Democrats & Liberals Archives

Free Trade, Free Markets?

The GOP: Party of the Free Market. Correct? Not so fast. In reading Adam Smith, one is not merely told that government restraint is bad for business, but also government support.

If that is the case, why are we giving tax breaks to businesses to do things, to move in certain directions? If we are dealing with a free market approach, why does it include what is essentially the subsidization of business practices?

I was listening to the news and this expert comes on saying that the improvements in the economy have largely been based on all the money the Bush administration has been pushing into the economy in various forms. Is that a good thing? No. Much of the money that's being used for that purpose is borrowed money. Debt is deadweight on future revenues. Bush is therefore buying the current prosperity at the expense of the future. The theory behind doing this is that one kickstarts the economy, and growth swallows the debt.

But this is a gamble. What's more, it's a treatment of the symptoms. Like many such treatments it may end up masking the disease, allowing it to remain or get worse.

Let's face facts: it wasn't taxes or goverment regulation that killed the boom, it was incompetent and dishonest business practices. It was all the IPOs that involved companies with no business models, which were done by people simply trying to drive speculation through the roof. If you want more details on that, click here for a Frontline documentary on the issue.

It was all the companies who were using means recently legalized in the name of deregulation to cover up and cover for losses, badly mishandling the finances of their companies, but making millions, even billions doing it. Guess what- there's another Frontline about this issue too.

I live at ground zero for the energy company collapse. Enron was in my backyard. I've even visited the buildings where these giant corporations once stood.

Now, many of the libertarian free marketers would say the system worked, the market corrected the error. They're half right. The market did make a correction. But that correction was delayed, and aggravated by a failure of regulation. Had stricter accounting standards been in place, the public and the stockholders would have known about Enron taking bigger financial bites than it could chew. Feedback was the essential element missing, the element that would have allowed the market to correct the problems in Enron and other companies long before they became catastrophic. Here, regulation would have allowed the market forces to do their job.

Regulation on the energy markets would have had the same effect. California was not short on energy, but short on protection from those whose speculative money grubbing drove them to manipulate the markets, creating artificial power shortages and congestion.

We are also suffering because many of our closest business partners in the world have set up trade protections and other market skewing restrictions on our goods. We can go as free trade as we want to, but if all the other countries we deal with fail to do so, we are at an artificial disadvantage. Right now our business interests allow this to happen, to keep imports cheap. But we pay for it, because the market is not free to decide whether our goods, made domestically, are better than those overseas. Again, greed has outweighed the need to set the market right, either by demanding and getting those restrictions cut down, or by inflicting punitive duties and tarriffs on foreign goods, equal to those they have raised. We are losing jobs and business overseas to our competitors, including China.

No market runs itself. People are to complicated as human beings for things to be that simple. The Markets work because they allow people to sort our their mutual self interests without resorting to a clumsy manipulation of the system itself. However, there are many practices encouraged by greed that the market cannot react fast enough to intercept, that it cannot account for. There are also other practices and realms of thought that the market only has a tangential relationship with. The Environment, Scientific Discourse, culture and Art. The market doesn't tell me what's pleasing to the eye, healthy for my body, and what I can find to be reliably true about the universe.

It can only react to these things, and it's awful shame that often, instead of honestly dealing with these issues, the business community instead decides to manipulate, triangulate, and stuff whatever concerns are raised by these fields into a box of what they consider profitable and safe for business. Where the market is encountering realities it should be adjusting to, business is trying to manipulate the market by skewing people's perceptions about our world and ourselves.

I am not so naive as to think that jobs and other economic issues will never compete with the other interests of the environment, of the arts, and of the sciences. I believe we should meet the challenges posed to us by nature, human and otherwise, creatively, with negotiation and discussion, learning and understanding. It is long past time, though, that our business community be taught that its interest cannot always be victorious, that it is business's turn to have to adapt to the realities of the world around it.

Posted by Stephen Daugherty at June 15, 2004 8:51 AM