What Have Free Markets Done For Us?
We are taught from an early age that free markets are almighty, almost holy. They are the answer to all of life’s problems. We are told they are virtuous in all respects. As Enron’s website once declared: “We believe in the inherent wisdom of open markets.” Enron CEO Ken Lay actually said “I believe in God and I believe in free markets.” Check out any number of Congressional campaign websites, including our own Rep. Tom Reed’s, and you’ll see the heaps of praise being bestowed upon the almighty free market.
I bring up Ken Lay and Enron near the 10th anniversary of the company’s corruption filled collapse. I can’t help but wonder, with all we hear about the moral superiority of free markets, what it is they have actually provided for us as employees, citizens, and as humans? They can’t be flawless and constantly morally pure, can they?
Looking back through history and all the circumstances that resulted from our faith in free markets, it’s awfully puzzling why we continue to have faith in them. Time and time again, free markets have led us to economic collapses, slavery, corruption, monopolies, lopsided distribution of goods and assets, oligarchies, despotism, and recently, the abandonment of American manufacturing for cheap, overseas laboryou get the idea. The list does go on and on.
The only tool for preventing or fighting against these problems is government regulation. By now, we have all been taught that government regulation is the ultimate evil and is destroying our American way of living. I posit the opposite in declaring that government regulations helped foster that same American way of life and that the deregulations of the last 30 years have been slowly destroying it. All we need to do is look back over the past century and we’ll find that the American economy flourished in a period of high taxation and heavy regulation, while it has continually faltered and even recessed in a period of lower taxation and deregulation.
One of the biggest mistakes people make when talking about free markets is that they exist and operate by themselves, without any assistance from government. This couldn’t be further from the truth. Markets rely on government. The government provides the currency that markets are based on. Government also provides a military, an infrastructure for the transportation of goods, and an educational system that trains future workers. So, in these ways, markets rely on governments to exist and to function. There is no way to completely separate the two.
In the period after WWII, taxes were high and government regulation of businesses was in full swing. Unions were also in their prime. During this time, it seemed everyone had a shot at the American Dream; accumulating wealth independently, investing in homes, and saving for retirement. In spite of what many today would claim as heavy and overly burdensome government regulation, businesses were booming, GDP was growing, and wealth distribution had never been more even. The wealth of the world’s greatest nation was being invested to improve people’s lives. Homeownership was also at all time highs. Life was good.
Fast forward to present day and you find a different situation. Deregulation has been a main theme of Presidential administrations from Nixon onward, including Clinton and Carter. The size of companies has grown astronomically to the point of being “too big to fail” and our choices for products and services have dwindled. Just think how few choices you have in purchasing things. Want a soda? Will that be Pepsi or Coke, or generic? How about a cable company? Time Warner or Comcast? Which cell phone provider would you like? Verizon, sprint, or T-Mobile? Hurry up and choose before Sprint and T-Mobile merge. Unregulated markets typically don’t offer consumers a wide range of choices as monopolies form, swallowing up the competition.
Deregulation is often credited for the financial meltdown in 2008. After the Great Depression, the federal government intervened with the financial market, putting in place regulations on banks and security companies in order to try and prevent another economic failure in the future. Well, as the economy recovered and appeared to be healthy, the financial industry lobbied heavily to roll back almost all of those regulations. The government sold out to the industry and one by one the regulations were either thrown out the window or watered down so much, they were rendered ineffective.
I don’t write this as a complete defense of heavy handed regulation. However, in light of the state of our current economy, with stagnant wages, increasing concentration of wealth for the 1%, an economy that is growing at a snail’s pace, etc., it seems like a good time to rethink our love affair with free markets and ask what have they done for us.
James Bliss is a Jamestown resident who studied philosophy at Florida State University.