“The Free Market”

Libertarians and capitalists write as if there were some natural or divine force known as “the market”.  There is no such thing.  There is no MARKET, only markets, and a market is a place where people exchange goods and services, sometimes but not always for money.  Think of the Athenian Agora or a local farmers’ market.  Another way to look at markets is to describe them as playing fields for exchanges.  A market as place or playing field may become institutionalized, as a person or group of persons or a community or government claims ownership and the right to regulate it, just as the city or a business group may own a baseball stadium and a league of team owners agree to a set of rules.

A market is said to be free, not because no one pays entrance or user fees–they almost always do–but because access is not restricted.  However, once  a market become institutionalized, they can never be  entirely free, because the owners and regulators will always seek to maximize their own revenues and those of their friends, relations, allies, and fellow-citizens.

There is no known society without some kind of market.  Even communist countries had informal and black markets, and one may have comparatively free markets (hardly ever absolutely free) in societies where even the word capitalism is unknown.    When capitalists equate the “free market” with capitalism, they are either lying or hopelessly ignorant.

Let me quote a few paragraphs from my Perspective in the current number of Chronicles:

“Libero Ingresso” says the little sign on the doors of an Italian shop.  English-speakers who know enough Italian to translate the words, Free Entrance, sometimes wonder if there was a time when Italian shopkeepers charged customers an admission fee, to be refunded, perhaps, if a purchase was made.  It is just the sort of thing you might expect of Old Europe.  We Anglo-Saxons, after all, revealed the truths of free market economics at a time when the rest of the world was groaning in the darkness of mercantilism and protectionism, when honest farmers and merchants paid taxes on their windows and might be forced to labor on their lord’s land or the king’s highway.

Alas, these speculations, so comforting to our Anglo-Saxon vanity, are dashed on the hard rock of linguistic reality.  Libero (from Latin liber) means “free” in the sense of unrestricted or open, not “free” in the sense of no payment required (for which the Italians still use the Latin gratis).  French preserves the distinction between liber (French libre) and gratuitus (gratuity). In Spanish, de gastos (of charge) is added to libre for things that cost no money; otherwise one might try to  walk out of bar without paying for a Cuba Libre.

Romance languages have inherited something of Latin’s precision.  It is in English (and German) where the notions of liberty and costlessness are confused.  I wonder how many of us, when we hear the terms “free market” and “free trade,” think initially of cost-free access to markets?  When, as I have frequently done, I make the joke that there is no such thing as a free market, because there are always fees to be paid, I hardly ever get a response, neither a flicker of recognition nor a snicker of contempt.  In fact, a free market is a market into which anyone can enter and free trade is a trade between nations that cannot be forbidden or limited by national governments.  This latter phrase is somewhat ambiguous, since governments often limit international trade by imposing tariffs.  This ambiguity does not alter the fundamental fact, which is that free markets and free trade are not, by definition, free of cost but (supposedly) free from coercion.

“Well, what difference does it make?  This quibbling over the meaning of words is not going to help us out of the current economic crisis.”

Possibly not, but it is hard to see that any useful set of solutions can be proposed if we deceive ourselves, and, in the world we live in, there is hardly a more pernicious form of deception than the misuse—deliberate or unintentional—of language.  We have lived so long on the bad ideas that lie behind bad words that our minds have been poisoned and our very wills corrupted to the marrow of our being.  Freedom for us is no longer viewed as a positive good, a moral and spiritual way of living that has been shaped by centuries of experience; it is now only the right to be perverse—to take drugs that make us stupid, to read nasty books that make us crazy, and to molest other people’s children and kill our own.  Kris Kristofferson probably intended no harm by his oft-quoted line, “Freedom’s just another word for nothing left to lose,” but he did succeed in encapsulating in a mere ten words the servility of modern men and women for whom freedom means dependency, whether on a drug, a guru, or a social worker.

Later  on in the same article, I summon the ghost of Cicero to comment on some of our errors, and here is what he has to say about terms like “the economy” and “the market.”

I asked Cicero how he would have handled the American economy.

“Economy?  That is the art of managing a household and, as I understand, you people apply it to theories of buying and selling.  Your first mistake, it seems to me, lay in turning ideas into things.  A good Roman would not do this; his language would not permit it.  But you people are forever talking about history, as if it meant the events of the past (instead of the study of the past) or the geography of Europe as if it meant the actual places rather than a description of places.  What a muddle you seem to have got yourself into, where you cannot  speak about  things except as abstractions.  You even, I am told, worship an almighty dollar made out of mere paper. I wish we had thought of that one when we were raising money to fight against Mark Antony, but we knew even then that only a tyrant would degrade the currency.”

“Excuse me, Marcus Tullius, but could we return to the question?  I know you’d like to get back to your conversation with Scipio Africanus…”

“As I was saying, you people are always mistaking words and ideas for things and then, by treating what is unreal as if it were real, you cannot see the real.  I heard what you were saying a few paragraphs above, and you are perfectly correct, if a bit shallow, in questioning the meaning of that misleading phrase, the “free market.”  You people seem to think that there is some ultimate principle or universal law of nature you call “The Market,” when in fact there is no such thing.  There is no “Market”, only markets.  Markets are not ideas or mechanisms of exchange: They are places where people buy and sell things, and it hardly makes any difference whether the market in question is the forum holitorium in Rome, where vegetables were sold (you can find the ruins in several nearly derelict churches), or something like your New York Stock exchange, where most of the orders are now placed through these computers you seem so proud of, though to me they seem like nothing more interesting than a gigantic abacus that enslaves the very people who pretend to be masters.
Capital and Capitalism

We have to begin by distinguishing at least three separate notions: 1) capital, 2) the economic system that is typified by owners of capital and which is misleadingly known as capitalism, and 3) the ideology of Capitalism.

Capital is simply a fancy word used to describe  what a man has to sell and the necessary means for setting up and maintaining his enterprise.  Let us imagine a truck gardener, who takes his vegetables to a farmer’s market.  His capital consists of such things as the vegetables he has to sell, the pickup truck he uses to take them to market, his tractor and other farm implements, the 10 acres he farms, etc.  The time comes when he wishes to expand his business by buying another ten acres, but he does not have the cash, either for the land or for the additional seed and implements.  The widow next door gives him $100,000 in return for a fourth of the business and a fourth of the profits.  She is now part-owner, though she does no work.

The new field and expanding operations, however, require two illegal Mexicans to work.  Where previously the farmer had done everything himself, he now has employees.  In other societies he might have bought the employees, who would be known as slaves.  The situation of the two is not so different.  Slaves in many societies  had a good deal of free time and independence, while the Mexicans have no more income and a good deal more insecurity.

In any event, capital is universal in all but the most primitive societies, and some form of “capitalism”, that is, ownership of the means of the production and control of laborers, is almost as universal. The Romans were great capitalists in this slightly erroneous sense of the word, though Roman social life and ideology was not Capitalist, that is, Romans liked to think of themselves either as patriotic gentlemen or farmers, much as an 18th century English capitalist liked to become a country gentleman as soon as he could afford it.

Capitalism with a capital C, however, is the system and ideology that grew up with liberalism, and it emphasizes the unrestricted rights of capitalists, whose activities  more or less define the society, as, for example, fighting noblemen defined parts of Medieval Europe.  Let me quote from my students’ book on socialism:

Liberals usually (though not always) support capitalism, but liberalism and capitalism must be distinguished.  Capitalism, although it is often confused with liberal theories of the free market, is actually an economic system that emphasizes capital, that is, the money invested into a company that pays wages to its employees.  In principle, capitalism is incompatible with socialism, because capitalism presupposes private property and laws protecting property, while socialists traditionally have advocated public ownership of the great economic interests.  In reality, however, capitalism and socialism have tended to merge.   In countries that have nationalized large businesses, capitalist managers were often hired to run the corporations, while in countries that are officially capitalistic, large corporations cooperate closely with government agencies and often secure important benefits to themselves and to the detriment of smaller rivals.  Adam Smith, the first theorist of capitalism, noted that rival  businessmen would rather combine to control, by fixing wages and prices, than compete in the marketplace.  In the 20th century this has usually meant a close collaboration of business and government, in capitalist as much as in socialist countries.

Liberalism

From Socialism

“In the United States political discourse has been complicated by the deliberate misuse of terms.  Historically and still, for the most part, in Europe, the words liberal, conservative, and socialist have clear and distinct meanings.  Liberals, or “classical liberals” as they are known in America, believe (as their name suggests) in liberty.  Since the purpose of this book is to define and describe socialism, it is enough to say at this point that socialists emphasize economic justice, the redistribution of wealth and opportunity, and state ownership or control of great economic interests.

Liberal movements and parties oppose all unnecessary obstacles to individual liberty, self-fulfillment, and the progress of the human race.  Historically, liberals argued against monarchy (though there were liberal monarchists) traditional class structures, established churches, tariffs on trade, and even (in the case of J.S. Mill) against restrictive moral codes and the subjugation of women.  Liberals believed that the best economic results would come about in a system of free competition within the marketplace.

If liberalism’s code words are liberty, progress, and competition, conservatives have spoken of the importance of religion, social stability, and  traditional loyalties to the family and the nation.  Although conservatism, unlike liberalism, never had a clear program or ideology, conservatives instinctively resisted change, and until the mid-20th century, most conservatives were, at best, lukewarm defenders of capitalism and competition.  They often agreed with the moral arguments put forward by socialists who favored assistance to the poor, and they disagreed sharply with the liberal faith in free trade.  Without being nationalists, conservatives are eager to defend their nations, a fact that makes international conservative cooperation extremely difficult.

In the 20th century, conservatives in the US and the UK adopted much of the liberal economic agenda, without necessarily sacrificing all of their old commitments to family, aristocracy, and religion.  Liberals, as they lost the support of the working classes, either turned conservative or adopted the parts of the socialist agenda they found compatible with their own.  For example, liberals originally spoke of liberty in terms of freedom from restraint, but in the late 19th century some of them began to speak of liberty in terms of the freedom to do something, such as to pursue a professional career.  These liberals concluded that the poor could only pursue their plans if they were given free education.

The changing meanings of these terms can be very confusing, seeing that American “conservatives” like Ronald Reagan or William F. Buckley are really liberals, while liberals like Senator Edward Kennedy or Hilary Rodham Clinton are closer to being socialists than liberals.  To keep things simple, I shall use conservative and liberal in their classical senses, though when capitalized they will refer to conservative or liberal parties and their members.  Since American “liberals” do not like to be called socialists, they will usually be described as “left liberals,” though when their programs coincide with those of socialist parties, the spade will have to be called a spade and not a garden fork.”

For this discussion, perhaps  it is enough to say that liberal individualism, with its opposition to community, authority and tradition and its emphasis on universal rational principles, although it includes many morally wholesome principles, is false to human nature and inconsistent with Christianity.  So-called Democratic Capitalism, which puts economic and political liberty as the highest good or, worse still, relies on the principle of subjective value, cannot be reconciled with the morality of Christ and the Apostles or of the Church’s teachings.  We can speak more about this later, but there is no point in discussing anything, unless we agree on terms.

These brief and unpolished paragraphs are not intended as the final word on anything but only brief introductions to clarify the terms of discourse.If I have misstated or overstated something, I am happy to be corrected.   But I do ask you all not to distract the discussion with allusions to this or that classical liberal or libertarian, even if, like Acton, they thought they could reconcile Christianity and Capitalism.  As Acton once observed of himself, as a Catholic he was a bad liberal (or was it vice versa?).