Home > Comments and Reflection > “…There’s NO such thing of Free Market…”

“…There’s NO such thing of Free Market…”

It is common to hear people call for the removal of the government from the market or launch defenses of the ‘free’ market. It is asserted that governments always get things wrong and that regulations only make things worse. Conservatives proclaim that if the economy was only left in the hands of the free market everything would be better. However there is no such thing as the free market. It doesn’t exist and probably never did. Every market has some rules and regulations that even conservatives admit are necessary. We have grown so use to them that we don’t see them but they are still there. The market is never free.

The examples of this are so numerous you’d be surprised you didn’t think of them before. For example child labor laws. Every so called free market has these laws restricting the actions of business. This is clearly a government regulation hampering and hindering entrepreneurs and probably creating market inefficiencies. But not even a diehard free marketer would call for their abolition. But how can the market be called free if the government decides who businesses can and cannot hire?

There are a huge number of areas in which the government has decided the market cannot enter. (The list and indeed the whole post is inspired by Ha-Joon Chang’s excellent book 23 Things They Don’t Tell You About Capitalism) For example it is illegal to buy or sell government jobs, politician’s votes or judges’ decisions. Government regulation greatly hampers the sale of alcohol, medicine and firearms. That is to say nothing of the seemingly obvious examples of prohibitions on the sale of humans (i.e. slavery) or drugs. It is illegal to sell toxic or rotten food or pollute the environment to the point that people die.

When conservatives argue that the market should be free is this what they mean? You might not take this point serious claiming no sensible person would argue for the legalization of all of the above. But why not? Each one in its self is government intervention in the free market. If the freer the market the greater the benefit for all, as conservatives such as Milton Friedman argued, then surely abolishing these prohibitions would leader to greater economic prosperity? Every argument against government intervention in healthcare or education could be used against government intervention in drugs or votes or organs. If unions and labor laws distort the market creating inefficiencies that harms us all then so does child labor laws. What’s the difference between health and safety laws and child labor laws? Both distort the market so surely to have a “free” market we must get rid of both of them.

Then there is government intervention in what job you can have. Many if not most jobs require a license of some sort. For example doctors, pilots, pharmacists, police officers, lawyers, teachers, bankers, accountants, engineers and electricians all need licenses of some sort to perform their job. You can’t walk in off the street and be hired as a surgeon. These are all examples of restrictions imposed (usually by the government) that hamper the free market. Should they be abolished? Why should some bureaucrat decide what job you should have? Then again would you feel save flying in a plane knowing the pilot has no qualification? Would you feel satisfied being treated by a doctor who walked in off the street and set up a clinic? There are also consumer laws like the right to return faulty merchandise. Interest rates are not set in the free market rather they are decided by the government for political reasons.

You might be surprised at how much government intervention decides your wage. As Chang points out, if the market was truly “free” everyone in the First World would have a wage that would be 80-90% lower. This is because if it wasn’t for the government there would be an influx of immigrants from the Third World. The wage gap is so large that immigrants would keep coming until wages were equal in Europe and Africa. Instead government intervention artificially protects First World workers wages and keeps them far above those of the rest of the world. When conservatives claim they want the market to be “free” somehow I don’t think this is what they mean. The entire “free” market so praised by conservatives is actually based upon massive state intervention. But what right does the government have to interfere? Why should it interfere with the sole aim of driving up wages and labor costs? Isn’t that socialism?

Thus the debate on the “free” market is less about economics and more about politics and morality. For example no conservative (I hope) wants to return us to the way economies were 100 and 150 years ago, where most people worked 60 hour weeks in dirty and dangerous conditions for starvation wages. Yet changes to this were opposed as they interfered with workers right to work as long as they want in whatever conditions they want (that was the excuse used).

There is no such thing as the free market. There never was and never will be. The next time you hear someone argue against interference with the “free” market or that only under the “free” market we will prosper, ask them what they think of government restrictions on child labor or slavery or mass immigration. If they want a truly free market without any intervention by bureaucrats they should be opposed to this. Instead you’ll probably find they are merely stating a personal political opinion. Not even a conservative really wants a truly free market.

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