The “Free Market” Fantasy

Free market fantasy: “As if Alan Greenspan and Ayn Rand were somehow on a desert island very selfishly deciding how to barter and make a profit off each other… May they each win.”–Economist Michael Hudson

In his book, “23 Things They Don’t Tell You about Capitalism” South Korean economist Ha Joon-Chang debunks the current free market fundamentalism by citing historical facts of which few are aware.

For one thing, the rich countries of Great Britain and the USA did not get that way by employing free markets; rather they used tariffs and subsidies and they continue these practices to this very day. Alexander Hamilton’s idea of protecting infant industries until they could compete on the world market was adopted successfully by our fledgling republic.

Joon-Chang>“US shifted to protectionism after the Anglo-American War of 1812. By the 1830s, its industrial tariff rate, at 40-50 per cent, was the highest in the world, and remained so until the Second World War.

The US may have invented the theory of infant industry protection, but the practice had existed long before. The first big success story was, surprisingly, Britain – the supposed birthplace of free trade. In fact, Hamilton’s programme was in many ways a copy of Robert Walpole’s enormously successful 1721 industrial development programme, based on high (among world’s highest) tariffs and subsidies, which had propelled Britain into its economic supremacy.”

South Korea followed this practice, nurturing POSCO, the fourth largest steel company in the world, and the giants Samsung and Hyundai. China’s state-owned enterprises, an abomination to free-market fundies, nevertheless carry on efficiently and have one major advantage, according to Oxford’s Colin Mayer.

“The state has been a tremendous source of continuity and long-term investment in Chinese corporations and has contributed to the success of the Chinese economy. This is in marked contrast to the very short-term approach by investors, particularly in (our) corporations.”

According to Michael Hudson, the free market as envisioned by Adam Smith meant free from monopolies and money-changers. This was called classical liberal economics. This changed to neo-liberal economics in the 1970s, which flipped the meaning of free markets on its head-it made the monopolies free from regulation and set the money-changers free to gamble and get as much interest as they could by whatever means they could wrangle.

The results of forced deregulation and privatization have been devastating around the world, except for a very few people at the top of the food chain. In 1979 the top 1% took 10% of US income but by 2006 the top 1% was taking 23%. The 1% has actually profited from the crash of 2008, while everyone else has been hurt.

All this would be bad enough, but neoliberal economics as pushed by the International Monetary Fund demands that poor developing countries privatize, deregulate and open up to foreign investors-that is, if they want a loan from the IMF. This insures that the country will remain in debt bondage and unable to develop its own industries, a form of economic colonization and wealth extraction.

This cannot go on forever, of course. It cannot go on until, say, 500 people own the whole world.

“War is peace,” Orwell said, and “freedom is slavery.”

“Free Markets” as currently defined is leading to debt slavery on a global scale.

I try to always suggest what one person can do.

1. Tell the FreeMarketeers they’re full of hoppy toads.

2. As much as possible, get out of debt yourself.

3. Have some fun today. No, that has nothing to do with free markets, I’d just like you to have some fun today. J