Author Topic: Why Free-market Economics Is a Fraud  (Read 1133 times)

24KT

  • Getbig V
  • *****
  • Posts: 24455
  • Gold Savings Account Rep +1 (310) 409-2244
Why Free-market Economics Is a Fraud
« on: July 18, 2014, 10:18:45 PM »
Why Free-market Economics Is a Fraud
by: Ian Fletcher


If there's one thing everyone in America knows, it's that free-market economics is true and free markets are best.

After all, we're not Communists, are we? They starved and lost the Cold War because they believed otherwise. And their watered-down European cousins, the socialists? More of the same, only less so. Even liberals get this nowadays. All hail the free market!

Trouble is, things "everyone" knows are often wrong. And this is no exception.

It's time to start getting honest about a very simple fact: Nobody, but nobody, really believes in free markets. That's right. Not the Republican Party, not the libertarians, not the Wall Street Journal, nobody.

Here's why: a truly free market is a perfectly competitive market. Which means that whatever you have to sell in that market, so does your competition. Which means price war. Which means your price gets driven down. Which means little or no profit for you.

Oops!

Naturally, businesses flee perfectly competitive markets like the plague. In fact, the fine art of doing so is a big part of what they teach in business schools.

That's why businesses use strategies like product differentiation, so their competition is no longer selling the exact same product they are. That's why they use strategies like branding, so their buyers don't think the products are the same.

Businesses will, in fact, do almost anything to get out of the hell of pure head-to-head competition.

They don't do it because they're crooked; they do it because they have an intrinsic economic incentive to. Always.

This is part of the innate essence of capitalism. It is not a flaw or a defect. It is part of what makes the whole system go. It is part of what makes capitalism capitalism.

People are the same way. Consider your own career. Why do you get paid more than the minimum wage? (I'm hoping you do.) Probably because you have some skill that everybody else doesn't have. So you don't have to bid against every unemployed person in your area to hold your job. Just a few of them. Which pushes your wage above the legal minimum.

That skill of yours is what economists call a "barrier to entry" -- entry into the market for your job, that is. And if you're anything other than a damn fool, you'll cherish it like your very life.

I sure do.

Now let's consider the other side of the equation. We've looked at free markets in things you sell. Now let's consider free markets in things you buy.

Here everything gets turned around. If I'm buying something, I want the freest possible market in that product.

I don't, to take an example recently on my mind, want there to be only one market for live Christmas trees in my town. I want there to be two (or more), and right next to each other so I can easily comparison shop. And I want to shop for more-easily shippable goods on the Internet, if possible, where I can potentially find the lowest price in the entire world.

I want, in other words, every seller's nightmare. Which every smart seller will use every legal trick in the book to avoid.

As a result, nobody with any wits about them really believes in free markets. People believe in them when it's in their interest, but not when it's the other way around.

This is a systemic, structural condition, so anyone who tells you they believe in "free markets" is either lying, stupid, or hasn't thought the whole concept through properly.

The latter category is quite common. Many people do their thinking about political ideology in an entirely different -- and dreamily disconnected -- mental space than they use for managing real life.

Frankly, everyone I've ever met gets the truth well enough in practice, in their own personal life or in how they run their business, so I just don't believe anymore that anyone does believe in free markets.

Like any rational person, I'm open to counter-examples if anyone can show me any. But I've been asking around for a while on this, and haven't come up with much.

This is not just an esoteric point, still less yet one more example of the familiar fact that people are hypocrites in politics.

Here's why it matters. The political players in America today who claim to support free markets don't. They support free markets in the things their backers buy, but maximum barriers to entry in the things their backers sell.

For example, one of the great unnoticed achievements of the Republicans (and their Democrat collaborators) from Reagan onward has been to gut U.S. antitrust law. Having a monopoly, or a cozy oligopoly with friendly rivals, is one of the best barriers to entry around.

As recently documented in Barry Lynn's fine book Cornered: The New Monopoly Capitalism and the Economics of Destruction, American industry is now concentrated as it hasn't been since before the era of Teddy Roosevelt and his trustbusters. (There's a different kind of Republican for you, by the way. These truths are not liberal or conservative.)

Most Americans don't realize this has happened because, unlike in the old days of Standard Oil, oligopolies today are cunning about masking their existence.

To take just one example, America's eyeglass frame industry is now dominated by the conglomerate Luxottica. That's why frames are so expensive. And any company, like Oakley the sunglass maker, that tries to break into the market? They find themselves shut out of a Luxottica-controlled distribution system. And retailers are now afraid to receive distribution from anyone else, lest they be cut off.

It's a remarkably well-oiled scheme, and it has its parallels in many other industries. But the average consumer has no idea about this, because the range of brands, if not suppliers, in optical shops remains diverse.

We're fat, dumb and happy. We've been fooled. But behind the smiling mask of a hundred labels smirks a single monopolist.

But aren't there laws against this sort of thing?

Well, there sure used to be, enforced by unsung lawyers and bureaucrats (horrors!) at the Justice and Commerce Departments. Whom nobody considered very glamorous, but who were doing the rest of us a big favor. Talk about forgotten wisdom!

Consider some other examples:
  • Tyson in chicken
  • Smithfield in ham
  • Menu Foods in pet food
  • Frito-Lay in chips
  • InBev and MillerCoors in beer
  • PepsiCo, Coca-Cola, and Nestlé in bottled water
  • Dickinson in medical devices
  • Microsoft in operating systems
  • Iron ore (three companies)
  • Aluminum
  • Cement
  • Railroads
  • Banking

The number of problems caused by letting monopoly power -- whose key consequence is known as "pricing power" -- is astonishing.

For one thing, this is a huge part of what ails American farmers. Family farmers are caught between the agribusiness monopolies who push up the price of their inputs (feed, seed, fertilizer, etc.) and the agribusiness monopolies who push down the price of their outputs. (The economists' term for the latter is "monopsony," with an "s" -- but it works the same way as monopoly.)

It's the perfect racket.

And it's no surprise that on the other side of the equation, "free" market politicians are very diligent in imposing genuinely free markets where this suits the interests of the multinational "American" corporations that fatten their campaign coffers.

This is done, of course, as a matter of high principle and sophisticated economic rationality. It's remarkably easy to make wonderful after-dinner speeches about free markets.

Let's start with labor. Post-Nixon Republicans have genuinely supported just about every policy designed to weaken the pricing power of labor. This starts with weakening unions and letting the inflation-adjusted minimum wage fall, but it doesn't end there.

You think Ronald Reagan got in 1986, and George W. Bush wanted in 2007, amnesties for illegal immigrants because they were nice, compassionate people? To ask the question is to answer it. Whatever the ultimate merits of amnesty as policy, for them it was about cheap labor, plain and simple.

The reality is that the past prosperity of America has never been based on pure free markets -- starting with the fact that we had the highest average income in the world in 1776 because the colonies had structurally tight labor markets due to the open frontier. (Europeans and other Old World peoples were trapped by the iron law of wages because they had nowhere to go.)

Free, or nearly free, markets do have their rightful place in many parts of the economy, and it would be foolish to sabotage them. But in other areas -- above all, in labor markets -- our prosperity was based on pricing power.

A number of areas other than labor also worked better thanks to a healthy dose of pricing power. Try advanced technology, for a start. The patent system, which is not natural, is a fairly recent invention, and does not de facto exist even today in much of the world, is one. Innovation doesn't come cheap, and without pricing power for innovators, few companies could afford it.

Even the existence of scale economies, which are intrinsic to modern, large-scale, capital-intensive industry, implies markets that are less than free. Why? Because scale economies intrinsically imply a small number of large producers and thus give rise to oligopoly, with the consequences mentioned earlier.

This is why most other industrialized nations aren't romantics about free markets, are honest about their frequent nonexistence, and focus their policies on taming the negative effects of oligopoly while capturing the positive ones. They understand, for one thing, that big corporations are necessary but often pirates, and focus on making them share their loot with their crews.

We, on the other hand, live in a state of denial about the piracy.

So the next time someone tells you to believe in "free" markets, just tell them you'll believe as soon as they do.

When pigs fly.

http://www.huffingtonpost.com/ian-fletcher/free-market-economics-critique_b_1155820.html
w

24KT

  • Getbig V
  • *****
  • Posts: 24455
  • Gold Savings Account Rep +1 (310) 409-2244
Re: Why Free-market Economics Is a Fraud
« Reply #1 on: July 18, 2014, 10:21:11 PM »
America's Biggest Scam - The "Free Market" System

Americans are constantly bombarded with propaganda of all sorts. Commercials, political ads, even the cable “news” — all of it carefully calibrated to influence the way we think and what we believe to be “true.” I’ve often imagined Nazi Reich Minister for Propaganda Joseph Goebbels smiling in his grave at the machinations of today’s United States.

One of the most deeply ingrained — and therefore most assiduously cultivated — American mythologies is that private enterprise always longs for free markets. This is true to such an extent that many market-friendly commentators reflexively support anything a corporate spokesperson says.

The same goes, in the opposite direction, whenever anyone in government or politics criticizes American enterprise.

But what if we’re being sold a load of bull? What if the primary enemies of American economic freedom are the very corporations that dominate our lives, and increasingly our politics and way of life?

The reality is that the U.S. economy has become grotesquely lopsided, with massive corporations operating as near-monopolies or oligopolies (uncompetitive markets) in sector after sector.

The U.S. Economy: Behind the Scenes

Since the early 1980s, corporations have consolidated control over dozens of U.S. industries, including cable, airlines, retail and agribusiness. Where once there were many small and mid-size businesses, today only a few goliaths remain.

These behemoths use their market power to extract economic value far in excess of what a competitive market would dictate. This “economic rent” — the return to market power rather than innovation or competitiveness — is transferred from consumers, workers and other entrepreneurs to rich executives and shareholders, driving the massive inequality that is the hallmark of today’s U.S. society and politics.

Indeed, America’s much-maligned “one percent” derives much of its lopsided wealth not from its intrinsic capitalistic prowess, but from its ability to purchase the laws and regulations it wants from our greedy political class. It’s not an exaggeration to say that much of corporate America invests as much in “rent-seeking” — a.k.a. lobbying — as in actual production.

Consider the $2.5 trillion U.S. health-care industry, which consumes a larger proportion of our GDP than any other country on earth. Rising health costs are rooted in a round of mergers that started in the 1980s, when competition regulations were relaxed under the Reagan administration. Most Americans today live in areas where there is little competition among hospitals, which are free to raise prices at will.

As a result, the prices charged for medical services bear no relation to the costs of production or the benefit to the patient/consumer. Market power redistributes hundreds of billions of dollars in wealth to the owners of health-care capital.

Consolidation among cable providers has enabled Comcast, Time Warner, AT&T and others to raise prices at three times faster than inflation since 2008. As a result, Americans now pay double or triple what consumers in other countries pay, for slower and less reliable broadband internet access.

In agriculture, consolidation and resulting monopolistic purchasing power has enabled firms such as Tyson to force down farm-gate prices and raise their own profit by dictating prices to farmers. The average farm price of a hog dropped 31% between 1989 and 2008, a period when the top four pork processors increased their market share from 45% to 63%.

The market power of consolidation and anti-competitive behavior also affects workers. Executives at Google, Apple, Intel, Intuit, Pixar and Adobe — who share dozens of board members — were caught in a secret agreement not to recruit one another’s employees, in order to suppress salaries. Tech workers who sued this cartel estimate the scheme reduced the salaries of 60,000 workers by more than $3 billion.

That’s money that goes into overstuffed One Percent bank accounts rather than be spent on goods and services in local economies.

Finally, the “opportunity cost” of this market dominance is the lost income and innovation of the tens of thousands of entrepreneurial small businesses, which never get off the ground or are given the opportunity to grow enough to create jobs in the face of unfair competition.

And yet, we hear little about this reality. Instead, we are treated to a daily barrage of attacks on immigrants, working people, the unemployed, minorities and others who are essentially powerless compared to the deep-pocketed, lobbyist-protected corporations that dominate our economy and politics.

Beyond Party Politics

Add all this together and you have a compelling argument that the decline of the U.S. economy isn’t as simple as we are led to believe. The very forces that invest so much to keep us focused on government as the source of our decline may well be the chief culprit, or at least co-complicit with the latter.

One of the critical pillars of the propaganda machine that successfully diverts our attention from this state of affairs, Wizard of Oz style, is the gladiatorial spectacle of Red vs. Blue, Republican vs. Democrat. We are told that the only route to salvation is to join one of these two tribes, which then dictate what we are to think. In their arrogance, they tell us theirs are the only roads we can take.

Many Americans have essentially ceded their ability to reason for themselves to highly-paid shills on 24/7 cable channels, spouting arguments that would make Reich Minister Goebbels giddy with admiration.

Both political parties are part of the mechanism that keeps America in a state of corporate oligarchy. The apparatus is designed to spread and control wealth only within itself. And that’s as far as the American Dream goes.

So what does that mean for wealth builders and those of us with a “sovereign “ state of mind, who are not resigned to the framework and refuse to become swept up in the downward spiral of the U.S. economy?

It means … find safe ground for yourself, your family and your hard-earned assets.
w

Coach is Back!

  • Competitors
  • Getbig V
  • *****
  • Posts: 59465
  • It’s All Bullshit
Re: Why Free-market Economics Is a Fraud
« Reply #2 on: July 18, 2014, 10:40:41 PM »
Still can't find a job without the government assistants huh?

24KT

  • Getbig V
  • *****
  • Posts: 24455
  • Gold Savings Account Rep +1 (310) 409-2244
Re: Why Free-market Economics Is a Fraud
« Reply #3 on: July 18, 2014, 10:49:09 PM »
Still can't find a job without the government assistants huh?

Coach, do you actually read posts before you respond to them? Serious question.

ps: Spell check can help you as well.
w

Coach is Back!

  • Competitors
  • Getbig V
  • *****
  • Posts: 59465
  • It’s All Bullshit
Re: Why Free-market Economics Is a Fraud
« Reply #4 on: July 18, 2014, 11:35:14 PM »
Coach, do you actually read posts before you respond to them? Serious question.

ps: Spell check can help you as well.

No way me nor almost anyone on here is going to read all that.

24KT

  • Getbig V
  • *****
  • Posts: 24455
  • Gold Savings Account Rep +1 (310) 409-2244
Re: Why Free-market Economics Is a Fraud
« Reply #5 on: July 19, 2014, 01:30:47 AM »
No way me nor almost anyone on here is going to read all that.

The word 'nor' is one half of a paired conjunction and is inappropriate, unless accompanied by the word 'neither'.

eg: It's quite clear that neither politics nor proper English grammar are your strong suits.

That said, I'd like to suggest that perhaps you might not want to respond to posts unless you read them first.

Seriously, ...I'm very embarrassed for you.  :-[
w

whork

  • Getbig V
  • *****
  • Posts: 6587
  • Getbig!
Re: Why Free-market Economics Is a Fraud
« Reply #6 on: July 19, 2014, 06:53:52 AM »
Great post should be stickied.

whork

  • Getbig V
  • *****
  • Posts: 6587
  • Getbig!
Re: Why Free-market Economics Is a Fraud
« Reply #7 on: July 19, 2014, 06:54:50 AM »
No way me nor almost anyone on here is going to read all that.

Dont worry Coach nobody is interested in your opinion.

Ok for laughs maybe.

Coach is Back!

  • Competitors
  • Getbig V
  • *****
  • Posts: 59465
  • It’s All Bullshit
Re: Why Free-market Economics Is a Fraud
« Reply #8 on: July 19, 2014, 08:15:21 AM »
The word 'nor' is one half of a paired conjunction and is inappropriate, unless accompanied by the word 'neither'.

eg: It's quite clear that neither politics nor proper English grammar are your strong suits.

That said, I'd like to suggest that perhaps you might not want to respond to posts unless you read them first.

Seriously, ...I'm very embarrassed for you.  :-[

History shows where you stand on issues so there is really no sense. When I read "Why Free-Market Economics is a Fraud" posted up by a flaming liberal living in a socialist (we're right there btw) country, it speaks volumes.

Kazan

  • Getbig V
  • *****
  • Posts: 6803
  • Sic vis pacem, parabellum
Re: Why Free-market Economics Is a Fraud
« Reply #9 on: July 19, 2014, 08:25:58 AM »
Ever heard of anti-trust laws? Yeah we have them in the US. So if there are indeed monopolies exist, then the federal and state governments aren't doing their jobs. Then again in a free market, the best product wins, people buy it. If you have an inferior product you go out of business.
ΜΟΛΩΝ ΛΑΒΕ

GigantorX

  • Getbig V
  • *****
  • Posts: 6370
  • GetBig's A-Team is the Light of Truth!
Re: Why Free-market Economics Is a Fraud
« Reply #10 on: July 19, 2014, 09:31:27 AM »
The U.S. doesn't practice a "Free-Market System," not anymore at least.

Hope this helps.

Coach is Back!

  • Competitors
  • Getbig V
  • *****
  • Posts: 59465
  • It’s All Bullshit
Re: Why Free-market Economics Is a Fraud
« Reply #11 on: July 19, 2014, 10:32:07 AM »
Did a little research on 'Ian Fletcher". Seems I wasn't too far off with my judgement of the title of this thread which is why I stopped reading after the title. Libs are so incredibly predictable.

avxo

  • Getbig V
  • *****
  • Posts: 5605
  • Iron Pumping University Math Professor
Re: Why Free-market Economics Is a Fraud
« Reply #12 on: July 19, 2014, 11:35:08 AM »
(24KT copy-pasting from http://www.huffingtonpost.com/ian-fletcher/free-market-economics-critique_b_1155820.html):

blah blah blah

To take just one example, America's eyeglass frame industry is now dominated by the conglomerate Luxottica. That's why frames are so expensive. And any company, like Oakley the sunglass maker, that tries to break into the market? They find themselves shut out of a Luxottica-controlled distribution system. And retailers are now afraid to receive distribution from anyone else, lest they be cut off.

more blah blah blah, followed by more bullshit

This single statement marks this whole "article" as trash. Oakley frames are available in just about every place which sells glasses. In fact there's too many of them for my taste.

What a bunch of bullshit by the author and a waste of bandwidth by our resident snake-oil gas-pill-and-plastigold peddler. Having read this "article" I feel cheated out of a few minutes of my life.

tonymctones

  • Getbig V
  • *****
  • Posts: 26520
Re: Why Free-market Economics Is a Fraud
« Reply #13 on: July 19, 2014, 07:15:48 PM »
This single statement marks this whole "article" as trash. Oakley frames are available in just about every place which sells glasses. In fact there's too many of them for my taste.

What a bunch of bullshit by the author and a waste of bandwidth by our resident snake-oil gas-pill-and-plastigold peddler. Having read this "article" I feel cheated out of a few minutes of my life.
truth, oakley glasses are fucking every where. I actually have a pair of prescription glasses that are oakley frames..

Any place that sells glasses or sun glasses is likely going to sale Oakley glasses.

as for wanting your time back, thats exactly why i didnt waste my time reading jagsons posts.

Coach is Back!

  • Competitors
  • Getbig V
  • *****
  • Posts: 59465
  • It’s All Bullshit
Re: Why Free-market Economics Is a Fraud
« Reply #14 on: July 19, 2014, 07:30:25 PM »
truth, oakley glasses are fucking every where. I actually have a pair of prescription glasses that are oakley frames..

Any place that sells glasses or sun glasses is likely going to sale Oakley glasses.

as for wanting your time back, thats exactly why i didnt waste my time reading jagsons posts.


this

OzmO

  • Moderator
  • Getbig V
  • *****
  • Posts: 22688
  • Drink enough Kool-aid and you'll think its healthy
Re: Why Free-market Economics Is a Fraud
« Reply #15 on: July 20, 2014, 08:27:54 AM »
truth, oakley glasses are fucking every where. I actually have a pair of prescription glasses that are oakley frames..

Any place that sells glasses or sun glasses is likely going to sale Oakley glasses.

as for wanting your time back, thats exactly why i didnt waste my time reading jagsons posts.

Details and distinctions

Skip8282

  • Getbig V
  • *****
  • Posts: 7004
Re: Why Free-market Economics Is a Fraud
« Reply #16 on: July 20, 2014, 05:29:24 PM »
No way me nor almost anyone on here is going to read all that.


Nope...no fucking way any normal person would, lol.

avxo

  • Getbig V
  • *****
  • Posts: 5605
  • Iron Pumping University Math Professor
Re: Why Free-market Economics Is a Fraud
« Reply #17 on: July 20, 2014, 07:54:59 PM »

Nope...no fucking way any normal person would, lol.

Hey now... I read it. It was painful and I regret it, but I read it.

tonymctones

  • Getbig V
  • *****
  • Posts: 26520
Re: Why Free-market Economics Is a Fraud
« Reply #18 on: July 20, 2014, 07:55:37 PM »
Hey now... I read it. It was painful and I regret it, but I read it.
well that will learn you