Tag Archives: free market economy

Seeing is Believing

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Americans  are prepared to die for their fantasies. Our fantasies as they have been translated into military adventures have already killed many in foreign lands. I believe that many Americans will die. The reality we all have is the stress of uncertainty and uncertainty is all we have. No fantasy can change that fact.

Economics is a very simple subject. It is normal to come up with complex theories that tell us there are ways governments can stimulate economies productively. Charlatans become well paid for making people believe that economics can do things that cannot be done. The temptation to believe  smart people can make the universe less harsh than it is is overwhelming.

Free markets alone create wealth and optimize fairness. It is often said that government intervention is necessary to temper the harshness of free markets.  The fantasy is that government has a way to accomplish such a task.

A peculiar aspect of the free market system is that in the present moment benefits are invisible.  Adam Smith coined the phrase invisible hand. Society assumes nothing positive is going on.

On the other hand when unemployment increases and business fail, those things are right out front for everyone to see. It looks is if all opportunities are disappearing and nothing positive will emerge. Fantasy will dictate that government can fix it. People will fantasize that smart people in government will do something to keep the economy from collapsing. Smart people will bubble up with programs that are based on seemingly flawless logic. Fixing the economy is a terrific hustle. Much wealth and income has been accumulated presenting and implementing economic improvement plans. In the history of the world there has never once been a benefit from a government intervention in an economy.

The free market system is what occurs in nature when slaves are freed. In any other system, force is used in the market place. When Adam Smith was writing The Wealth of Nations, serfs in Europe were gaining freedom, both personal and economic. The difficulty in assigning a government the task of allowing free market discipline is that the population is unable to fathom that it will work.

So, many solutions are fantasized. None of them will work. Governments do all they can to prevent recessions. In time an even bigger recession occurs because government intervention always misallocates resources.

Citizens opt for government intervention because they can see economic problems as they unfold. The only real solution is to do nothing and wait as resources are being allocated more efficiently and new business ventures are bubbling up. Panic sets in because the solution, while working, is invisible.   The problems are in plain sight. People believe what they see but what they can’t see is actually much more important.

Rigged Market Economy

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bush_fascismThe transition has been made in the U.S. from a free market economy to a rigged market economy.

The following is a decent definition of a free market economy.
“DEFINITION of ‘Free Market’
A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.” http://www.investopedia.com/terms/f/freemarket.asp
In the beginning, the U.S. economy was largely free in nature. In a new land with little structure, a free market system developed naturally. The free market concept worked so well, the founding fathers saw fit to separate from England rather than accept government interference. From day one in the new country anyone who could used government as a means of living off the efforts of others. But, the opportunities to do so were minimal. As the country grew and became more complex this changed. Corporations became very powerful and increasingly pressured congress to rig markets. From the 1980s on government policy killed off the free market system.
Adam Smith, father of free market thought, addressed the problem in his classic, Wealth Of Nations.
“Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.”
? Adam Smith
“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.”
? Adam Smith, The Wealth of Nations
Today, for the most part, government decides what citizens purchase and what they pay. Health care is a good example. It is the largest segment of the economy. Government policy dictates that patients pay an insurance company first. The physician is paid by the insurance company. The insurance company plays a role in determining treatment and what medicine is prescribed.
For the most part citizens are happy with the lower living standards of a rigged market system because they are relieved of the stress of making decisions. They are happy to pay more in return for the illusion of being taken care of. They have no choice so they might as well be happy. Government frequently decides what they buy and they don’t mind.
History’s most famous rigged market system was Germany under Hitler just prior to World War II. One of the seldom mentioned attributes of a free market is peace. As a country moves away from free markets, the chances of war accelerate greatly.
Karl Marx is often noted as history’s most destructive economist. In years to come he will probably be supplanted by the names of Ben Bernanke, Henry Paulsen and Janet Yellen. These are the economists who with the authority given them put the last nails in the coffin of the American free market system.