Thread: The Myth of the Free Market

professor robert reich offers food for thought on the so called 'free market'.

One of the most deceptive ideas continuously sounded by the Right (and its fathomless think tanks and media outlets) is that the "free market" is natural and inevitable, existing outside and beyond government. So whatever inequality or insecurity it generates is beyond our control. And whatever ways we might seek to reduce inequality or insecurity -- to make the economy work for us -- are unwarranted constraints on the market's freedom, and will inevitably go wrong.

By this view, if some people aren't paid enough to live on, the market has determined they aren't worth enough. If others rake in billions, they must be worth it. If millions of Americans remain unemployed or their paychecks are shrinking or they work two or three part-time jobs with no idea what they'll earn next month or next week, that's too bad; it's just the outcome of the market.
According to this logic, government shouldn't intrude through minimum wages, high taxes on top earners, public spending to get people back to work, regulations on business, or anything else, because the "free market" knows best.

In reality, the "free market" is a bunch of rules about (1) what can be owned and traded (the genome? slaves? nuclear materials? babies? votes?); (2) on what terms (equal access to the internet? the right to organize unions? corporate monopolies? the length of patent protections? ); (3) under what conditions (poisonous drugs? unsafe foods? deceptive Ponzi schemes? uninsured derivatives? dangerous workplaces?) (4) what's private and what's public (police? roads? clean air and clean water? healthcare? good schools? parks and playgrounds?); (5) how to pay for what (taxes, user fees, individual pricing?). And so on.

These rules don't exist in nature; they are human creations. Governments don't "intrude" on free markets; governments organize and maintain them. Markets aren't "free" of rules; the rules define them.

The interesting question is what the rules should seek to achieve. They can be designed to maximize efficiency (given the current distribution of resources), or growth (depending on what we're willing to sacrifice to obtain that growth), or fairness (depending on our ideas about a decent society). Or some combination of all three -- which aren't necessarily in competition with one another. Evidence suggests, for example, that if prosperity were more widely shared, we'd have faster growth.

The rules can even be designed to entrench and enhance the wealth of a few at the top, and keep almost everyone else comparatively poor and economically insecure.

Which brings us to the central political question: Who should decide on the rules, and their major purpose? If our democracy was working as it should, presumably our elected representatives, agency heads, and courts would be making the rules roughly according to what most of us want the rules to be. The economy would be working for us; we wouldn't be working for the economy.
Instead, the rules are being made mainly by those with the power and resources to buy the politicians, regulatory heads, and even the courts (and the lawyers who appear before them). As income and wealth have concentrated at the top, so has political clout. And the most important clout is determining the rules of the game.

Not incidentally, these are the same people who want you and most others to believe in the fiction of an immutable "free market."

If we want to reduce the savage inequalities and insecurities that are now undermining our economy and democracy, we shouldn't be deterred by the myth of the "free market." We can make the economy work for us, rather than the other way around. But in order to change the rules, we must exert the power that is supposed to be ours.

ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century.



can't imagine this type of thinking taking hold in the US, but IMO life for the majority would improve significantly if it did.

Originally Posted by raycarey

can't imagine this type of thinking taking hold in the US, but IMO life for the majority would improve significantly if it did.

Plenty of people believe in it, but unfortunately, whoever they vote for is going to get bought off eventually.

Originally Posted by harrybarracuda

Originally Posted by raycarey

can't imagine this type of thinking taking hold in the US, but IMO life for the majority would improve significantly if it did.

Plenty of people believe in it, but unfortunately, whoever they vote for is going to get bought off eventually.

that's essentially what reich says

If our democracy was working as it should, presumably our elected representatives, agency heads, and courts would be making the rules roughly according to what most of us want the rules to be. The economy would be working for us; we wouldn't be working for the economy.
Instead, the rules are being made mainly by those with the power and resources to buy the politicians, regulatory heads, and even the courts (and the lawyers who appear before them). As income and wealth have concentrated at the top, so has political clout. And the most important clout is determining the rules of the game.

and i agree with the two of you, but what is beyond me is why so many people in red states vote for what is so clearly against their own best interest.

Originally Posted by raycarey

and i agree with the two of you, but what is beyond me is why so many people in red states vote for what is so clearly against their own best interest.

And in the blue states. You squabble with the reds about irrelevant bullshit like gay marriage, abortions, stem-cell research etc, but the democrats do exactly the same here,

"The rules can even be designed to entrench and enhance the wealth of a few at the top, and keep almost everyone else comparatively poor and economically insecure."

Originally Posted by Rainfall

"The rules can even be designed to entrench and enhance the wealth of a few at the top, and keep almost everyone else comparatively poor and economically insecure."

Yup.

The "social" bickering seems to be a distraction form the collusion of both parties who hold a duopoly on power.

And, the US is a "rent-seeking state."

Powerful interests lobby the government to redistribute wealth to them - that has already been created.

If it were a truly free market, all major US banks and auto manufacturers would be either dead or foreign owned. The US sugar industry would collapse overnight, and some of your familiar media channels would be foreign owned or controlled. Halliburton and the like, sucking off a benevolent government tit, would have made way less money too- or at least have had to earn it more.

What I find quite strange is that the most strident 'pro-business', 'anti-regulation' ranters are the very same people that have always benefited most from the fact it is not a free market. Even research and technology development, from which private corporations have made trillions, is nowhere near a free market- it is very heavily government subsidised.

innovation depends on bold entrepreneurship. But the entity that takes the boldest risks and achieves the biggest breakthroughs is not the private sector; it is the much-maligned state. Mazzucato notes that “75 per cent of the new molecular entities [approved by the Food and Drug Administration between 1993 and 2004] trace their research ...to publicly funded National Institutes of Health (NIH) labs in the US”…. A perhaps even more potent example is the information and communications revolution…. “All the technologies which make the iPhone ‘smart’ are also state-funded… the internet, wireless networks, the global positioning system, microelectronics, touchscreen displays and the latest voice-activated SIRI personal assistant.”… Why is the state’s role so important? The answer lies in the huge uncertainties, time spans and costs associated with fundamental, science-based innovation. Private companies cannot and will not bear these costs, partly because they cannot be sure to reap the fruits and partly because these fruits lie so far in the future. Indeed, the more competitive and finance-driven the economy, the less the private sector will be willing to bear such risks…. The days of AT&T’s path-breaking Bell Labs are long gone. In any case, the private sector could not have created the internet or GPS. Only the US military had the resources to do so. Arguably, the most important engines of innovation in the past five decades have been the US Defense Advanced Research Projects Agency and the NIH.
Brad DeLong : Martin Wolf: A much-maligned engine of innovation: Noted for August 4, 2013


'Free Market' advocates are being very slippery calling themselves that, because that is the last thing they actually want. They just want the market rigged even more in their favor, ungrateful sods.

Here is a list of US government bailouts since 1990- government bailouts are, of course, taboo in a free market-

● Chrysler 1980 In 1979 Chrysler suffered a loss of $1.1 billion. That year the corporation requested aid from the government. In 1980 the Chrysler Loan Guarantee Act was passed, which provided $1.5 billion in loans to rescue Chrysler from insolvency. In addition, the government's aid was to be matched by U.S. and foreign banks. (What happened after the bailout?) $4.0 billion
● Continental Illinois National Bank and Trust Company 1984 Then the nation's eighth largest bank, Continental Illinois had suffered significant losses after purchasing $1 billion in energy loans from the failed Penn Square Bank of Oklahoma. The FDIC and Federal Reserve devised a plan to rescue the bank that included replacing the bank's top executives. (What happened after the bailout?) $9.5 billion
● Savings & Loan 1989 After the widespread failure of savings and loan institutions, President George H. W. Bush signed and Congress enacted the Financial Institutions Reform Recovery and Enforcement Act in 1989. (What happened after the bailout?) $293.3 billion
● Airline Industry 2001 The terrorist attacks of September 11 crippled an already financially troubled industry. To bail out the airlines, President Bush signed into law the Air Transportation Safety and Stabilization Act, which compensated airlines for the mandatory grounding of aircraft after the attacks. The act released $5 billion in compensation and an additional $10 billion in loan guarantees or other federal credit instruments. (What happened after the bailout?) $18.6 billion
● Bear Stearns 2008 JP Morgan Chase and the federal government bailed out Bear Stearns when the financial giant neared collapse. JP Morgan purchased Bear Stearns for $236 million; the Federal Reserve provided a $30 billion credit line to ensure the sale could move forward. $30 billion
● Fannie Mae / Freddie Mac 2008 On Sep. 7, 2008, Fannie and Freddie were essentially nationalized: placed under the conservatorship of the Federal Housing Finance Agency. Under the terms of the rescue, the Treasury has invested billions to cover the companies' losses. Initially, Treasury Secretary Hank Paulson put a ceiling of $100 billion for investments in each company. In February, Tim Geithner raised it to $200 billion. The money was authorized by the Housing and Economic Recovery Act of 2008. $400 billion
● American International Group (A.I.G.) 2008 On four separate occasions, the government has offered aid to AIG to keep it from collapsing, rising from an initial $85 billion credit line from the Federal Reserve to a combined $180 billion effort between the Treasury ($70 billion) and Fed ($110 billion). ($40 billion of the Treasury’s commitment is also included in the TARP total.) $180 billion
● Auto Industry 2008 In late September 2008, Congress approved a more than $630 billion spending bill, which included a measure for $25 billion in loans to the auto industry. These low-interest loans are intended to aid the industry in its push to build more fuel-efficient, environmentally-friendly vehicles. The Detroit 3 -- General Motors, Ford and Chrysler -- will be the primary beneficiaries. $25 billion
● Troubled Asset Relief Program 2008 In October 2008, Congress passed the Emergency Economic Stabilization Act, which authorized the Treasury Department to spend $700 billion to combat the financial crisis. Treasury has been doling out the money via an alphabet soup of different programs. Here’s our running tally of companies getting TARP funds. $700 billion
● Citigroup 2008 Citigroup received a $25 billion investment through the TARP in October and another $20 billion in November. (That $45 billion is also included in the TARP total.) Additional aid has come in the form of government guarantees to limit losses from a $301 billion pool of toxic assets. In addition to the Treasury's $5 billion commitment, the FDIC has committed $10 billion and the Federal Reserve up to about $220 billion. $280 billion
● Bank of America 2009 Bank of America has received $45 billion through the TARP, which includes $10 billion originally meant for Merrill Lynch. (That $45 billion is also included in the TARP total.) In addition, the government has made guarantees to limit losses from a $118 billion pool of troubled assets. In addition to the Treasury's $7.5 billion commitment, the FDIC has committed $2.5 billion and the Federal Reserve up to $87.2 billion. $142.2 billion
History of U.S. Gov’t Bailouts - ProPublica


If the US government actually did move towards free market principles, the disengenouosly named Free marketeers would be squealing they loudest. So really, they are just a business lobby in false gowns.

sounds like the OP is not clear IMO, a lot of confusion about the definition and what it constitutes, adding political motivation with references to Democracy to add another level of confusion.

Is the Free Market a myth ? of course, it's not, it's real and happening, it's a "frictionless" market for the mighty and powerful, they get away with everything, like they should do in a free market. It's a market where the large entities can exploit and eat the smaller entities, in a free market, the big gets bigger, and the small get slaughtered.

I don't know but that sounds pretty accurate to what it's happening around the world with multinationals and big corporations.

What needs to be done is to destroy "Free Market" once for all, because it's definitely not a myth, it's as real as a drone strike on an Afghanistan wedding.