THE FREE MARKET; AND ALL THAT JAZZ

Doug Dowd

The rising tide of center/right socioeconomic policies in the United States (among other societies) appalls a goodly share of our people. Riding high on what is now a flood tide, propelled by and propelling it, has been the phenomenal Second Coming of capital's deity, "the free market" -- otherwise known as "laissez-faire," or "rugged individualism," its slogan "Each for himself and God for all" (as the elephant said, while he danced among the chickens).

The ideas enabling its reincarnation, today as earlier, are as meretricious as the policies they justify are odious; for the past twenty years or so they have swamped us in an almost totalitarian onslaught from economists, politicians, and business, with abundant amplification through the media. In that same process, much abetted by other and linked developments (weakened unions, strengthened corporations, consumerist addictions, and marketed politicians), traditional opposition has been rendered scattered, muted, feckless.

Until yesterday. Now that folks like (and some unlike) us are once more getting our act together, it may be useful -- briefly, perforce -- to underscore some of the elements of today's self-adulatory ideology which, though they have become "common sense" are very much the opposite of good sense.

As economist Sam Bowles pointed out in 1991 (in Challenge Magazine), "Markets not only allocate resources and distribute income, they also shape our culture, foster or thwart desirable forms of human development, and support a well defined structure of power. Markets are as much political and cultural institutions as they are economic." The marketability of everything, an aim long-expressed by market guru Milton Friedman, means the commodification of everything; such commodification is already in place where it should exist not at all, or only when subject to public scrutiny or control: in education, health care, in the preservation of natural resources, in social insurance, in prisons, in national and state parks.

The spuriousness of today's free market dogma is many-sided; take the command "listen to the markets." WHICH market?" Only rarely is there a hint of the usually correct answer: financial markets, and their "investors." The well-spun belief is that the financial sector's main function the servicing of productive investment in plant and equipment (etc.). Not now. Wall Street now is dominated by speculation in securities and foreign exchange (to say nothing of their rock-and-roll troublemaker, derivatives). Foreign exchange markets do between $1.5 and $2 trillion (repeat: trillion) daily; the derivatives market plays with upwards of $90 trillion annually. "Investors"? Gamblers is the better term. And it is a commonplace that most of those doing the gambling for financial companies (or themselves) are very young, little experienced or knowledgeable, prone to "animal house" impulses and behavior -- see Liar's Poker, by Michael Lewis -- not the ideal personnel for guiding zillions of dollars through a global economy that would be uncomfortably volatile even if steered by old geezers. Writing in 1936, when all this was in its adolescence, Keynes famously remarked "Speculators may do no harm as bubbles on a steady stream of enterprise. But the situation is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done."

The gospel of the free market was articulated by Adam Smith in 1776, for an entirely different world. Setting aside for the moment reservations noted above about the free market as icon, it may be believed that Smith would be distressed by the use of his arguments today: 1) the free markets he had in mind were competitive in a particular sense, reflecting the emerging realities of his time and place; 2) his emphasis was on production and trade (not finance); 3) his arguments assumed only small firms, none having power to shape let alone to control its own market, either as regards demand or supply.

His arguments could apply to the many millions of today's tiny -- not "small" -- companies: even "small" businesses as now defined have hundreds of employees (and Fortune Small Business is written for them). The millions of "tinies" are retailers, restaurants/ bars, artisans, whatever, run by families, partners, individuals, mostly working hard to survive, often as an alternative to having to work for someone else.

Nowadays, almost all commodities and many services are produced and controlled by mammoth, mostly transnational companies (TNCs): about 300 TNCs control at least a quarter of the entire world's productive assets. Their rivalries are intense; they fear and even hate each other, hit below the belt, advertise till the cows come home, you name it: they do not "compete" as Smith or current economic theory means it. The TNCs inflict considerably more damage -- of all kinds -- on people and nature in their own and other countries than Smith could have imagined; and he imagined a fair amount: "Businessmen," he said, "are an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." And, he added, "Wherever there is great property, there is great inequality. For one rich man, there must be at least five hundred poor...."

Smith relied upon "the invisible hand" of active and ubiquitous competition to keep business power in check; what we have, instead, is the not always invisible fist of giant business, shaping both demand and supply, owning much of the State, gussied up by their media slickies 24/7.

Smith's focus was the national economy. His most influential follower, David Ricardo (writing in 1817), focused on the world economy, and was the source of the "free trade" arguments of our time. A supporter of industrialization, his aim was to get rid of tariffs on imports, existing because of the political power of the landed gentry. The tariff lifted the price of their crops, gave them an "unearned income," pushed up the price of food and thus the subsistence wage, and thus held back industrialization. Ricardo assumed (among other now totally unrealistic assumptions) that industrial technology is immobile. It was then; now it is easily mobile, and a main basis for the TNCs and their "downsizing and outsourcing."

          And for the devastation the TNCs have wrought in the "emerging market economies." Unspeakable though the colonial/imperialist practices of the past were, the havoc of recent decades has affected considerably more people and created human, social, and natural disasters in ways and to degrees that are likely to be irreversible. Unsurprisingly, it is the TNCs that have been the main force behind "free trade" today. Marx got that right in 1848 when "If the Free Traders cannot understand how one nation can grow rich at the expense of another, we need not wonder, since these same gentlemen also refuse to understand how in the same country one class can enrich itself at the expense of another."

A brief glance at a few historical realities of "the free market" operating at its freest is instructive. Great Britain was the first society to convert land and labor into commodities, as the eighteenth century ended. One consequence was that 80 percent of the cultivable land came to be owned by 2-3000 families, and that the largest part of the population -- once the "sturdy yeomanry" of England -- had become a proletariat, greasing the skids for Britain to become the first industrial capitalist nation.

In the United States both land and labor had long been commodities. By the 1920s that had meant disaster for producers of staple crops such as wheat and corn; it had been a disaster from the beginning for most workers in almost all occupations, most dangerously so in coal mining. The free market for farmers meant producing the wrong crops in the wrong quantities in the wrong places and getting hammered both by the market and by nature: see Grapes of Wrath. For coal miners -- and for mine owners -- the disasters mixed bodily with monetary harm.

It took a lot of effort to end those free markets (unions for workers, governmental market control for farmers); efforts whose good effects have been allowed to diminish and whose bad effects have grown: thus every weeknight on PBS, Archer Daniels Midland, the largest agricultural firm in the world, we may depend on them to see that the children of the future will be fed. ADM was fined $100 million last year for price-fixing. (Sue me, sue me, ADM; what can you do me?)

In a nutshell, and far from originally: free markets mean freedom for business to get what they want, anywhere, in any way they want, and if you don't like it, you can lump it. Or organize.