Thursday, August 31, 2006

[economy] for and against free markets

Today I took a car from the side of the road, having agreed a price for the journey to the centre. How legal this is over here I’m not sure but it’s free enterprise, it’s a voluntary transaction between two parties and it was win/win for both today. There are many such transactions over here and it’s not going too far to state that without them, the economy would implode.

Everyone’s making his little on the side. The babushki lined up along the footpath selling jars of berries, jams and salads – that’s free enterprise, as are the million or so deals done by mobile telephone day and night. Today, in front of our house, a car pulled up, then another, two boots/trunks were opened and the deal was done.

I have always operated in a free economic zone. Years ago I got it into my head to follow the family business and get into screen printing sports t-shirts for clubs and so I hawked my wares around the city, made contacts and the big boys waited till simple economics snuffed me out.

Along the way I met a guy who produced trophies for clubs and we combined forces. I had two girls working for me, plus a day job. Big mistake. Suddenly, mindboggling orders came in and we had neither the infrastructure, the talent nor the time. That was the end of the business.

And yet I strongly believe in market forces and feel that in a free economy such as we have [on one level] over here - anything is possible. However, there are distinct negatives, which I never really saw until I got into ‘trade’. Arguments against a free economy do exist and include:

Market economies have higher average incomes - but these are unequally distributed. They do not tolerate any competitor for the free market system in itself. Once a market is imposed by people’s acquisitive instinct, other forms of economy are snuffed out. Forever.

A comprehensive global free market, by definition, will always tend to a planetary monopoly. In one’s own country, anti-trust laws partially moderate the trend but outside of national constraints, where is the constraining force? The UN? The WTO?

Expansionism is one of the clearest characteristics of market liberalism and if you were to ask Mexico and Brazil about this, they’ll say it all works one way – in favour of the US.

Free marketism is not above military conquest. Austria, Belgium, France, Germany, Italy, Luxembourg, the Netherlands, Bosnia, Kosovo, East Timor, and parts of Macedonia all owe their economies to the aftermath of military action.

NATO itself lists ‘the free market’ among its core values.

The market becomes a goal in itself, replacing spirituality as the summum bonum.

The free market limits choice - it produces only goods and services which are marketable and only in sizes and numbers produced as a job lot, eg. clothes at Debenhams which are never the right size and with all the good patterns and colours taken . The little man who started up a sweatshirt shop in radical designs falls to the big boys who latch onto his idea and produce their own. An example was the IQ range.

Free markets tend to monopoly, not to the highest good of the greatest number of enterprises. The ubiquitous Walmart, which decrees to suppliers the specifications, the unit price and the payment arrangements, take it or leave it; or McDonald’s specifying the exact potatoes which are acceptable are examples of this.

The market is not innovative. It will run with someone’s idea and then standardize it for bulk sale. One of the few firms where this is not so is Hermes.

Self-regulation is a myth. It is simply dog eat dog. Here are the rules:

# to compete for market share
# to damage the interests of competitors
# to sell products at more than cost price
# to seek to ensure its own continued existence, even when that contradicts ethical goals
# to exclude from decision-making persons of good will and ability
# to internalise the principle of competition among job applicants - so creating a labour market.

Whatever happens to the Gross National Product, the combined market share is always 100%. To increase share, a successful business competes its rivals out of existence. At first, the rival firms suffer financial loss. Ultimately, they can not meet their financial obligations: they collapse, usually via a bankruptcy procedure.

This is how a free market works – mammoth monopolies, eg. Walmart, move in on a town like Port Elgin, in Ontario and squeeze the life out of the local economy. Over here, Moscow money moves in and squeezes out first local entrepreneurs and then businessmen on rungs progressively lower down.

A market society is not based on ‘added value’ but ‘decreased value’ across the range of society. The entrepreneur has no other interest other than his own and he will not seek to protect others. If you say that that’s the job of the government, then you are no longer a free marketeer.

The free market is always 'triangular' in character. At least one buyer and two competing sellers are needed. One must always lose.

Repeated transactions and interactions, on the basis of the outcome of previous transactions and interactions, have a centering effect and leads to a more conformist society, with everyone wearing virtually the same as everyone else and going about their business in the same way as everyone else.

Having said all that, I still support a market society for the reason that I can’t see the obligation to help those who won’t help themselves, as distinct from those who can’t help themselves. Even free marketeers recognize that pensioners cannot fend for themselves, especially if it is their parents involved.

The free market would be a grand idea if people were essentially altruistic, which they aren’t, unless they embrace a philosophy close to the Christian ethic. A free market is essential to the economic well being in macro terms – the government must pick up the pieces in the other areas.

Therefore, this militates against the free market and leaves the government between a rock and a hard place. And what does the poor old government do about monopolies and trusts? I’ve read the economics of monopolies ultimately self-imploding and the theory would be valid if it weren’t for one factor – the inexorable move towards global monopolization on the part of all major money lending institutions.

But that’s another topic.

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