Free Market

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From the German halfling:

Expound good man.

 

The idea that the market is a self-regulatory forum is based on the presumption that buyers and producers are equally influential, and ultimately equally powerful.

That is a nice idea, but it falls short. One critical issue, after the amount of available capital, for example is knowledge. That is commonly encountered in consumer lawsuits, where producers are given a larger bruden of proof, as a result of their inherently superior knowledge about their products.

The market didn't prevent ENRON's accounting scandal. In fact, the shareholders, the market, were/ was deceived by fraudulent heads of business who controlled what information went out and what was kept secret. And that happened with complicity of other major players in the market. The much praised (and IMO overrated) US accounting standards evidently also didn't prevent that from happening.

Or think about price agreements in certain industries that essentially eliminiate competition.

The question can be asked wether there is any fair competition at all, or rather, wether the 'buyers market' is a mere fiction.

There has to be a regulation mechanism to ballance this out, or the result will be predatory business conduct. I have serious doubt that a truly 'free' market can exist in reality.

 

I agree to what you're saying wholeheartedly and thank you Ragusa, you've made it into words what I've been thinking for a while now and failed to phrase properly myself.

 

It's not about the nanny state.
An exaple that is slightly but illustrative: To assume that for instance an employer and his employee are equals - one offering a service, and the other one accepting the offer and paying for it, is dangerously naive. Of course they are not equal. And of course there is dependency involved. And of course this dependency results in a greater leverage on the side of the employer and of course this dependency can be abused, and is regularly abused even inspite of regulations.
In Germany companies over a given size are supposed to have a 'Betriebsrat' that allows employee participation in decisionmaking, and functions as an arbiter in employer-employee relations. The idea behind it is not socialism but fairness. In the company I work, there is an unwritten understanding that the first one to suggest to form something like that will be fired, even though that would be clearly illegal. People are not taking that risk. Equality?

Ever heared about 'usury'? It's the most strongly market-driven approach to business. It's the plague, and you are the only one to have antibiotics. The rules of price and demand. You get rich. Hooray. Well, or you get mugged, or lynched. Maybe for a reason.

You have to understand what civil law is about. It's first, of course, about you and maintaining your rights on property, and your rights of self-determination, EDIT: or your 'pursuit of happiness' to which property as a tool is the key. Property and what you do with it on the market is a means to an end, not an end in itself. I cannot stress that enough. /EDIT
But the second, and equally important function is to regulate inter-citizen affairs in order to ensure relatively fair business. It is a very basic insight that capital gives leverage that necessiates a ballancing of interests if fairness is to be achieved. Because if there is no fairness, people will perceive it as injust, and the consequence is ultimately civil unrest. You don't want that.

These are the two basic functions of civil law, even though the 'free marketeers' tend to forget about the second part of the equation - much like corporations tend to forget about the 'paying taxes' aspect of taking advantage of a country's taxpayer funded infrastructure.

The way how you try to achieve a ballance differs. We are in Germany clearly more protective than other countries, and I think for good reason. Still, we're not a nanny state. You still have to take care your interests are taken care of. The state will not do it for you. It only gives you a tool, you can utilise. You still have to fight yourself.
And even when it's about utilisation, the practical obstacles are that people, to repeat the previous example of an employee, usually just don't have the money and financial staying power to pursue their interests adequately in court, a benefit companies do tend to have, along with usually competent lawyers. Equal players? Hardly.

'The market' thinks in terms of profit only. It is not patriotic. If 'the market' can reduce costs and increase profits by killing jobs in the US and outsourcing them to Guatemala, rather than invest in innovation, it'll do it. It's the cheap, most cost-effective, way to profit without investment. Is it long term? Who cares. The shareholders are happy at time of the quarterly report. When today Walmart offers to a huge extent Chinese made products, it's not because the Chinese are cheaper or better. It's because there are no US suppliers for the sort of products left. It's been a long way since 'Papa Walmart' prided himself for offering US made products at bargain prices.

I believe man is more than a beast driven by the urge to accumulate wealth. I do not believe that a free market is a good in itself. Economic activity is mankind’s most important activity and the most conducive to human happiness, and economics is what politics is or should be all about? Sorry, I don't buy that. I find it odd that the party in the US that has allied itself with the Christian Right to fight shallow materialism preaches 'Economism', too. I think it's about much more than that: Culture matters. Ethnicity matters. History matters.

To expect the market to regulate itself is like expecting self-restraint from a hurricane.

[ January 29, 2007, 19:31: Message edited by: Ragusa ]

 

Perhaps more to the point, if 'the market' can reduce costs and increase profits by killing people, it will do it.

This is not a paranoid conspiracy-theory point of view; it's perfectly illustrated by America's involvement in Latin America, dating back to before the Civil War. Consider how many times the Marines landed in Central America. Consider why they were landing. Consider what the basic goal of gunboat diplomacy was (short version: profit).

Domestically, it's illustrated by the history of labor disputes between, oh, 1870-1940 in America. Employers commonly, even typically, employed violence, up to and including killing people, to aid their bottom line.

 

Another point in case for your argument would be Britain's East India Company, and their conduct in India.

Clearly excessive, but we may get there again. After all the East India Company did what they did because they could. We already have PMCs, or mercenaries, guarding business interests. Why not directly enforce them?

 

Indeed. One can add things like the Opium War, mercantilism in general, Commodore Perry 'opening' Japan, colonialism (especially the Iberian version), quite a few (quite possibly most) of the European wars of the past several centuries, the America/Japan part of WWII (competition for Asian markets was the driving cause of the conflict), and so on.

Also, now that I think about it, it's made very plain the The Federalist that the purpose of the federal government in general and military in particular is primarily nurturing the interests of the upper class. Defense against the people (explicit mentions of Shay's Rebellion, the Whiskey Rebellion); defense against slave uprisings; the defense of American trade interests and, eventually, the imposition of same.

Which, I think, ought to be considered when inveighing against the 'nanny state'; it wasn't that long ago--assuming it's no longer the case--that government was actively involved in aiding the rich at the expense of the poor.