If they know anything about “free markets,” advocates do not want you to know that they do not believe what they advocate. “Free market” sounds good; Americans like things which are called “free.” Even a “free lunch” sounds good, but its non-existence is a disappointment. People with little interest or training in economics or business rarely think through what the phrase means and implies. Special-interest types—chamber of commerce bosses, corporate spokespeople, lobbyists everywhere, think-tank flaks, and professorial lackeys—use the phrase to deceive the public or its representatives to achieve something beneficial to businesses and thereby to betray the public interest.
The truth is that no one believes in a “free market” because its consequences are disastrous. A “free market” would be entirely independent of government intervention of any kind. It would neither regulate nor support the market or its members. It would protect nobody from anything. “Caveat emptor”—“let the buyer beware”—would be the operating maxim of a “free market.” The phrase is widely recognized as a caution to buyers; it is infrequently realized as a caution about sellers as potentially dishonest. Since businesses sell to other companies as well as consumers, a totally “free market” would be predatory, unpredictable, and potentially ruinous. Neither companies nor consumers want such “free markets.”
So everyone recognizes the need for a modicum of honesty in a “free market.” But for markets to be reasonably honest, the consumer—individual or business—must be reasonably informed to make rational decisions or to take sensible actions. Otherwise, to the degree that sellers are not honest, to that degree they can swindle consumers. In an advanced economy, honesty is important not only to companies and consumers involved in transactions, but also to others who are affected by them. Most businesses, especially financial and investment businesses, require knowledge of the performance of other companies and consumers in order to respond to market conditions. Dishonesty in a “free market” distorts and damages the market and, beyond it, the economy.
But appeals to honesty, however earnest, have little effect on the performance of sellers. In lieu of moral suasion, honesty requires an arbiter and an enforcer. Since consortiums of sellers can be no help—they invariably collude to manipulate markets and deceive others for advantage—only federal and state governments have the means to promote honesty. But their means necessarily constrain sellers and, more rarely, buyers, and thus limit the freedom of the market. Only would-be swindlers deny that a properly functioning market requires, not freedom from, but obedience to, laws or regulations governing the collection and reporting of information, and the representation of goods and services in advertising. So the actual need for honesty, not some whim of government, is one prompt to constrain “free markets.”
Special-interest complaints about “over-regulation,” “excessive red tape,” and the like suggest something suspicious about resistance to the disclosure of complete, accurate, and pertinent information. Businesses usually try to spin or suppress the truth about their goods and services, however deficient or dangerous, when it is contrary to interest. They often form business-wide organizations to coordinate spurious misinformation to defeat government efforts. The Tobacco Institute spent millions over decades to deny or discredit truthful research that smoking increases the chances of cancer. The Petroleum Institute does much the same thing when it claims that fracking is an environmentally benign or minimally adverse extractive process; or that modern oil pipelines are now—as they were once and are always advertised to be—safe and spill-free means of sending sludge over major aquifers and sensitive environments. Such organizations are constitutionally incapable of the truth. Their complaints about government intervention in, and perversion of, the “free market” are just exhaust gases polluting public debate.
Advocates of the “free market,” if they really believed in it as something other than a heads-I-win/tails-you-lose scam, would as vigorously oppose government largess in the form of special favors: tax abatements, grants, subsidies, deferrals, loan guarantees, allowances, deductions, write-offs, regulatory waivers, liability caps, civil settlements instead of criminal prosecutions for legal violations—the list is very long. But, to no one’s surprise, they do not. The truth is that American corporations receive about $1 trillion—that is, about $1,000,000,000,000—annually in such special favors from government (repaid with contributions to campaigns or friendly PACs to their legislative benefactors). Without this trillion-dollar government intervention, think how much freer the market would be, how much smaller government would be, how much less necessary some regulation would be, how much smaller the national deficit would be, how much lower taxes would be.
But free-market advocates want nothing to do with this “free market”; it costs them too much. Except for the favors propping up many companies, even entire industries, many would not thrive or even survive. To provide equity holders with their expected return, they would have to raise prices and thereby become less competitive, lose business, and cut returns. Ironically, they are dependents, if not virtually wards, of the government. (Compare this position to conservative opposition to social programs because they presumably make individuals dependent on the state. Hypocrisy anyone?)
Consider the health insurance industry. Before the Affordable Care Act (ACA), the industry operated according to corporatized medicine to maximize profits by capping benefits, curtailing payments, cancelling policies, or restricting coverage—“free market” forms of rationing health care and jeopardizing lives and health. Egregious stories—I can tell one—are legion. The industry fears ACA because, once in operation, everyone will see that private health insurance, just because it is private, adds nothing of value to health care. Everyone will see that the term “private” means mandatory payments for unnecessary profits but for no additional health-care benefit. The move to a single-payer government program like Medicare or Medicaid will be gradual but inexorable. The only impediment will be hysterical cries of “death panels,” “socialized medicine” (as in most countries with advanced economies), and the demise of the “free market.”
Consider the nuclear power industry. The Price-Anderson Act aims to “encourage private investment in commercial nuclear power by placing a cap, or ceiling on the total amount of liability each holder of a nuclear power plant licensee faced in the event of an accident.” It reduces investor risk but also increases public risk. Companies facing the full costs of an accident would have to spend more on plant safety; reduce profits and returns, and thereby discourage investment; or raise rates (to less- or non-competitive levels), or abandon nuclear power altogether as a poor company investment. Without this federal intervention in the “free market,” the nuclear power industry would be smaller or non-existent. Ironically, the federal government pursues contradictory objectives; to encourage nuclear power, it enables plants to be built less safe yet assumes responsibility for their safety. In these two roles, it often speaks out of both sides of its mouth and thus fails as an honest broker when public trust is crucial to the industry.
Consider housing mortgages and gasoline prices. The tax deduction for housing mortgages encourages higher housing and rental prices, higher debt, and more compounding interest payments. For a very modest reduction in individual taxes, mortgage holders spend thousands more than they otherwise would have if they had not been gulled by this government gift to the housing and banking industries. Again, by suppressing the price of gasoline with favors and giveaways to the oil industry, the government gives misleading cost information to consumers. Without this intervention in the market, the price of gasoline would match that in other countries and would encourage alternative forms of transportation, reduce the number of cars and trucks, prompt the development of small and safer and more fuel-efficient vehicles, discourage automobile traveling, and lower infrastructure costs—which cost Americans, whether they drive or not, billions a year. The increase in the annual cost of gasoline would be only a fraction of the aggregate savings to drivers and other taxpayers. These government actions, good for companies, bad for all citizens, hide the true costs of housing and automobiles, and thereby encourage ill-informed, unduly expensive decisions. In such instances, the government violates its role as referee and enforcer of honest markets in order to benefit companies, not consumers.
The government’s concern for public safety explains another necessary government intervention in “free markets.” As governments at all levels—local, country, state, and national—pass laws to define responsibilities for damage to others and thereby seek to prevent, punish, or compensate victims for such damage, so they pass regulations of businesses or industries to achieve the same purposes. When businesses or industries oppose regulations, they are trying to shirk customary legal responsibilities to do no harm to others or to be held accountable for it. (Compare this position to conservative advocacy of “personal [that is, individual] responsibility.” More hypocrisy?)
The phrases “free market,” “less government regulation,” or “smaller government” are verbal smoke and mirrors. The really big lie in American politics is the canard that government involvement in the market interferes with businesses and impedes their ability to provide competitive goods and services throughout the world as well as good jobs to Americans. For advocates of “free markets” know this truth: without government intervention and assistance, and without taxpayer support, many companies—think first of defense contractors—would collapse. Advocates of “free markets” would never admit that many businesses could not cut it without state or federal governments to prop them up. Otherwise, the many business failures would diminish the allure of “free market” capitalism, even to its ardent advocates.
Since the Supreme Court treats companies as people, we should do to them what conservatives want to do with real people: end their dependency on government welfare.