Libertarians throw the phrase “free market” around a lot, but the important word among those two is free. Markets, per se, are really an after-thought. It’s not as if we don’t want freedom in our non-market activities. We want to have freedom, in all ways, including in our “market transactions”. The word market confuses a lot of people because they imagine “markets” to be an institution, a thing that one can point to and say “this is a Market”. But we don’t mean it that way, really. There’s no such thing as a market. It’s just a catch-all term to cover the sum total of all exchanges.
The only alternative to a market is to have rationing by command. One monopoly with control of all goods who hands them out to people according to a scheme that monopoly has planned out in advance. A situation where there is any sort of trade at all, is technically a market.
Now it is true that any exchange leaves people better off than they would be had they not made the exchange, or they wouldn’t do it. This even applies to a simple robbery. When the robber says “your money or your life” and you hand over the money, at the time, you felt that that was the better option. However, this is where context comes in. To paraphrase Lysander Spooner, one must question how the robber came into the position to offer you that exchange. For another oft used example, when the sweatshop owner offers people a job under terrible conditions, and they take that job, certainly, to them, it was better than not having that job. Simply banning that transaction will leave those people with even worse options to survive. But again, what must be questioned is how the sweatshop owner came into the position of making that offer.
When the politicians and media pundits talk about “market-based solutions” or “markets” at all, one must wonder what sort of markets we are dealing with. Almost certainly not “free markets” for many, many reasons. The biggest culprit here, and the one that is the least visible to most people is the banking system, with central banking as it’s lynchpin, the piece of the machine that holds the whole thing together. Even people that complain about “the Fed” generally see the problem with it being “inflation”, meaning price inflation. The part that is less seen is how the banking system as we know it creates oligopoly/oligopsony, meaning a market with a few large producers who are able to wield unnatural control over buying labor and selling their products.
A fiat currency, that is to say a currency not backed by anything in particular except the government forcing people to use it, floats against the value of all goods and services that can be bought with that currency. As more currency enters the system, the marginal value of each unit of currency goes down. This is ordinarily seen in the form of price inflation, but that depends on how quickly goods and services are being produced in relation to how quickly currency is entering the system. Either way though, X amount of currency will buy less if there is 10000*X amount of currency than if there was 1000*X.
Now when a bank lends currency to a large corporation, to a great extent (95-99%), that currency is “produced” out of thin air. A number goes into a ledger, and now *poof* that account has, say, 100 million dollars in it. This currency doesn’t really exist in the system until it is spent. Whatever that corporation spends that money on, it has essentially stolen from everyone else who is holding an amount of that currency. Assuming the loan is going to be paid back, then it is the bank who has stolen it.
(If I rob your house and lend the money I steal to someone to buy a lamp, who does the lamp actually belong to?)
Whoever sold the corporation whatever it bought benefits a certain amount from that new money as well. They are getting a signal that there is more demand for X, and will raise their prices. They in turn will spend that money, etc… Whoever sees that money last, will benefit least because prices have already gone up to match the new level of currency.
To simplify this model, you can see it as a redistribution of purchasing power. Those who borrow the most gain the most, and those who save, lose the most. In the end the banks themselves gain the most because they get all of that purchasing power back and then some, as long as interest payments are able to keep up with inflation. This forces the banks to make sure that interest rates are high enough to account for inflation, or they will lose purchasing power in the long run.
But this leads to a situation where those who establish themselves early in a market are able to compete for banking dollars better than late comers. Plus, the money they got was more valuable than the money the late comers got. This leads to an ever escalating “barrier to entry” as the fixed costs of doing business rise and rise.
This alone eventually creates oligopoly, with no other intervention. To make it worse, almost everything that the government does either destroys capital outright, inhibits new capital formation, or controls how capital can be transferred. This makes the marginal cost of capital higher, which benefits the existing owners of capital at the expense of everyone else. This artificial scarcity of capital creates an artificial abundance of labor relative to capital, which leads to unemployment and low wages.
Regulation is a big part of this scheme. The regulatory state as we know it was created by the progressive movement in the late 1800s and early 1900s. Though the mythology of American history implies otherwise, it was well known at the time that this would create oligopoly. Oligopoly was promoted as a more “rational” way of having markets than the “chaos” of free markets. Of course once you establish oligopoly, regulation becomes “necessary” in order to prevent the oligopoly from completely screwing everyone else over. It’s a chicken-egg type of self-fulfilling prophecy.
If it came to pass that the only beverage suppliers, including water, were CocaCola Inc and PepsiCo, and it was impossibly expensive for anyone else to legally provide beverages, there would be a good case to be made to regulate those companies in order to prevent them from selling us sewage at 10 dollars a bottle. There would certainly be a black market in water, which the “law and order” types would cry about. The quality and price of that black market water would be questionable and people would be killing each other over turf. There would probably be some right wingers at that point saying “let them die of thirst” but in this case, the left-wingers would be right, in context. But one must again question how such a situation came to pass.
One of the major forms of oligopolistic regulation and one of the most obvious is the idea of “intellectual property”. Copyrights and patents directly establish oligopoly, if not monopoly, for a certain amount of time. Patents at least are fairly limited in their time and scope. But copyrights are essentially perpetual for the purposes of any human lifetime. And the precedent has been set of extending copyright terms indefinitely, specifically to protect copyrights already held by big business. (see Disney for an example)
After the fact of establishing this system of oligopoly, the government then will step in and subsidize those at the bottom of this government-created pyramid in order to prevent mass starvation and riots. Interestingly enough, this subsidy also creates a barrier to entry in markets, by putting a floor on labor costs, making oligopoly worse, and pushing more people down to this floor in the long run.
Eventually the logic of this system leads to a sort of Kapitalist Leninism, in which there is one large producer that sells everything and employs everyone who is employed and everyone else is on welfare. The movie Wall-e showed this sort of “business communism” pretty well.
Right wingers talk about “markets” all day long, but to a large extent, what they oppose is merely the welfare part of the system. They oppose the redistribution from the rich and middle class to the poor, but not the redistribution from the poor and middle class to the rich. If one takes their ideology to its logical extreme, we would have the banks owning everything, maybe the top 10% of all workers in each field would have a job and everyone else would be forced to join the military or starve. This military would necessarily be employed to protect “private property” from looters and rioters, so the common man would be forced to kill his neighbors or be killed by them. The Kapitalist Leninism of the liberal consensus almost looks good in comparison. This is what so-called liberals or progressives envision when you say the term “free markets” or “capitalism” to them. Neither the “left” nor the “right” as we know them today understands or opposes the mechanism of oligopoly, they’re just fighting over how the spoils are spread around.
To our descendents who will live in a free society, “Dilbert” wouldn’t make any sense. No one could stay in business doing those things, because someone else would rise up to challenge any business run so poorly. “Office politics” would be impossible because you’d lose money, and there wouldn’t be endless reams of financing and “bailouts” to keep you in business. Capital would grow horizontally and organically, because there would be an incentive to save. This would lower the price of capital and make businesses more and more competitive, in wages, prices and product quality. Without banks redistributing capital to the core and without the government raising the barriers to entry, “big business” as we know it – oligopolies who decide who is employed and who is unemployed, who produce shoddy products with poor customer service because “where else are you going to go?” would be impossible. This is why the “free” part of the phrase free markets is much more important than the market part. We already have markets. What we don’t have is freedom.
Nice to see you writing here, Anna. I think for most talking heads in venues like CNBC and Ali Velshi’s program, “free market” is just a verbal tic for “the kind of economy we have now.” They’ll respond to a complaint about drug prices or CEO salaries by saying “But isn’t that just the way the free market works?” I doubt any thought is even involved in formulating the response.
In my experience, there are many things called “market.” So I find myself confused by comparing the first paragraph to the last. We do have markets in the world, including farmers’ markets, shopping cities, and financial “markets.” Most of these are not free precisely because they sit in fixed positions and can be “taken down” by government force. It is hard to avoid regulation and taxation if your shoppe cannot get up and run away.
One of the potential opportunities of the Internet and social networking sites is flash crowds. There may be an application to agorism here. A series of messages goes out to vendors, followed by a series of messages from the vendors to their customers. A “flash market” appears somewhere in town, hidden in a warehouse perhaps. Or out on the open road, in an empty field by the side of a side road. First the vendors arrive, which is why they get word first. Then the buyers arrive. Business is transacted and a festival atmosphere is prevalent. After a fixed time, or in the event of a satellite passing over, or word leaking out, the market closes (as the vendors individually or severally choose) and the whole thing melts away. Flash market, no taxes, no regulators.
Some years ago I was involved with a private venture capital stock exchange. One of the companies I was managing owned the market. It was more free than most markets. Although we had conditions for listing a company, we worked with several currencies that were based on free market principles. These included e-gold, 1MDC, and others. The servers were in a good jurisdiction, far from the meddlesome feral gov’t. So that gang of thieves stole the gold underlying 1MDC and subsequently coerced a plea bargain agreement where the owner of e-gold became a felon in his own home (house arrest). These actions created a huge hole in our stock market where a big pile of gold used to be. The lesson to learn here is: single points of failure are a bad idea.
One of the best articles I’ve read here.
This lays out really well why I don’t consider markets any sort of panacea (and why I don’t like describing myself as a “market anarchist”). Indeed, I’d take the author’s critique of existing conventional markets further – it’s almost as if markets are employed as second-order checks on first-order central planning by the powers that be. Markets are used not to get rid of central planning, but to shore up central planning to prevent sudden collapses and maintain status quo power relationships.
The goal seems to be the channelling of market forces to particular parties’ advantage, not to actually use markets to deliver maximally efficient, let alone just, ends. Markets are just a tool, after all; they are not the essence of human freedom and cooperation. They need to be free from manipulation because all aspects of the human condition must be free of manipulation.
“The regulatory state as we know it was created by the progressive movement in the late 1800s and early 1900s. Though the mythology of American history implies otherwise, it was well known at the time that this would create oligopoly. Oligopoly was promoted as a more “rational” way of having markets than the “chaos” of free markets.”
Dubious. Discuss. Citation needed.
Progressivism is a mix of social, economic, and political ideas. A simple definition is “the attempt to end all discrimination”. That means discrimination based on sex, race, sexual orientation, health, and yes, wealth. The ironic thing is that I don’t think progressives would disagree with anything you said here, only they would draw a different conclusion than. Their conclusion would be that the market is inherently discriminatory. So they would be market abolitionists. As am I. That’s not to say they’re against the market mechanism. We understand that discrimination in regards to products can be a very efficient way of coming up with better and better ones, but we’re just against money. You can’t compete economic equality into existence. You just can’t. It has to remain, underneath all market transactions, at all times.
A progressive would never advocate for oligopoly. Progressives are basically syndicalists. A large institution is much harder to unionize. The owners of the means of production are usually much more influential and therefore harder to deal with. The event that changed much of American history is the court case Dodge v. Ford Motor Company, which basically declared (no matter what people say to the contrary) that corporations exist solely for the purpose of maximizing shareholder wealth. Up until this point, corporations weren’t necessarily immune to stakeholder concerns. Now they are. It’s called shareholder primacy and progressives are totally against it. This is what created oligopoly, as these corporations became almost completely unaccountable to anyone but shareholders. I say almost because they were also accountable to the state. This is where the regulations come in. Regulations didn’t create oligopoly, they were instituted in response to it.
It is but a few small court decisions from corrupt, activist judges (mostly in Deleware) who have created the oligopoly we live in today. And no judges have done anything to overturn their rulings.
Scarcity creates an absense of freedom and a condition of dependency. Therefore, a market in which we all must buy our necessities for living is fundamentally discriminatory and socially Darwinian. There must be some communal aspect to our societies, and then we can have friendly competition on top of that.
Syndic, I think she was referring to the capital-P Progressive movement at the turn of the 20th century, which was very much managerialist and bureaucratic–not to people who use “progressive” as a self-designation today.
The Progressive movement of a century ago was the direct ancestor of mainstream liberalism.
As for the people who call themselves “progressive” today, they strike me as neither fish nor fowl. There’s a large element of continuity with mid-20th century liberalism (“Consensus Capitalism” or corporate liberalism), but also a lot of green and postmodern stuff thrown in. I don’t think the different flavors of the resulting mix work very well together at all. On the one hand you’ve got all the green, decentralist, small footprint stuff. On the other hand, you’ve got the Michael Moore calls for restoring heavy industry output sufficient to employ the whole country full-time like Flint ca. 1950. There’s simply no way to reconcile the two, unless the industry is churning out pseudo-”green” crap and finding ways to make people buy it whether they want it or not, and then getting people to throw it away and replace it every two weeks. The America Moore celebrates was built on mass consumerism and planned obsolescence, and could never have existed without it.
Kevin, the progressive movement of today and the progressive movement of the turn of the 20th century aren’t any different. They’re the same movement. It’s been an effort to end discrimination all along. Can you provide any evidence that the Progressive movement at the turn of the 20th century “was very much managerialist and bureaucratic”? And even then can you show any evidence that it created oligopoly instead of being in response to it? I’d appreciate it.
re: “It’s been an effort to end discrimination all along.”
Well, for starters, the American eugenics programs that Hitler drew from for inspiration were a “progressive” thing.
http://www.ncbi.nlm.nih.gov/pubmed/2698847
Does Anna or somebody else mind expanding a bit on these quotes? I'm not sure if I'm understanding the full implications of what she said.
"Those who borrow the most gain the most, and those who save, lose the most."
"This makes the marginal cost of capital higher, which benefits the existing owners of capital at the expense of everyone else."
@CommunitySyndic: I'm going to respond to what I believe is pertinent and disregard what I believe to be superflous, too compound to address in this one post, or that I simply have no disagreement with.
"Can you provide any evidence that the Progressive movement at the turn of the 20th century “was very much managerialist and bureaucratic”?"
http://www.amazon.com/Triumph-Conservatism-Gabrie…
Oh gosh, the things you can learn about when you actually apply yourself to learning about things. Now, what Kolko covers should be pretty basic knowledge for any contemporary leftist, it is a wonder you didn't try and name drop him ahead of time in order to try and cut us off.
"A progressive would never advocate for oligopoly."
And a fascist would never advocate murder, but since when are victims of genocide people, mirite? Simply because a Progressive never explicity states "oligopoly ought to be a norm" doesn't mean it isn't implicit in their reasoning, advocacy, and actions. What you're doing here is the clearest case of what your posts have been: a failure to contextualize concepts and history beyond a simplistic understanding of what is written.
"Progressives are basically syndicalists."
This is so completely incorrect I'm absolutely shocked that you even suggest such a thing, given that Progressives and syndicalists have been historically in opposition to each other (and this is pretty well documented by Goodman, Kolko, Zinn, Malatesta, Kropotkin et. al., which in turn makes this statement strike me as one made in complete ignorance). Progressives explicitly advocated the abolition and degradation of various syndicalist ventures and worker-organized societiess throughout the early 20th century (the best instance which comes to mind right now was the systemic choking off of the fraternity-lodge medical practice, but there are myriad other instances which could be pulled from), and advocated that technocratic institutions made of "experts" ought to have the function of regulating life as we know it — production, distribution, what we put in our minds, our bodies, EVERYTHING. The reality of Progressivism is that it served only to forward the interests of the privileged technocratic elite, just like any group placed into a position of power will do. Bakunin wrote with stunning clarity when he penned the words "[n]o dictatorship can have any other aim but that of self-perpetuation, and beget only slavery in the people tolerating it."
"This is where the regulations come in. Regulations didn’t create oligopoly, they were instituted in response to it."
I can't speak for Kevin, but I imagine he might be a bit too modest to point to his own work (or perhaps a bit more able to put together an answer to your question from the eruditic ether). I, however, have no compunctions in using his work as a great basis for which to make this needed point:
http://members.tripod.com/kevin_carson/sitebuilde…
As Kevin points out and thoroughly cites, when the trust movement couldn't abolition competition through price-cutting, they sought to ban it outright through the use of federally subsidized and privileged trade associations and legislation. This in turn created the stability the large corporations craved so as not to lose their market share. It is no secret that Monsanto, Cargill, Halliburton, etc. have all used or created the regulatory infrastructure in place to push out competition, and it wasn't any different 100 years ago.
"Scarcity creates an absense of freedom and a condition of dependency. Therefore, a market in which we all must buy our necessities for living is fundamentally discriminatory and socially Darwinian. There must be some communal aspect to our societies, and then we can have friendly competition on top of that."
I believe you're failing to see that artificial scarcity (I say "artificial" because scarcity is real, but exists as a malevolent specter simply because of organizational and institutional trends which have brought us to such a point where one can not enjoy the surplus of their labor) and the absence of freedom are bedfellows within the State paradigm; one can't go far without the other. If we had accessibility to capital and credit, land and labor, there would be no stranglehold by which the State and Capital could do us harm.
“This artificial scarcity of capital creates an artificial abundance of labor relative to capital, which leads to unemployment and low wages.”
Yes, part and parcel of what Catherine Austin Fitts calls The Slow Burn. No need to worry about the devaluation of your assets or capital (in any so-called financial meltdown), if you’re part of the elite. You can just devalue labor, and depopulate. That is the plan.
Interview with Fitts here: http://www.mystreamingserver.com/Archives/CAFitts040610.mp3
Remarkably balanced article for C4SS. Keep this up and you will be looking for a new publisher.
Markets are no after thought. What does “freedom” even mean if it’s used without any context whatsoever? Free to what? A single person with no contract isn’t free or not free; to use the term presupposes interpersonal contact and exchange. And the moment interpersonal contact (much less exchange) is involved, so are markets.
So “freedom” by itself is meaningless–think of “freedom from want,” etc. Liberty is a better term. But to give these terms meaning–liberty, freedom–you have to define or anchor them in what is unique about libertarianism, which is our unique libertarian view about property assignment rules: basically, our Lockean-ish view of homesteading (see my What Libertarianism Is). Saying “free market” at least ties the notion of freedom to a property rights regime. It implies that we are talking about freedom in terms of property rights–because a market arises only when (a more or less Lockean conception of) property rights are respected.
Too many of the left-libertarians have tried to take “capitalism” from us. Their progressive cousins have already stolen “liberal” from us. Please don’t take “free market” too.
Progressives took the word "liberal" by applying it to themselves. Left-libertarians are refusing to apply terms like "capitalism" and "free market" to themselves… so if you want it, you can have it.
As for particular property assignment rules being the definitive point of libertarianism… haven't you paid any attention to the left-libertarian critique? That is exactly what distinguishes left libertarians from other libertarians.
Kinsella, nevermind the above post. I've re-read some of your writing and see where your coming from.
As for the point of this post, I agree that "free market" should not be used as a synonym for libertarianism. However, it is one aspect of libertarianism among many. Market behavior (explicit exchanges of goods and services) are a popular target of statists, so it is one place where libertarians rightfully push back. The term "market" can be a useful modifier to define the scope of the issue being discussed.
Re: "what is unique about libertarianism, which is our unique libertarian view about property assignment rules"
I thought what was unique about libertarian thought is that we actually want individuals to be free to do all they wish to do so long as they don't infringe on the freedom of other individuals. Rules regarding property and possession are just ways to realize this principle in the physical world.
CommunitySyndic, read Gabriel Kolko's Triumph of Conservatism and Railroads and Regulation for documentation of how the Progressivism of the late 19th and early 20th centuries was pro-corporate/pro-oligopoly and anti-consumer/anti-labour. (See also Roy Childs' article about the supposedly anti-business legislation of the Progressive Era.)
Oops, I didn’t notice that AnarchoJesse already recommended Kolko.
@Stephen – I am not trying to take away the term "free market" at all – thus the title of this article. I am trying to make people wary of calling any old thing a "market" in contrast to a real free market.
If you add a glass of water to a gallon of sewage, you get sewage. If you add a glass of sewage to a gallon of water, you get sewage.