Free Markets: Illusion or Utopia?

A 2007 study showed that the most economically free countries in the world are Hong Kong, Singapore, Australia and the United States.  But there is no such thing as a “free market”. There has never been one nor ever will be. (I could end this entry on that note).

The mantra of “free markets” rings loudly ever so often after a severe financial crisis. It is unrealizable.  In scholarly debates, the concept of a free market is contrasted with the concept of a coordinated market.  Rule making institutions external to forces of supply and demand create space for those forces to control productive output and distribution.

The market is one of the many social institutions. And public goods and social necessities cannot be treated as if they are commodities produced for sale on the market. “Free market” doctrine aims to liberate an economy from government “interference”. There is no economy without government rules and institutions. All key inputs for an economy – land, labour, capital - are only sustained by government actions.

Both left and right movements today focus on “deregulation” – for the right it is to remove impediments of government; for the left, it is the scourge of all inequalities. Giant corporate and lobbyists want to maximise returns and through less market regulation and impediments to unionization, that may inevitably lead to bottomless bailouts.

We must not discuss regulation verses deregulation but what kinds of regulations we prefer: Those designed to benefit wealth or for the common good? And those rules and rights that recognise skills and talents or those that rig the game in favour of Big Business?

We have seen in Europe right-wing fringe parties gain traction. This is in response to austerity which has left growth rates tepid and unemployment high. A new course has to be set if we want to reduce the threat of nationalist and xenophobic right from getting stronger. Then perhaps we may remain between an illusion and utopia.

Source: The Power of Market Fundamentalism: Karl Polanyi’s Critique, Fred Block and Margaret Somers, Harvard University Press, 2014.