Debunking the Free Market Myth #1

The fight against health care and Obama's administration has been carefully defined by the right as a narrative of free market versus socialist tactics, or more implicitly, everything American versus either benign pseudo-European socialism or at worst, authoritarian socialism of the fascist ilk. But, I find it ingenuous and nonsensical to not look at Obama's efforts, the country's needs, and the economic structure through a more nuanced, socio-historical lens that avoids the empty platitudes of politicking. Moreover, when one is confronted by an agitator, or someone arguing based on historical eternals or faulty logic, you need to be equipped. Let's look at some of the myths.

Myth #1: In the past, markets were freer. Be dealing with this myth first, I am essentially destroying my entire blog below; if I can handle this one, then every other is simply a corollary and therefore debunked. Anyway, have there ever been truly free markets? If by free, we are referring to the "invisible hand" of supply and demand that underscored Adam Smith's vision of capitalism, then the answer is a resounding no. One of the things my students, and nearly all humans do -- which was at the heart of Marx's argument -- is assume the social structure that they are born into has always been and will always be. Part of this is intellectual laziness: not taking the time to learn about past societies or massive historical changes. However, the lion's share of blame likely can be found in our neuro-anatomy. Think about it in this way: you grow up with yourself, and while you know you have changed as a person over the last however many years, the changes have been imperceptible. So much so, that you likely have found yourself evaluating how you have gotten where you are today. Maybe you see a "turning-point" moment and highlight it as the day things changed, but can we really be sure? In thirty years, will that moment still be seen the same way? Well, this analogy can be applied to our conception of social structure. And, learning history does not suffice. One must gain historical consciousness: they must make the facts they are learning breath with life. As the famed Roman historian Livy once said, "The study of history is the best medicine for a sick mind."

Back to our myth. Were there ever truly free markets? Not really. Before states and writing existed, it appears as if the form of economic subsistence was mostly derived from the household in hunting and gathering techniques. There were no markets. With chiefdoms came some early market-like notions: relatively long-distance trade emerged, but mostly for prestige goods from one chief to another and vice versa. With the rise of states some 5,000 years ago, state-sponsored long-distance trade occurred. Merchants were endowed with goods, they would take the entire risk born of traveling, sell their wares to other merchants, aristocracy, or nobles, and return with new goods for the king and some profit for themselves. The key, though, is the vast majority of people in these early urban states were super poor. They weren't farmers because they lived in cities; and not everyone was a good craftsman or artisan. They were laborers, beggars, or servants. They had no disposable income. The bazaars that did exist catered mostly to bartering and trading as money was not yet as standardized and diffuse as it would become later.

Again, this history lesson is a bit off of the myth, which is really about classic America: a golden age of veritable free market entrepreneurship. Is this true? Again, no. Markets were freer in a sense in the 18th and 19th centuries. Less government regulation, but also much greater risk. Snake oil, one of my favorite products, is a perfect example for an entire economic system. People were free to sell what they wanted, and they worked very hard to create a market. There was no FDA to review whether the product was safe or even effective; there was no agency that put pressure on you to be honest in your business practices and truthful in your claims. So, in a sense, the market did regulate itself, but at a disadvantage to the average person who had little time or education (or wikipedia) to discover whether snake oil was healthy, efficacious, or useless; he market then was still tilted against the working class. Thus, the arguments then were like today: corporations and the capitalist class deserve free markets. By the time capitalism and the industrial age took off, post-Civil War America, it looked nothing like the GOP wants it to be and the tea baggers think it was. Just go back and look at the Supreme Court decisions from about 1870-1930...they are unbelievably lopsided towards defending the rights of corporations; the 14th amendment, enacted to protect the protect individuals especially newly "freed" black slaves was used by corporations to protect themselves against the claims of individuals. Moreover, the so-called gilded age coincided with the rise of the "captains of industry" like Carnegie and Rockefeller, who also looked like the monopoly fellow and acted like him too. They were cruel, nefarious, cunning, and not unlike the oil barron that Daniel Day-Lewis played in There Will be Blood. They hated workers and saw them as expendable, fighting against workplace regulations that led to the death, dismemberment, illness, and malaise of uncounted numbers of people who helped build this country. Like the GOP today, they were hypocrites: from one side of the mouth they supported the working white American class in public, while hiring immigrants whenever possible because they were cheaper, harder workers, and expendable. They bought congress....look it up. The most corrupt period in legislative history in the US was during the "gilded" age. The markets were anything but free. The Horatio Alger myth of people pulling themselves up by their bootstraps distorted the objective reality: few people experienced mobility then, few experience it now. Demand could be shaped with cunning and creative advertising campaigns; this is also a fact. Think about this....why would a corporation spend 1-2 billion dollars on a thirty second Super Bowl ad if it had no impact on people's buying habits? That is irrational and everything economic models of capitalism would rally against. The early Sears and Roebuck catalogs provided strong indications that people's tastes, preferences, and desires could be shaped by advertisers. Was the market free? Yes, because the government continued to not care. That is, the practices of the capitalist class sunk the economy into the Great Depression and it was clear the old ways were unstable. What followed was the Warren court which salvaged the Bill of Rights as a document of the citizen and not the corporation; the restructuring of the American economy and government such that we didn't have to follow Germany's, Italy's, Spain's or any other European nation's strong moves towards socialism. We could have capitalism, and relatively free markets, while also protecting people...What a novel idea!!!!

One final note: go read Adam Smith. His theory was essentially this: where merchants, tradesmen, and owners of capital were unregulated, the nations wealth would grow. A sort of trickle-down economics pre-Reagan. You have to put his words into a certain socio-historical context (the late eighteenth century). First, England likely taxed and regulated inter- and intra-national trade. Second, he recognized in his book that completely free trade could and probably should never happened. Third, the question that often is ignored by modern GOPers/free-market advocates because modern economics has institutionalized its (wrong) answer is: what ensures that the market will regulate itself and people will do what it is right and not do things like monopolize, sell bad wares, etc? His answer is self-interest. If everyone follows their own self-interest than the economy will run smoothly. People won't buy things they don't need, are made terribly, or they can find cheaper; people won't sell things that will bankrupt them, that will harm people and come back to financially haunt them, etc. It is called the "rational-man" model and it is the basic assumption of human agency that underlies modern US action and interaction. Sociology, anthropology, and many other social sciences have long demonstrated empirically that people don't act this way. (1) Not every person has access to all the relevant knowledge in order to make the best decision in pursuing their self-interest; (2) socialization and social pressures go a long way in shaping our self-interest, often in ways counter-intuitive or against what would objectively be in our best interests; (3) corporations, like the car companies, do use rational calculus...but not for the benefit of the many: when a defect that kills people is discovered they weigh the cost of recall and repair vis-a-vis the number of likely lawsuits they will get; (4) irrationalities dominate market actions: gas spikes lead to people hoarding gasoline, brief fads and fashions created by TV, celebrities, and other media spark intensified purchasing, planned obsolescence precludes consumers from making good purchasing decisions, and people often think with their heart, their sexual organs, or other non-cerebral aspects of their body, which advertisers use to their advantage. So, the answer is no: markets are not free, never have been, and never will be. In theory yes, in practice absolutely not.