How Free Is the 'Free Market'?

by Jeffrey Tucker

1/05/08

Display Full Article/Printer Friendly | Send to a Friend   See if you can spot anything wrong with the following claim, a version of which seems to appear in a book, magazine, or newspaper every few weeks for as long as I've been reading public commentary on economic matters:   The dominant idea guiding economic policy in the United States and much of the globe has been that the market is unfailingly wise . . . . But lately, a striking unease with market forces has entered the conversation. The world confronts problems of staggering complexity and consequence, from a shortage of credit following the mortgage meltdown, to the threat of global warming. Regulation . . . is suddenly being demanded from unexpected places.   Now, a paragraph like this one printed in the New York Times opinion section on December 30, 2007, makes anyone versed in economic history crazy with frustration. Just about every word is misleading in several ways, and yet some version of this scenario appears as the basis of vast amounts of punditry.   The argument goes like this:   Until now we've lived in a world of laissez-faire capitalism, with government and policy intellectuals convinced that the market should rule no matter what. Recent events, however, have underscored the limitations of this dog-eat-dog system, and reveal that simplistic ideology is no match for a complex world. Therefore, government, responding to public demand that something be done, has cautiously decided to reign in greed, force us all to grow up, and see the need for a mixed economy.   All three claims are wrong. We live in the 100th year of a heavily regulated economy, and even 50 years before that the government was strongly involved in regulating trade.   The planning apparatus established for World War I set wages and prices, monopolized monetary policy in the Federal Reserve, presumed first ownership over all earnings through the income tax, presumed to know how vertically and horizontally integrated businesses ought to be, and prohibited the creation of intergenerational dynasties through the death tax.   That planning apparatus did not disappear but lay dormant temporarily, awaiting FDR, who turned that machinery to all-around planning during the 1930s, the upshot of which was to delay recovery from the 1929 crash until after the war.   Just how draconian the intervention is ebbs and flows from decade to decade, but the reality of the long-term trend is undeniable: more taxes, more regulation, more bureaucracies, more regimentation, more public ownership, and ever less autonomy for private decision-making. The federal budget is nearly $3 trillion per year, which is three times what it was in Reagan's second term. Just since Bush has been in office, federal intervention in every area of our lives has exploded, from the nationalization of airline security to the heavy regulation of the medical sector to the centralized control of education.   With "Free Markets" like this, who needs Socialism?   So, the first assumption that we live in a free-market world is simply not true. In fact, it is sheer fantasy. How is it that journalists can continually get away with asserting that the fantasy is true? How can informed writers continue to fob off on us the idea that we live in a laissez-faire world that can only be improved by just a bit of public tinkering? Prev - Next >> Page 1 2