free market vs capitalism

Free markets are a key component of capitalism although they do not fully define what capitalism is. A free market is driven by 'demand and supply' leading to. 1 The U.S. free market depends on capitalism to thrive. The law of demand and supply sets prices and distributes goods and services. That fits right in with. In a capitalist economic system, the work of managing resources is left to private enterprises, and the free market is allowed to dictate product prices. free market vs capitalism

Free market vs capitalism -

Communism, Socialism, Capitalism, and Democracy

Communism, socialism, capitalism, and democracy are all among our top all-time lookups, and user comments suggest that this is because they are complex, abstract terms often used in opaque ways. They're frequently compared and contrasted, with communism sometimes equated with socialism, and democracy and capitalism frequently linked.

Part of the confusion stems from the fact that the word communism has been applied to varying political systems over time. When it was first used in English prose in the mid-19th century, communism referred to an economic and political theory that advocated the elimination of private property and the common sharing of all resources among a group of people; in this use, it was often used interchangeably with the word socialism by 19th-century writers.

The differences between communism and socialism are still debated, but generally English speakers use communism to talk about the political and economic ideologies that find their origin in Karl Marx’s theory of revolutionary socialism, which advocates a proletariat overthrow of capitalist structures within a society; societal and communal ownership and governance of the means of production; and the eventual establishment of a classless society. The most well-known expression of Marx’s theories is the 20th-century Bolshevism of the U.S.S.R., in which the state, through a single authoritarian party, controlled a society’s economic and social activities with the goal of realizing Marx’s theories. Socialism, meanwhile, is most often used in modern English to refer to a system of social organization in which private property and the distribution of income are subject to social control. (The term is also often used in the phrase democratic socialism, which is discussed here.)

Communism and socialism are both frequently contrasted with capitalism and democracy, though these can be false equivalencies depending on the usage. Capitalism refers to an economic system in which a society’s means of production are held by private individuals or organizations, not the government, and where products, prices, and the distribution of goods are determined mainly by competition in a free market. As an economic system, it can be contrasted with the economic system of communism, though as we have noted, the word communism is used of both political and economic systems. Democracy refers not to an economic system but to a system of government in which supreme power is vested in the people and exercised through a system of direct or indirect representation which is decided through periodic free elections. (For discussion about whether the United States is accurately described as a democracy or as a republic, see the article here.)

Readers should consult the individual entries for a full treatment of the various ways in which each of these four words is used.

Источник: https://www.merriam-webster.com/dictionary/capitalism

Capitalism: The Good, the Bad and the Ugly

18 minute read

Updated on Tue May 25 2021

Over the last 300 years, capitalism has become the main economic system in our world. With capitalism, the means of production (the things needed to produce products and services) are owned and controlled by businesses or individuals, rather than the government. This means that individual people run the economy without the government affecting what happens. Instead, what happens is determined by something called the “free market”.

Essentially, this means that people can buy whatever they want (demand) and sell whatever they want (supply) without the government getting involved in their transaction.

Now, we know that this is almost never the case; governments usually have rules that affect how and what people can buy or sell. For example, many governments do not allow recreational drugs to be sold and they punish businesses that cause pollution, such as oil spills.

Many governments also collect taxes and help provide things like healthcare, roads and education. They can even decide the price of certain products and services to make sure people can afford to buy them.

That was a trick question! In fact, no country has ever achieved a totally capitalist economy. Almost all economies are called mixed economies. This means that they combine bits of both capitalism and socialism.

Why do we always hear about capitalism vs socialism?

A fully socialist economic system involves everything being owned and shared by communities rather than by individuals. In a society like this, production is decided by the government and is meant to benefit society rather than make a profit for individuals. The shared ownership aims to make society more equal.

The rise of neoliberalism

The main form of capitalism that we’ve seen since the 1980s has been neoliberal capitalism. It was particularly popular and promoted by Ronald Reagan (president of the USA) and Margaret Thatcher (prime minister of the UK).

Neoliberalism tends to support deregulation (making laws like workers rights less strict), reducing government spending (particularly on social programmes), and encouraging privatisation. This is all essentially trying to make the market more ‘free’ from government intervention.

In other words, it's moving closer towards pure capitalism.

What does capitalism look like in different places?

Let’s take a look at how neoliberalism plays out today in two very different countries: the USA and Norway.

The United States of America

The USA is quite a capitalist country - in fact, it’s the 6th most capitalist country in the world, according to one ranking.

Even though the US places high on the index, it is still a mixed-market economy. The US is partly capitalist because the means of production are privately owned and are used to make profits. It is partly socialist because its economy has regulations, and taxes are collected to be spent on things like education, healthcare, and transport.

How does that compare to Norway?

Norway is a mostly capitalist country. However, it is less capitalist than the US in the sense that the government plays a larger role in the economy.

In fact, the government in Norway owns much of the country's largest businesses.

This means the government has been able to control businesses through ownership rather than regulation. Furthermore, around 30% of working people were employed by the government in 2015. This is almost double the percentage of the US population employed by the government in the same year.

Some economists have called Norway an example of "cuddly capitalism", with low levels of inequality and people looked after by the government (described as a welfare state).

Norway’s tax system is designed to redistribute income more equally than that of the US, which is more effective at reducing poverty:

Now that we understand the different forms that capitalism can take, let’s explore the positive and negative outcomes it can have - the good, the bad and the ugly sides.

What problems has capitalism solved?

Capitalism has led to an incredible amount of innovation and progress. This is because people or businesses have been competing to be better, in order to make more money. For example, competition to find good ways to capture solar energy has hugely driven down the price of this renewable energy over the last few years.

A better standard of living might also be due to capitalism. As people got richer, their quality of life also tended to improve (though only up to a certain limit). In fact, worldwide poverty has dramatically fallen in the last two centuries: before then, over 80% of the world’s population lived in extreme poverty.

That’s a reduction of more than two-thirds! And since 1992, rates of poverty have continued to fall.

What problems has capitalism caused?

A key part of capitalism is capital accumulation. This is the idea that the more money you have, the more money you can make.

For example, say you own a factory that makes cars by hand. The last five years have brought you a profit of $100. With this $100 you can now buy a machine that will build the cars faster. Now that you can make more cars per year your profit for the next five years is $1000. With this $1000 you buy 10 car-making machines, which now bring you a lot more profit than before, and so on and so forth…

Most of this capital accumulation comes from the profits of businesses; these profits are being continually put back into the business. This creates a cycle where rich people continue to get more money and resources, and therefore control more and more parts of the economy and society.

While capitalism has made most people richer, due to capital accumulation it’s made the rich a lot richer.

This wealth inequality exists both within and between countries, and it stops people from getting basic human rights, like food, shelter and the ability to have control over their lives.

This is relevant to climate change because inequality is not just about money; it’s also seen in CO₂ emissions. From 1990-2015, the richest 1% were responsible for 15% of cumulative CO₂ emissions; this is twice as much as the poorest 50% of the world’s population combined.

Aside from increasing inequality, trying only to maximise profits encourages other problems too. It can lead businesses to pay workers as little as possible, even if that means workers remain in poverty and have unsafe working conditions.

It also encourages short-term thinking. An example of this is planned obsolescence, where products are deliberately designed to break long before they should. This means that people have to buy new ones, which then makes more money for the businesses. Likewise, as we learnt in the last chapter, infinite growth (endless capital accumulation) is most likely not sustainable in the long run and has already caused much destruction on our planet.

Conclusion

Capitalism does not work for everyone: it benefits a few and leaves the rest to scramble for the scraps. The lack of access to opportunities is not fair. So what can be done? The next few chapters will hopefully help you understand how we can try to amend and slowly transform our economic system into something that works for everyone and allows our planet's life to thrive.

Next Chapter
Источник: https://climatescience.org/advanced-capitalism-climate

How Britain fell out of love with the free market

Twelve years ago, shortly after winning his third consecutive general election, Tony Blair gave the Labour party a brief lecture on economics. “There is no mystery about what works,” he said, crisply, speaking from a podium printed with the slogan “Securing Britain’s Future” at the party conference in Brighton. “An open, liberal economy prepared constantly to change to remain competitive.”

Blair rounded on critics of modern capitalism: “I hear people say we have to stop and debate globalisation. You might as well debate whether autumn should follow summer. They’re not debating it in China and India.” He went on: “The temptation is … to think we protect a workforce by regulation, a company by government subsidy, an industry by tariffs. It doesn’t work today.” Britain should not “cling on to the European social model of the past”.

Most of his conference speech was vigorously applauded. But the passage on economics was received with solemn looks and silence. There was no heckling, as there had been when previous Labour leaders and chancellors delivered what they saw as home truths about the economy. Instead, there was a sense of resignation in the hall: an acceptance by a party of the left that the right had won the economic argument.

In the early years of the 21st century, the inevitability of an ever more competitive, deregulated, internationally orientated market economy, to which both government and society were subordinate – a doctrine often called neoliberalism – was accepted right across the mainstream of British politics: from the Thatcherites who still dominated the Conservative party; to the increasingly pro-business Liberal Democrats, who would soon form a coalition government with the Tories; to the Scottish National party, whose then leader Alex Salmond praised Ireland and Iceland for their low corporate taxes; to the Blair cabinet itself, where, I was told by a senior Labour figure in 2001, “You won’t find a single member with anything critical to say about capitalism.” It was assumed by the main parties that most voters felt the same way.

Margaret Thatcher’s government had overcome fierce opposition to install a free-market economy in Britain. But under Blair, seemingly more consensual and less dogmatic, the extending of markets into ever more areas of everyday life was presented as unavoidable, or simply practical: “what works”. The British housing market was thriving, with home ownership reaching an all-time high in 2003. There had not been a recession since 1991, a blissfully long time for the previously fitful British economy. Compared to the sometimes tatty, depopulating country of the 70s and 80s, much of Britain in the early 2000s looked successful – a society of regenerating city centres and steadily rising wages.

The free-market ascendancy was acknowledged even by some of its strongest critics. In 2000, the Marxist historian Perry Anderson declared: “The only starting-point for a realistic left today is a lucid registration of historical defeat … Neo-liberalism as a set of principles rules undivided across the globe: the most successful ideology in world history.” In 2007, Naomi Klein wrote in her book The Shock Doctrine that capitalism was “conquering its final frontiers”.

In 2017, that aura of invulnerability has evaporated. Disenchantment with the economic status quo has been potently expressed in elections across the world, from France to the US. But in no democracy has the political shift against the free market been as stark as in Britain.

Since Thatcher’s election in 1979, Conservative and Labour governments have privatised and deregulated, reduced taxes for business and indulged its excesses, opened up the economy to foreign capital and commercialised the national psyche, until Britain became one of the world’s most thoroughly neoliberal societies. And yet, at last year’s EU referendum, the votes of those “left behind” by all this played an unexpectedly pivotal role. Then, at this year’s general election, both the Conservatives and Labour campaigned – or appeared to campaign – against the economic system that they themselves had created.

The Conservative manifesto attacked “aggressive asset-stripping” of British companies by foreign buyers; “perverse pricing” by privatised rail companies; “exploitative” markets in energy, property, insurance and telecommunications; and “the remuneration of some corporate leaders … [which] has risen far faster than some corporate performance”.

“We reject the cult of selfish individualism,” the manifesto declared, in language seemingly calculated to insult Thatcherites. “We do not believe in untrammelled free markets.” Instead, the Conservatives now believed that “regulation [was] necessary for the proper ordering of any economy”. They would “enhance workers’ rights and protections”, and create an “economy that works for everyone”. The obvious implication was that the free market had created the opposite.

The Labour manifesto opened with almost exactly the same words: “Creating an economy that works for all”. Like the Tories, Labour attacked executive pay and promised to strengthen workers’ rights. Like the Tories, they offered an “industrial strategy” through which government – long depicted by free-marketeers as largely irrelevant or actively harmful – would help modernise the economy. And like the Tories, Labour said companies should no longer be run primarily for their shareholders, as free-market doctrine has insisted since the early 80s, but also for the benefit of their employees, customers and the public as a whole.

While the Conservatives offered mostly rhetoric, Labour offered policies – nationalisation, restored trade union rights, restrictions on the City of London – which would undo much of British neoliberalism. It is these policies that, on 8 June, helped Labour achieve its largest vote since Blair’s landslide in 1997, and now leaves the party possibly on the verge of power. John McDonnell, who lists one of his recreational activities in Who’s Who as “generally fermenting the overthrow of capitalism”, could soon be chancellor.

Amid all the current political turmoil in Britain and the wider world, the shift against free markets has yet to register fully with much of the media or many voters. But the most ardent neoliberals have noticed. “Free marketeers have been gobsmacked,” says Mark Littlewood, director of the Institute of Economic Affairs, which has supplied British politicians with pro-capitalist arguments for 62 years. “Things we thought of as like the laws of gravity are now up for grabs.”

The end of the free-market monopoly in British politics is part of an even bigger change. After almost a quarter of a century when it was widely agreed that the fundamentals of the economy were too important to be meddled with by politicians, or be subject to democratic scrutiny, the contest to shape that economy has restarted.


One clue as to why Britain fell out of love with the free market is in the tone now adopted by its defenders. Gone is the capitalist triumphalism of the Thatcher and Blair eras. Instead, there are apologies. “Markets can be brutal,” concedes the Conservative MP James Cleverly, leader of the Free Enterprise Group, a Commons pressure group with three dozen members (all Tories) that was founded in 2010. “The benefits of free markets have not spread themselves between the generations as equally as many of us would like,” he says. “Part of the reason Corbyn got so much support in the election, for policies which I regard as economically illiterate, is that many people don’t value the impact my kind of economic values have had on their lives. The big wins we had with market reforms in Britain were back in the 80s.”

These days, many free marketeers are highly critical of how British capitalism operates. “The City is incorrectly incentivised,” says the Tory peer Nigel Vinson, who has been a leading player in Britain’s free-market thinktanks since the formative days of Thatcherism in the mid-70s. “We have sold far too many companies to foreign owners. A lot of corporate takeovers are personal megalomania, not corporate efficiency. There are abuses of market power, such as [the zero-hours employer] Sports Direct. Meanwhile you see [the advertising executive] Martin Sorrell taking home £70m in 2015. That sets a rotten example.”

Littlewood lists other dysfunctions: “Wage stagnation, poor GDP growth, crony capitalism in the contracting-out of public services, endless gaming of the system by corporations, a general ennui about the prevailing economic system … ” Finally, he cites the event that did more than any other to discredit free-market capitalism in Britain: “the 2008 crash”, the banking crisis caused by the deregulation and hubris of the financial markets.

That crisis and what followed – recession, prolonged weak growth, ballooning public and private debt, and seemingly endless austerity – has already destroyed or severely damaged the governments of Gordon Brown, David Cameron and Theresa May. It has necessitated contortions that suggest an economic system on life support: bank bailouts, unprecedentedly low interest rates, and quantitative easing – ie the Bank of England simply printing money and pumping it into the economy.

“The architecture of neoliberalism has had huge holes blown in it,” says Will Davies, reader in political economy at Goldsmiths, University of London. He argues that free-market capitalism has suffered a two-stage collapse: “First, in 2008, it was revealed as financially unviable. Then, in 2016 and 2017, it went into political crisis.” One symptom of the latter, he says, has been a rupture between big business and the main British political parties.

But this is not the first time that the economic failings and social costs of neoliberalism have led people to forecast its demise. Repeatedly in the past three decades, critiques and alternatives have been conceived and promoted, refined and combined by innovative thinkers and politicians of both main parties – and then frustrated and largely forgotten, until the re-emergence of many of their themes and advocates under May and Corbyn.

In the meantime, the free market has survived, and worked its way into more aspects of Britons’ daily lives, becoming in many ways progressively more efficient and thorough in its commodification of our activities, our homes, our minds. In fact, it might be this inhuman efficiency, and its social consequences, that has provoked the current political revolt against modern capitalism.

Is this revolt just another episode in a long resistance to neoliberalism, or is it a breakthrough? And if so, do Labour or the Conservatives have another viable economic model, which might make capitalism less dominant in our lives?


The first chance to change the economic order that Thatcher and John Major’s governments had imposed on Britain came 22 years ago. In January 1995, a few months after Blair was overwhelmingly elected Labour leader, the then Guardian economics editor Will Hutton published a panoramic book about the British economy, The State We’re In. Hutton had spent years exploring the economic ideas and social consequences of Thatcherism, and had decided that both were disastrous. He was a follower of John Maynard Keynes, the early-20th-century economist whose vision of a milder, state-regulated capitalism had shaped the postwar Britain that Thatcherism largely erased. Hutton was also close to the Labour party: two rising young Blairites, Yvette Cooper and David Miliband, gave him comments on the book’s manuscript.

The State We’re In depicted British economic life after a decade-and-a-half of Conservative free-market reforms as “meaner, harder, and more corrupting”. It also saw the economy as a failure in business terms: short-termist, low in productivity, over-reliant on the City of London and old technology, prone to boom and bust. Britain was falling behind other capitalist countries. “The individualist, laissez-faire values which imbue the economic and political elite,” wrote Hutton, “have been found wanting.” His solution was to import the best practices of other economies, particularly Germany, which he admired for its more patient, more socially inclusive economic approach. He called his vision “stakeholder” capitalism.

The book had a cautious initial print run of 3,500. But its timing was good: Britain was emerging sluggishly from a long recession, and was tired of Tory government. The State We’re In sold 250,000 copies, making it one of the bestselling economics books in Britain since the second world war. Among its readers were much of the New Labour government-in-waiting: Gordon Brown, Ed Balls, John Prescott, Robin Cook and Tony Blair himself.

“Tony was not a man of settled opinions, nor someone who knew a lot about economics,” says Hutton, “but David Miliband persuaded him to read it. This may be apocryphal, but apparently there is a picture of Blair reading it on holiday.” During 1995 and 1996, Blair’s speeches began to refer to the limitations of the free market, and to the desirability of a “stakeholder” economy, “run for the many, not for the few” – an almost exact prefiguring of the title of the 2017 Labour manifesto.

But then these themes were abruptly dropped. According to Hutton, as the 1997 election neared, Blair was told by his more nervous advisors that any talk of reforming British capitalism would be presented by the Conservatives as a return to the economic interventionism of the troubled Labour governments of the 70s. For decades, they had been crudely but effectively caricatured by the Tories, and much of the media, as bullyingly leftwing and disastrous. Meanwhile Brown, who as shadow chancellor had spent years trying to win over the City, decided Hutton’s book was too hostile to bankers; and Prescott, a Labour traditionalist, decided it was not anti-capitalist enough. “I was frozen out,” Hutton says.

In the late-90s, the economy started growing more consistently, as part of a technology-driven boom across the western world, and Hutton’s view of Britain began to seem too pessimistic. On winning power in 1997, Labour left most of the structure and practices of Thatcherite capitalism in place, and rather than question its rationale, they used swelling tax revenues to soften its social effects, for example through tax credits to subsidise low wages.

Outside Britain, the free market had more doubters. In 1997, the World Bank, previously an uncritical advocate of its state-shrinking orthodoxies, published a report conceding that “an effective state is the cornerstone of successful economies”. In South America, the failures of market-driven economic policies began to move electorates dramatically leftward. And in 1999, an even wider mass movement formed around the world against the environmental and social damage done by globalisation, as the spread of free-market capitalism was euphemistically called by its advocates. Enormous protests took place, from Genoa to Seattle. Smaller, but still vibrant, anti-capitalist demonstrations began to occur regularly in London.

But still most British politicians did not take them very seriously, regarding the movement as backward-looking and naively utopian. In a brief book published in 2001, the Financial Times journalist John Lloyd, a former communist who had become a New Labour associate, described the activists’ annual summit at Porto Alegre in Brazil as “a ragbag of declamation, hot air and vapidity”. The contempt was mutual: most of the protestors showed no interest in forming alliances with centre-left politicians in order to slightly civilise capitalism. “It’s not our job to suggest alternatives!” one prominent activist told me in 2000.

By the mid-00s, the protests were tailing off. Rather than listen to the anti-capitalists, the Blair government and its centre-left counterparts regulated their sometimes violent demonstrations with ever more riot police – while regulating the more powerful anarchic forces of finance capitalism less and less. The British public, meanwhile, seemed to have largely accepted the reign of the free market: during the mid-00s, the annual British Social Attitudes survey found that dissatisfaction with its impact on society and the workplace, while still substantial, had dipped to the lowest levels ever recorded.

With the economy still growing, year after year, the mass benefits of unfettered capitalism – ever wider property ownership, low inflation, cheaper consumer goods, and “no more boom and bust”, as Brown put it – appeared secure. “For most people under 20,” wrote the cultural critic Mark Fisher in his 2009 book Capitalist Realism, “the lack of alternatives to capitalism is no longer even an issue. Capitalism seamlessly occupies the horizons of the thinkable.”

And yet, even during these boom years there were signs that the free-market economy might be brittle. In 2001, the rail infrastructure company Railtrack – which had been one of the Conservatives’ most high-profile privatisations seven years earlier – went into administration after the Hatfield train crash and a botched modernisation of the west coast mainline. In 2002 the company was effectively nationalised by the Blair government – a policy approach supposedly discredited and abandoned in the 70s – and became Network Rail.

Meanwhile, the short-term British business culture identified by Will Hutton persisted. Investment by companies fell almost continuously between the late-90s and the late-00s. With trade unions weak, many employers became meaner. “Around 2003, wages for most Britons started to flatline,” says Will Davies. This was usually a sign of a recession rather than a boom, and had not happened since the early 80s. In order to keep shopping, people borrowed: outstanding private debt, already high by international standards in 2003, at about twice the national GDP, began rising, faster and faster, towards a peak of more than two-and-a-half times GDP in 2008.

“Much of the apparently benign [economic] growth … did not in fact represent a sustainable expansion,” wrote the economists Michael Jacobs and Mariana Mazzucato in their introduction to the 2016 book Rethinking Capitalism. “Rather, it reflected an unprecedented increase in household and corporate debt … lax lending practices … [and] an asset price bubble, which would inevitably burst.” Large elements of the neoliberal British economy were going to prove unsustainable.


In Dagenham, on the eastern edge of London, the local Labour MP Jon Cruddas noticed pressures building. The area has some of the cheapest housing in London – worn but sought-after 1930s semis – but “around 2002, 2003”, Cruddas says, “the economic status quo stopped working: wages, property prices, competition for public services … People were not living the lives they had been promised by the politicians.” In 2007, he stood for the Labour deputy leadership.

Cruddas was (and is) on the left of the party, but had a reputation for free thinking and building unexpected alliances. After working in Downing Street in the 90s, and helping introduce the minimum wage – one of Blair and Brown’s few alterations to the economic status quo – Cruddas had become frustrated by their refusal to confront corporate power. He based his deputy leadership bid around attacks on “free-market dogma”, and warnings about “the material insecurities” and proliferation of low-skilled jobs in his and other working-class constituencies. Once famous for highly unionised car manufacturing, Dagenham was becoming a patchwork of derelict former factory sites and casualised, low-paid work in retail. Standing against five other less radical, better-known candidates, Cruddas won the election’s first round. But subsequent rounds of voting narrowly eliminated him from the contest.

Regardless, the tempo of the revolt against free-market Britain picked up. The following year, the activist and thinker Maurice Glasman, whom Cruddas knew well, began to conceive of a movement he called Blue Labour. Glasman had worked for years with people who felt bullied by the modern economy, through the community organisation London Citizens. “I was just channelling what I was hearing,” he says. “People would say to me, ‘I’ve got to work two jobs to survive,’ or ‘I’ve had to move to London to find a job, but my mum is in Derby and she’s dying.’”

A social conservative, Glasman saw capitalism as “a criminal, dominating thing” that fractured families and communities. Glasman is an intense, compelling talker, and as with Will Hutton a decade earlier, his ideas intrigued senior New Labour figures, many of whom were becoming more interested in the importance of community themselves. But when he properly laid out his critique of capitalism, he remembers, “their faces would go a bit blank. Then they would say: ‘You don’t understand. It’s the goose that lays the golden egg.’”

Along with close allies such as Ed Balls, Brown saw the deregulated City of London as a source of tax revenue to fund more generous state spending. During his premiership from 2007 to 2010, despite the City’s major part in causing the 2008 financial crisis, Labour could never quite bring itself to turn against the free-market capitalism it had inherited and furthered.

Instead, improbably, the denunciation came from the right. Phillip Blond was a conservative philosopher and theologian with a declamatory, slightly old-fashioned persona and prose style who had lectured for years at a small Church of England higher-education college based in Cumbria and Lancashire. In 2008, he began publishing newspaper articles attacking the Thatcherites and New Labour as co-conspirators. “The lesson of the last 30 years,” he told Guardian readers in May of that year, “is that neither the state nor the market is able to alleviate poverty or deliver opportunity for all.” Cleverly branded as Red Toryism, Blond’s ideas caught the attention of David Cameron. He was then still a relatively new Tory leader, and was energetically and shamelessly looking to differentiate his approach from Thatcherism.

In January 2009, Blond wrote much of a speech that Cameron delivered to the annual summit of the global business elite at Davos. “This is what too many people see when they look at capitalism today,” declared the Tory leader, who had until recently been an enthusiastic free-marketeer himself. “Markets without morality … wealth without fairness … recklessness and greed … lives [that] feel like little more than flotsam in some vast international sea of business.”

Cameron’s solution was almost laughably vague and ambitious: the creation, by unspecified means, of a new “capitalism with a conscience”. But he and Blond caught a mood. Thanks to the financial crisis, during 2008 and 2009 Britain suffered its worst recession since the calamitous first years of Thatcher’s market experiment in the early 80s.

In 2010, as Brown’s government ended and Cameron’s began, Westminster was suddenly crowded with competing critiques of the free market. As well as Red Toryism and Blue Labour, there was “fake capitalism”, an idea promoted by the Conservative MP Jesse Norman. It said that, in Britain, corporations lived too easily off earnings from privatised state functions. There was also a run of acclaimed books about the costs and flaws of neoliberalism: The Spirit Level: Why More Equal Societies Almost Always Do Better, by Richard Wilkinson and Kate Pickett in 2009, 23 Things They Don’t Tell You About Capitalism by Ha-Joon Chang in 2010, and The New Few: Or a Very British Oligarchy, published in 2012 by Ferdinand Mount, who in the 80s had been one of Thatcher’s senior advisors. And over the winter of 2011-12, there was Occupy London, a raucous anti-capitalist encampment outside St Paul’s Cathedral. During its first weeks, Occupy London received strikingly plentiful and respectful media coverage.

The culmination of all these revolts, some hoped, would be the party leadership of the one senior New Labour figure who had never been fully converted to the free market, Ed Miliband. “When Ed and I worked for Gordon at the Treasury,” says the Labour peer Stewart Wood, who became a Miliband advisor, “we used to sneak off for a drink at the end of the day, and say to each other, ‘Why isn’t the government doing anything to challenge the market?’”

Miliband unexpectedly won the Labour leadership in 2010, after campaigning against “brutish US-style capitalism” and for a more controlled, egalitarian British economy. As leader, he consulted Hutton and Glasman, whom he made a Labour peer. He appointed Cruddas to lead a review of all Labour’s policies. And he made high-profile speeches attacking corporate “asset-strippers” and “predators”, the treatment of customers by the privatised utilities, and the worsening living standards of “the squeezed middle”. He condemned neoliberalism in more concrete terms than Cameron’s generalities at Davos.

Cruddas was energised: “We were beginning to change lanes as a party.” Even some of the small residue of older Labour MP’s who had never accepted any aspect of Blairism were intrigued. John McDonnell told me: “In some of his criticisms of the market, Ed Miliband was ahead of his time.”

But Miliband’s judicious, qualified critique of capitalism had to compete for political space with other, more primal forces unleashed or strengthened by the financial crisis: resentment of immigrants and the European Union; resentment of MPs after the expenses scandal, and of elites in general; and above all, Cameron’s appealingly simplistic austerity policies.

Even though the cuts in state spending made the daily experience of neoliberalism worse for many Britons – by weakening the initiatives introduced by New Labour to soften it – the rhetoric used to justify austerity helped make the general discourse about the economy more cautious, not more adventurous. Rather than talking about the bankers, and how to reduce their power, people increasingly talked about scroungers. The economic views of many voters initially moved rightwards, not leftwards.

With his modest communication skills, Miliband faced a huge task in advocating a different kind of economy. The few reforms he proposed were either too abstract and technical-sounding (“predistribution”, or creating a capitalism that requires less redistribution of income by government), or too short-term (a temporary price cap on energy bills) to form a coherent picture.

Like Blue Labour and the Red Tories, he wanted to remove the worst excesses of the free market while leaving the rest of it intact. The ambivalence of the Labour mainstream towards capitalism, an ambivalence as old as the party itself, “played out inside him,” says Cruddas. Last month, Miliband told the Guardian with a characteristically opaque mix of self-confidence and self-criticism: “I think what Jeremy [Corbyn’s success] teaches me is that when I had instincts that we needed to break with the past, and we needed more radicalism, I was right.”

In 2015, whatever Miliband’s true intentions, the many remaining neoliberals in the Labour hierarchy, such as then shadow chancellor Ed Balls, had other economic priorities. So, increasingly, did Glasman, who became controversially preoccupied by the idea that a reformed British capitalism would involve drastically less immigration. At that year’s general election, after an internal struggle that Cruddas and Miliband lost, Labour presented a manifesto that emphasised cutting the national deficit in language little different from that used by the Tories. The manifesto only criticised the deregulated capitalism that had effectively created that deficit in the first place in coded terms: “We will build an economy that works for working people,” it promised blandly. Even though more and more politicians and commentators agreed that free-market Britain was working less and less well, the anti-capitalist moment seemed to have gone.


But even rigid, insular Westminster politics has to bend to economic realities in the end. In 2017, after two more years of thin growth and austerity, with British wages in their longest slump since the Napoleonic wars, and home ownership at a 30-year low, neoliberalism is no longer producing enough winners to be an utterly dominant set of political ideas. An opportunity has been created – bigger than any before – for the anti-capitalist counter-revolution that has been stopping and starting since the mid-90s.

Phillip Blond senses it. “I go into No 10 [Downing Street] a lot,” he says. “They really do get it about the failures of the market.” Glasman has been to No 10 in recent months too. “There is a stirring among genuine Conservatives,” he says. “A realisation that capitalism is against place and home.”

Cruddas quite liked the 2017 Conservative manifesto: “Some of it was very well written. I thought: ‘Spot on. Confront the market. Make government more interventionist.’ It was an attempt to acknowledge that the world is now challenging the old Thatcher certainties.” But he liked the Labour manifesto a lot more. “It has set up the possibility of … a different kind of economy. There are more continuities between the manifesto and Ed’s than people assume, but under Ed we had to smuggle our anti-free-market stuff in. It wasn’t spoken to properly. Corbyn and McDonnell are more explicit. Some of the people and energy from the anti-globalisation movement of the 2000s have fed into [the pro-Corbyn movement] Momentum. And some of the concerns of those activists are being reconciled with the economic concerns of people here, in Dagenham. Everything’s in play. It’s fantastic.”

In early July, not long after Labour’s far better than expected election performance, I went to a party rally in Parliament Square. During the 90s and 00s, I had been there repeatedly for slightly sparse anti-capitalist demonstrations, which felt, at best, defiant. But now the atmosphere was expectant. “We are winning, and the battle is now on our terms,” said one of the warm-up speakers, to a mass of young and much older faces – the potent Corbyn electoral coalition made flesh. McDonnell made a short, fierce speech attacking “the bankers and profiteers” and “neoliberal trickle-down economics”. He ended with a promise: “Another world is in sight!”

Afterwards, I asked him why it had taken so long. The financial crisis began exactly 10 years ago this month. “When a crash occurs, people are in survival mode,” he said. “It’s when growth returns that people get angry.” What did he think of the Conservatives’ apparent break with the free market? “The Tories are opportunists.” Then he talked fluently for several minutes about Labour’s plans to “learn from Germany” about how to create a more high-tech, more long-term economy. It sounded like a passage from The State We’re In. With his neat silver hair, and wearing a striped shirt with a bright summer jumper slung over his shoulders, McDonnell even looked like an off-duty German industrialist.

But wasn’t he meant to be interested in replacing capitalism rather than reforming it? He gave a big, knowing smile. “It’s a staged transformation of our economic system.” Then he continued less gnomically: “Public ownership. A fairer distribution of wealth than in Germany. A society that is radically more equal … ”

Even economic thinkers close to McDonnell wonder if a Corbyn government could effect such a transformation. Paul Mason, author of Postcapitalism, says: “They have a big task with a small team. We face problems – climate change, information technology destroying jobs, a market economy that in many sectors is not capable any more of generating value – that were not faced by Keynes,” the last economist to shift British capitalism to the left, more than 70 years ago.

Mazzucato is probably McDonnell’s favourite contemporary economist. In her much-cited 2013 book The Entrepreneurial State, she argued convincingly – as the Labour manifesto did – that through state-funded research and other investment, government acts as an essential accelerator of capitalism rather than a drag on it, as free-marketeers usually claim. Last year, she gave the first lecture in an ongoing series of Labour events intended by McDonnell to set out a “New Economics”. According to the website LabourList, “McDonnell sat [in] rapt attention throughout.”

In a hot meeting room at University College London, where she is director of a new institute for innovation, the Italian-American Mazzucato told me that the 2017 Labour manifesto was “a turning point” in British economic policy, “full of good stuff, a new energy”. She advises McDonnell. Yet she also advises the Conservative business secretary, Greg Clark, and the SNP. She thinks Labour could do better: “I say to them, ‘You sound defensive. You sound like you know what’s wrong with the economy, rather than what could happen.’” She says Labour needs to explain its economic policies more compellingly: “When you do bold things, if you don’t have the language to describe them, you’re going to be in trouble.”

The Conservative reformers of British capitalism have the opposite problem. So far, their rhetoric dwarfs their solutions. “Their promises to put workers on company boards, to stop high executive pay, haven’t really gone anywhere,” says Tim Bale, a leading historian of the party. Many observers, on both the left and the right, interpreted the 2017 Tory manifesto’s anti-market talk as solely a ploy to attract Labour voters – a ploy that failed so badly that it led to the resignation of one of its devisers, Theresa May’s joint chief of staff Nick Timothy.

Blond insists that many senior Tories besides Timothy oppose neoliberalism. Before Thatcher, there was a recurring Conservative impulse to soften capitalism during hard times – from the future prime minister Harold Macmillan’s influential 1938 book The Middle Way to Edward Heath’s centrist government in the 70s. But that impulse has weakened. “Most Tory MPs are Thatcher’s children,” says Bale. “Most Tory thinktanks are still in a free-market phase.” So is the Tory press: “I could more easily imagine an asteroid hitting the earth,” says Mason, “than the Sun and the Mail coming out for state intervention.”

Many Tory activists and voters have also become free-market diehards. During the election, when the usually revered editor of the website ConservativeHome, Paul Goodman, told readers “to get over Thatcher” and embrace the Tory manifesto, because “the world has moved on”, the response was prickly. One post accused May of being “a Labour sympathiser”. Another pointed out that Heath’s policies failed.

Moreover, the current government might respond to Brexit – an even bigger economic shock than Heath suffered in the turbulent 70s – by becoming more neoliberal, not less, having freed British business from the EU’s limited restrictions on capitalism. Tory economic policy has swerved suddenly rightwards before. Faced with the aftermath of the financial crisis, Cameron and his chancellor, George Osborne, quickly dropped Red Toryism and instead told Britons to toughen up for “the global race” – their phrase for an ever-more competitive capitalism. Osborne had never lost his faith in the free market. “Cameron turned out to be just a standard Thatcherite,” Blond now says.

As Cameron, the son of a wealthy stockbroker, knew well, Britain is still home to plenty of neoliberalism’s beneficiaries: hedge funders, homeowners with the right kind of property, disproportionately rewarded “top talent” from footballers to management consultants, and companies built on cheap labour and loose regulation. They will not give up their supremacy easily, and after Brexit, a Tory government – or a Labour one – might be desperate for economic growth from any source.


As an idea, the free marketretains a simple power. “Neoliberalism was sold as capitalism perfected,” says Mason. That has made its diminishing returns politically explosive, but it has also made a reformed capitalism hard to sell. “The idea that markets work well in very limited circumstances, that economic life is about compromise, imperfectability – that’s not an argument you can present easily in a tabloid or a political advertisement,” says Abby Innes, assistant professor of political sociology at the London School of Economics.

Critics of neoliberal Britain have long dressed their texts and speeches with rosy images of other countries’ kinder economies. “Following the successful example of Germany and the Nordic countries,” says the 2017 Labour manifesto, “we will establish a National Investment Bank … that unlike giant City of London firms, will be dedicated to supporting inclusive growth.” In today’s spivvy Britain, how grown-up and enlightened that sounds. But on reflection, the idea that Britain should become more like Germany – its profoundly different capitalism the product of a different geography, culture and history – feels both very ambitious and yet also underwhelming. Can’t we come up with our own economic vision?

Somehow, it would have to reconcile the intensely competitive, commercialised daily existence of many Britons with the fact that the economic system that created that individualistic world no longer works very well. But perhaps the children of Thatcher’s children have an answer. Many of them are already living with this tension: working ambitiously but often for nothing; sharing living space and possessions as well as racing to buy them; jostling with each other for the smallest economic opportunities, but also marching together for Corbyn.

The emerging outline of a new economic order is often present, not much noticed, amid the final stirrings of the old. In the 70s, the City traders and sharkish entrepreneurs of the Thatcher era to come were often already at work, even as trade unions and Keynesians still held court in Downing Street.

If Brexit proves a disaster, or another crisis soon hits our largely unreformed financial system, as an increasing number of commentators predict, the political space for alternatives to neoliberalism may open further. But Glasman predicts that working out exactly what comes after modern British capitalism will be “the job of the rest of our lives”. He is 56 years old.

Main illustration by Jasper Rietman

Follow the Long Read on Twitter at @gdnlongread, or sign up to the long read weekly email here.

Источник: https://www.theguardian.com/news/2017/aug/04/how-britain-fell-out-of-love-with-the-free-market

The task of any definition is to separate its object from others, to expose its uniqueness so all can recognize it and distinguish it from other, similar objects. We define “dog” to differentiate it from other animals, “chair” from other furniture, and “Mary” from other people. We should then define capitalism to differentiate it from other economic systems – the organized production and distribution of goods and services in a community – around qualities unique to it.

A key unique quality of capitalism is the employer/employee relationship between two different groups of the people engaged together in the economic system. That relationship entails an exchange of wages or salaries for labor power – the ability of an employee to work. A contract between employer and employee covers that exchange plus the employee’s exertion of brains and muscles over lengths of time and to ends specified by the employer. Capitalism’s unique employer/employee relationship distinguishes it, for example, from slavery, feudalism, and communism as alternative economic systems.

In slave economic systems, the key relationship is one of master and slave, where the slave is the property of the master or a third person. This differs clearly from capitalism, where no person is another’s property. Capitalism contrasts equally clearly with feudalism, where the key relationship links lord and serf by their sworn acceptance of specific obligations, loyalties, and duties to one another.

Wages do not exist in either slave or feudal economic systems. Marx’s gestures toward communism entail a key relationship radically different from that of the capitalist, feudal, or slave economic systems. In communism, no split or division occurs between two different groups of participants in production – no masters and slaves, lords and serfs, or employers and employees. Instead one and the same community designs, directs, and performs the work of an enterprise such that each community member has one vote and enterprise decisions are made democratically. Worker coops are the form in which that economic system is most often encountered in the modern world.

The employer/employee relationship structuring enterprises thus serves nicely and neatly to define capitalism as distinct from alternative economic systems. In contrast, other current definitions of capitalism fail to make such distinctions. Mainstream media, politicians, and most professional economists in the United States define capitalism above all in terms of “private” or “free” enterprises and “free” or “unregulated” markets. But those definitions are inadequate and inappropriate; they do not distinguish capitalist from other economic systems.

That is because private enterprises exist in them all. An enterprise is private if the individuals who own and operate it hold no positions within any governmental apparatus or agency. A state enterprise would then be one owned and/or operated by officials or other persons holding positions within state apparatuses or agencies.

In today’s United States capitalism, state capitalist enterprises include the Post Office, Amtrak, the Tennessee Valley Authority, countless municipal transport systems, state schools, and so on. These coexist with private capitalist enterprises. Both are capitalist because both embody the same basic employer/employee relationship. Slave systems likewise display both private and state slave enterprises, and feudal systems include both private and state feudal enterprises.

In modern socialist systems ranging from Scandinavia to the USSR and the People’s Republic of China, both private and state enterprises have coexisted. Because of their shared employer/employee relationships, they deserve to be called private and state capitalist enterprises notwithstanding their “socialist” labels. Indeed, those labels reveal that some socialist critics of capitalism did not question its defenders’ definitions. In my view, that weakened their critiques. Lastly, instances of communist enterprises, where the worker coop relationship displaces the employer/employee relationship, have been scattered but are relatively rare across the modern world.

The proportions of private versus state enterprises have varied from system to system. They have also varied within each system from time to time and region to region. Private enterprise is thus not an effective definition of capitalism. Its presence does not distinguish capitalism from the other systems.

Much the same analysis applies to free markets where buyers and sellers exchange with minimal outside interference. Free markets have almost always coexisted in varying proportions with planned state interventions to limit or regulate exchanges: free markets versus planning. Markets have existed for a long time in human history, not just during the times of capitalism.

In slavery, for example, slaves and what slaves produced, such as cotton, passed through markets; they were distributed via market exchanges. Sometimes those markets were relatively free; sometimes states intervened to control them. Lords and serfs interacted in markets where many products of feudal economies were exchanged. Those markets were also sometimes free and sometimes not. Socialist societies, whatever their mix of capitalist and worker coop-type enterprises, have likewise combined free markets and state planning.

In short, all the systems display mixtures of free markets and planning. We cannot definitionally distinguish capitalism from them along the lines of free markets versus state planning.

Why then did an inadequate definition prevail in mainstream discussions and popular usage over an available, better one? The answer hinges on ideology. The defenders of capitalism preferred the inadequate definition because it was far easier to defend capitalism if and when it was defined that way. The defenders had the resources—supportive capitalists’ wealth, power, and cultural influence—to make their preferences prevail.

The definition of capitalism in terms of the employer/employee relationship is difficult to defend for several reasons. First of all, it renders capitalism as patently undemocratic. In capitalist workplaces (factories, offices, and stores) an unaccountable minority (owners, boards of directors, top executives) wield nearly absolute power over the enterprise.

They decide what, how, and where to produce and what to do with the net revenues produced by the employees. The latter are the majority inside enterprises. Yet the employees must live with the results of enterprise decisions from which they are excluded. Especially in countries with some democratic traditions or aspirations, defending so undemocratic a workplace structure—and the capitalism it grounds—would be difficult.

Second, the dualistic employer/employee definition of capitalism suggests affinities with the parallel dualisms of slavery (master/slave) and feudalism (lord/serf). The history of the revolutionary breaks of capitalism from feudalism and slavery (French and American revolutions, U.S. Civil War, and so on) illustrates that revolutionaries then thought their breaks were deep and dramatic.

Liberty, equality, fraternity, and democracy were the slogans and banners of those breaking to capitalism. Those who favor capitalism have always nurtured and reaffirmed its association with those slogans. In contrast, the employer/employee definition suggests rather that the master/slave and lord/serf dualisms have a modern-day parallel or equivalent in the employer/employee dualism. Using that definition, one might infer that perhaps some further break—say beyond any dualism—belongs on history’s agenda.

Third, defining capitalism in terms of “free” or “private” enterprises and markets foregrounds and celebrates certain citizens enjoying “liberty” from an oppressive state. That definition is often extended to include individual initiative, as in “freedom” to establish one’s own business enterprise, and an “incentive system” where profit rewards successful business ventures. This definition of capitalism identifies its uniqueness in its enabling, protecting, and guaranteeing all individuals the freedom to start and grow their own enterprises to earn profits without state interference.

In this definition, all other systems (and especially socialism) constrict and constrain those freedoms. In historical fact, individuals in various slave, feudal, and other economic systems have sometimes faced quite parallel incentives to start new enterprises. Capitalism has also, to varying degrees in various times and places, stifled incentives and blocked enterprise freedoms, for example via its patent and trademark laws, tendencies to monopoly, inequality, business cycle downturns, and so on.

Definitions are shaped by and react back upon the contexts and conflicts of their times and places. The old, conservative definition of capitalism is now contested, as is everything else about that system. By articulating now an overdue refutation of its prevailing definition, the critique of capitalism deepens.

Источник: http://www.milwaukeeindependent.com/syndicated/free-markets-liberty-many-terms-used-describe-capitalism-economic-system-incorrect/

Basic Concepts, Economic Systems, The Marketplace


Free market” is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services. Thus, when I buy a newspaper from a newsdealer for fifty cents, the newsdealer and I exchange two commodities: I give up fifty cents, and the newsdealer gives up the newspaper. Or if I work for a corporation, I exchange my labor services, in a mutually agreed way, for a monetary salary; here the corporation is represented by a manager (an agent) with the authority to hire.

Both parties undertake the exchange because each expects to gain from it. Also, each will repeat the exchange next time (or refuse to) because his expectation has proved correct (or incorrect) in the recent past. Trade, or exchange, is engaged in precisely because both parties benefit; if they did not expect to gain, they would not agree to the exchange.

This simple reasoning refutes the argument against free trade typical of the “mercantilist” period of sixteenth- to eighteenth-century Europe and classically expounded by the famed sixteenth-century French essayist Montaigne. The mercantilists argued that in any trade, one party can benefit only at the expense of the other—that in every transaction there is a winner and a loser, an “exploiter” and an “exploited.” We can immediately see the fallacy in this still-popular viewpoint: the willingness and even eagerness to trade means that both parties benefit. In modern game-theory jargon, trade is a win-win situation, a “positive-sum” rather than a “zero-sum” or “negative-sum” game.

How can both parties benefit from an exchange? Each one values the two goods or services differently, and these differences set the scene for an exchange. I, for example, am walking along with money in my pocket but no newspaper; the newsdealer, on the other hand, has plenty of newspapers but is anxious to acquire money. And so, finding each other, we strike a deal.

Two factors determine the terms of any agreement: how much each participant values each good in question, and each participant’s bargaining skills. How many cents will exchange for one newspaper, or how many Mickey Mantle baseball cards will swap for a Babe Ruth, depends on all the participants in the newspaper market or the baseball card market—on how much each one values the cards as compared with the other goods he could buy. These terms of exchange, called “prices” (of newspapers in terms of money, or of Babe Ruth cards in terms of Mickey Mantles), are ultimately determined by how many newspapers, or baseball cards, are available on the market in relation to how favorably buyers evaluate these goods—in shorthand, by the interaction of their supply with the demand for them.

Given the supply of a good, an increase in its value in the minds of the buyers will raise the demand for the good, more money will be bid for it, and its price will rise. The reverse occurs if the value, and therefore the demand, for the good falls. On the other hand, given the buyers’ evaluation, or demand, for a good, if the supply increases, each unit of supply—each baseball card or loaf of bread—will fall in value, and therefore the price of the good will fall. The reverse occurs if the supply of the good decreases.

The market, then, is not simply an array; it is a highly complex, interacting latticework of exchanges. In primitive societies, exchanges are all barter or direct exchange. Two people trade two directly useful goods, such as horses for cows or Mickey Mantles for Babe Ruths. But as a society develops, a step-by-step process of mutual benefit creates a situation in which one or two broadly useful and valuable commodities are chosen on the market as a medium of indirect exchange. This money-commodity, generally but not always gold or silver, is then demanded not only for its own sake, but even more to facilitate a reexchange for another desired commodity. It is much easier to pay steelworkers not in steel bars but in money, with which the workers can then buy whatever they desire. They are willing to accept money because they know from experience and insight that everyone else in the society will also accept that money in payment.

The modern, almost infinite latticework of exchanges, the market, is made possible by the use of money. Each person engages in specialization, or a division of labor, producing what he or she is best at. Production begins with natural resources, and then various forms of machines and capital goods, until finally, goods are sold to the consumer. At each stage of production from natural resource to consumer good, money is voluntarily exchanged for capital goods, labor services, and land resources. At each step of the way, terms of exchanges, or prices, are determined by the voluntary interactions of suppliers and demanders. This market is “free” because choices, at each step, are made freely and voluntarily.

The free market and the free price system make goods from around the world available to consumers. The free market also gives the largest possible scope to entrepreneurs, who risk capital to allocate resources so as to satisfy the future desires of the mass of consumers as efficiently as possible. Saving and investment can then develop capital goods and increase the productivity and wages of workers, thereby increasing their standard of living. The free competitive market also rewards and stimulates technological innovation that allows the innovator to get a head start in satisfying consumer wants in new and creative ways.

Not only is investment encouraged, but perhaps more important, the price system, and the profit-and-loss incentives of the market, guide capital investment and production into the proper paths. The intricate latticework can mesh and “clear” all markets so that there are no sudden, unforeseen, and inexplicable shortages and surpluses anywhere in the production system.

But exchanges are not necessarily free. Many are coerced. If a robber threatens you with, “Your money or your life,” your payment to him is coerced and not voluntary, and he benefits at your expense. It is robbery, not free markets, that actually follows the mercantilist model: the robber benefits at the expense of the coerced. Exploitation occurs not in the free market, but where the coercer exploits his victim. In the long run, coercion is a negative-sum game that leads to reduced production, saving, and investment; a depleted stock of capital; and reduced productivity and living standards for all, perhaps even for the coercers themselves.

Government, in every society, is the only lawful system of coercion. Taxation is a coerced exchange, and the heavier the burden of taxation on production, the more likely it is that economic growth will falter and decline. Other forms of government coercion (e.g., price controls or restrictions that prevent new competitors from entering a market) hamper and cripple market exchanges, while others (prohibitions on deceptive practices, enforcement of contracts) can facilitate voluntary exchanges.

The ultimate in government coercion is socialism. Under socialist central planning the socialist planning board lacks a price system for land or capital goods. As even socialists like Robert Heilbroner now admit (see socialism), the socialist planning board therefore has no way to calculate prices or costs or to invest capital so that the latticework of production meshes and clears. The experience of the former Soviet Union, where a bumper wheat harvest somehow could not find its way to retail stores, is an instructive example of the impossibility of operating a complex, modern economy in the absence of a free market. There was neither incentive nor means of calculating prices and costs for hopper cars to get to the wheat, for the flour mills to receive and process it, and so on down through the large number of stages needed to reach the ultimate consumer in Moscow or Sverdlovsk. The investment in wheat was almost totally wasted.

Market socialism is, in fact, a contradiction in terms. The fashionable discussion of market socialism often overlooks one crucial aspect of the market: When two goods are exchanged, what is really exchanged is the property titles in those goods. When I buy a newspaper for fifty cents, the seller and I are exchanging property titles: I yield the ownership of the fifty cents and grant it to the newsdealer, and he yields the ownership of the newspaper to me. The exact same process occurs as in buying a house, except that in the case of the newspaper, matters are much more informal and we can avoid the intricate process of deeds, notarized contracts, agents, attorneys, mortgage brokers, and so on. But the economic nature of the two transactions remains the same.

This means that the key to the existence and flourishing of the free market is a society in which the rights and titles of private property are respected, defended, and kept secure. The key to socialism, on the other hand, is government ownership of the means of production, land, and capital goods. Under socialism, therefore, there can be no market in land or capital goods worthy of the name.

Some critics of the free market argue that property rights are in conflict with “human” rights. But the critics fail to realize that in a free-market system, every person has a property right over his own person and his own labor and can make free contracts for those services. Slavery violates the basic property right of the slave over his own body and person, a right that is the groundwork for any person’s property rights over nonhuman material objects. What is more, all rights are human rights, whether it is everyone’s right to free speech or one individual’s property rights in his own home.

A common charge against the free-market society is that it institutes “the law of the jungle,” of “dog eat dog,” that it spurns human cooperation for competition and exalts material success as opposed to spiritual values, philosophy, or leisure activities. On the contrary, the jungle is precisely a society of coercion, theft, and parasitism, a society that demolishes lives and living standards. The peaceful market competition of producers and suppliers is a profoundly cooperative process in which everyone benefits and where everyone’s living standard flourishes (compared with what it would be in an unfree society). And the undoubted material success of free societies provides the general affluence that permits us to enjoy an enormous amount of leisure as compared with other societies, and to pursue matters of the spirit. It is the coercive countries with little or no market activity—the notable examples in the last half of the twentieth century were the communist countries—where the grind of daily existence not only impoverishes people materially but also deadens their spirit.


About the Author

Murray N. Rothbard, who died in 1995, was the S. J. Hall Distinguished Professor of Economics at the University of Nevada in Las Vegas. He was also the leading Austrian economist of the last half of the twentieth century. This article was edited slightly to reflect the demise of various communist countries.


Further Reading

 

Ballve, Faustino. Essentials of Economics. Irvington-on-Hudson: Foundation for Economic Education, 1963.

Hazlitt, Henry. Economics in One Lesson. 1946. San Francisco: Fox and Wilkes, 1996.

Mises, Ludwig von. Economic Freedom and Intervention. Edited by Bettina Greaves. Irvington-on-Hudson: Foundation for Economic Education, 1990.

Rockwell, Llewellyn Jr., ed. The Economics of Liberty. Auburn, Ala.: Ludwig von Mises Institute, 1990.

Rockwell, Llewellyn Jr., ed. The Free Market Reader. Auburn, Ala.: Ludwig von Mises Institute, 1988.

Rothbard, Murray N. Power and Market: Government and the Economy. 2d ed. Kansas City: Sheed, Andrews and Mcmeel, 1977.

Rothbard, Murray N. What Has Government Done to Our Money? 4th ed. Auburn, Ala.: Ludwig von Mises Institute, 1990.

 


COLLECTION: BASIC CONCEPTS

The Library of Economics and Liberty

Copyright @ 1999-2019 Liberty Fund, Inc.
All Rights Reserved

Источник: https://www.econlib.org/library/Enc/FreeMarket.html

Free market

Form of market-based economy

For economic systems where markets (either free or regulated) are the primary allocation mechanism, see Market economy.

"Free enterprise" redirects here. For other uses, see Free enterprise (disambiguation).

In economics, a free market is a system in which the prices for goods and services are self-regulated by buyers and sellers negotiating in an open market. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority, and from all forms of economic privilege, monopolies and artificial scarcities.[1] Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, also called a liberal market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.

Scholars contrast the concept of a free market with the concept of a coordinated market in fields of study such as political economy, new institutional economics, economic sociology and political science. All of these fields emphasize the importance in currently existing market systems of rule-making institutions external to the simple forces of supply and demand which create space for those forces to operate to control productive output and distribution. Although free markets are commonly associated with capitalism in contemporary usage and popular culture, free markets have also been components in some forms of socialism.[2]

Criticism of the theoretical concept may regard systems with significant market power, inequality of bargaining power, or information asymmetry as less than free, with regulation being necessary to control those imbalances in order to allow markets to function more efficiently as well as produce more desirable social outcomes.

Economic systems[edit]

Capitalism[edit]

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[3][4][5][6] Central characteristics of capitalism include capital accumulation, competitive markets, a price system, private property and the recognition of property rights, voluntary exchange and wage labor.[7][8] In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in capital and financial markets whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.[9]

Economists, historians, political economists and sociologists have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free-market capitalism, state capitalism and welfare capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership,[10] obstacles to free competition and state-sanctioned social policies. The degree of competition in markets and the role of intervention and regulation as well as the scope of state ownership vary across different models of capitalism.[11][12] The extent to which different markets are free and the rules defining private property are matters of politics and policy. Most of the existing capitalist economies are mixed economies that combine elements of free markets with state intervention and in some cases economic planning.[13]

Market economies have existed under many forms of government and in many different times, places and cultures. Modern capitalist societies—marked by a universalization of money-based social relations, a consistently large and system-wide class of workers who must work for wages (the proletariat) and a capitalist class which owns the means of production—developed in Western Europe in a process that led to the Industrial Revolution. Capitalist systems with varying degrees of direct government intervention have since become dominant in the Western world and continue to spread. Capitalism has been shown to be strongly correlated with economic growth.[14]

Georgism[edit]

Main article: Georgism

For classical economists such as Adam Smith, the term free market does not necessarily refer to a market free from government interference, but rather free from all forms of economic privilege, monopolies and artificial scarcities.[1] This implies that economic rents, i.e. profits generated from a lack of perfect competition, must be reduced or eliminated as much as possible through free competition.

Economic theory suggests the returns to land and other natural resources are economic rents that cannot be reduced in such a way because of their perfect inelastic supply.[15] Some economic thinkers emphasize the need to share those rents as an essential requirement for a well functioning market. It is suggested this would both eliminate the need for regular taxes that have a negative effect on trade (see deadweight loss) as well as release land and resources that are speculated upon or monopolised. Two features that improve the competition and free market mechanisms. Winston Churchill supported this view by the following statement: "Land is the mother of all monopoly".[16] The American economist and social philosopher Henry George, the most famous proponent of this thesis, wanted to accomplish this through a high land value tax that replaces all other taxes.[17] Followers of his ideas are often called Georgists or geoists and geolibertarians.

Léon Walras, one of the founders of the neoclassical economics who helped formulate the general equilibrium theory, had a very similar view. He argued that free competition could only be realized under conditions of state ownership of natural resources and land. Additionally, income taxes could be eliminated because the state would receive income to finance public services through owning such resources and enterprises.[18]

Laissez-faire[edit]

Main article: Laissez-faire

The laissez-faire principle expresses a preference for an absence of non-market pressures on prices and wages such as those from discriminatory government taxes, subsidies, tariffs, regulations of purely private behavior, or government-granted or coercive monopolies. In The Pure Theory of Capital, Friedrich Hayek argued that the goal is the preservation of the unique information contained in the price itself.[19]

The definition of free market has been disputed and made complex by collectivist political philosophers and socialist economic ideas.[1] This contention arose from the divergence from classical economists such as Richard Cantillon, Adam Smith, David Ricardo and Thomas Robert Malthus and from the continental economics developed primarily by the Spanish scholastic and French classical economists, including Anne-Robert-Jacques Turgot, Baron de Laune, Jean-Baptiste Say and Frédéric Bastiat. During the marginal revolution, subjective value theory was rediscovered.[20]

Although laissez-faire has been commonly associated with capitalism, there is a similar economic theory associated with socialism called left-wing or socialist laissez-faire, also known as free-market anarchism, free-market anti-capitalism and free-market socialism to distinguish it from laissez-faire capitalism.[21][22][23] Critics of laissez-faire as commonly understood argue that a truly laissez-faire system would be anti-capitalist and socialist.[24][25] American individualist anarchists such as Benjamin Tucker saw themselves as economic free-market socialists and political individualists while arguing that their "anarchistic socialism" or "individual anarchism" was "consistent Manchesterism".[26]

Socialism[edit]

Main article: Socialism

See also: Socialist economics

Various forms of socialism based on free markets have existed since the 19th century. Early notable socialist proponents of free markets include Pierre-Joseph Proudhon, Benjamin Tucker and the Ricardian socialists. These economists believed that genuinely free markets and voluntary exchange could not exist within the exploitative conditions of capitalism. These proposals ranged from various forms of worker cooperatives operating in a free-market economy such as the mutualist system proposed by Proudhon, to state-owned enterprises operating in unregulated and open markets. These models of socialism are not to be confused with other forms of market socialism (e.g. the Lange model) where publicly owned enterprises are coordinated by various degrees of economic planning, or where capital good prices are determined through marginal cost pricing.

Advocates of free-market socialism such as Jaroslav Vanek argue that genuinely free markets are not possible under conditions of private ownership of productive property. Instead, he contends that the class differences and inequalities in income and power that result from private ownership enable the interests of the dominant class to skew the market to their favor, either in the form of monopoly and market power, or by utilizing their wealth and resources to legislate government policies that benefit their specific business interests. Additionally, Vanek states that workers in a socialist economy based on cooperative and self-managed enterprises have stronger incentives to maximize productivity because they would receive a share of the profits (based on the overall performance of their enterprise) in addition to receiving their fixed wage or salary. The stronger incentives to maximize productivity that he conceives as possible in a socialist economy based on cooperative and self-managed enterprises might be accomplished in a free-market economy if employee-owned companies were the norm as envisioned by various thinkers including Louis O. Kelso and James S. Albus.[27]

Socialists also assert that free-market capitalism leads to an excessively skewed distributions of income and economic instabilities which in turn leads to social instability. Corrective measures in the form of social welfare, re-distributive taxation and regulatory measures and their associated administrative costs which are required create agency costs for society. These costs would not be required in a self-managed socialist economy.[28]

Concepts[edit]

Economic equilibrium[edit]

Main article: Economic equilibrium

With varying degrees of mathematical rigor over time, the general equilibrium theory has demonstrated that under certain conditions of competition the law of supply and demand predominates in this ideal free and competitive market, influencing prices toward an equilibrium that balances the demands for the products against the supplies.[29] At these equilibrium prices, the market distributes the products to the purchasers according to each purchaser's preference or utility for each product and within the relative limits of each buyer's purchasing power. This result is described as market efficiency, or more specifically a Pareto optimum.

This equilibrating behavior of free markets requires certain assumptions about their agents—collectively known as perfect competition—which therefore cannot be results of the market that they create. Among these assumptions are several which are impossible to fully achieve in a real market, such as complete information, interchangeable goods and services and lack of market power. The question then is what approximations of these conditions guarantee approximations of market efficiency and which failures in competition generate overall market failures. Several Nobel Prizes in Economics have been awarded for analyses of market failures due to asymmetric information.

Low barriers to entry[edit]

Main article: Barriers to entry

A free market does not require the existence of competition, however, it does require a framework that allows new market entrants. Hence, in the lack of coercive barriers, for example, paid licensing certification for certain services and businesses, competition between businesses flourishes all through the demands of consumers, or buyers. It often suggests the presence of the profit motive, although neither a profit motive or profit itself are necessary for a free market.[citation needed] All modern free markets are understood to include entrepreneurs, both individuals and businesses. Typically, a modern free-market economy would include other features such as a stock exchange and a financial services sector, but they do not define it.

Perfect competition and market failure[edit]

Main articles: Market failure and Perfect competition

Conditions that must exist for unregulated markets to behave as free markets are summarized at perfect competition. An absence of any of these perfect competition ideal conditions is a market failure. Most schools of economics[which?] allow that regulatory intervention may provide a substitute force to counter a market failure. Under this thinking, this form of market regulation may be better than an unregulated market at providing a free market.

Spontaneous order[edit]

Main article: Spontaneous order

See also: Invisible hand

Friedrich Hayek popularized the view that market economies promote spontaneous order which results in a better "allocation of societal resources than any design could achieve".[30] According to this view, market economies are characterized by the formation of complex transactional networks that produce and distribute goods and services throughout the economy. These networks are not designed, but they nevertheless emerge as a result of decentralized individual economic decisions. The idea of spontaneous order is an elaboration on the invisible hand proposed by Adam Smith in The Wealth of Nations. About the individual, Smith wrote:

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.[31]

Smith pointed out that one does not get one's dinner by appealing to the brother-love of the butcher, the farmer or the baker. Rather, one appeals to their self-interest and pays them for their labor, arguing:

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.[32]

Supporters of this view claim that spontaneous order is superior to any order that does not allow individuals to make their own choices of what to produce, what to buy, what to sell and at what prices due to the number and complexity of the factors involved. They further believe that any attempt to implement central planning will result in more disorder, or a less efficient production and distribution of goods and services.

Critics such as political economist Karl Polanyi question whether a spontaneously ordered market can exist, completely free of distortions of political policy, claiming that even the ostensibly freest markets require a state to exercise coercive power in some areas, namely to enforce contracts, govern the formation of labor unions, spell out the rights and obligations of corporations, shape who has standing to bring legal actions and define what constitutes an unacceptable conflict of interest.[33]

Supply and demand[edit]

Main article: Supply and demand

Demand for an item (such as goods or services) refers to the economic market pressure from people trying to buy it. Buyers have a maximum price they are willing to pay and sellers have a minimum price they are willing to offer their product. The point at which the supply and demand curves meet is the equilibrium price of the good and quantity demanded. Sellers willing to offer their goods at a lower price than the equilibrium price receive the difference as producer surplus. Buyers willing to pay for goods at a higher price than the equilibrium price receive the difference as consumer surplus.[34]

The model is commonly applied to wages in the market for labor. The typical roles of supplier and consumer are reversed. The suppliers are individuals, who try to sell (supply) their labor for the highest price. The consumers are businesses, which try to buy (demand) the type of labor they need at the lowest price. As more people offer their labor in that market, the equilibrium wage decreases and the equilibrium level of employment increases as the supply curve shifts to the right. The opposite happens if fewer people offer their wages in the market as the supply curve shifts to the left.[34]

In a free market, individuals and firms taking part in these transactions have the liberty to enter, leave and participate in the market as they so choose. Prices and quantities are allowed to adjust according to economic conditions in order to reach equilibrium and properly allocate resources. However, in many countries around the world governments seek to intervene in the free market in order to achieve certain social or political agendas.[35] Governments may attempt to create social equality or equality of outcome by intervening in the market through actions such as imposing a minimum wage (price floor) or erecting price controls (price ceiling). Other lesser-known goals are also pursued, such as in the United States, where the federal government subsidizes owners of fertile land to not grow crops in order to prevent the supply curve from further shifting to the right and decreasing the equilibrium price. This is done under the justification of maintaining farmers' profits; due to the relative inelasticity of demand for crops, increased supply would lower the price but not significantly increase quantity demanded, thus placing pressure on farmers to exit the market.[36] Those interventions are often done in the name of maintaining basic assumptions of free markets such as the idea that the costs of production must be included in the price of goods. Pollution and depletion costs are sometimes not included in the cost of production (a manufacturer that withdraws water at one location then discharges it polluted downstream, avoiding the cost of treating the water), therefore governments may opt to impose regulations in an attempt to try to internalize all of the cost of production and ultimately include them in the price of the goods.

Advocates of the free market contend that government intervention hampers economic growth by disrupting the natural allocation of resources according to supply and demand while critics of the free market contend that government intervention is sometimes necessary to protect a country's economy from better-developed and more influential economies, while providing the stability necessary for wise long-term investment. Milton Friedman pointed to failures of central planning, price controls and state-owned corporations, particularly in the Soviet Union and China[37] while Ha-Joon Chang cites the examples of post-war Japan and the growth of South Korea's steel industry.[38]

Criticism[edit]

See also: Criticism of capitalism

Critics of the free market have argued that in real world situations it has proven to be susceptible to the development of price fixing monopolies.[39] Such reasoning has led to government intervention, e.g. the United States antitrust law.

Two prominent Canadian authors argue that government at times has to intervene to ensure competition in large and important industries. Naomi Klein illustrates this roughly in her work The Shock Doctrine and John Ralston Saul more humorously illustrates this through various examples in The Collapse of Globalism and the Reinvention of the World.[40] While its supporters argue that only a free market can create healthy competition and therefore more business and reasonable prices, opponents say that a free market in its purest form may result in the opposite. According to Klein and Ralston, the merging of companies into giant corporations or the privatization of government-run industry and national assets often result in monopolies or oligopolies requiring government intervention to force competition and reasonable prices.[40] Another form of market failure is speculation, where transactions are made to profit from short term fluctuation, rather from the intrinsic value of the companies or products. This criticism has been challenged by historians such as Lawrence Reed, who argued that monopolies have historically failed to form even in the absence of antitrust law.[41][unreliable source?] This is because monopolies are inherently difficult to maintain as a company that tries to maintain its monopoly by buying out new competitors, for instance, is incentivizing newcomers to enter the market in hope of a buy-out. Furthermore, according to writer Walter Lippman and economist Milton Friedman, historical analysis of the formation of monopolies reveals that, contrary to popular belief, these were the result not of unfettered market forces, but of legal privileges granted by government.[42][unreliable source?]

American philosopher and author Cornel West has derisively termed what he perceives as dogmatic arguments for laissez-faire economic policies as free-market fundamentalism. West has contended that such mentality "trivializes the concern for public interest" and "makes money-driven, poll-obsessed elected officials deferential to corporate goals of profit – often at the cost of the common good".[43] American political philosopher Michael J. Sandel contends that in the last thirty years the United States has moved beyond just having a market economy and has become a market society where literally everything is for sale, including aspects of social and civic life such as education, access to justice and political influence.[44] The economic historian Karl Polanyi was highly critical of the idea of the market-based society in his book The Great Transformation, noting that any attempt at its creation would undermine human society and the common good.[45]

Critics of free market economics range from those who reject markets entirely in favour of a planned economy as advocated by various Marxists to those who wish to see market failures regulated to various degrees or supplemented by government interventions. Keynesians support market roles for government such as using fiscal policy for economic stimulus when actions in the private sector lead to sub-optimal economic outcomes of depressions or recessions. Business cycle is used by Keynesians to explain liquidity traps, by which underconsumption occurs, to argue for government intervention with fiscal policy. David McNally of the University of Houston argues in the Marxist tradition that the logic of the market inherently produces inequitable outcomes and leads to unequal exchanges, arguing that Adam Smith's moral intent and moral philosophy espousing equal exchange was undermined by the practice of the free market he championed. According to McNally, the development of the market economy involved coercion, exploitation and violence that Smith's moral philosophy could not countenance. McNally also criticizes market socialists for believing in the possibility of fair markets based on equal exchanges to be achieved by purging parasitical elements from the market economy such as private ownership of the means of production, arguing that market socialism is an oxymoron when socialism is defined as an end to wage labour.[46]

Some would argue that only one known example of a true free market exists, namely the black market. The black market is under constant threat by the police, but under no circumstances do the police regulate the substances that are being created. The black market produces wholly unregulated goods and are purchased and consumed unregulated. That is to say, anyone can produce anything at any time and anyone can purchase anything available at any time. The alternative view is that the black market is not a free market at all since high prices and natural monopolies are often enforced through murder, theft and destruction. Black markets can only exist peripheral to regulated markets where laws are being regularly enforced.[citation needed]

See also[edit]

Notes[edit]

  1. ^ abcPopper, Karl (1994). The Open Society and Its Enemies. Routledge Classics. ISBN .
  2. ^Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN .
  3. ^Zimbalist, Sherman and Brown, Andrew, Howard J. and Stuart (October 1988). Comparing Economic Systems: A Political-Economic Approach. Harcourt College Pub. pp. 6–7. ISBN .
  4. ^Rosser, Mariana V.; Rosser, J Barkley (23 July 2003). Comparative Economics in a Transforming World Economy. MIT Press. p. 7. ISBN .
  5. ^Chris Jenks. Core Sociological Dichotomies. "Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit." London; Thousand Oaks, CA; New Delhi. Sage. p. 383.
  6. ^Gilpin, Robert (5 June 2018). The Challenge of Global Capitalism : The World Economy in the 21st Century. ISBN . OCLC 1076397003.
  7. ^Heilbroner, Robert L. "Capitalism"Archived 28 October 2017 at the Wayback Machine. Steven N. Durlauf and Lawrence E. Blume, eds. The New Palgrave Dictionary of Economics. 2nd ed. (Palgrave Macmillan, 2008) doi:10.1057/9780230226203.0198.
  8. ^Louis Hyman and Edward E. Baptist (2014). American Capitalism: A ReaderArchived 22 May 2015 at the Wayback Machine. Simon & Schuster. ISBN 978-1-4767-8431-1.
  9. ^Gregory, Paul; Stuart, Robert (2013). The Global Economy and its Economic Systems. South-Western College Pub. p. 41. ISBN .
  10. ^Gregory and Stuart, Paul and Robert (28 February 2013). The Global Economy and its Economic Systems. South-Western College Pub. p. 107. ISBN .
  11. ^Macmillan Dictionary of Modern Economics, 3rd Ed., 1986, p. 54.
  12. ^Bronk, Richard (Summer 2000). "Which model of capitalism?". OECD Observer. Vol. 1999 no. 221–22. OECD. pp. 12–15. Archived from the original on 6 April 2018. Retrieved 6 April 2018.
  13. ^Stilwell, Frank. "Political Economy: the Contest of Economic Ideas". First Edition. Oxford University Press. Melbourne, Australia. 2002.
  14. ^Sy, Wilson N. (18 September 2016). "Capitalism and Economic Growth Across the World". Rochester, NY. SSRN 2840425.
  15. ^Adam Smith, The Wealth of NationsBook V, Chapter 2, Part 2, Article I: Taxes upon the Rent of Houses.
  16. ^House Of Commons May 4th; King's Theatre, Edinburgh, July 17
  17. ^Backhaus, "Henry George's Ingenious Tax," pp. 453–58.
  18. ^Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. p. 21. ISBN .
  19. ^Hayek, Friedrich (1941). The Pure Theory of Capital.
  20. ^Popper, Karl (2002). The Poverty of Historicism. Routledge Classics. ISBN .
  21. ^Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY:Minor Compositions/Autonomedia
  22. ^"It introduces an eye-opening approach to radical social thought, rooted equally in libertarian socialism and market anarchism." Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY: Minor Compositions/Autonomedia. p. back cover.
  23. ^"But there has always been a market-oriented strand of libertarian socialism that emphasizes voluntary cooperation between producers. And markets, properly understood, have always been about cooperation. As a commenter at Reason magazine's Hit&Run blog, remarking on Jesse Walker's link to the Kelly article, put it: "every trade is a cooperative act." In fact, it's a fairly common observation among market anarchists that genuinely free markets have the most legitimate claim to the label "socialism." "Socialism: A Perfectly Good Word Rehabilitated" by Kevin Carson at website of Center for a Stateless Society.
  24. ^Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part One".
  25. ^Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part Two".
  26. ^Tucker, Benjamin (1926). Individual Liberty: Selections from the Writings of Benjamin R. Tucker. New York: Vanguard Press. pp. 1–19.
  27. ^"Cooperative Economics: An Interview with Jaroslav Vanek". Interview by Albert Perkins. Retrieved March 17, 2011.
  28. ^The Political Economy of Socialism, by Horvat, Branko (1982), pp. 197–98.
  29. ^Theory of Value by Gérard Debreu.
  30. ^Hayek cited. Petsoulas, Christina. Hayek's Liberalism and Its Origins: His Idea of Spontaneous Order and the Scottish Enlightenment. Routledge. 2001. p. 2.
  31. ^Smith, Adam (1827). The Wealth of Nations. Book IV. p. 184.
  32. ^Smith, Adam (1776). "2". The Wealth of Nations. 1. London: W. Strahan and T. Cadell.
  33. ^Hacker, Jacob S.; Pierson, Paul (2010). Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class. Simon & Schuster. p. 55.
  34. ^ abJudd, K. L. (1997). "Computational economics and economic theory: Substitutes or complements?"(PDF). Journal of Economic Dynamics and Control. 21 (6): 907–42. doi:10.1016/S0165-1889(97)00010-9. S2CID 55347101.
  35. ^"Archived copy". Archived from the original on 2014-05-22. Retrieved 2014-06-06.CS1 maint: archived copy as title (link)
  36. ^"Farm Program Pays $1.3 Billion to People Who Don't Farm". Washington Post. 2 July 2006. Retrieved 3 June 2014.
  37. ^Ip, Greg and Mark Whitehouse, "How Milton Friedman Changed Economics, Policy and Markets", Wall Street Journal Online (November 17, 2006).
  38. ^"Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism", Ha-Joon Chang, Bloomsbury Press, ISBN 978-1596915985
  39. ^Tarbell, Ida (1904). The History of the Standard Oil Company. McClure, Phillips and Co.
  40. ^ abSaul, John The End of Globalism.
  41. ^"Cliche #41: "Rockefeller’s Standard Oil Company Proved That We Needed Anti-Trust Laws to Fight Such Market Monopolies", The Freeman, January 23, 2015. Retrieved December 20, 2016.
  42. ^"Why We Need To Re-think Friedman's Ideas About Monopolies". ProMarket. 2021-04-25. Retrieved 2021-09-27.
  43. ^"Cornel West: Democracy Matters", The Globalist, January 24, 2005. Retrieved October 9, 2014.
  44. ^Michael J. Sandel (June 2013). Why we shouldn't trust markets with our civic life. TED. Retrieved January 11, 2015.
  45. ^Henry Farrell (July 18, 2014). The free market is an impossible utopia. The Washington Post. Retrieved January 11, 2015.
  46. ^McNally, David (1993). Against the Market: Political Economy, Market Socialism and the Marxist Critique. Verso. ISBN .

Further reading[edit]

  • Block, Fred and Somers, Margaret R (2014). The Power of Market Fundamentalism: Karl Polanyi's Critique.Harvard University Press. ISBN 0674050711.
  • Boettke, Peter J. "What Went Wrong with Economics?", Critical Review Vol. 11, No. 1, pp. 35, 58.
  • Harcourt, Bernard (2012). The Illusion of Free Markets: Punishment and the Myth of Natural Order.Harvard University Press. ISBN 0674066162.
  • Cox, Harvey (2016). The Market as God. Harvard University Press. ISBN 9780674659681.
  • Hayek, Friedrich A. (1948). Individualism and Economic Order. Chicago: University of Chicago Press. vii, 271, [1].
  • Palda, Filip (2011) Pareto's Republic and the New Science of Peace 2011 [1] chapters online. Published by Cooper-Wolfling. ISBN 978-0-9877880-0-9.
  • Sandel, Michael J. (2013). What Money Can't Buy: The Moral Limits of Markets.Farrar, Straus and Giroux. ISBN 0374533652.
  • Stiglitz, Joseph. (1994). Whither Socialism? Cambridge, Massachusetts: MIT Press.
  • Verhaeghe, Paul (2014). What About Me? The Struggle for Identity in a Market-Based Society. Scribe Publications. ISBN 1922247375.
  • Robert Kuttner, "The Man from Red Vienna" (review of Gareth Dale, Karl Polanyi: A Life on the Left, Columbia University Press, 381 pp.), The New York Review of Books, vol. LXIV, no. 20 (21 December 2017), pp. 55–57. "In sum, Polanyi got some details wrong, but he got the big picture right. Democracy cannot survive an excessively free market; and containing the market is the task of politics. To ignore that is to court fascism." (Robert Kuttner, p. 57).

External links[edit]

Источник: https://en.wikipedia.org/wiki/Free_market

Historical poverty reductions: more than a story about ‘free-market capitalism’

In one of our most popular charts, we show that the share of people living in extreme poverty around the world has fallen continuously over the last two centuries.

In our experience from the last couple of months, when people are presented with this empirical fact, many often say that globalization in the form of ‘free-market capitalism’ is the main force to be thanked for such remarkable historical achievement. Here we want to argue that while free markets are undoubtedly important, this focus on ‘free-market capitalism’ alone is misguided.

Yes, over the last two centuries free markets and globalization have had a positive effect on aggregate economic growth, contributing to better living conditions and the reduction of extreme poverty across the world. Yet this is far from the only important socioeconomic change and moreover, the last two centuries have not been all about ‘free-market capitalism’. Governments around the world have dramatically increased their potential to collect revenues in order to redistribute resources through social transfers and raise the living standards of those that are worst off.

Larger governments

The following visualization shows the evolution of government expenditure as a share of national income for a selection of countries over the last century. The data comes from Mauro et al. (2015) and you can use the option ‘ Add country ’ to include other series.1

The reach of governments has grown substantially over the last century: the share of total output that governments control is much larger today than a century ago.

In absolute terms, the growth of governments is even more striking. GDP has grown substantially in the last century, so most governments around the world control more resources today than ever before.

More social protection

The visualization above shows that government spending in early-industrialized countries grew substantially in the 20th century. The following visualization shows that this was the result of growth specifically in social spending.

The data presented in this visualization comes from several different sources. In the ‘sources’ tab you can read more about how we combined them to produce a unified series.

The main message from this chart is that the explosive process of globalization that we have experienced in the last couple of centuries took place at the same time that governments increased their potential for taxing and redirecting resources through public policies, particularly social transfers.

Why should we care?

It is true that the historical reduction of extreme poverty around the world happened as markets liberalized and capitalism flourished. But it is also true that this reduction of poverty and improvement of living conditions happened at the time that public spending and redistribution to the worst off reached by far the highest levels ever.

The point we want to emphasize is that the world economy has changed in many ways in the last two centuries; and while globalization has been a key factor contributing to raising living standards across the world, its positive effects have been modulated by public policies, particularly social transfers.

This matters because policies aimed at liberalizing trade, and policies aimed at providing social safety nets, are often advocated by different groups. And it is common for these groups to argue that they are in conflict. Both economic theory and the empirical evidence from the fight against extreme poverty suggest that this is a mistake: globalization and social policy should be treated as complements rather than substitutes.

Источник: https://ourworldindata.org/historical-poverty-reductions-more-than-a-story-about-free-market-capitalism

: Free market vs capitalism

Free market vs capitalism
Free market vs capitalism
SBI ONLINE BANKING LOGIN PERSONAL BANKING LOGIN FIRST TIME

Historical poverty reductions: more than a story about ‘free-market capitalism’

In one of our most popular charts, we show that the share of people living in extreme poverty around the world has fallen continuously over the last two centuries.

In our experience from the last couple of months, when people are presented with this empirical fact, many often say that globalization in the form of ‘free-market capitalism’ is the main force to be thanked for such remarkable historical achievement. Here we want to argue that while free markets are undoubtedly important, this focus on ‘free-market capitalism’ alone is misguided.

Yes, over the last two centuries free markets and globalization have had a positive effect on aggregate economic growth, contributing to better living conditions and the reduction of extreme poverty across the world. Yet this is far from the only important socioeconomic change and moreover, the last two centuries have not been all about ‘free-market capitalism’. Governments around the world have dramatically increased their potential to collect revenues in order to redistribute resources through social transfers and raise the living standards of those that are worst off.

Larger governments

The following visualization shows the evolution of government expenditure as a share of national income free market vs capitalism a selection of countries over the last century. The data comes from Mauro et al. (2015) and you can use the option ‘ Add country ’ to include other series.1

The reach of governments has grown substantially over the last century: the share of total output that governments control is much larger today than a century ago.

In absolute terms, the growth of governments is even more striking. GDP has grown substantially in the last century, so most governments around the world control more resources today than ever before.

More social protection

The visualization above shows that government spending in early-industrialized countries grew substantially in the 20th century. The following visualization shows that this was the result of growth specifically in social spending.

The data presented in this visualization comes from several different sources. In the ‘sources’ tab you can read more about how we combined them to produce a unified series.

The main message from this chart is that the explosive process of globalization that we have experienced in the last couple of centuries took place at the same time that governments increased their potential for taxing and redirecting resources through public policies, particularly social transfers.

Why should we care?

It is true that the historical reduction of extreme poverty around the world happened as markets liberalized and capitalism flourished. But it is also true that this reduction of poverty and improvement of living conditions happened at the time that public spending and redistribution to the worst off reached by far the highest levels ever.

The point we want to emphasize is that the world economy has changed in many ways in the last two centuries; and while globalization has been a key factor contributing to raising living standards across the world, its positive effects have been modulated by public policies, particularly social transfers.

This matters because policies aimed at liberalizing trade, and policies aimed at providing social safety nets, are often advocated by different groups. And it is common for these groups to argue that they are in conflict. Both economic theory and the empirical evidence from the fight against extreme poverty suggest that this is a mistake: globalization and social policy should be treated as complements rather than substitutes.

Источник: https://ourworldindata.org/historical-poverty-reductions-more-than-a-story-about-free-market-capitalism

Free market

Form of market-based economy

For economic systems where markets (either free or regulated) are the primary allocation mechanism, see Market economy.

"Free enterprise" redirects here. For other uses, see Free enterprise (disambiguation).

In economics, a free market is a system in which the prices for goods and services are self-regulated by buyers and sellers negotiating in an open market. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority, and from all forms of economic privilege, monopolies and artificial scarcities.[1] Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, also called a liberal market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.

Scholars contrast the concept of a free market with the concept of a coordinated market in fields of study such as political economy, new institutional economics, economic sociology and political science. All of these fields emphasize the importance in currently existing market systems of rule-making institutions external to the simple forces of supply and demand which create space for those forces to operate to control productive output and distribution. Although free markets are commonly associated with capitalism in contemporary usage and popular culture, free markets have also been components in some forms of socialism.[2]

Criticism of the theoretical concept may regard systems with significant market power, inequality of bargaining power, or information asymmetry as less than free, with regulation being necessary to control those imbalances in order to allow markets to function more efficiently as well as produce more desirable social outcomes.

Economic systems[edit]

Capitalism[edit]

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[3][4][5][6] Central characteristics of capitalism include capital accumulation, competitive markets, a price system, private property and the recognition of property rights, voluntary exchange and wage labor.[7][8] In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in capital and financial markets whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.[9]

Economists, historians, political economists and sociologists have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free-market capitalism, state capitalism and welfare capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership,[10] obstacles to free competition and state-sanctioned social policies. The degree of competition in markets and the role of intervention and regulation as well as the scope of state ownership vary across different models of capitalism.[11][12] The extent to which different markets are free and the rules defining private property are matters of politics and policy. Most of the existing capitalist economies are mixed economies that combine elements of free markets with state intervention and in some cases economic planning.[13]

Market economies have existed under many forms of government and in many different times, places and cultures. Modern capitalist societies—marked by a universalization of money-based social relations, a consistently large and system-wide class of workers who must work for wages (the proletariat) and a capitalist class which owns the means of production—developed in Western Europe in a process that led to the Industrial Revolution. Capitalist systems with varying degrees of direct government intervention have since become dominant in the Western world and continue to spread. Capitalism has been shown to be strongly correlated with economic growth.[14]

Georgism[edit]

Main article: Georgism

For classical economists such as Adam Smith, the term free market does not necessarily refer to a market free from government interference, but rather free from all forms of economic privilege, monopolies and artificial scarcities.[1] This implies that economic rents, i.e. profits generated from a lack of perfect competition, must be reduced or eliminated as much as possible through free competition.

Economic theory suggests the returns to land and other natural resources are economic rents that cannot be reduced in such a way because of their perfect inelastic supply.[15] Some economic thinkers emphasize the need to share those rents as an essential requirement for a well functioning market. It is suggested this would both eliminate the need for regular taxes that have a negative effect on trade (see deadweight loss) as well as release land and resources that are speculated upon or monopolised. Two features that improve the competition and free market mechanisms. Winston Churchill supported this view by the following statement: "Land is the mother of all monopoly".[16] The American economist and social philosopher Henry George, the most famous proponent of this thesis, wanted to accomplish this through a high land value tax that replaces all other taxes.[17] Followers of his ideas are often called Georgists or geoists and geolibertarians.

Léon Walras, one of the founders of the neoclassical economics who helped formulate the general equilibrium theory, had a very similar view. He argued that free competition could only be realized under conditions of state ownership of natural resources and land. Additionally, income taxes could be eliminated because the state would receive income to finance public services through owning such resources and enterprises.[18]

Laissez-faire[edit]

Main article: Laissez-faire

The laissez-faire principle expresses a preference for an absence of non-market pressures on prices and wages such as those from discriminatory government taxes, subsidies, tariffs, regulations of purely private behavior, or government-granted or coercive monopolies. In The Pure Theory of Capital, Friedrich Hayek argued that the goal is the preservation of the unique information contained in the price itself.[19]

The definition of free bank of america fraud department email address has been disputed and made complex by collectivist political philosophers and socialist economic ideas.[1] This contention arose from the divergence from classical economists such as Richard Cantillon, Adam Smith, David Ricardo and Thomas Robert Malthus and from the continental economics developed primarily by the Spanish scholastic and French classical economists, including Anne-Robert-Jacques Turgot, Baron de Laune, Jean-Baptiste Say and Frédéric Bastiat. During the marginal revolution, subjective value theory was rediscovered.[20]

Although laissez-faire has been commonly associated with capitalism, there is a similar economic theory associated with socialism called left-wing or socialist laissez-faire, also known as free-market anarchism, free-market anti-capitalism and free-market socialism to distinguish it from laissez-faire capitalism.[21][22][23] Critics of laissez-faire as commonly understood argue that a truly laissez-faire system would be anti-capitalist and socialist.[24][25] American individualist anarchists such as Benjamin Tucker saw themselves as economic free-market socialists and political individualists while arguing that their "anarchistic socialism" or "individual anarchism" was "consistent Manchesterism".[26]

Socialism[edit]

Main article: Socialism

See also: Socialist economics

Various forms of socialism based on free markets have existed since the 19th century. Early notable socialist proponents of free markets include Pierre-Joseph Proudhon, Benjamin Tucker and the Ricardian socialists. These economists believed that genuinely free markets and voluntary exchange could not exist within the exploitative conditions of capitalism. These proposals ranged from various forms of worker cooperatives operating in a free-market economy such as the mutualist system proposed where can i open a business bank account Proudhon, to state-owned enterprises operating in unregulated and open markets. These models of socialism are not to be confused with other forms of market socialism (e.g. the Lange model) where publicly owned enterprises are coordinated by various degrees of economic planning, or where capital good prices are determined through marginal cost pricing.

Advocates of free-market socialism such as Jaroslav Vanek argue that genuinely free markets are not possible under conditions of private ownership of productive property. Instead, he contends that the class differences and inequalities in income and power that result from private ownership enable the interests of the dominant class to skew the market to their favor, either in the form of monopoly and market power, or by utilizing their wealth and resources to legislate government policies that benefit their specific business interests. Additionally, Vanek states that workers in a socialist economy based on cooperative and self-managed enterprises have stronger incentives to maximize productivity because they would receive a share of the profits (based on the overall performance of their enterprise) in addition to receiving their fixed wage or salary. The stronger incentives to maximize productivity that he conceives as possible in a socialist economy based on cooperative and self-managed enterprises might be accomplished in a free-market economy if employee-owned companies were the norm as envisioned by various thinkers including Louis O. Kelso and James S. Albus.[27]

Socialists also assert that free-market capitalism leads to an excessively skewed distributions of income and economic instabilities which in turn leads to social instability. Corrective measures in the form of social welfare, re-distributive taxation and regulatory measures and their associated administrative costs which are required create agency costs for society. These costs would not be required in a self-managed socialist economy.[28]

Concepts[edit]

Economic equilibrium[edit]

Main article: Economic equilibrium

With varying degrees of mathematical rigor over time, the general equilibrium theory has demonstrated that under certain conditions of competition the law of supply and demand predominates in this ideal free and competitive market, influencing prices toward an equilibrium that balances the demands for the products against the supplies.[29] At these equilibrium prices, the market distributes the products to the purchasers according to each purchaser's preference or utility for each product and within the relative limits of each buyer's purchasing power. This result is described as market efficiency, or more specifically a Pareto optimum.

This equilibrating behavior of free markets requires certain assumptions about their agents—collectively known as perfect competition—which therefore cannot be results of the market that they create. Among these assumptions are several which are impossible to fully achieve in a real market, such as complete information, interchangeable goods and services and lack of market power. The question then is what approximations of these conditions guarantee approximations of market efficiency and which failures in competition generate overall market failures. Several Nobel Prizes in Economics have been awarded for analyses of market failures due to asymmetric information.

Low barriers to entry[edit]

Main article: Barriers to entry

A free market does not require the existence of competition, however, it does require a framework that allows new market entrants. Hence, in the lack of coercive barriers, for example, paid licensing certification for certain services and businesses, competition between businesses flourishes all through the demands of consumers, or buyers. It often suggests the presence of the profit motive, although neither a profit motive or profit itself are necessary for a free market.[citation needed] All modern free markets are understood to include entrepreneurs, both individuals and businesses. Typically, a modern free-market economy would include other features such as a stock exchange and a financial services sector, but they do not define it.

Perfect competition and market failure[edit]

Main articles: Market failure and Perfect competition

Conditions that must exist for unregulated markets to behave as free markets are summarized at perfect competition. An absence of any of these perfect competition ideal conditions is a market failure. Most schools of economics[which?] allow that regulatory intervention may provide a substitute force to counter a market failure. Under this thinking, this form of market regulation may be better than an unregulated market at providing a free market.

Spontaneous order[edit]

Main article: Spontaneous order

See also: Invisible hand

Friedrich Hayek popularized the view that market economies promote spontaneous order which results in a better "allocation of societal resources than any design could achieve".[30] According to this view, market economies are characterized by the formation of complex transactional networks that produce and distribute goods and services throughout the economy. These networks are not designed, but they nevertheless emerge as a result of decentralized individual economic decisions. The idea of spontaneous order is an elaboration on the invisible hand proposed by Adam Smith in The Wealth of Nations. About the individual, Smith wrote:

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.[31]

Smith pointed out that one does not get one's dinner by appealing to the brother-love of the butcher, the farmer or the baker. Rather, one appeals to their self-interest and pays them for their labor, arguing:

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.[32]

Supporters of this view claim that spontaneous order is superior to any order that does not allow individuals to make their own choices of what to produce, what to buy, what to sell and at what prices due to the number and complexity of the factors involved. They further believe that any attempt to implement central planning will result in more disorder, or a less efficient production and distribution of goods and services.

Critics such as political economist Karl Polanyi question whether a spontaneously ordered market can exist, completely free of distortions of political first national bank of nebraska headquarters, claiming that even the ostensibly freest markets require a state to exercise coercive power in some areas, namely to enforce contracts, govern the formation of labor unions, spell out the www discover com pay my bill and obligations of corporations, shape who has standing to bring legal actions and define what constitutes an unacceptable conflict of interest.[33]

Supply and demand[edit]

Main article: Supply and demand

Demand for an item (such as goods or services) refers to the economic market pressure from people trying to buy it. Buyers have a maximum price they are willing to pay and sellers have a minimum price they are willing to offer their product. The point at which the supply and demand curves meet is the equilibrium price of the good and quantity demanded. Sellers willing to offer their goods at a lower price than the equilibrium price receive the difference as producer surplus. Buyers willing to pay for goods at a higher price than the equilibrium price receive the difference as consumer surplus.[34]

The model is commonly applied to wages in the market for labor. The typical roles of supplier and consumer are reversed. The suppliers are individuals, who try to sell (supply) their labor for the highest price. The peoples bank holyoke ma are businesses, which try to buy (demand) the type of labor they need at the lowest price. As more people offer their labor in that market, the equilibrium wage decreases and the equilibrium level of employment increases as the supply curve northwest bank warren pa to the right. The opposite happens if fewer people offer their wages in the market as the supply curve shifts to the left.[34]

In a free market, individuals and firms taking part in these transactions have the liberty to enter, free market vs capitalism and participate in the market baby names that begin with m for a girl they so choose. Prices and quantities are allowed to adjust according to economic conditions in order to reach equilibrium and properly allocate resources. However, in many countries around the world governments seek to intervene in the free market in order to achieve certain social or political agendas.[35] Governments may attempt to create social equality or equality of outcome by intervening in the market through actions such as imposing a minimum wage (price floor) or erecting price controls (price ceiling). Other lesser-known goals are also pursued, such as in the United States, where the federal government subsidizes owners of fertile land to not grow crops in order to prevent the supply curve from further shifting to the right and decreasing the equilibrium price. This is done under the justification of maintaining farmers' profits; due to the relative inelasticity of demand for crops, increased supply would lower the price but not significantly increase quantity demanded, thus placing pressure on farmers to exit the market.[36] Those interventions are often done in the name of maintaining basic assumptions of free markets such as the idea that the costs of production must be included in the price of goods. Pollution and depletion costs are sometimes not included in the cost of production (a manufacturer that withdraws water at one location then discharges it polluted downstream, avoiding the cost of treating the water), therefore governments may opt to impose regulations in an attempt to try to internalize all of the cost of production and ultimately include them in the price of the goods.

Advocates of the free market contend that government intervention hampers economic growth by disrupting the natural allocation of resources according to supply and demand while critics of the free market contend that government intervention is sometimes necessary to protect a country's economy from better-developed and more influential economies, while providing the stability necessary for wise long-term investment. Milton Friedman pointed to failures of central planning, price controls and state-owned corporations, particularly in the Soviet Union and China[37] while Ha-Joon Chang cites the examples of post-war Japan and the growth of South Korea's steel industry.[38]

Criticism[edit]

See also: Criticism of capitalism

Critics of the free market have argued that in real world situations it has proven to be susceptible to the development of price fixing monopolies.[39] Such reasoning has led to government intervention, e.g. the United States antitrust law.

Two prominent Canadian authors argue that government at times has to intervene to ensure competition in large and important industries. Naomi Klein illustrates this roughly in her work The Shock Doctrine and John Kemba financial credit union atm Saul more humorously illustrates this through various examples in The Collapse of Globalism and the Reinvention of the World.[40] While its supporters argue that only a free market can create healthy competition and therefore more business and reasonable prices, opponents say that a free market in its purest form may result in the opposite. According to Klein and Ralston, the merging of companies into giant corporations or the privatization of government-run industry and national assets often result in monopolies or oligopolies requiring government intervention to force competition and reasonable prices.[40] Another form of market failure is speculation, where transactions are made to profit from short term fluctuation, rather from the intrinsic value of the companies or products. This criticism has been challenged by historians such as Lawrence Reed, who argued that monopolies have historically failed to form even in the absence of antitrust law.[41][unreliable source?] This is because monopolies are inherently difficult to maintain as a company that tries to maintain its monopoly by buying out new competitors, for instance, is incentivizing newcomers to enter the market in hope of a buy-out. Furthermore, according to writer Walter Lippman and economist Milton Friedman, historical analysis of the formation of monopolies reveals that, contrary to popular belief, these were the result not of unfettered market forces, but of legal privileges granted by government.[42][unreliable source?]

American philosopher and author Cornel West has derisively termed what he perceives as dogmatic arguments for laissez-faire economic policies as free-market fundamentalism. West has contended that such mentality "trivializes the concern for public interest" and "makes money-driven, poll-obsessed elected officials deferential to corporate goals of profit – often at the cost of the common good".[43] American political philosopher Michael J. Sandel contends that in the last thirty years the United States has moved beyond just having a market economy and has become a market society where literally everything is for sale, including aspects of social and civic life such as education, access to justice and political influence.[44] The economic historian Karl Polanyi was highly critical of the idea of the market-based society in his book The Great Transformation, noting that any attempt at its creation would undermine human society and the common good.[45]

Critics of free market economics range from those who reject markets entirely in favour of a planned economy as advocated by various Marxists to those who wish to see market failures regulated to various degrees or supplemented by government interventions. Keynesians support market roles for government such as using fiscal policy for economic stimulus when actions in the private sector lead to sub-optimal economic outcomes of depressions or recessions. Business cycle is used by Keynesians to explain liquidity traps, by which underconsumption occurs, to argue for government intervention with fiscal policy. David McNally of the University of Houston argues in the Marxist tradition that the logic of the market inherently produces inequitable outcomes and leads to unequal exchanges, arguing that Adam Smith's moral intent and moral philosophy espousing equal exchange was undermined by the practice of the free market he championed. According to McNally, the development of the market economy involved coercion, exploitation and violence that Smith's moral philosophy could not countenance. McNally also criticizes market socialists for believing in the possibility of fair markets based on equal exchanges to be achieved by purging parasitical elements from the market economy such as private ownership of the means of production, arguing that market socialism is an oxymoron when socialism is defined as an end to wage labour.[46]

Some would argue that only one known example of a true free market exists, namely the black market. The black market is under constant threat by the police, but under no circumstances do the police regulate the substances that are being created. The black market produces wholly unregulated goods and are purchased and consumed unregulated. That is to say, anyone can produce anything at any time and anyone can purchase anything available at any time. The alternative view is that the black market is not a free market at all since high prices and natural monopolies are often enforced through murder, theft and destruction. Black markets can only exist peripheral to regulated markets where laws are being regularly enforced.[citation needed]

See also[edit]

Notes[edit]

  1. ^ abcPopper, Karl (1994). The Open Society and Its Enemies. Routledge Classics. ISBN .
  2. ^Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN .
  3. ^Zimbalist, Sherman and Brown, Andrew, Howard J. and Stuart (October 1988). Comparing Economic Systems: A Political-Economic Approach. Harcourt College Pub. pp. 6–7. ISBN .
  4. ^Rosser, Mariana V.; Rosser, J Barkley (23 July 2003). Comparative Economics in a Transforming World Economy. MIT Press. p. 7. ISBN .
  5. ^Chris Jenks. Core Sociological Dichotomies. "Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit." London; Thousand Oaks, CA; New Delhi. Sage. p. 383.
  6. ^Gilpin, Robert (5 June 2018). The Challenge of Global Capitalism : The World Economy in the 21st Century. ISBN . OCLC 1076397003.
  7. ^Heilbroner, Robert L. "Capitalism"Archived 28 October 2017 at the Wayback Machine. Steven N. Durlauf and Lawrence E. Blume, eds. The New Palgrave Dictionary of Economics. 2nd ed. (Palgrave Macmillan, 2008) doi:10.1057/9780230226203.0198.
  8. ^Louis Hyman and Edward E. Baptist (2014). American Capitalism: A ReaderArchived 22 May 2015 at the Wayback Machine. Simon & Schuster. ISBN 978-1-4767-8431-1.
  9. ^Gregory, Paul; Stuart, Robert (2013). The Global Economy and its Economic Systems. South-Western College Pub. p. 41. ISBN .
  10. ^Gregory and Stuart, Paul and Robert (28 February 2013). The Global Economy and its Economic Systems. South-Western College Pub. p. 107. ISBN .
  11. ^Macmillan Dictionary of Modern Economics, 3rd Ed., 1986, p. 54.
  12. ^Bronk, Richard (Summer 2000). "Which model of capitalism?". OECD Observer. Vol. 1999 no. 221–22. OECD. pp. 12–15. Archived from the original on 6 April 2018. Retrieved 6 April 2018.
  13. ^Stilwell, Frank. "Political Economy: the Contest of Economic Ideas". First Edition. Oxford University Press. Melbourne, Australia. 2002.
  14. ^Sy, Wilson N. (18 September 2016). "Capitalism and Economic Growth Across the World". Rochester, NY. SSRN 2840425.
  15. ^Adam Smith, The Wealth of NationsBook V, Chapter 2, Part 2, Article I: Taxes upon the Rent of Houses.
  16. ^House Of Commons May 4th; King's Theatre, Edinburgh, July 17
  17. ^Backhaus, "Henry George's Ingenious Tax," pp. 453–58.
  18. ^Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. p. 21. ISBN .
  19. ^Hayek, Friedrich (1941). The Pure Theory of Capital.
  20. ^Popper, Karl (2002). The Poverty of Historicism. Routledge Classics. ISBN .
  21. ^Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY:Minor Compositions/Autonomedia
  22. ^"It introduces an eye-opening approach to radical social thought, rooted equally in libertarian socialism and market anarchism." Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY: Minor Compositions/Autonomedia. p. back cover.
  23. ^"But there has always been a market-oriented strand of libertarian socialism that emphasizes voluntary cooperation between producers. And markets, properly understood, have always been about cooperation. As a commenter at Reason magazine's Hit&Run blog, remarking on Jesse Walker's link to the Kelly article, put it: "every trade is a cooperative act." In fact, it's a fairly common observation among market anarchists that genuinely free markets have the most legitimate claim to the label "socialism." "Socialism: A Perfectly Good Word Rehabilitated" by Kevin Carson at website of Center for a Stateless Society.
  24. ^Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part One".
  25. ^Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part Two".
  26. ^Tucker, Benjamin (1926). Individual Liberty: Selections from the Writings of Benjamin R. Tucker. New York: Vanguard Press. pp. 1–19.
  27. ^"Cooperative Economics: An Interview with Jaroslav Vanek". Interview by Albert Perkins. Retrieved March 17, 2011.
  28. ^The Political Economy of Socialism, by Horvat, Branko (1982), pp. 197–98.
  29. ^Theory of Value by Gérard Debreu.
  30. ^Hayek cited. Petsoulas, Christina. Hayek's Liberalism and Its Origins: His Idea of Spontaneous Order and the Scottish Enlightenment. Routledge. 2001. p. 2.
  31. ^Smith, Adam (1827). The Wealth of Nations. Book IV. p. 184.
  32. ^Smith, Adam (1776). "2". The Wealth of Nations. 1. London: W. Strahan and T. Cadell.
  33. ^Hacker, Jacob S.; Pierson, Paul (2010). Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class. Simon & Schuster. p. 55.
  34. ^ abJudd, K. L. (1997). "Computational economics and economic theory: Substitutes or complements?"(PDF). Journal of Economic Dynamics and Control. 21 (6): 907–42. doi:10.1016/S0165-1889(97)00010-9. S2CID 55347101.
  35. ^"Archived copy". Archived from the original on 2014-05-22. Retrieved 2014-06-06.CS1 maint: archived copy as title (link)
  36. ^"Farm Program Pays $1.3 Billion to People Who Free market vs capitalism Farm". Washington Post. 2 July 2006. Retrieved 3 June 2014.
  37. ^Ip, Greg and Mark Whitehouse, "How Milton Friedman Changed Economics, Policy and Markets", Wall Street Journal Online (November 17, 2006).
  38. ^"Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism", Ha-Joon Chang, Bloomsbury Press, ISBN 978-1596915985
  39. ^Tarbell, Ida (1904). The History of the Standard Oil Company. McClure, Phillips and Co.
  40. ^ abSaul, John The End of Globalism.
  41. ^"Cliche #41: "Rockefeller’s Standard Oil Company Proved That We Needed Anti-Trust Laws to Fight Such Market Monopolies", The Freeman, January 23, 2015. Retrieved December 20, 2016.
  42. ^"Why We Need To Re-think Friedman's Ideas About Monopolies". ProMarket. 2021-04-25. Retrieved 2021-09-27.
  43. ^"Cornel West: Democracy Matters", The Globalist, January 24, 2005. Retrieved October 9, 2014.
  44. ^Michael J. Sandel (June 2013). Why we shouldn't trust markets with our civic life. TED. Retrieved January 11, 2015.
  45. ^Henry Farrell (July 18, 2014). The free market is an impossible utopia. The Washington Post. Retrieved January 11, 2015.
  46. ^McNally, David (1993). Against the Market: Political Economy, Market Socialism and the Marxist Critique. Verso. ISBN .

Further reading[edit]

  • Block, Fred and Somers, Margaret R (2014). The Power of Market Fundamentalism: Karl Polanyi's Critique.Harvard University Press. ISBN 0674050711.
  • Boettke, Peter J. "What Went Wrong with Economics?", Critical Review Vol. 11, No. 1, pp. 35, 58.
  • Harcourt, Bernard (2012). The Illusion of Free Markets: Punishment and the Myth of Natural Order.Harvard University Press. ISBN 0674066162.
  • Cox, Harvey (2016). The Market as God. Harvard University Press. ISBN 9780674659681.
  • Hayek, Friedrich A. (1948). Individualism and Economic Order. Chicago: Free market vs capitalism of Chicago Press. vii, 271, [1].
  • Palda, Filip (2011) Pareto's Republic and the New Science of Peace 2011 [1] chapters online. Published by Cooper-Wolfling. ISBN 978-0-9877880-0-9.
  • Sandel, Michael J. (2013). What Money Can't Buy: The Moral Limits of Markets.Farrar, Straus and Giroux. ISBN 0374533652.
  • Stiglitz, Joseph. (1994). Whither Socialism? Cambridge, Massachusetts: MIT Press.
  • Verhaeghe, Paul (2014). What About Me? The Struggle for Identity in a Market-Based Society. Scribe Publications. ISBN 1922247375.
  • Robert Kuttner, "The Man from Red Vienna" (review of Gareth Dale, Karl Polanyi: A Life on the Left, Columbia University Press, 381 pp.), The New York Review of Books, vol. LXIV, no. 20 (21 December 2017), pp. 55–57. "In sum, Polanyi got some details wrong, but he got the big picture right. Democracy cannot survive an excessively free market; and containing the market is the task of politics. To ignore that is to court fascism." (Robert Kuttner, p. 57).

External links[edit]

Источник: https://en.wikipedia.org/wiki/Free_market

How Britain fell out of love with the free market

Twelve years ago, shortly after winning his third consecutive general election, Tony Blair gave the Labour party a brief lecture on economics. “There is no mystery about what works,” he said, crisply, speaking from a podium printed with the slogan “Securing Britain’s Future” at the party conference in Brighton. “An open, liberal economy prepared constantly to change to remain competitive.”

Blair rounded on critics of modern capitalism: “I hear people say we have to stop and debate globalisation. You might as well debate whether autumn should follow summer. They’re not debating it in China and India.” He went on: “The temptation is … to think we protect a workforce by regulation, a company by government subsidy, an industry by tariffs. It doesn’t work today.” Britain should not “cling on to the European social model of the past”.

Most of his conference speech was vigorously applauded. But the passage on economics was received with solemn looks and silence. There was no heckling, as there had been when previous Labour leaders and chancellors delivered what they saw as home truths about the economy. Instead, there was a sense of resignation in the hall: an acceptance by a party of the left that the right had won the economic argument.

In the early years of the 21st century, the inevitability of an ever more competitive, deregulated, internationally orientated market economy, to which both government and society were subordinate – a doctrine often called neoliberalism – was accepted right across the mainstream of British politics: from the Thatcherites who still dominated the Conservative party; to the increasingly pro-business Liberal Democrats, who would soon form a coalition government with the Tories; to the Scottish National party, whose then leader Alex Salmond praised Ireland and Iceland for their low corporate taxes; to the Blair cabinet itself, comenity credit cards list 2014, I was told by a senior Labour figure in 2001, “You won’t find a single member with anything critical to say about capitalism.” It was assumed by the main parties that most voters felt the same way.

Margaret Thatcher’s government had overcome fierce opposition to install a free-market economy in Britain. But under Blair, seemingly more consensual and less dogmatic, the extending of markets into ever more areas of everyday life was presented as unavoidable, or simply practical: “what works”. The British housing market was thriving, with home ownership reaching an all-time high in 2003. There had not been a recession since 1991, a blissfully long time for the previously fitful British economy. Compared to the sometimes tatty, depopulating country of the 70s and 80s, much of Britain in the early 2000s looked successful – a society of regenerating city centres and steadily rising wages.

The free-market ascendancy was acknowledged even by some of its strongest critics. In 2000, the Marxist historian Perry Anderson declared: “The only starting-point for a realistic left today is a lucid registration of historical defeat … Neo-liberalism as a set of principles rules undivided across the globe: the most successful ideology in world history.” In 2007, Naomi Klein wrote in her book The Shock Doctrine that capitalism was “conquering its final frontiers”.

In 2017, that aura of invulnerability has evaporated. Disenchantment with the economic status quo has been potently expressed in elections across the world, from France to the US. But in no democracy has the political shift against the free market been as stark as in Britain.

Since Thatcher’s election in 1979, Conservative and Labour governments have privatised and deregulated, reduced taxes for business and indulged its excesses, opened up the economy to foreign capital and commercialised the national psyche, until Britain became one of the world’s most thoroughly neoliberal societies. And yet, at last year’s EU referendum, the votes of those “left behind” by all this played an unexpectedly pivotal role. Then, at this year’s general election, both the Conservatives and Labour campaigned – or appeared to campaign – against the economic system that they themselves had created.

The Conservative manifesto attacked “aggressive asset-stripping” of British companies by foreign buyers; “perverse pricing” by privatised rail companies; “exploitative” markets in energy, property, insurance and telecommunications; and “the remuneration of some corporate leaders … [which] has risen far faster than some corporate performance”.

“We reject the cult of selfish individualism,” the manifesto declared, in language seemingly calculated to insult Thatcherites. “We do not believe in untrammelled free markets.” Instead, the Conservatives now believed that “regulation [was] necessary for the proper ordering of any economy”. They would “enhance workers’ rights and protections”, and create an “economy that works for everyone”. The obvious implication was that the free market had created the opposite.

The Labour manifesto opened with almost exactly the same words: “Creating an economy that works for all”. Like the Tories, Labour attacked executive pay and promised to strengthen workers’ rights. Like the Tories, they offered an “industrial strategy” through which government – long depicted by free-marketeers as largely irrelevant or actively harmful – would help modernise the economy. And like the Tories, Labour said companies should no longer be run primarily for their shareholders, as free-market doctrine has insisted since the early 80s, but also for the benefit of their employees, customers and the public as a whole.

While the Conservatives offered mostly rhetoric, Labour offered policies – nationalisation, restored trade union rights, restrictions on the City of London – which would undo much of British neoliberalism. It is these policies that, on 8 June, helped Labour achieve its largest vote since Blair’s landslide in 1997, and now leaves the party possibly on the verge of power. John McDonnell, who lists one of his recreational activities in Who’s Who as “generally fermenting the overthrow of capitalism”, could soon be chancellor.

Amid all the current political turmoil in Britain and the wider world, the shift against free markets has yet to register fully with much of the media or many voters. But the most ardent neoliberals have noticed. “Free marketeers have been gobsmacked,” says Mark Littlewood, director of the Institute of Economic Affairs, which has supplied British politicians with pro-capitalist arguments for 62 years. “Things we thought of as like the laws of gravity are now up for grabs.”

The end of the free-market monopoly in British politics is part of an even bigger change. After almost a quarter of a century when it was widely agreed that the fundamentals of the economy were too important to be meddled with by politicians, or be subject to democratic scrutiny, the contest to shape that economy has restarted.


One clue as to why Britain fell out of love with the free market is in the tone now adopted by its defenders. Gone is the capitalist triumphalism of the Thatcher and Blair eras. Instead, there are apologies. “Markets can be brutal,” concedes the Conservative MP James Cleverly, leader of the Free Enterprise Group, a Commons pressure group with three dozen members (all Tories) that was founded in 2010. “The benefits of free markets have not spread themselves between the generations as equally as many of us would like,” he says. “Part of the reason Corbyn got so much support in the election, for policies which I regard as economically illiterate, is that many people don’t value the impact my kind of economic values have had on their lives. The big wins we had with market reforms in Britain were back in the 80s.”

These days, many free marketeers are highly critical of how British capitalism operates. “The City is incorrectly incentivised,” says the Tory peer Nigel Vinson, who has been a leading player in Britain’s free-market thinktanks since the formative days of Thatcherism in the mid-70s. “We have sold far too many companies to foreign owners. A lot of corporate takeovers are personal megalomania, not corporate efficiency. There are abuses of market power, such as [the zero-hours employer] Sports Direct. Meanwhile you see [the advertising executive] Martin Sorrell taking home £70m in 2015. That sets a rotten example.”

Littlewood lists other dysfunctions: “Wage stagnation, poor GDP growth, crony capitalism in the contracting-out of public services, endless gaming of the system by corporations, a general ennui about the prevailing economic system … ” Finally, he cites the event that did more than any other to discredit free-market capitalism in Britain: “the 2008 crash”, the banking crisis caused by the deregulation and hubris of the financial markets.

That crisis and what followed – recession, prolonged weak growth, ballooning public and private debt, and seemingly endless austerity – has already destroyed or severely damaged the governments of Gordon Brown, David Cameron and Theresa May. It has necessitated contortions that suggest an economic system on life support: bank bailouts, unprecedentedly low interest rates, and quantitative easing – ie the Bank of England simply printing money and pumping it into the economy.

“The architecture of neoliberalism has had huge holes blown in it,” says Will Davies, reader in political economy at Goldsmiths, University of London. He argues that free-market capitalism has suffered a two-stage collapse: “First, in 2008, it was revealed as financially unviable. Then, in 2016 and 2017, it went into political crisis.” One symptom of the latter, he says, has how do you add a card to cash app a rupture between big business and the main British political parties.

But this is not the first time that the economic failings and social costs of neoliberalism have led people to forecast its demise. Repeatedly in the past three decades, critiques and alternatives have been conceived and promoted, refined and combined by innovative thinkers and politicians of both main parties – and then frustrated and largely forgotten, until the re-emergence of many of their themes and advocates under May and Corbyn.

In the meantime, the free market has survived, and worked its way into more aspects of Britons’ daily lives, becoming in many ways progressively more efficient and thorough in its commodification of our activities, our homes, our minds. In fact, it might be this inhuman efficiency, and its social consequences, that has provoked the current political revolt against modern capitalism.

Is this revolt just another episode in a long resistance to neoliberalism, or is it a breakthrough? And if so, do Labour or the Conservatives have another viable economic model, which might make capitalism less dominant in our lives?


The first chance to change the economic order that Thatcher and John Major’s governments had imposed on Britain came 22 years ago. In January 1995, a few months after Blair was overwhelmingly elected Labour leader, the then Guardian economics editor Will Hutton published a panoramic book about the British economy, The State We’re In. Hutton had spent years exploring the economic ideas and social consequences of Thatcherism, and had decided that both were disastrous. He was a follower of John Maynard Keynes, the early-20th-century economist whose vision of a milder, state-regulated capitalism had shaped the postwar Britain that Thatcherism largely erased. Hutton was also close to the Labour party: two rising young Blairites, Yvette Cooper and David Miliband, gave him comments on the book’s manuscript.

The State We’re In depicted British economic life after a decade-and-a-half of Conservative free-market reforms as “meaner, harder, and more corrupting”. It also saw the economy as a failure in business terms: short-termist, low in productivity, over-reliant on the City of London and old technology, prone to boom and bust. Britain was falling behind other capitalist countries. “The individualist, laissez-faire values which imbue the economic and political elite,” wrote Hutton, “have been found wanting.” His solution was to import the best practices of other economies, particularly Germany, which he admired for its more patient, more socially inclusive economic approach. He called his vision “stakeholder” capitalism.

The book had a cautious initial print run of 3,500. But its timing was good: Britain was emerging sluggishly from a long recession, and was tired of Tory government. The State We’re In sold 250,000 copies, making it one of the bestselling economics books in Britain since the second world war. Among its readers were much of the New Labour government-in-waiting: Gordon Brown, Ed Balls, John Prescott, Robin Cook and Tony Blair himself.

“Tony was not a man of settled opinions, nor someone who knew a lot about economics,” says Hutton, “but David Miliband persuaded him to read it. This may be apocryphal, but apparently there is a picture of Blair reading it on holiday.” During 1995 and 1996, Blair’s speeches began to refer to the limitations of the free market, and to the desirability of a “stakeholder” economy, “run for the many, not for the few” – an almost exact prefiguring of the title of the 2017 Labour manifesto.

But then these themes were abruptly dropped. According to Hutton, as the 1997 election neared, Blair was told by his more nervous advisors that any talk of reforming British capitalism would be presented by the Conservatives as a return to the economic interventionism of the troubled Labour governments of the 70s. For decades, they had been crudely but effectively caricatured by the Tories, and much of the media, as bullyingly leftwing and disastrous. Meanwhile Brown, who as shadow chancellor had spent years trying to win over the City, decided Hutton’s book was too hostile to bankers; and Victoria secret plus size pink sweatpants, a Labour traditionalist, decided it was not anti-capitalist enough. “I was frozen out,” Hutton says.

In the late-90s, the economy started growing more consistently, as part of a technology-driven boom across the western world, and Hutton’s view of Britain began to seem too pessimistic. On winning power in 1997, Labour left most of the structure and practices of Thatcherite capitalism in place, and rather than question its rationale, they used swelling tax revenues to soften its social effects, for example through tax credits to subsidise low wages.

Outside Britain, the free market had more doubters. In 1997, the World Bank, previously an uncritical advocate of its state-shrinking orthodoxies, published a report conceding that “an effective state is the cornerstone of successful economies”. In South America, the failures of market-driven economic policies began to move electorates dramatically leftward. And in 1999, an even wider mass movement formed around the world against the environmental and social damage done by globalisation, as the spread of free-market capitalism was euphemistically called by its advocates. Enormous protests took place, from Genoa to Seattle. Smaller, but still vibrant, anti-capitalist demonstrations began to occur regularly in London.

But still most British politicians did not take them very seriously, regarding the movement as backward-looking and naively utopian. In a brief book published in 2001, the Financial Times journalist John Lloyd, a former communist who had become a New Labour associate, described the activists’ annual summit at Porto Alegre in Brazil as “a ragbag of declamation, hot air and vapidity”. The contempt was mutual: most of the protestors showed no interest in forming alliances with centre-left politicians in order to slightly civilise capitalism. “It’s not our job to suggest alternatives!” one prominent activist told me in 2000.

By the mid-00s, the protests were tailing off. Rather than listen to the anti-capitalists, the Blair government and its centre-left counterparts regulated their sometimes violent demonstrations with ever more riot police – while regulating the more powerful anarchic forces of finance capitalism less and less. The British public, meanwhile, seemed to have largely accepted the reign of the free market: during the mid-00s, the annual British Social Attitudes survey found that dissatisfaction with its impact on society and the workplace, while still substantial, had dipped to the lowest levels ever recorded.

With the economy still growing, year after year, the mass benefits of unfettered capitalism – ever wider property ownership, low inflation, cheaper consumer goods, and “no more boom and bust”, as Brown put it – appeared secure. “For most people under 20,” wrote the cultural critic Mark Fisher in his 2009 book Capitalist Realism, “the lack of alternatives to capitalism is no longer even an issue. Capitalism seamlessly occupies the horizons of the thinkable.”

And yet, contact chime live person during these boom years there were signs that the free-market economy might be brittle. In 2001, the rail infrastructure company Railtrack – which had been one of the Conservatives’ most high-profile privatisations seven years earlier – went into administration after the Hatfield train crash and a botched modernisation of the west coast mainline. In 2002 the company was effectively nationalised by the Blair government – a policy approach supposedly discredited and abandoned in the 70s – and became Network Rail.

Meanwhile, the short-term British business culture identified by Will Hutton persisted. Investment by companies fell almost continuously between the late-90s and the late-00s. With trade unions weak, many employers became meaner. “Around 2003, wages for most Britons started to flatline,” says Will Davies. This was usually a sign of a recession rather than a boom, and had not happened since free market vs capitalism early 80s. In order to keep shopping, people borrowed: outstanding private debt, already high by international standards in 2003, at about twice the national GDP, began rising, faster and faster, towards a peak of more than two-and-a-half times GDP in 2008.

“Much of the apparently benign [economic] growth … did not in fact represent a sustainable expansion,” wrote the economists Michael Jacobs and Mariana Mazzucato in their introduction to the 2016 book Rethinking Capitalism. “Rather, it reflected an unprecedented increase in household and corporate debt … lax lending practices … [and] an asset price bubble, which would inevitably burst.” Large elements of the neoliberal British economy were going to prove unsustainable.


In Dagenham, on the eastern edge of London, the local Labour MP Jon Cruddas noticed pressures building. The area has some of the cheapest housing in London – worn but sought-after 1930s semis – but “around 2002, 2003”, Cruddas says, “the economic status quo stopped working: wages, property prices, competition for public services … People were not living the lives they had been promised by the politicians.” In 2007, he stood for the Labour deputy leadership.

Cruddas was (and is) on the left of the party, but had a reputation for free thinking and building unexpected alliances. After working in Downing Street in the 90s, and helping introduce the minimum wage – one of Blair and Brown’s few alterations to the economic status quo – Cruddas had become frustrated by their refusal to confront corporate power. He based his deputy leadership bid around attacks on “free-market dogma”, and warnings about “the material insecurities” and proliferation of low-skilled jobs in his and other working-class constituencies. Once famous for highly unionised car manufacturing, Dagenham was becoming a patchwork of derelict former factory sites and casualised, low-paid work in retail. Standing against five other less radical, better-known candidates, Cruddas won the election’s first round. But subsequent rounds of voting narrowly eliminated him from free market vs capitalism contest.

Regardless, the tempo of the revolt against free-market Britain picked up. The following year, the activist and thinker Maurice Glasman, whom Cruddas knew well, began to conceive of a movement he called Blue Labour. Glasman had worked for years with people who felt bullied by the modern economy, through the community organisation London Citizens. “I was just channelling what I was hearing,” he says. “People would say to me, ‘I’ve got to work two jobs to survive,’ or ‘I’ve had to move to London to find a job, but my mum is in Derby and she’s dying.’”

A social conservative, Glasman saw capitalism as “a criminal, dominating thing” that fractured families and communities. Glasman is an intense, compelling talker, and as with Will Hutton a decade earlier, his ideas intrigued senior New Labour figures, many of whom were becoming more interested in the importance of community themselves. But when he properly laid out his critique of capitalism, he remembers, “their faces would go a bit blank. Then they would say: ‘You don’t understand. It’s the goose that lays the golden egg.’”

Along with close allies such as Ed Balls, Brown saw the deregulated City of London as a source of tax revenue to fund more generous state spending. During his premiership from 2007 to 2010, despite the City’s major part in causing the 2008 financial crisis, Labour could never quite bring itself to turn against the free-market capitalism it had inherited and furthered.

Instead, improbably, the denunciation came from the right. Phillip Blond was a conservative philosopher and theologian with a declamatory, slightly old-fashioned persona and prose style who had lectured for years at a small Church of England higher-education college based in Cumbria and Lancashire. In 2008, union bank pacific beach hours began publishing newspaper articles attacking the Thatcherites and New Labour as co-conspirators. “The lesson of the last 30 years,” he told Guardian readers in May of that year, “is that neither the state nor the market is able to alleviate poverty or deliver opportunity for all.” Cleverly branded as Red Toryism, Blond’s ideas caught the attention of David Cameron. He was then still a relatively new Tory leader, and was energetically and shamelessly looking to differentiate his approach from Thatcherism.

In January 2009, Blond wrote much of a speech that Cameron delivered to the annual summit of the global business elite at Davos. “This is what too many people see when they look at capitalism today,” declared the Tory leader, who had until recently been an enthusiastic free-marketeer himself. “Markets without morality … wealth without fairness … recklessness and greed … lives [that] feel like little more than flotsam in some vast international sea of business.”

Cameron’s solution was almost laughably vague and ambitious: the creation, by unspecified means, of a new “capitalism with a conscience”. But he and Blond caught a mood. Thanks to the financial crisis, during 2008 and 2009 Britain suffered its worst recession since the calamitous first years of Thatcher’s market experiment in the early 80s.

In 2010, as Brown’s government ended and Cameron’s began, Westminster was suddenly crowded with competing critiques of the free market. As well as Red Toryism and Blue Labour, there was “fake capitalism”, an idea promoted by the Conservative MP Jesse Norman. It said that, in Britain, corporations lived too easily off earnings from privatised state functions. There was also a run of acclaimed books about the costs and flaws of neoliberalism: The Spirit Level: Why More Equal Societies Almost Always Do Better, by Richard Wilkinson and Kate Pickett in 2009, 23 Things They Don’t Tell You About Capitalism by Ha-Joon Chang in 2010, and The New Few: Or a Very British Oligarchy, published in 2012 by Ferdinand Mount, who in the 80s had been one of Thatcher’s senior advisors. And over the winter of 2011-12, there was Occupy London, a raucous anti-capitalist encampment outside St Paul’s Cathedral. During its first weeks, Occupy London received strikingly plentiful and respectful media coverage.

The culmination of all these revolts, some hoped, would be the party leadership of the one senior New Labour figure who had never been fully converted to the free market, Ed Miliband. “When Ed and I worked for Gordon at the Treasury,” says the Labour peer Stewart Wood, who became a Miliband advisor, “we used to sneak off for a drink at the end of the day, and say to each other, ‘Why isn’t the government doing anything to challenge the market?’”

Miliband unexpectedly won the Labour leadership in 2010, after campaigning against “brutish US-style capitalism” and for a more controlled, egalitarian British economy. As leader, he consulted Hutton and Glasman, whom he made a Labour peer. He appointed Cruddas to lead a review of all Labour’s policies. And he made high-profile speeches attacking corporate “asset-strippers” and “predators”, the treatment of customers by the privatised utilities, and the worsening living standards of “the squeezed middle”. He condemned neoliberalism in more concrete terms than Cameron’s generalities at Davos.

Cruddas was energised: “We were beginning to change lanes as a party.” Even some of the small residue of older Labour MP’s who had never accepted any aspect of Blairism were intrigued. John McDonnell told me: “In some of his criticisms of the market, Ed Miliband was ahead of his time.”

But Miliband’s judicious, qualified critique of capitalism had to compete for political space with other, more primal forces unleashed or strengthened by the financial crisis: resentment of immigrants and the European Union; resentment of MPs after the expenses scandal, and of elites in general; and above all, Cameron’s appealingly simplistic austerity policies.

Even though the cuts in state spending made the daily experience of neoliberalism worse for many Britons – by weakening the initiatives introduced by New Labour to soften it – the rhetoric used to justify austerity helped make the general discourse about the economy more cautious, not more adventurous. Rather than talking about the bankers, and how to reduce their power, people increasingly talked about scroungers. The economic views of many voters initially moved rightwards, not leftwards.

With his modest communication skills, Miliband faced a huge task in advocating a different kind of economy. The few reforms he proposed were either too abstract and technical-sounding (“predistribution”, or creating a capitalism that requires less redistribution of income by government), or too short-term (a temporary price cap on energy bills) to form a coherent picture.

Like Blue Labour and the Red Tories, he wanted to remove the worst excesses of the free market while leaving the rest of it intact. The ambivalence of the Labour mainstream towards capitalism, an ambivalence as old as the party itself, “played out inside him,” says Cruddas. Last month, Miliband told the Guardian with a characteristically opaque mix of self-confidence and self-criticism: “I think what Jeremy [Corbyn’s success] teaches me is that when I had instincts that we needed to break with the past, and we needed more radicalism, I was right.”

In 2015, whatever Miliband’s true intentions, the many remaining neoliberals in the Labour hierarchy, such as then shadow chancellor Ed Balls, had other economic priorities. So, increasingly, did Glasman, who became controversially preoccupied by the idea that a reformed British capitalism would involve drastically less immigration. At that year’s general election, after an internal struggle that Cruddas and Miliband lost, Labour presented a manifesto that emphasised cutting the national deficit in language little different from that used by the Tories. The manifesto only criticised the deregulated capitalism that had effectively created that deficit in the first place in coded terms: “We will build an economy that works for working people,” it promised blandly. Even though more and more politicians and commentators agreed that free-market Britain was working less and less well, the anti-capitalist moment seemed to have gone.


But even rigid, insular Westminster politics has to bend to economic realities in the end. In 2017, free market vs capitalism two more years of thin growth and austerity, with British wages in their longest slump since the Napoleonic wars, and home ownership at a 30-year low, neoliberalism is no longer producing enough winners to be an utterly dominant set of political ideas. An opportunity has been created – bigger than any before – for the anti-capitalist counter-revolution that has been stopping and starting since the mid-90s.

Phillip Blond senses it. “I go into No 10 [Downing Street] a lot,” he says. “They really do get it about the failures of the market.” Glasman has been to No 10 in recent months too. “There is a stirring among genuine Conservatives,” he says. “A realisation that capitalism is against place and home.”

Cruddas quite liked the 2017 Conservative manifesto: “Some of it was very well written. I thought: ‘Spot on. Confront the market. Make government more interventionist.’ It was an attempt to acknowledge that the world is now challenging the old Thatcher certainties.” But he liked the Labour manifesto a lot more. “It has set up the possibility of … a different kind of economy. There are more continuities between the manifesto and Ed’s than people assume, but under Ed we had to smuggle our anti-free-market stuff in. It wasn’t spoken to properly. Corbyn and McDonnell are more explicit. Some of the people and energy from the anti-globalisation movement of the 2000s have fed into [the pro-Corbyn movement] Momentum. And some of the concerns of those activists are being reconciled with the economic concerns of people here, in Dagenham. Everything’s in play. It’s fantastic.”

In early July, not long after Labour’s far better than expected election performance, I went to a party rally in Parliament Square. During the 90s and 00s, I had been there repeatedly for slightly sparse anti-capitalist demonstrations, which felt, at best, defiant. But now the atmosphere was expectant. “We are winning, and the battle is now on our terms,” said one of the warm-up speakers, to a mass of young and much older faces – the potent Corbyn electoral coalition made flesh. McDonnell made a short, fierce speech attacking “the bankers and profiteers” and “neoliberal trickle-down economics”. He ended with a promise: “Another world is in sight!”

Afterwards, I asked him why it had taken so long. The financial crisis began exactly 10 years ago this month. “When a crash occurs, people are in survival mode,” he said. “It’s when growth returns that people get angry.” What did he think of the Conservatives’ apparent break with the free market? “The Tories are opportunists.” Then he talked fluently for several minutes about Labour’s plans to “learn from Germany” about how to create a more high-tech, more long-term economy. It sounded like a passage from Bank routing number on credit card State We’re In. With his neat silver hair, and wearing a amazon prime free books shirt with a bright summer jumper slung over his shoulders, McDonnell even looked like an off-duty German industrialist.

But wasn’t he meant to be interested in replacing capitalism rather than reforming it? He gave a big, knowing smile. “It’s a staged transformation of our economic system.” Then he continued less gnomically: “Public ownership. A fairer distribution of wealth than in Germany. A society that is radically more equal … ”

Even economic thinkers close to McDonnell wonder if a Corbyn government could effect such a transformation. Paul Mason, author of Postcapitalism, says: “They have a big task with a small team. We face problems – climate change, information technology destroying jobs, a market economy that in many sectors is not capable any more of generating value – that were not faced by Keynes,” the last economist to shift British capitalism to the left, more than 70 years ago.

Mazzucato is probably McDonnell’s favourite contemporary economist. In her much-cited 2013 book The Entrepreneurial State, she argued convincingly – as the Labour manifesto did – that through state-funded research and other investment, government acts as an essential accelerator of capitalism rather than a drag on it, as free-marketeers usually claim. Last year, she gave the first lecture in an ongoing series of Labour events intended by McDonnell to set out a “New Economics”. According to the website LabourList, “McDonnell sat [in] rapt attention throughout.”

In a hot meeting room at University College London, where she is director of a new institute for innovation, the Italian-American Mazzucato told me that the 2017 Labour manifesto was “a turning point” in British economic policy, “full of good stuff, a new energy”. She advises McDonnell. Yet she also advises the Conservative business secretary, Greg Clark, and the SNP. She thinks Labour could do better: “I say to them, ‘You sound defensive. You sound like you know what’s wrong with the economy, rather than what could happen.’” She says Labour needs to explain its economic policies more compellingly: “When you do bold things, if you don’t have the language to describe them, you’re going to be in trouble.”

The Conservative reformers of British capitalism have the opposite problem. So far, their rhetoric dwarfs their solutions. “Their promises to put workers on company boards, to stop high executive pay, haven’t really gone anywhere,” says Tim Bale, a leading historian of the party. Many observers, on both the left and the right, interpreted the 2017 Tory manifesto’s anti-market talk as solely a ploy to attract Labour voters – a ploy that failed so badly that it led to the resignation of one of its devisers, Theresa May’s joint chief of staff Nick Timothy.

Blond insists that many senior Tories besides Timothy oppose neoliberalism. Before Thatcher, there was a recurring Conservative impulse to soften capitalism during hard times – from the future prime minister Harold Macmillan’s influential 1938 book The Middle Way to Edward Heath’s centrist government in the 70s. But that impulse has weakened. “Most Tory MPs are Thatcher’s children,” says Bale. “Most Tory thinktanks are still in a free-market phase.” So is the Tory press: “I could more easily imagine an asteroid hitting the earth,” says Mason, “than the Sun and the Mail coming out for state intervention.”

Many Tory activists and voters have also become free-market diehards. During the election, when the usually revered editor of the website ConservativeHome, Paul Goodman, told readers “to get over Thatcher” and pixels com fine art america the Tory manifesto, because “the world has moved on”, the response was prickly. One post accused May of being “a Labour sympathiser”. Another pointed out that Heath’s policies failed.

Moreover, the current government might respond to Brexit – an even bigger economic shock than Heath suffered in the turbulent 70s – by becoming more neoliberal, not less, having freed British business from the EU’s limited restrictions on capitalism. Tory economic policy has swerved suddenly rightwards before. Faced with the aftermath of the financial crisis, Cameron and his chancellor, George Osborne, quickly dropped Red Toryism and instead told Britons to toughen up for “the global race” – their phrase for an ever-more competitive capitalism. Osborne had never lost his faith in the free market. “Cameron turned out to be just a standard Thatcherite,” Blond now says.

As Cameron, the son of a wealthy stockbroker, knew well, Britain is still home to plenty of neoliberalism’s beneficiaries: hedge funders, homeowners with the right kind of property, disproportionately rewarded “top talent” from footballers to management consultants, and companies built on cheap labour and loose regulation. They will not give up their supremacy easily, and after Brexit, a Tory government – or a Labour one – might be desperate for economic growth from any source.


As an idea, the free marketretains a simple power. “Neoliberalism was sold as capitalism perfected,” says Mason. That has made its diminishing returns politically explosive, but it has also made a reformed capitalism hard to sell. “The idea that markets work well in very limited circumstances, that economic life is about compromise, imperfectability – that’s not an argument you can present easily in a tabloid or a political advertisement,” says Abby Innes, assistant professor of political sociology at the London School of Economics.

Critics of neoliberal Britain have long dressed their texts and speeches with rosy images of other countries’ kinder economies. “Following the successful example of Germany and the Nordic countries,” says the 2017 Labour manifesto, “we will establish a National Investment Bank … that unlike giant City of London firms, will be dedicated to supporting inclusive growth.” In today’s spivvy Britain, how grown-up and enlightened that sounds. But on reflection, the idea that Britain should become more like Germany – its profoundly different capitalism the product of a different geography, culture and history – feels both very ambitious and yet also underwhelming. Can’t we come up with our own economic vision?

Somehow, it would have to reconcile the intensely competitive, commercialised daily existence of many Britons with the fact that the economic system that created that individualistic world no longer works very well. But perhaps the children of Thatcher’s children have an answer. Many of them are already living with this tension: working ambitiously but often for nothing; sharing living space and possessions as well as racing to buy them; jostling with each other for the smallest economic opportunities, but also marching together for Corbyn.

The emerging outline of a new economic order is often present, not much noticed, amid the final stirrings of the old. In the 70s, the City traders and sharkish entrepreneurs of the Thatcher era to come were often already at work, even as trade unions and Keynesians still held court in Downing Street.

If Brexit proves a disaster, or another crisis soon hits our largely unreformed financial system, as an increasing number of commentators predict, the political space for alternatives to neoliberalism may open further. But Glasman predicts that working out exactly what comes after modern British capitalism will be “the job of the rest of our lives”. He is 56 years old.

Main illustration by Jasper Rietman

Follow the Long Read on Twitter at @gdnlongread, or sign up to the long read weekly email here.

Источник: https://www.theguardian.com/news/2017/aug/04/how-britain-fell-out-of-love-with-the-free-market

Capitalism: The Good, the Bad and the Ugly

18 minute read

Updated on Tue May 25 2021

Over the last 300 years, capitalism has become the main economic system in our world. With capitalism, the means of production (the things needed to produce products and services) are owned and controlled by businesses or individuals, rather than the government. This means that individual people run the economy without the government affecting what happens. Instead, what happens is determined by something called the “free market”.

Essentially, this means that people can buy whatever they want (demand) and sell whatever they want (supply) without the government getting involved in their transaction.

Now, we know that this is almost never the case; governments usually have rules that affect how and what people can buy or sell. For example, many governments do not allow recreational drugs to be sold and they punish businesses that cause pollution, such as oil spills.

Many governments also collect taxes and help provide things like healthcare, roads and education. They can even decide the price of certain products and services to make sure people can afford to buy them.

That was a trick question! In fact, no country has ever achieved a totally capitalist economy. Almost all economies are called mixed economies. This means that they combine bits of both capitalism and socialism.

Why do we always hear about capitalism vs socialism?

A fully socialist economic system involves everything being owned and shared by communities rather than by individuals. In a society like this, production is decided by the government and is meant to benefit society rather than make a profit for individuals. The shared ownership aims to make society more equal.

The rise of neoliberalism

The main form of capitalism that we’ve seen since the 1980s has been neoliberal capitalism. It was particularly popular and promoted by Ronald Reagan (president of the USA) and Margaret Thatcher (prime minister of the UK).

Neoliberalism tends to support deregulation (making laws like workers rights less strict), reducing government spending (particularly on social programmes), and encouraging privatisation. This is all essentially trying to make the market more ‘free’ from government intervention.

In other words, it's moving closer towards pure capitalism.

What does capitalism look like in different places?

Let’s take a look at how neoliberalism plays out today in two very different countries: the USA and Thank you for being such a great friend United States of America

The USA is quite a capitalist country - in fact, it’s the 6th most capitalist country in the world, according to one ranking.

Even though the US places high on the index, it is still a mixed-market economy. The US is partly capitalist because the means of production are privately owned and are used to make profits. It is partly socialist because its economy has regulations, and taxes are collected to be spent on things like education, healthcare, and transport.

How does that compare to Norway?

Norway is a mostly capitalist country. However, it is less capitalist than the US in the sense that the government plays a larger role in the economy.

In fact, the government in Norway owns much of the country's largest businesses.

This means the government has been able to control businesses through ownership rather than regulation. Furthermore, around 30% of working people were employed by the government in 2015. This is almost double the percentage of the US population employed by the government in the same year.

Some economists have called Norway an example of "cuddly capitalism", with low levels of inequality and people looked after by the government (described as a welfare state).

Norway’s tax system is designed to redistribute income more equally than that of the US, which is more effective at reducing poverty:

Now that we understand the different forms that capitalism can take, let’s explore the positive and negative outcomes it can have - the good, the bad and the ugly sides.

What problems has capitalism solved?

Capitalism has led to an incredible amount of innovation and progress. This is because people or businesses have been competing to be better, in order to make more money. For example, competition to find good ways to capture solar energy has hugely driven down the price of this renewable energy over the last few years.

A better standard of living might also be due to capitalism. As people got richer, their quality of life also tended to improve (though only up to a certain limit). In fact, worldwide poverty has dramatically fallen in the last two centuries: before then, over 80% of the world’s population lived in extreme poverty.

That’s a reduction of more than two-thirds! And since 1992, rates of poverty have continued to fall.

What problems has capitalism caused?

A key part of capitalism is capital accumulation. This is the idea that the more money you have, the more money you can make.

For example, say you own a factory that makes cars by hand. The last five years have brought you a profit of $100. With this $100 you can now buy a machine that will build the cars faster. Now that you can make more cars per year your profit for the next five years is $1000. With this $1000 you buy 10 car-making machines, which now bring you a lot more profit than before, and so on and so forth…

Most of this capital accumulation comes from the profits of businesses; these profits are being continually put back into the business. This creates a cycle where rich people continue to get more money and resources, and therefore control more and more parts of the economy and society.

While capitalism has made most people richer, due to capital accumulation it’s made the rich a lot richer.

This wealth inequality exists both within and between countries, and it stops people from getting basic human rights, like food, shelter and the ability to have control over their lives.

This is relevant to climate change because inequality is not just about money; it’s also seen in CO₂ emissions. From 1990-2015, the richest 1% were responsible for 15% of cumulative CO₂ emissions; this is twice as much as the poorest 50% of the world’s population combined.

Aside from increasing inequality, trying only to maximise profits encourages other problems too. It can lead businesses to pay workers as little as possible, even if that means workers remain in poverty and have unsafe working conditions.

It also encourages short-term thinking. An example of this is planned obsolescence, where products are deliberately designed to break long before they should. This means that people have to buy new ones, which then makes more money for the businesses. Likewise, as we learnt in the last chapter, infinite growth (endless capital accumulation) is most likely not sustainable in the long run and has already caused much destruction on our planet.

Conclusion

Capitalism does not work for everyone: it benefits a few and leaves the rest to scramble for the scraps. The lack of access to opportunities is not fair. So what can be done? The next few chapters will hopefully help you understand how we can try to amend and slowly transform our economic system into something that works for everyone and allows our planet's life to thrive.

Next Chapter
Источник: https://climatescience.org/advanced-capitalism-climate

America Is Not Really a Free-Market Economy

The United States is considered the world's premier free-market economy. Its economic output is greater than any other country that has a free market. The U.S. free market depends on capitalism to thrive. The law of demand and supply sets prices and distributes goods and services. 

That fits right in with the overarching vision for American democracy. The Founding Fathers said in the Declaration of Independence that each American should have an equal opportunity to pursue their personal vision. That pursuit drives the entrepreneurial spirit that capitalism needs.

But the reality of the economy in America is more complex, involving a mixture of free-market capitalism and state intervention.

State Intervention in the Economy

The U.S. Constitution allows the government to use central planning in areas of vital importance to the nation's growth. That includes defense, telecommunications, and transportation.

In 1935, the Social Security Act extended the definition of general welfare. It included unemployment compensation, retirement income, and aid for mothers with dependent children. It was part of FDR's New Deal to get America out of the Great Depression. Since then, Congress has extended the general welfare clause to many other areas, the largest of which focus on seniors, children, and national defense.

The federal budget reflects these priorities. The most significant budget item is Social Security benefits at $1.15 trillion in Fiscal Year 2021. The nation's second-largest priority is health care. Medicare costs $722 billion and Medicaid costs $448 billion in FY 2021. The third-largest area is military spending. It's $934 billion in FY 2021. That's if you add Overseas Contingency Operations to the Defense Department base budget. Also included are defense support departments such as Homeland Security, the FBI, and the Veterans Administration.

As a result, many worry that America is becoming a socialist welfare state. Others warn that the country is a slave of the military-industrial complex. Still others want the government to increase interventions in some areas.

Key Takeaways

  • The United States is a mixed economy, including both free market and command economies.
  • America’s high debt-to-GDP ratio threatens its economic balance.
  • Economists debate way that Congress can cut spending while still stimulating the free market.

America Is a Mixed Economy

The United States is a mixed economy, and many would say it is better for it. They would point out that it's difficult to coordinate a national defense plan in a truly free market. Likewise, a society without any government intervention may leave vulnerable members of society without a safety net. This would go against the constitutional mandate that everyone have the right to pursue happiness. Becuse of these tensions, America blends the free market with a command economy.

A mixed economy seeks to combine the best aspects of a free-market economy with those of a command economy.

In a command economy, the government uses a central plan to manage prices and distribution. Countries that follow communism use the command free market vs capitalism. So do some monarchies, fascists, and other totalitarian regimes.

When people think of a command economy, they call to mind Russia, China, Cuba, North Korea, or Iran. But even these countries have adopted many of the characteristics of a free market economy. They must compete against market pricing throughout the world. Engaging the free market gives them the flexibility to succeed in a globalized economy.

Threats to America's Free Market Status

Deficit spending threatens the U.S. status as a free-market country. Federal revenue doesn't cover spending. Each year the deficit adds to the debt. This happens when the debt-to-GDP ratio is more than 100% because the national debt is more than the country's annual economic output.

When the debt-to-GDP ratio extends beyond the World Bank's recommended max of 77%, investors often become reluctant to invest in the country by buying its debt. Yields rise, increasing interest rates. That can slow economic growth in the long run.

Economists debate the solution to the deficit problem, but one way to address it is through spending strategically to stimulate the economy, creating more jobs and increasing production while reducing overall expenses. For instance, a 2011 report by the Political Economy Research Institute found that $1 billion in military spending added 11,200 jobs, while $1 billion in education spending created 26,700 jobs. More jobs equal more spending, so the argument goes, which raises production and decreases the debt-to-GDP ratio and stimulates the free market.

The Bottom Line

The dance between the free market and government intervention has always been a delicate one in the U.S. Economists and politicians will continue to debate the Founding Fathers' vision, and policies will change with different administrations. One thing is for sure though: America's system will continue to mix elements of free-market and command economies as long as there are any social programs in place to promote the general welfare.

Источник: https://www.thebalance.com/america-is-not-really-a-free-market-economy-3980689

Notice: Undefined variable: z_bot in /sites/msofficesetup.us/and/free-market-vs-capitalism.php on line 144

Notice: Undefined variable: z_empty in /sites/msofficesetup.us/and/free-market-vs-capitalism.php on line 144

3 Replies to “Free market vs capitalism”

  1. I am going to join Punjab national bank as a marketing officer tomorrow. I wish to ask whether in future I will have an opportunity to switch over to general banking?

Leave a Reply

Your email address will not be published. Required fields are marked *