If you live in the American South, like I do, you will notice that there are few claims around here held as dearly (and uncritically) as the proclaimed ideal of the self-regulatory nature of the free-market. And, as we enter an election year, the truth of this particular economic gospel is starting to be preached from all corners below the Mason-Dixon Line. These days I consider myself to be largely apolitical. I have certain opinions, as they regard to specific issues, which can individually carry political implications (or not). But I do not try to make my opinions fit into a greater political narrative, and often, I find myself with one camp on one matter, and with the other camp on another. Thus, my reasons for calling into question the veracity of laissez-faire style free-market economics is not based on a political ideology, but the fact that its supporters consider their personal preferences to be beyond reproach and absolute.
Roughly speaking, the free-market is a market system where prices are determined by supply and demand. A free-market economy is an economy where all aspects of business are unregulated by any factors other than the market participants (ideally this means no government oversight, either placing restrictions on, or giving favor to, businesses). When it comes to the Western world, the free-market serves a vital function in the operation of our economies, because it is the primary plane of operation we have erected by which to carry out commerce. The problem I have with the arguments made by advocates of a complete laissez-faire free-market economy, is that they totally neglect the fact that the free-market does not exist independent of us; it is not a natural phenomenon, it came about through the direct, personal involvement of individuals. It operates through the direct, personal involvement of individuals. So, in what way does it make sense to say that the system is (or, ideally, needs to be) self-regulating?
This is the primary problem with free-market fundamentalism in a nutshell; the idea that the free-market is some sort of self-correcting, self-sustaining, omniscient force, always able to yield the most egalitarian and utilitarian result. Many laissez-faire advocates will no doubt object to this generalization, but in reality it is a very apt synopsis of how their ideas come across to outside observers. If you are convinced that no sort of outside regulation (especially a governmental one), should be permitted to oversee and remedy the workings/progress/abuses of businesses, then you are by default claiming that the businesses, themselves, will always be capable of supervising themselves, as no doubt abuses and corruptions will occasionally occur (and then some). Here, I have to applaud laissez-faire advocates for the amount of trust they place in faceless conglomerates, while at the same time dismissing the intentions of faceless federal agencies. But one cannot help but point out the lapse in logic.
To claim that federal regulation can only mess-up the market, and then point to examples of government corruption as evidence for one’s claim, but then further on hold that any corruption seen on the side of private corporations is simply part of the self-regulating process, is a fallacious argument of special pleading. In the current economic model we reside in, to entirely detach the government from the workings of businesses does not just remove a thorn out of the paw of CEO’s, or limit their money-making capacity, it also removes the provision of the health standard for our foods (which did not exist in the late 19th/early 20th century, nor was it much of a concern for the food conglomerates of the time), and prevent the import of potentially harmful material to enter the country (imagine if during the Chinese Lead Toys Scare, we decided that only the Chinese Company’s own regulators, who allowed the tainted product to enter the market to begin with, can do the proper investigations). Of course, the government bureaucrats are shady, and constantly on the lookout for profit and self-promotion, but to pretend that business bureaucrats are any more trustworthy–especially when dealing with things that would decide their overall revenue–is plain delusional. Remember how hard the auto industry fought in the 1960s against fixing a few measly safety hazards in their cars, even though the expense was negligible in light of their yearly intake on the market. Luckily, they lost that battle, but it wasn’t because the omniscient guidance of the free-market led them to make the right decision.
Fundamentally, what needs to be understood is that the free-market does not have a mind, and it is not alive; it is a man-made system, limited by our capabilities, and directed by our faults. And within the scope of the laissez-faire mindset, its capacity to correct the shady activities of corporate interests relies entirely on the self-interested corporations themselves.
Now, let me clear up a mistake often made by the political Left when discussing this issue; namely, the false assertion that corporations are evil in some way. This is not true, corporations are not evil, nor are the people who make up their boards. Corporations are for-profit institution, by which I mean that they are outlets which provide a service for the sake of gaining a profit. This is not evil, but it is not—in any way—an ingredient of something that is concerned with promoting the well-being of the individual’s liberties.
Despite what laissez-faire advocates want to claim, there is no history of a business independently implementing much needed regulatory policies on itself, without external pressure. No tycoon took a stroll through his factory, only to be struck by the urge to extend a reasonable minimum wage to his workers. At no point did a business take a stand to condemn the use of child labor as a legitimate means to carry on its enterprise before child labor laws were passed. All of this was brought about through outside pressure; either workers petitioning to local and federal agents, or the federal government itself clamping down on social inequalities in the work place (as slow to the draw as it might have been). Because that’s what the whole point of a government is, to prove a service and look out for the interests of its citizens, not the corporations. Too often it fails miserably in this department, but to suggest that the solution to the problem is to completely remove all third-party oversight from the equation is plainly unfounded.
A conglomerate exists to make a profit, if it can cut corners to increase profit, it will. If it can ignore precautions to maximize revenue–even if it’s only in the short-term with detrimental effects likely to happen as a direct result–it will. Again, this is not a condemnation; I also believe that for opponents of laissez-faire economics to say that such a thing is evil, while regulatory measures are innately good, would be equally simplistic and stupid. My argument is about efficiency, and the fact that the laissez-faire stance that the free-market will always find a way to work out its problems by itself has no barring in reality, and seems to rely mainly on the frustration people have towards the incompetency of their government. All of this is understandable, but what justification lies there in the presupposition that free-market participants will be more efficient in fostering a healthy economy for the rest of us? Pointing to the inaptitude of one side, does not garner points for yours.