“So contrast that to the crash of ’29, when, suddenly, the US got involved in a lot of programs, like Barrack Obama’s getting involved in a lot of programs now ... and so ... the recession/depression we can look forward to lasting a lot longer in America, than if Obama just sat back and let the market, you know, be a market.” Max Keiser
Max Keiser, that very entertaining online econo-show host and ex trader, is advocating here the kind of laissez faire, non-interventionist economics that quickly turned the 1920-21 stock market crash into the roaring twenties. I enjoy much of what Max Keiser says and support his efforts to bring important information to the attention of as many people as possible, but this is an argument I do not agree with. However, because it is a good example of the circular “freedom = free markets = democracy” meme so virally ensconced in the public’s imagination, and spreading worldwide since the collapse of “communism,” it presents me with an opportunity too nice to ignore.
The roaring twenties was a speculation-led bubble that directly created the 1929 crash, which itself gave us the Great Depression, so to see that period as somehow economically healthy is somewhat specious. Furthermore, there is a lot of debate about whether intervention or non-intervention turned what might otherwise have been merely a mini-recession into a multi-year depression, but neither of these objections is what I want to tackle here. What troubles me is this idea of the free market. What does that actually mean, in detail?
To my mind it would mean, in pure form at least, no rules whatsoever, which would mean all synthetic derivatives and any trading of anything — including kiddy-porn, snuff movies, cocaine, heroin — would be okay, as would Wild West style gangsterism and true, hard-man, survival of the fittest punch-ups by any means imaginable. If only the fittest survive, in terms of ruthlessness, brawn, intelligence, cunning etc., that can only be good, right? Children working in factories, slavery, genocide of unneeded human excess, the whole nine yards. Those who survive that kind of a market place really would be deserving of their precious existence. But no one in their right mind advocates such a world. So what are free markets?
A free market is one in which the settled rule of law operates in the interest of effective and honest trading. So free markets need laws, which are tricky, complex things full of devilish details and convenient loopholes at the best of times, and subject to revision and interpretation — change is the only constant. The Market therefore needs the help of a legislature and executive that properly understand it (very problematic because politicians don’t work in the markets), the legislature and executive themselves needing money to operate at all. This money must of course come from the business activity of the market via taxation and donation.
So we necessarily have a State-Market partnership which exists in a system whose principal quality is the pursual of success as denoted by material acquisition and wealth. Ever-present in this system as an ongoing pressure towards corruption is money, and, by definition, that being rich is better than being poor. Out of this bizarrely supposed separation of Market and State there is, to my mind, simply no way a free market can exist. There has never been one, and will never be one; intervention is essential, corruption inevitable.
As I have argued before, markets are monopoly/oligopoly/cartel creating processes. They are predicated on competition, which means winners and losers, and the winners slowly gain sufficient power to control the market to their advantage. Nice guys finish last. Greed is good. Greed cuts through. Being rich is better than being poor. The system is stimulated by its very nature to render perfect competition impossible, regardless of its intrinsic theoretical failings. Only perfect competition could produce a free market. A perfectly competitive market is composed of perfectly informed and rational market actors, both as buyers and sellers. This is not possible. If it were, markets probably wouldn’t need any laws.
Perfect competition and free markets are economics’ Utopia condition that can never be reached. Until they occur (and they never do), distribution of goods and services will not be efficient (i.e. built-in obsolescence), will be unfair, and we will get poverty, war, and the many other unsavoury aspects of all monetary socioeconomic models. Even Adam Smith, a passionate advocate of free markets, recognised this:
“To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but, what is much more unconquerable, the private interests of many individuals, irresistibly oppose it.”
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
There is no way to prevent conspiracy, fraud, or any other type of corruption that the human imagination can conceive of, except through intervention by the State in the Market, such intervention always being, of course, very imperfect. And because the State must intervene, there is necessarily a close relationship between it and the Market (to my mind they are two sides of the same coin and share many characteristics). It is in the Market’s interest — because the name of the game is to acquire wealth — to pressure government to enact law in its favour. This dynamic is inescapable.
Unless we pursue true abundance globally and establish an economics without price. In the same way that Open Source Software and Wikipedia are self-organising and non-monetary in their internal operations, so resource distribution can be too. Now that we can technically produce abundance, the only way to distribute goods and services fairly is by transcending the price system. We just have to learn how to want this, culturally, voluntarily, and then go for it.