulations were to be abandoned and yet aren´t those things becoming rampant in our current system? Are we not experiencing troubling times because those who made the systems have gamed the systems? Yes, we common folk are bearing the brunt of this economic crisis. Yes, the system has abandoned us and left it up to our future to pay. Yet don´t we have only ourselves to blame? What do you expect when a system is set up such as the one we have where the very powerful can gain control and can maintain control through manipulation? If you expect them to look after anyone else other than themselves and their friends, if you expect them to look after your interests or to even care about you, then perhaps you should think about performing a reality check on yourself.

We as a society have forsaken free markets because of the tireless propaganda fed to us through corporate media and government education systems. Through history classes we have been taught that free markets have been responsible for the severest of economic downturns. Through the media we have been told that free markets have led to the greatest abuses of our economy and the most egregious thefts from the working classes. Such reporting is fallacious, for there were regulations put in place that were supposedly put there for the protection of the common man, and yet somehow they failed. These markets weren´t free, but regulated by government. When government regulations fail, the blame seems to always be put squarely on the shoulders of the unregulated free market.

The phrase "unregulated free market" is a fallacy in itself, for the free market is in actuality the most regulated market known to man. The last statement might seem counter-intuitive, however it is nothing more than common sense. Government regulations do little except to give insiders and big players with mega capital a competitive edge in trying to create a monopoly and to keep outsiders from entering the playfield in the first place. Certainly in theory there will be checks and balances and people who care enough about the system to make certain regulations do what they were intended to do, but in practice, in real life situations, we can see that this simply does not happen. A payoff here, a handout to a friend or relative there, and we see just how quickly the system set in place to safeguard the little guy becomes corrupted. Free markets, however, depend on the consumer to regulate them. It is the common man who will decide where to spend his money and where not to. The common man is not only going to look after his best interests, but it is nearly impossible for a business to game the system since it would have to deal with consumers at large rather than a single entity it can buy off or bribe.

One could argue that the consumer would have to learn too much about those he´s doing business with in order to effectively regulate the market. On the surface this might seem like a good argument, and yet I believe that this argument lacks merit in that it underestimates the intelligence of the average man. I don´t just say this because I believe in a man´s ability to reason for himself if he so chooses, I say this because we have seen in our lifetime man´s ability to adapt to the necessities that life throws at him.

The clearest example of the above phenomenon is the computer. Three decades ago, in the late 1970s, very few people knew how to operate one. Some people believed that computers would always be limited to use by businesses and specially trained personnel. They couldn´t imagine a household computer because they didn´t believe the average human would have reason to use one, let alone be able to learn to use one. Now it would be hard to imagine life without the personal computer. It would be hard to imagine everyday life without cell phones and other electronic devices. Now nearly everyone has some level of technical knowledge when it comes to employing these devices. It seems to me that the same phenomenon would occur in a free market. Knowledge is not something that is static, it is something that grows as necessity dictates.

The ongoing, non stop bailouts, such as they are, have not been made to protect the common folk, as much as certain political forces would like you to believe. They are not being made to protect your retirement, or to keep certain people in their homes, or to safeguard jobs, or even to thaw the frozen credit market, they are being made to prop up and protect an elitist system and to help make certain the masses of humanity are forever indebted to certain monetary interests. The fact that these steps may help out some folks that have not made the wisest decisions with their money is simply a politically desired side effect. It is the middle class who have worked hard and scrimped and saved and their children who end up paying the most in the long run. It is those who have done the right thing who end up being punished while those who have chosen poorly are rewarded.

One may rightly wonder if these bailouts would have occurred in a truly free market. The answer must be unequivocally no. In a free market, failures would fail. Businesses would have to take responsibility for their poor decisions as well as good ones. A poorly run company would have to pay the consequences and a well run company would be rewarded. Would this cause suffering? Well, certainly for some, but no system is ever going to be perfect and we can´t keep pretending we can protect everyone forever. Besides, there are people suffering now with the current system and the misery will likely get much worse before it gets better. If we were to allow the companies that are going to fail to fail then there would be opportunities opening up for others who would innovate and run the businesses the way they should be run. This would give the consumer more choices, and isn´t that something most people want? The way things are going with the bailouts and the over regulation that is occurring, soon no new players will be able to get into certain markets to compete and we´ll all be stuck with few choices, and probably not very good ones, as the mergers and the centralization of banking power continue while smaller institutions go bankrupt or are bought up. Fewer choices, less service, and less innovation is not desirable.

As we move forward in these uncertain times we might do well to try to remember some of the lessons from our past. Look at the societies that have been most prosperous and you will find that they were grounded in freedom, where the people were allowed to innovate and create. It can be seen that when societies impose too many controls on people, when it comes to trading goods and services, the growth of that society is stifled. This can be seen in recent history in the fall of communism and the eastern bloc. When markets are deregulated even a little and government steps back to let them work, growth occurs. This can be seen in China´s recent climb to prominence. This is true not only in the marketplace, but in the private lives of a nation´s citizens as well. Prosperity happens when people are allowed to make up our own minds about where, how and when to spend our own money. A prosperous society is an open society free from secretive plans and dealings, free to discuss matters openly without fear of retribution. Freedom works. I can only hope the incoming administration considers this as they move forward and try to undo any harm that may have been caused by the previous administration. Somehow I doubt they will. Government has a tendency to prefer socialism and its own growth over the needs of the people.

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