Ten more popular lies about free markets

It sounds good doesn't it...

Maybe we should look beyond the fatalistic, nihilistic and frankly quite dumb ideas of free market capitalism - they have failed - and look to build a better tomorrow together.

Now I'll leave aside the fact that free markets and capitalism have, in any meaningful way, 'failed' - we know that's a lie - and look at a few more of the commonplace little fibs about free markets.

"It's all about profit". I guess this is right in one respect since in a system of free exchange there has to be value or the exchange doesn't take place. But, using the more regular understanding of profit, this is simply a lie - free markets are about mutual advantage, co-operation and exchange not the exploitation implicit in saying "it's all about profit"

"Only shareholders benefit". Again this isn't true - for sure, in a capitalist business shareholders risk their cash in exchange for a return (in either a share of profits or an increase in the value of their share). But when you buy something, you get a benefit - thirty minutes with an advertising copywriter will tell you this as it's the basis for those "it's the sizzle not the sausage" comments such folk like. You buy things because you get value from having or using them - indeed levels of benefit to consumers vastly exceed the returns to entrepreneurs or to the providers of risk capital (aka shareholders)

"People aren't rational so free markets won't work". How often have you heard it explained that people are stupid, ignorant, ill-informed, misled and that this means free markets are exploitative? The odd thing is that the idea of people being 'rational' is an academic convenience - nobody at all believes people always behave rationally. This makes markets imperfect but not so imperfect that they don't or can't operate to the mutual benefit of participants. Look at the choice of bread and cheese in your local supermarket and then explain how such a range is possible other than in a market system where people risk their money, time and resources to provide goods or services they think you might like to purchase?

"There's too much choice - it confuses people". The bread and cheese observation applies here too - do you really believe we'd be better off if we only had a limited or prescribed choice of goods? Yes there's lots of choice but, in the end, we use heuristics - mental short cuts - as consumers (this is why fmcg manufacturers spend millions on brand marketing) to manage choices available in the marketplace.

"Free markets are impossible because free choice is impossible". A variant on the 'too much choice' lie, this one is often used to argue for state direction or ownership. At times the argument is little more that saying "you can't make a perfect vacuum so Thermos flasks won't work" - because our choices are partly guided by socialisation, information and environment they are less than 'free'. But this sort of argument doesn't mean that more choice and more information don't make for more free markets and greater social benefit

"Markets have to be controlled or it would be chaos and anarchy!" Now here we've to make a distinction between a set of rules (very free market environments like stock exchanges have clear and enforced rules) and controlling or directing the market. Observing an old-fashioned, pre-Internet stock exchange looked like chaos as people rushed about shouting, waving paper and seemingly causing mayhem. But at the end of each day all the transactions were logged, all the prices agreed and the chaos looks like an orderly list of stock prices. Markets need rules but they don't need government-mandated orderliness or restrictions saying who can or can't participate in buying or selling good and services

"Free markets are unfair". Usually this refers to the fact that we can't all afford to buy all the things - there's a little bit of the green-eyed god in all of us after all. We look at the bloke with the nice jag or the woman flying first class and little 'it's not fair' particles trigger that jealousy. But it's not the market creating the unfairness or indeed causing the uneven distribution of resources and, at the level of transaction, markets are absolutely fair - there's a buyer and a seller who agree a mutually beneficial exchange. That some people are willing to pay a lot extra to get some perceived status advantage (a nicer car or a plusher seat) doesn't mean the markets for cars and seats are unfair

"Capitalism equals free markets". Well no. We're dealing with two entirely different ideas - how society manages exchange and how entrepreneurs secure the funding to run their business. Capitalism is, quite simply, a system where the small part of exchange benefit we call profit is returned to those who took the financial risk. It is possible - look at today's Russia or large parts of European agriculture - to have a capitalist system operating in markets that are anything but free. And, it's fair to say too that capitalists often like this arrangement since it means they can capture a larger part of that exchange benefit in the form of profit

"Social ownership requires socialism". Again no. There's plenty of social ownership in open market economies (mutuals, co-operatives, worker-owned, etc) and the best of these businesses compete successfully with orthodox capitalist forms of ownership - John Lewis, Ove Arup. There's no need for government to own or control any part of the economy to have a system where social ownership thrives.

Free markets - the ideology as much as the things themselves - are the main reason why we moved from most of us living in abject grinding poverty to today's cornucopia of goods and services. That ideology is about allowing everyone to participate in the market, to innovate and invent, to buy and sell, to take risks and to navigate the sometimes confusing world of choices, options and myriad varieties of cheese or bread. By all means criticise big business cosying up to big government, have a pop at rich people avoiding taxes the rest of us can't dodge and lay into corruption, exploitation and unethical practices wherever they occur. But don't kill the idea of the market as it's the best way we've got to carry on getting healthier, wealthier and happier.




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