The Price of Free Markets

One point on which Old Right and traditional conservatives could generally agree with Libertarians is the high value they put upon economic freedom and a deep distrust of government regulation. In our free-wheeling discussions, Rothbard and I struck a bargain. Since we agreed on eliminating about 90% of the powers of the Federal government, we would only quarrel over that disputed 10% once we had achieved our impossible dream. Murray, as an anarchist, wanted to privatize roads, bridges, and prisons, while I, though willing to entertain the possibility, thought it not unreasonable for government to have some role in providing for the common good. Since we would be lucky even to slow, much less halt the growth of government power, there was no point in arguing about the things that could never be put on the table.

I have not changed my mind or reneged on the agreement. The problem with the Libertarian position, however, is not that it is impractical or that I find parts of it morally repugnant. The problem is that it is false. They speak in abstract and universal terms about the “free market” as if it were a force of nature like the laws of gravity or thermodynamics. If it were, then we would expect to find free markets, in the classical liberal sense, flourishing everywhere, whereas in fact the varieties of human social life have engendered thousands of systems of economic exchange, but nowhere have we a record of a truly free-market economy.

Advocates of capitalism 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 not a metaphysical principle but 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.

The word “free” is a little ambiguous. Pretending not to understand, I used to observe that in every market, sellers and buyers generally have to pay someone or some entity a tax or a toll or agree to use a currency (and currencies, including precious metals, always include a percentage for the sovereign). Libertarians and classical liberals will usually retort that they don’t mean “free” in the sense of “gratis” but in the sense of unconstrained. But markets historically have been subject to any number of constraints: there are market officials who guard against false weights and frauds, rules excluding contraband merchandize or merchants from hostile tribes or countries. 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.

The free market, like other aspects of human liberty, is an ideal, not a universal reality. It is a little like what Aristotle says about natural justice. Is it, he asks, like fire, which burns the same in Greece and in Persia? Obviously not. It is more like right-handedness, a natural tendency (at least in a majority of men and women) but one that can be over-ridden, to a great extent, through disciplined training. My father was left-handed, but the sisters in his school tied his left hand behind his back and forced him to do everything with his right. I know this is supposed to cause problems, but in his case it made him so ambidexterous that he could win bets on the golf course. He played left-handed and if he got too far ahead, he would offer to use his partner’s clubs and swing with his right. He was less good with the right, but good enough.

So there is a human tendency to resent interference in our efforts to provide for necessities, whether by growing food or making exchanges, and there is a tradition in the West—one that goes back to the ancients—to give a great deal of social and economic liberty to citizens. Since the Renaissance, these market freedoms have been increasingly (until the 20th century) taken for granted as desirable.

But the free market is not an ultimate good; it is not even a good in se. It is a mechanism by which people provide for necessities and satisfy desires. If those desires are destructive, than a free market actually does harm. Think of the market as a tool or weapon, a hammer or a gun. They can be used for useful and necessary purposes—building bookshelves or shooting game, but you can also beat someone’s brains out with a hammer and commit a series of murders with the gun.

Free markets serve our desires—natural and otherwise—to enhance our material life and increase our stock of things we need or want. The desire to acquire and possess is natural, and it is found in all human societies. But, like the sex drive, it can either be channeled into useful and constructive activities, or it can take a perverse turn in the direction of greed, cupidity, and the pointless and repetitive impulse to acquire more and more and more. I have known some quite rich people who made good use of their wealth and enjoyed a full life. But there are others—I know several but can point to Warren Buffet—who are never satisfied with the enormous wealth they possess but cannot enjoy. People who pass their entire lives making money never learn how to spend it.