Thursday, June 22, 2017

Chris Dillow — Free Markets Need Equality

I would change the title by replacing "equality" with "symmetry."
There’s one thing that’s crucial – equality [symmetry] of power. For free markets to have public acceptance, the worst-off must have bargaining power. Without this, “free” markets merely become a device for exploitation.
The basis of economic liberalism is free markets and free trade.

Classical and neoclassical economics provided the foundation of economic liberalism historically. Classical and neoclassical economics assume perfect competition. Perfect competition is vitiated by asymmetries, especially asymmetry of power and information. Perfect markets also presume symmetrical opportunity of participants.

Concentration of capital vitiates these assumptions of economic liberalism about free markets and free trade. Capitalism is about favoring capital as an economic factor on the assumption that growth is chiefly a function of capital formation. This disadvantages labor (workers) and land (the environment).

Owing to the economies of scale, free market capitalism leads to concentration of capital in fewer and fewer hands, which leads in turn to monopoly and monopsony in economics and oligarchy and plutonomy in politics. This vitiates both economic liberalism and political liberalism.

Free market capitalism based on economic liberalism is antithetical to the foundations of liberalism.

This is one of the chief paradoxes of liberalism.

There is no way to generate a truly liberal system, which involves integration, when one factor is favored over others.

As Aquinas said at the outset of De ente et essentia, paraphrasing Aristotle, "A small mistake at the beginning becomes a large by the end."
The inference here is, for me, obvious. If you are serious about wanting free markets you must put in place the conditions which are necessary for them – namely, greater bargaining power for tenants, customers and workers. This requires not just strong anti-monopoly policies but also policies such as a high citizens income, full employment and mass housebuilding.
In short, free markets require egalitarian policies. Free marketeers who don’t support these are not the friends of freedom at all, but are merely shills for exploiters.
Stumbling and Mumbling
Free Markets Need EqualityChris Dillow | Investors Chronicle

1 comment:

Unknown said...

For over forty years, my response to this issue as been - the capitalist/colonial argument for free markets comes after the rich have robbed everybody else at gunpoint. Once having done that, then they say "let us now engage in free trade"