Myth of the "Free Market"

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Support for "free market" capitalism in the U.S. has collapsed, along with the financial system and the global economy as a whole, according to a recent poll.

Much has been made of late of growing numbers of Americans who view socialism and, yes, even communism as better alternatives to capitalism. As many as on-third of Americans seem to support increased social democracy, public control over the economy, and more public options in society.

Even more more significantly is the sharp decrease in support for "free market" capitalism. According to a GlobeScan poll, a mere half of people around the world agree that "free market" capitalism is the "best economic system." Globally this tepid support for capitalism remains unchanged over recent years.

In the U.S., however, attitudes towards capitalism have undergone rapid and radical change over the past few years. For example, in 2002 about 8 in 10 Americans supported capitalism. In 2010, only 59 percent agreed with the statement that it is the "best economic system", a mere 5 percentage point higher than the global total.

Indeed, as the GlobeScan poll revealed, fewer Americans support capitalism than Chinese people.

No wonder. As 25 million Americans lack jobs, major multinational corporations seem to get richer, pay fewer taxes, and their CEOs buy government policies, e.g, Koch brothers of Koch Industries.

These changes (dare one say improvements) in public opinion in the U.S. have also coincided with the largest labor movement uprising since the 1930s, an uprising begun in Wisconsin and which may change the political landscape in the 2012 elections.

The collapse of the myth of "free market" capitalism is essential to a basic understanding of capitalism, writes University of Cambridge economist Ha-Joon Chang in his recent book, 23 Things They Didn't Tell You About Capitalism (2). While Chang is a supporter of capitalism, the poll cited above shows that for many working Americans with this understanding has come a desire for a different system or process – even if they haven't yet joined the ranks of those who support socialism or communism.

According to Chang, proponents of "free market" capitalism had convinced many of us that markets free of government intervention work best. Resources, innovation, incentive are blocked when governments get involved in the marketplace. Indeed, government intervention reflects only "politically motivated interference," the "free marketeers" claim. Almost word for word these are the talking points of Republican opposition to environmental regulation, health reform, and Wall Street oversight.

Ignored in this set of claims is that from its very beginnings, capitalism has been highly politicized, Chang potions out. Take the first attempts by the British to regulate child labor in 1819, for example. Their first laws focused only on the children laboring in the country's grueling cotton factories, confining child labor to 12 year-olds and older and to less than about 70 hours per week. Presaging the likes of Newt Gingrich, Rand Paul, Sarah Palin, and corporate backers of the tea party, opponents of the law decried this government "interference" in the market on ideological grounds, claiming it interfered with legal contracts between small children and rich and powerful cotton manufacturers.

Chang writes, "Today, even the most ardent free-market proponents in Britain or other rich countries would not think of bringing child labor back as part of the market liberalization package that they so want" (2). Of course, Cahng wrote this in 2010 probably before hearing of the likes Republican politicians in Maine and Missouri who are the trying to roll back child labor restrictions or to eliminate funding for enforcement of laws that prohibit child labor.

Objections to child labor laws, then and now, hinge on a defense of allowing corporations to hire workers they can pay the least – exploit the most – and gain the most profit from (3).

While Chang takes this government protection of children from exploitation "for granted," citing the fact that mot people accept such laws as "natural," it is clear that Republican politicians favor returning to a 19th century version of super-exploitative capitalism. Chang cites broad public support for environmental protections as a form of government intervention that is viewed positively. His remarks are supported by recent public opinion surveys in the U.S. that show strong support for federal agencies like the Environmental Protection Agency, even among Republican voters.

Chang cites a long list of ways governments regulate markets: medicines, alcohol and drugs, food supply, firearms, slavery, human body parts, legal practice, stock markets, corporate audits, licenses for just about everything, banking, real estate and construction, rent controls, minimum wages, immigration, interest rates, and international trade. To this list, labor union membership and collective bargaining between employees and employers could be added.

Of particular note of this discussion was the government bailout of Wall Street after the financial collapse. Some of the most ardent "free market" capitalists – many of whom were perpetrators of the events that led to the collapse – became "socialists," as some major mainstream media noted in the aftermath of that crisis, ironically fueled by deregulation motivated by "free market" ideology.

Chang argues that the myth of the "free market" rests on the fact that government intervention has become so natural a part of everyday life (and beneficial) that we do not see it, we do not notice it anymore. Further, he states, "[t]here is no scientifically defined boundary for free  market." In fact, economics is no science at all; it is "a political exercise" (8, 10). Advocates for a "free market" operate under pretense then. "Their ideological cloak is to pretend that their politics is not really political, but rather is an objective economic truth, while other people's politics is political. However, they are as politically motivated as their opponents" (10). Simply put, ideology, interests and the drive for power define the nature of this political struggle, not science, not objective facts, not inherent moral or natural truths.

"Free market" ideology, then, is little more than a sham cover for special interest struggles within the capitalist framework, from which working families derive neither serious benefit nor have an material interest in continuing to believe in.

Photo: Working families have felt what happens when Wall Street gets a free hand in the market. Now they want government to take their side. (by Bill Burke/AFL-CIO)

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  • @Bud Follow the links in the article to Maine and Missouri and to find out more about exactly what Republicans there are trying to do to child labor laws in the name of the "free market" and competition. As to your other remarks, they do not comport with how "free market" ideologues actually describe their view of capitalism.

    I am glad to see that you think rolling back child labor laws is perfectly ridiculous.

    Posted by Joel W., 04/21/2011 12:52pm (7 years ago)

  • This very easily could be the dumbest thing i've ever read. Do you honestly believe that Newt Gingrich, Rand Paul, and Sarah Palin want to get rid of child labor laws? The goal of the right wing is to not deregulate everything, but to even the playing field. US companies have been trying to compete in this world economy with their hands tied behind thier backs. There are some problems with capitolism and there is need for some regulations. but these regulations should be to creat a competative, fair market. and i wonder why china is more in favor for capitolism, maybe because they know how bad communism sucks?
    i'm out, Trump for president

    Posted by Bud Clark, 04/21/2011 11:21am (7 years ago)

  • Interesting article; thanks, Joel.
    Another way in which the "free market" is a myth is how the rhetoric plays out at the international level. After the fall of the USSR and Eastern European socialist states at the end of the 1980s and beginning of the 1990s, people like Ronald Reagan and Margaret Thatcher justified their agressive new imperialist advances by claiming that only the "free market" can bring poor nations out of poverty. But what this amounted to in practice was pushing of trade agreements in which the United States and other wealthy countries engaged in massive dumping. In other words, we, the taxpayers of the wealthier more developed countries actually ended up subsidizing transnational corporations so that they could penetrate the markets of poorer countries. Haiti is a good example: When Bill Clinton helped to restore the legally elected president of Haiti, Jean Bertrand Aristide, after a right wing military coup, it was in exchange for Aristide accepting the virtual elmination of tariffs on imported rice. So US rice producers, agribusiness giants at least at the marketing and export level, invaded Haiti with vast amounts of taxpayer subsidized US rice. This drastically undercut Haitian peasant production of rice, driving thousands of Haitian farmers off the land and into the cities. Similar things happened with NAFTA in Mexico and other such arrangements. "Free" trade is rigged trade; rigged in favor of international monopoly capital.

    Posted by Emile Schepers, 04/19/2011 2:01am (7 years ago)

  • Two of our earliest intrepid writers covered this very same topic at a convention in the fall of 1847...

    http://www.marxists.org/archive/marx/works/1848/free-trade/index.htm

    Posted by gary hicks, 04/16/2011 8:53pm (7 years ago)

  • One can locate contradictions and impossibilities in "free-market capitalism" in a variety of areas.

    Here are two I've had fun with when the libertarians present their utopia of private property run wild.

    The first impossibility for the government-free capitalism they imagine involves the use of a particular type of "eminent domain" without which vital capitalist investment would be impossible. Modern industry requires inexpensive and steady transportation for goods which they've gotten through a government-mandated "right of way" for the railroads then and the Internet communication corporations today. Railroads would have been impossible if the corporations had to purchase every single piece of land they needed for their tracks from sea to shining sea.

    I can remember the old pre-Internet cable TV days where New York landlords held the cable companies to ransom, or, to put it in the correct economic language, they demanded rent from the companies who wanted to string cable on their property. Then government intervened again and forced one set of property owners to sacrifice their property interests to another.

    The second impossibility of totally "free-market capitalism" rests with the limited-liability corporation, treated via a legal fiction as a human being, with an infinite life span. This economic and legal fiction is the result of legislation, not the recognition of some natural law.

    So the next time you hear one of the libertarians presenting their blue-sky vision of a economy without government, ask them how their system would function without corporations. Then ask then if they want to give the railroad land back to the original farmers.

    (Asking them if they'd want it returned to the original native owners will be too much for them.)

    Posted by M. Abelle, 04/15/2011 12:31pm (7 years ago)

  • @William: The link takes you to the site where you can find more info about the poll. It is a reputable firm that provides polls for major international media outlets and corporations. I know there is a tendency to attack the credibility of a poll if you don't agree with some of the conclusions that can be drawn from it, but unfortunately in this case it seems to be spot on -- and with good reason.

    Posted by Joel W., 04/13/2011 1:16pm (7 years ago)

  • Who took this poll some leftist group who asked push pull questions???? This country is in bad shape BECAUSE of the socialist push being done by the Democrats!!! Seeing the failure of this socialist agenda in Europe, Russia and other places, proves your analysis is TOTALLY WRONG!!!!!! It's time this nation got back to basics and reduced the Government to the (at the VERY least 1950) size!!!! Get the Government out of the private citizens business and out of the welfare state mentality!!! I don't want or need the government making decisions for me!!!! I'm an adult and can make my own decisions!!!!! I also don't like the government taking MY hard earned money and giving it to a BUM!!!!! Guess what I'm just a clerk in a store, I don't own a business and I rent an apartment! But I'm SMART enough to know a LIAR and LIES when is see them!

    Posted by William F Lynes, 04/13/2011 12:08am (7 years ago)

  • Chang's points and Joel's are well-taken. I would add also that the "free market" is not only a "myth" but something of a religious principle, like the trinity to Catholics or the proclamation of one God to Jews. In the case of these religious principles we can't prove that they don't exist(and we don't have to because no one can prove that they in the form of spirt Gods do exist). In the case of the free market we can show that it has never existed. Capitalists do everything they can to create competitive adantage with monopoly as their highest goal. The use the state/government to subsidize them and give them market control over foreign capitalists, over agrarian interests, and of course over labor. Even before the rise of large national and transnational corporations there was nevere anything like a "free market." And capitalists have always sought government subsidies in the form of franchises, land grants, state contracts, protective tariffs that benefitted industry over agriculture while opposing all forms of regulation and taxation that were to the benefit of the working class and the whole people

    Posted by norman markowitz, 04/12/2011 6:04pm (7 years ago)

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