Does “Free Market” Even Mean Anything?

Whenever you read the words “our free market system,” it should raise a red flag. See, for example an article titled “Nobel Prize Economists Say Free Market Competition Rewards Deception and Manipulation,” by George Akerlof and Robert Shiller (Evonomics, Jan. 6). Now, if “free market” means anything, it means an economy where all market exchange is free and voluntary, without coercive constraint. But as used in mainstream discourse, “the free market” means something like “neoliberal capitalism” or “the kind of corporate economy we have right now.” When right-wing politicians and talking heads, and mainstream (i.e. right-wing) libertarians defend the ungodly power and profits of big business against criticism, they refer to “our free market system.” And all too many critics of capitalism — although not all — slip into the lazy habit of referring to neoliberal corporate capitalism as “the free market.”

As an example of the latter, Akerlof and Shiller argue that “our free market system” by its very nature “tends to spawn manipulation and deception.” And what they describe — “[i]f business people behave in the purely selfish and self-serving way that economic theory assumes” — is an economy in which economic actors are abstract “economic men” and most productive and distributive functions are mediated by the cash nexus. But there have been markets throughout most of human history. And many of the societies in which market exchange has existed have arguably been a lot freer than the one we live in now. But societies in which everything is mediated by the cash nexus, and most economic functions are performed by for-profit business firms, are a relatively recent phenomenon of the capitalist era and — according to anthropologist David Graeber — totally a creation of the modern state. So what Akerlof and Shiller describe is actually a system created by massive state brutality, and maintained by ongoing state intervention, that grossly distorts spontaneous human social relations. What does their use of “free market”add to this?

And what, in practical terms, does a “free market system” even mean? Is a political-economic-social system in which the overwhelming majority of landed property can be traced back to state engrossment and land grants to privileged classes, and the enclosure of vacant and unimproved land by absentee landlords, and the rightful owners (i.e. the actual occupants, users and cultivators) pay tribute to them, a “free market”? Is a system where title to most of the world’s mineral and energy reserves dates to colonial robbery a “free market”? Is a system where the majority of profit depends on patents and copyrights — i.e., a state restriction on the right to copy information or designs — a “free market”? Is a system where the state limits competition, and most industries are dominated by a handful of corporations with administered pricing and collusive suppression of innovation a “free market”? Is a system where the majority of corporations would be running in red ink if the state weren’t socializing a major share of their operating costs and risks a “free market”?

If it is, the term “free market” doesn’t mean much. On the other hand if “free market” means anything, the present system is not a free market. It’s a system where capitalists and landlords control the state, and the main function of the state is to guarantee profits and rents to the propertied classes.

The only conclusion I can draw is that “free market,” as the overwhelming majority of people in mainstream discourse use it, simply means “the system we have now,” as opposed to (maybe?) Social Democracy or an idealized New Deal economy. But what we have now is arguably as statist as the New Deal or Western European Social Democracy ever was — it’s just that less of the state intervention is on the side of labor unions and the poor.

Some folks on the Left like Naomi Klein and Dean Baker recognize a distinction between “corporatism,” or the “corporate welfare,” and the “free market.” And some on the right are fond of responding to left-wing critics by saying “Oh, that’s corporatism (or crony capitalism), not capitalism.” But the latter, at least, do it as just a hand-waving gesture to acknowledge a few outlying phenomena like the Export-Import Bank or somesuch, while defending the core of the existing system as legitimate.

That’s nonsense. There is no “free market system.” There never has been. Despite the efforts of some on the Right to pretend that some period in the past has at least approximated laissez-faire, capitalism — the system that replaced feudalism 500 years or so ago — was founded on massive robbery, aggression and enslavement, and has been statist to its core ever since.

If politicians and talking heads, or academic intellectuals, want to talk about corporate capitalism, by all means let them do so. But stop talking as if the system we live under has anything to do with freedom.

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