Arguments against the free market.

UPDATE: Due to an influx of trolls from I don’t know where, I have to close the comments section.

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Milton Friedman is quoted as saying that “[u]nderlying most arguments against the free market is a lack of belief in freedom itself.” If we keep in mind that for free market advocates the term “freedom” only means the absence of force, or freedom1 (for those who don’t know my nomenclature, see this entry for explanation), then the quote makes a great deal of sense. I argue against the free1 market and I do indeed lack belief in freedom1. But this very abstract conception of freedom is so impoverished that its continued use as a valid political framework begs credulity; it has about as much to do with politics as alchemy has to do with science.

Like freedom1, the free1 market is a theoretical, idealized construct which reflects a very narrow view of power. A free1 market is an economic system where individuals perform voluntary transactions to their mutual advantage, free from government regulation and taxation. The model of human behavior underpinning this idealized structure is that of the Invisible Hand, which was expressed by Adam Smith as such:

Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it… He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

The Invisible Hand model can only obtain if a number of prerequisites are true: first, that everyone is self-interested, second, that there exists no sources of power above and beyond that of individuals (such as governments or corporations) which can be exploited for personal gains that are against public interest, third, that all trades are inherently beneficial for both parties, fourth, that competition is the most efficient way of structuring the interplay of self-interested individuals.

All these prerequisites are patently invalid. It is not true that everyone, or even most people, are self-interested, which is to say, only consider their own values as relevant to an ethical problem. Apart from some Objectivist droids and sociopaths, self-interest is pretty universally vilified and considered abnormal, as it should be. Self-interest is a very low level of moral development and it makes as much sense to posit universal altruism as it does to posit universal egoism.

The second prerequisite is especially problematic, since free1 market proponents believe in corporate power, and corporate power depends on government for enormous subsidies of infrastructure, favorable regulations and laws (including protectionism and immigration), money and protection of private property (i.e. of the means of production). Both forms of power are therefore always available for people in a free1 market to exploit for personal gain, bypassing the benefits to the public interest which are supposedly brought about by unfettered trade.

The third prerequisite is only true if we look at the issue from a superficial, voluntaryist point of view. Of course there is a mutual benefit in the sense that both parties to a trade have agreed to make the trade and therefore believe it’s better than the alternative. But this can only be convincing if one sees any given trade as existing in a vacuum. I’ve already argued against this over-simplified view.

As for the fourth prerequisite, competition is the most inefficient way of structuring production, motivating people and fostering creativity. This is a result confirmed by so many studies that it is an ironclad fact of sociology (see No Contest by Alfie Kohn for a summary of these studies).

This leads me to the first argument for free markets, which is that markets allocate resources efficiently. All free market arguments are wonderful examples of projection, and this one is no exception. I can’t think of a more inefficient system of resource allocation than one where everyone’s effort is duplicated endlessly in the name of “competition,” where resources are transformed to maximize profits instead of use value, where there is unemployment and wasteful production, and where natural resources are so drastically wasted. It’s hard to conceive of a workable economic system more inefficient than capitalism (although some forms of capitalism are far more wasteful and inefficient than others).

The second argument for free markets is that central planning is inadequate in gathering and using information due to its top-down nature, and the free market is somehow superior in its supposedly decentralized nature. Again this is pure projection, as free1 markets are a form of central planning: the corporation is the unit of planning and information is gathered within them on a top-down basis. In fact, the corporate structure have been compared to communist organization: both are rigid hierarchies made to benefit an elite at the expense of the common people, property is owned by the collective (the corporation as “person”), and no corporation uses market processes to allocate resources within itself but rather allocates resources top-down based on profit-maximization.

I’ve pointed out that the famous story I, Pencil, by Leonard Read, is actually the best argument for socialism that I’ve ever seen. I, Pencil relies entirely on demonstrating that any single person’s production is at best a marginal addition to everyone else’s production. Therefore any individual producer is largely indebted to, ultimately, eir entire society of co-producers, and the capitalist conception of property as individualistic is nonsensical.

The third argument is that free markets promote innovation and scientific research. This is pretty laughable given how much disrepute corporate-funded “scientific” research has fallen into. As for innovation, well, as long as we have Intellectual Property that pretense will remain equally false, although I think free1 market advocates are pretty divided on that issue. It is at least a good argument against the free market that it is the antithesis of responsible scientific research (for more information, see Trust Us, We’re Experts!, by Sheldon Rampton and John Stauber).

The fourth argument is the belief that there is a fundamental equality in a free market, at least in the sense that no one can set prices or impose regulations that are unwanted by others. This strange belief is the result of anti-government sentiments, but makes little sense in a system where corporations actually do set prices and impose their own regulations through State power. Of course free1 market advocates are against State power, but without a State corporations would simply fill the gap with their own self-regulating institutions. There’s no reason to think corporations wouldn’t have a common interest in banding together against labor power just because there’s no State.

Even from a capitalist standpoint, the free market is not effective at profit-seeking. Isolationism and high tariffs grow stronger corporations, free markets do not. In fact, free markets have historically been, more often than not, imposed on vassal States by imperialist States as part of a global strategy of economic domination and control.

Another popular argument for free markets is the so-called “tragedy of the commons,” the debunked myth (said debunking winning someone a Nobel Prize) that resources held in common will be depleted rapidly as people only seek their self-interest (another free market myth) and will seize everything they can. The historical reality is the exact opposite: commons of natural resources have been far more stable than privately-owned natural resources, which have been typified by rapid depletion and “tragedy.”

But despite these known facts, free market advocates continue to brandish the “tragedy of the commons” myth as if it was established scientific fact and proof positive of the superiority of free markets. The truth is actually a powerful argument against free markets: free markets are terrible at resource management compared to commons, because of the unaccountable, total control inherent to private property.

2 thoughts on “Arguments against the free market.

  1. Independent Radical March 22, 2015 at 21:06

    I think most people who bring up the “freedom” argument, whether it is in the context of economics or politics or gender issues or whatever, are really arguing for the freedom to choose how one will submit. In other words they are defending the freedom to give up freedom, a somewhat paradoxical viewpoint that presupposes the existance of power hierarchies and assumes that those are somehow compatible with freedom. Real freedom means the absense of power hierarchies and that can only be acheived if capitalism, gender, etc. are abolished, not by giving people the freedom to submit to these systems however they want.

    We also need to make a distinction between “believing in” (as in valuing something) and believing that something exists. I believe in freedom in the sense that I value it, but I do not believe that genuine freedom exists under capitalism or in any hierarchical order.

    • Francois Tremblay March 23, 2015 at 00:17

      Any notion of freedom that is not full (i.e. freedom3) necessarily implies submission to hierarchies, because social constructs like capitalism and gender are first and foremost implemented by indoctrination. Force and remunerations are huge supports for them, of course, but the fact of the matter is that if everyone in a society believes something is true, then for all intents and purposes it is true.

      I’m reading bell hooks at the moment and she has a great passage about resisting the definitions (including categorizations, I assume) imposed by the oppressor. That has to be a prerequisite for any notion of freedom, of individuality, of self-determination. Doesn’t it?

      The valuing v knowing the existence of something trips a lot of people up. People will argue, for example, saying “how can you believe God is evil unless you believe he exists?” or “how can you be against the State when you use State roads and services every day of your life?” I think minor variants of this are also used against feminism (the “feminists believe women are just walking vaginas” argument which seems to gain a lot of popularity).

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