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.