Liberty For All

by Jessica Pacholski

In finance the term “free market” is bandied around quite often. Free market capitalism versus socialist capitalism. I call it socialist capitalism because all financial systems are based on capital, production, labor, and commodities, hence are capitalistic. The only difference is who controls the means of production the people or the government. Those who argue the case for central planning and tighter government control often blame the free market for our problems. However, they don’t seem to understand what a free market is and often define corporatism as capitalism.

Corporatism, or Mercantilism, is where the large politically connected businesses dominate the market through the cartelizating effect of centralized power. In other words, it’s a government protected ring of monopolies. Free market capitalism is where the people actually regulate and control capital and production, competition is not good for monopolies and large market share in an industry is the outcome of consumer choice. In other words the free market is all of us. Billions of people making non-coerced transactions of our own free will, that is the “invisible” hand, it is consumer regulated business.

All business is motivated by its own interests. In actuality, all people are motivated by their self interest whether the reward is tangible or not. To change a business model it is far more expedient to go right to the source, make it unprofitable. If a company does something you find unconscionable, don’t give them your money. If doing the right thing makes them a profit it is an incentive for them to do so. You tie in their self interest with populace’s interests and everyone does better in the long run.

Competition is a positive. It keeps businesses honest, something that regulation does not do. When any industry is over regulated the corporation’s main objective becomes how to get around the regulation or use it to destroy smaller competitors. As a matter of fact the large corporations lobby for many of the laws that people assume they would be against. Why do they do this? Because many of the smaller less established businesses go under due to the new regulations, they do not have the resources to comply, ensuring compliance is very expensive and only the largest firms can afford to conform to the new regulations. Hence the reigning in of industry that the people feel regulation accomplishes usually serves to squash competition and enrich certain influential businessmen who use the government as special protection. This is monopoly, a condition that is near impossible in a real free market since government interference is necessary for it to exist.

Capitalism is usually maligned as “Social Darwinism”, dog eat dog, but is this a fair account? For a company to stay on top in an unfettered free market it must meet the needs of the consumers, keep their prices low, and keep innovating, if they fail to deliver they go out of operation. I guess that is survival of the fittest, however I can’t see why this is a bad thing. Companies that cannot compete should be forced to re-evaluate their business practices to become more efficient or be eliminated to make room for companies that can.

I know, what about the workers? How does it help workers to keep unproductive companies on life support and kill companies that could take its place? What if they are missing opportunities by keeping unsuccessful businesses alive? If their company is replaced with a more successful one they would benefit. It would be likely that the more stable company would offer competitive pay and because of better business practices their solvency helps to ensure their future employment. How are workers then hurt by the dissolution of the former employer’s company? It may cause short term problems, such as temporary unemployment, as the market changes, but in the long run both the workers and the consumers, who are in reality one in the same, are better off.

In short we should view the economy as an ecosystem, not a machine. It is the habitat of human interaction the natural process of evolution is a positive for all by directing resources into productive businesses and eliminating wasteful ones. The only way for this to work is to remove the force of government regulation in favor of consumer regulation. The “animal spirits” that Keynesian’s offer as a reason to dismiss free market advocates is a complete misdirection. We are the animal spirits and we are capable of making decisions without coercion. That is why they ridicule. They seek strong central control of the market which is really central control of the people.

Keynes once admitted that his economic system worked best under a “totalitarian” government. What he neglected to mention was that by adopting his system you could create one in a free society. Central planning of an economy is central planning of people’s decisions and choices. You cannot have freedom in the other areas of life without freedom in economics through free markets, yet there are many people who seem to think that you can.

The coercive approach doesn’t work. If you don’t believe me than think about this: There were over 10,000 pages of regulation on the issuance of mortgages at the time of the subprime market implosion and it was useless in stopping the catastrophe.

Jessica Pacholski is a 36-year-old mother of three beautiful girls who lives in Clayton, NC. She is a full-time mother and part-time writer who enjoys reading, painting and stirring the pot.  You can contact Jessica at jessicapacholski@gmail.com.