Over our near constant election cycles I hear a lot about "Free Markets" and especially the GOP talking about "getting off business' back so they can flourish" Since these terms are rarely used by anyone showing the slightest knowledge of what they mean, and often used in incomprehensible ways. But I guess it shouldn't be huge surprise in a country where great thinkers are usually reduced to soundbites and quips without acknowledging the theory behind the statements. For an outside example, consider the vast majority of Tea Partiers who are against and are even picketing the protest in Wisconsin. The City Workers are not protesting reduced benefits, they are protesting the eradication of the CBA (Collective Bargaining Agreement, think NFL potential lockout). The are protesting NON-REPRESENTATION. Ring a bell Tea Partiers?
Alright so lets get into free markets. First off I find it hilarious that a 'freer' market is one that is more liberalized. What is actually means is simply no government economic control or regulation; or more simply, no price controls or tariffs no any restrictions on business practices. Now this does not exist anywhere in the world, but the US comes as close as any country. A true market economy would quickly come under Underground Crime rule and prices would be on a roller coaster any given day due to supply and demand that morning. A communist country is the near totally controlled market. This leads to massive shortages and inefficient productivity making production of goods overly expensive.
So what are the problems with these Free Markets and De-regulation (getting off business' back)? I will review 3 big ones. But feel free to investigate others, there are many. Let's start with no economic intervention. No government involvement. This means, no rules for credit card companies or other lenders. No protection from a contract too hard to comprehend. No agencies to control risk. Sorry I veered into regulation already. Economic intervention would be price ceilings, floors and tariffs. And zero subsidies for business, especially farms. Basically an unstable market and that means an unstable dollar prone to inflation and free fall. Not much else to say, unless you don't understand inflation but that's a pretty long topic to actually understand why prices increase economy wide.
So back to regulation. So again basically no rules. Unfair practices are legit, and you can do whatever makes your business more profitable. This includes environmental dumping and air pollution. That may sound like whining, until you wake up and can't go outside because the air is actually dangerous. Has happened in LA. Imagine how fast it would happen now. Or take a look at China. Plus we have rules now (lax though they maybe) and still we almost collapsed. And while I'm on the Recession, Tea Partiers, THEY HAD TO BAIL THEM OUT. HAD TO. Or you would have woke up in a couple days and your debit and credit cards wouldn't work. And after the FDIC replaced all the lost funds inflation again. Bad for GDP growth. So treat your workers, business, customers and investments however you choose, no matter what. You can go alot deeper into this but I don't have that kind of time. So those are the broad themes but you get the idea.
Last issue is Monopoly and Unions. So I guess two things. Monopolies exist now but are government established like your utility company or how your phone used to work if you grew up in the 80's. You know, before you could carry your phone everywhere. In an unregulated economy you see essentially what already did happen here back in the late 1800's. A company would get to a size that allowed them to absorb any and all loses from underpricing their competitors. Eventually the smaller firms would lose too much business or lower their prices until they could not break even and closed. Then the one standing firm absorbs their clientele or the purchases the company at fire sale prices and now can charge whatever they want because they have no competitors and none will emerge because the barriers to entry have gotten too high. This is the principle of anti trust legislation. Even with that, we are having problems because it has been deregulated lately. Walmart now buys roughly 19% of the countries food products and charges higher prices than Grocieries but still get good business because of customers in for the other things they do carry at a lower price. What's the #1 rule of sales? "Get them in the door." That's the hardest part. If they secure too much of the market and decide to slash prices you could EASILY see Safeway, King Soopers and Albertson's collapse. It is the elimination of choice.
Last, Unions. This is the whole hoopla in Wisconsin this week. The government is trying to crush the Union. Remember, the Union isn't unwilling to negotiate to help the state save money, it is protesting the elimination of its Right to Negotiate. And try to do something hard for Americans but look back to when our Nation truly seemed unstoppable. It was generally the 50's. We won the War, had a robust economy, a thriving middle class and home ownership rising. Not to mention that every business provided health coverage. But that was also when insurance had regulations so they couldn't charge insane sums and deny coverage like the deregulated markets of the last 30 years has. Unions are why you work only 8 hours a day or get paid more. Why you have safety regulations, why you get paid vacation, why you get pensions or retirement accounts. Unions were 40% of the work force in the 50's and the rich were rich and the middle class hard working Americans had enough to not have to constantly worry, and to save for emergencies. Today, they hold 7% of all workers. And working pay averages have been nearly level since the 80's while corporate and capital gain profits have exploded, and cost of living increases at an increasing rate.
And as far the the Government Unions go, remember, they could all make a larger paycheck by doing the same jobs in the private sector, but take less to do a job they feel is important and we all reap the benefits. So instead of calling them selfish, thank them for taking less to do a hard job simply due to a sense of responsibility. o
