Tuesday, July 17, 2012

Debate on the Free Market

Required Reading for the Debate:

Arthur Brooks, "Five Myths About Free Enterprise"  (Washington Post, July 2012)
Joseph Stiglitz, "Of the 1%, By the 1%, For the 1% " (Vanity Fair, March 2011).

A conservative colleague, Scott, sent me the above piece by Arthur Brooks in order to persuade me that my hostility towards our American free-market system is misguided.  The piece got me thinking seriously about the huge divide between libertarians/conservatives and progressives/liberals in this country.  At times it almost seems as though we are speaking completely different languages and that any sort of reasonable meeting of the minds is impossible. 

I'll admit that more than a few times I've been guilty of baiting and provoking conservatives, but this time I thought I would try to see if it could be possible to have an honest, intelligent dialogue between the left and right on this very important issue.  We who are living in the United States in 2012 are at an economic and political crossroads: the country will either move in a more libertarian direction (smaller government, more tax cuts, less regulation) or a more liberal one (more government programs for those at risk, tax increase for the wealthy to pay for these programs, and increases in government regulations on corporations).   Since these ideas about our future are basically incompatible, it behooves all of us to think seriously about them. 

So I asked associates from across the ideological spectrum to weigh in on this issue.  And here is how they responded:

Mike Russo (Distributivist)

Scott, although I disagree with some of your positions, this is one case where we are in agreement. I believe in free enterprise--as much, or maybe even more, than any libertarian does. Remember, I own my own small business (it may not be a financially viable business, but it is a business nonetheless). And, as a businessman, it would be idiotic of me to attack the free enterprise system, which enables me to earn the meager profits that I do.

That having been said, I do believe that what we have in the United States today is not free enterprise in the true sense of the word--or in any sense that someone like Milton Friedman would understand it. What we have is actually a kind of corporate fascism, where a very small percentage of the population controls most of the wealth, rigs our economic system for its own advantage, and uses the ill-gotten wealth that they basically steal from the rest of us to control our system of government. 

So, although I agree that free enterprise in the true sense of the word might actually help to distribute wealth broadly and this would certainly promote the common good, this is most definitely not what we have in the United States at the present time. We might have had something of a free-market system in the post-war period, but is certainly doesn't exist any longer (especially after the Supreme Court's Citizens United decision).

The one thing I would take issue with in the piece is with Brook's claim that Wall Street and the banking industry had nothing to do with the financial crisis that we are in. This is typical conservative nonsense.  Wall Street  and the banking industry are almost totally to blame for our economic melt-down, and this is the very reason why we need much more government regulation of these industries.

But other than that, I'm glad that we can agree that free markets are a very good thing. We just need to define a bit more carefully what a true free market is...and what it is not.

P.S. Since we are exchanging required reading, here's something you might want to look at. It's by a Nobel Prize winning economist, but you can just call him a deluded liberal if you prefer:


Christopher Salute (Pro-Business Centrist)

I agree, for the most part with Brooks' five points. Though, I find anyone who stands completely on one side of any playing field more ignorant than those reading their articles. At least those reading the paper and educating themselves are attempting to find middle ground. And, I think that's where we'll all find peace with corporate and governmental policy.

I'm baffled at the stances I'm seeing against free trade, lately. I see it in students and even my own colleagues. We play the blame game and debate in circles. It comes down to a few inescapable facts:

Yes, many large corporations are corrupt. This is the case all over the world. The difference in the US is that they are not DIRECTLY tied to the government, local law enforcement, and exploiting their employees for pennies a day in unsafe work environments. And, you have the freedom to protest this without lethally being shot at.

The financial landscape exists this way for a few reasons. One is that bankers are constantly looking for higher margins. This is true. And, I think that there is a ridiculous amount of unshared wealth, out there. But, I'd prefer that over being allowed 2 pairs of shoes, a sack of flour, and a mule after working my tail off to become a doctor. Because, that's the other side of the coin.

What we forget are the other few reasons that the financial landscape is this way. The first is that corporate banks (unless they hold on to and service their "paper") borrow and sell to and from the US government. This is regulated. In order to remain competitive, loan agencies will push the legal limit to how far they can lend because they have to hit their quotas to be able to sell their loans back to the fed.. And, they depend on the government banks to say "yes you can" or "no you cannot do this." I think that is where the major breakdown was during the meltdown. Loan agencies are going to do everything they can to make money. This is to be expected. If you are the regulator, you must regulate. This is the difference between morality and LEGALITY.

The second is that consumers are no longer doing their homework. I have worked in finance, communications, human resources, marketing, sales, etc. etc. And, the silliest thing I hear from co-workers, colleagues, customers, alike is "Well, nobody ever told me that." Did you really think that borrowing another $100,000 against your home at a volatile interest rate was a good idea? Prime and other rates like this were jumping all over the place. Loans are subject to change based on this. You MUST know what you're doing before you jump into the deep end with all or most of your money.
  • "Nobody told me this rate could jump to 12%"
  • "Nobody told me that my art history degree wouldn't get me a job"
  • "Nobody told me that this product I paid $1 for was inferior to the $20 counterpart."
I think that what happened this decade was a perfect storm of uneducated (but more importantly irresponsible) consumers who expected someone else to do their work for them, definitely corrupt large corporate bankers, and a lending/government system that LOOKED more regulated than it actually was.

But, free enterprise? THAT is what creates jobs. Nearly 90% of us work for small businesses (under 1000 employees). They are responsible for the most job growth, innovation, and revenue in the US. So, why attack them?

I am all about job growth, giving back (believe me when I tell you I give a larger proportion of my earnings to charities all over the world than most anyone you'll meet), etc. And, I am the last one to buy a new car, 20 new suits, or a rolex. But, as a small business owner and executive in the top 10% of US salary earnings, I can tell you I have earned every dime I've made. And, if I were in the top 1%, I'd have earned that, too. What probably keeps me back is my desire to educate myself and see my family more. The career track I was one would have put me in that same bracket had I not gone back to school and chosen a different path. And, nobody is entitled to that money but me! Tax me all you want. I'll donate at my leisure. But, don't penalize me because you don't think I worked hard for it. I'm sorry that I don't have my own reality show for you to watch.

I continue to struggle because I live just outside the largest city in the world, am earning my PhD, and graduated college just a few years before the recession. I have debt, I have sat up at night wondering if I could make my mortgage payment, couponed my way through a grocery store so I could eat, etc. etc. I woke up the next day and I figured it out. But, thank GOODNESS I am in a country where I can do that. This sense of entitlement is the biggest barrier to getting us out of the recession. Nobody owes anyone a job, a suit, and a meal. If you think that, you'll be waiting for those until your last day. There are thousands of employed illegal aliens doing manual labor. That Art History degree is doing nothing on your wall so use it to dig up some potatoes in the midwest if you're that hard up for work.

 To generalize this group of people and say "all business men are criminals" is just as bad as saying "all protestors are bums."

Peter K. Fallon (Christian Progressive)

I think it comes down to a fundamental problem, one that no one really wants to talk about. That is ideology. Not any particular ideology, but the phenomenon of ideology itself: any idea, flexible in its birth, that becomes increasingly rigid and rule-bound to the point that it becomes "the one true way" and anyone with the balls to suggest a modification finds his/her loyalty or "purity" questioned.

That has happened to American Capitalism in the last thirty years (and, consequently, to global Capitalism after the fall of the rigidly ideological Soviet Union).

There is only one acceptable form of Capitalism -- out of many, many iterations -- for the American economic right today: global, unregulated, laissez faire, (so-called) "free-market" Capitalism. Any other form, for this group, is not Capitalism at all, but an evil masquerade of Capitalism (I can imagine some reading this right now thinking, "but it IS an evil masquerade! It IS!"). By this reckoning, FDR was a Socialist -- or even a Communist. Barack Obama is not only a Socialist or even a Communist, he is also a Nazi, a Kenyan, a usurper, and the embodiment of evil (I can imagine some reading this thinking, "but he IS the embodiment of evil! He IS!"). Government, this rigid, ideological perspective says, has no role to play in a marketplace: not consumer protection, not environmental protection, not the health and safety of workers and consumers, not the protection of investors and/or bank depositors, not the investment or subsidizing of new technologies that might release us from dependence on old technologies (which, oddly enough, this same group seems to have little objection to government subsidization).

Furthermore, government must not help the poor and unemployed (make them "dependent" on a "nanny state") lest they become lazy and spoiled. It is not insignificant that Adam Smith made note of the relationship between redundant labor and wages. Blessed are the poor, for they shall work more cheaply...

The fact of the matter is that Capitalism is a philosophy, not an ideology (or, at least, it is in principle if not in current practice). Smith's "Wealth of Nations" is not a rule book; it is a description of principles Smith observed at work in the emerging economy of the (English) industrial revolution. It is one of a number of Enlightenment documents, every bit as much as the distinct social contract theories of Hobbes and Rousseau, as Montesquieu's separation of legislative, judicial, and executive powers. And just as we've seen the changing nature of the social contract, as well as the changing nature of separation of powers (there were no multinational corporations with unlimited access to legislators until the 20th century), the nature of Capitalism legitimately changes, because the relationship between its constituents must change.

One of the biggest changes we have seen came in the 20th century and the rise of an image culture made possible by photography, the lithograph, and half-tone printing, and, of course, television. The digital technologies continue this change. Smith described a Capitalist system rationally organized around capital (including technology), resources (including labor), and a marketplace. Each market has its own needs, rationally identified; resources (including labor) are available to differing extents according to the various characteristics of the market; and capital goes to work organizing the resources and producing the commodity necessary to satisfy the market's need.

This situation no longer exists. It is gone the better part of a century, and completely gone a half-century or more. Capitalism as we currently play the game is more or less entirely irrational. Needs are trumped by mass-manufactured desires. Satisfaction is replaced by saturation. Quality of content falls to attractiveness of presentation.

But even Smith saw, 240-something years ago, that economic advancement -- especially when spurred by technological change -- has negative consequences for society.

I'm always curious whether the most rigid, ideological Capitalists have ever even read "Wealth of Nations;" however, I'd bet what little money I have in my 401k that most have not read Smith's "Theory of Moral Sentiments." It was Smith, indeed, who pointed out the problem of greed and selfishness; not merely pointed it out, but actually labeled it a "problem," one damaging to the social fabric. And he acknowledges that this greed sometimes results in objective social injustice. And -- AND! -- Smith actually points to the role of government in enforcing just interaction -- not simply by punishment once an injustice occurs, but "enforcing the practice of this virtue":

"As the violation of justice is what men will never submit to from one another, the public magistrate is under a necessity of employing the power of the commonwealth to enforce the practice of this virtue. Without this precaution, civil society would become a scene of bloodshed and disorder, every man revenging himself at his own hand whenever he fancied he was injured." (Theory of Moral Sentiments, VII. 4. 35.)

So if we could drop the ideological demands of "purity" and begin to see that there IS NO ONE "TRUE" Capitalism, and that Capitalism well-regulated is Capitalism still, and -- in Adam Smith's views -- one morally superior to a Capitalism that refuses to deal with anti-social attitudes like greed and selfishness, it would be a good thing.

As for Brooks's analysis of the five "myths":

1] Mark Twain's three types of lies: lies, damned lies, and statistics. There may be a greater proportion of the world's population living on more than $1/day now than in 1970. So what? In aggregate numbers there are a half billion more people living on $1/day now than in 1970. This is a desperate, de-contextualized piece of bullshit that ideological Capitalists (and, no, not all Capitalists are ideologues) trot out whenever they feel on the defensive. Poverty is growing in raw numbers. Hunger is growing in raw numbers. Globally. Stop with the "proportion of the world's population." Asia has grown far faster than Africa -- mostly because of a totalitarian, tightly-controlled Capitalism in China. In some places, like Zambia and Mozambique, the proportion of people living in desperate poverty has grown.

2] Brooks creates a false dichotomy. It's not either/or. Free markets don't have to be driven by greed. If they weren't driven by SOME greed, however, they wouldn't need regulation. And even when greed is present in a free market, not all the participants are greedy, self-centered, and anti-social. But greed drives a free market when market values replace humanist or spiritual ones, and no regulations are in place to inhibit selfish, anti-social behavior.

3] This is a scare tactic, closely related, I think, to calling any criticism of the (current) system of redistribution of wealth "class warfare." Americans DON'T resent the wealthy. They DO admire them. There's no class warfare going on. Americans simply want the wealthiest Americans to pay -- ooops, I almost said the nasty, class warfare-based phrase "their fair share." Americans simply want their wealthiest neighbors to pay in proportion to the benefits they receive. Even yesterday's Rasmussen poll -- that reddest of all red pollsters -- shows a majority of Americans (67%) in favor President Obama's tax plan. Envy has nothing to do with it. Justice has.

4] This one is just nuts. I have nothing to say -- except this: this is as good an example of the influence of ideology on opinion as you're ever likely to find. It becomes impossible to see something that is objectively manifest and measurable to the world if that something is in opposition to your ideology. It's a kind of cognitive dissonance. Or a refusal.

5] Free enterprise is not unfair, no. And I must say I find this one to be something of a straw-man argument, easily destroyed, that I've never heard from critics of Capitalism (as played right now). Free enterprise is NOT unfair. Free markets are NOT unfair. All of this, however, is a distraction from the real issue. What is unfair is the rigid, ideological orientation that demands the illogical conclusion that because they are NOT unfair, they must therefore be fair. This is an anthropomorphizing of a system -- a technique -- into a sentient being with will and intention. Saying a free market is unfair (or fair) is like saying a gun is fair or unfair, or a nuclear warhead is fair or unfair. What we DO with that gun or that nuclear warhead or that free market is really the question. What are the intentions of the man holding the gun? What are the intentions of the players in the market?

The fact remains that markets are not morally neutral. They are a technique founded on the values of profit, efficiency and expansion. They are no longer rational, being motivated by the desires of developed marketplaces as opposed to the needs of undeveloped ones. They tend to exploit the undeveloped markets for the benefit of the developed ones. Especially when they're not regulated.

And THAT, not Capitalism or a market, is what is unfair.

Thomas McNamara (Libertarian)

What is striking are the diametrically opposed views of capitalism of Michael and Peter. Mike starts off by saying he is a strong believer in free enterprise, perhaps more than me, and what he is railing against, without calling it by name, is crony capitalism. Mike points out that the capitalism we have now is not that advocated by Milton Friedman (who was my economics professor at Chicago). With all this I agree. There is a difference between being pro free market and pro big business. Watch Ron Paul on Youtube and you will see that libertarians are the biggest opponents of crony capitalism.

Peter likewise rails against crony capitalism. Peter argues that there is more than one type of capitalism, and capitalism with regulation is still capitalism, and we should get away from advocating just free market capitalism.

However, it is government intervention in the free market, whether by regulation or otherwise, which brings about crony capitalism. George Stigler (also University of Chicago) pioneered studies decades ago in the economic theory of regulation showing that big businesses or other political interest groups usually wind up "capturing" the regulators and using regulation for their benefit or against newer smaller competitors. The reason we have so much lobbying and crony capitalism is because the government has largesse to hand out, whether it be government loan guarantees in favor of Solyndra, Fannie Mae, Freddie Mac,, or government bailouts of banks. Minimize government intervention in the market and the government has less to hand out, and there will be less lobbying and crony deals. Thus, government regulation is not a solution, it is part of the problem.

Much of what Mike says is discussed in a recent book by Luigi Zingales (also of the University of Chicago), entitled A Capitalism for the People.  So, Mike, you have been exposed as a closet Chicagoan (Friedman, Zingales, et al.). Welcome. Your real argument is with another resident of Chicago, Peter Fallon, and his pro-regulation position.

Thomas Trottier [Marxist]

I guess I would say the following regarding this debate, from the perspective of a Marxist:

1. Capitalism creates a growing divide, with a few very wealthy at the top and a larger impoverished mass at the bottom. This is true world-wide or from just looking at the USA. When I look at this, I don't just look at income [although that can also show dramatic differences], I look at I look at ownership of property, particularly financial wealth. As an example, the richest 400 individuals in the USA in 2008 owned wealth directly that equaled 10% of the US GDP! This is a country of more than 300 million people.

2. Under capitalism, corporations that are successful and grow bigger push out the other businesses. Therefore there is greater concentration of wealth. Even if these corporations contract-out some of their work to small businesses, it is the corporations that dominate the economy. Look at how CVS and others have almost eliminated the mom & pop drugstore. Home Depot and Lowes have had a similar effect on the small hardware stores. That is not fascism, that is capiatlism.

3. Marx explains that capitalism has a tendency to over-production [and over capacity]. This leads to crisis. The 1930's crisis was ultimately caused by this. World War II, with its massive destruction eliminated the over-production and allowed the post-war boom that came to an end in the 1970's. Capital's use of credit, speculation and gimmicks allowed the economy to move forward, at a slower pace, but this prepared the world for the present slump and "credit crisis."

4. We are now in for a long period of world-wide capitalist downturn. All the governments have no choice but to implement austerity. The coming election in the USA is not a choice between bigger and smaller government, it is a choice between someone who openly proclaims austerity and someone who will basically pursue similar policies, but with maybe a few small taxes on the wealthier part of the population to convince people that we must share the pain. Neither party can solve this crisis.

5. Unemployment and poverty will grow, in an overall sense, as capitalism will not invest in any major way in production. Why would they? They have excess capacity.
6. As the reserve army of the unemployed grow, the capitalist will continue to cut wages and benefits and make workers [those luck enough to have a job] work longer and harder.

7. Like it or not, there will be many more movements [see Greece, Egypt, Spain, Quebec] in countries all over the world, including the USA as the masses struggle to defend their standard of living. Eventually, a layer will come to see that what is needed is Socialism. This will be a long and complex process given the capitalist control of the media and the confusion added to the movement regarding the experience of Stalinism and re-formism.

If you are interested in finding out more about the Marxist approach to the economy, check out Socialist Appeal's website

Peter K. Fallon (Reply to Thomas McNamara)

Tom, one of the dangers of ideology is its dismissive approach -- frequently descending into ridicule -- toward ideas that appear to threaten, simply because they question, the central "truth" of the ideology.

So when you weren't cha-cha-ing upon the supposedly diametrically-opposed views of Mike and myself (in fact, there is very little opposition between our statements, none of it diametric, all of it a matter of nuance -- and ideology hates nuance), you appeared to be two-stepping around my major point: whether you see Capitalism as a philosophy or an ideology; whether you think it is a "science" with "theories" supporting it, or whether it is really nothing more than a set of observations based on a constantly-changing human nature.

More importantly, you give no indication of whether you teach it as an ideology.

Finally, you misrepresent my stance. I am not "pro-regulation." I am anti-ideological. I am against the dismissal *before the fact* of the possible need for regulation to right wrongs the market fails to correct, or to balance a playing field that looks fine to the *human beings* playing on it, but not so fine to the ones who are left out. That may be a nuanced point, but it's not a terribly difficult distinction to recognize. So I wonder whether you simply missed it, or chose to dismiss it?

Thomas McNamara  (Reply to Peter K. Fallon)

First, let me point out that, as a practising attorney who does not have the summer off, I did not have the time to address everything with which I disagree in your email, when I responded to Mike's invitation to comment before leaving to go to work this morning. Nor did I think it was incumbent upon me to do so.

In successive emails you have expressed concern about what I teach my students about capitalism. I would never question you about what you teach your students in your class as I would not want to impinge upon your academic freedom. Since you asked, however, you should be aware that I am an adjunct instructor who teaches business law and I do not teach economics or capitalism.

My views about capitalism were formed based upon my study of economics at the University of Chicago, my reading, my observations of the world, my understanding of history, and my experience. I believe that free market capitalism is the economic system which leads to the most efficient allocation of scarce resources, is responsible for improving the quality of life of humankind, including poor people, and is the system most consistent with individual freedom. It concerns me not whether you want to refer to it as philosophy or ideology.

I respect your points of view, with most of which I disagree, but I am not dismissive of them a priori. For example, my views of the harmful effects and counterproductiveness of government regulation and intervention are based upon the work of George Stigler and others concerning the economic theory of regulation, and numerous examples of government regulation or intervention making problems worse (e.g., minimum wage laws intended to help poor people leading to greater unemployment of them, federal mortgage loan guarantees leading to the housing bubble and foreclosures, federal student loan guarantees leading to students being burdened with opressive debt and increases in tuition which far outstrip the pace of inflation, rent controls leading to reduced housing, price controls leading to scarcer supplies, stimulus and bailouts leading to debt crises and bubbles, antitrust laws supposedly intended to foster competition instead leading to government action against more succesful companies instigated by competitors who can not competer in the makerplace, the machinations of the Federal Reserve leading to the suppression of interest rates, less savings, and massive declines in 401K and pension fund values, etc., etc., etc.).

I am not dismissive of your views a priori.. I just find these writings and economic examples more persuasive.


  1. Liberals like Fallon and Russo try to make it seem like they support a free market system, but it's clear from what they write that they really don't. They support European-style statism, in which the government controls all aspects of the economy and tries to tell people how to live their lives. It's freedom, not big government, that has made us the greatest country in the world for over 200 years!!!

    Gary (Carbondale, IL)

  2. Thanks for sharing this on the OWS site. As someone who has been involved with OWS from the beginning, I guess that my thoughts on this subject will be somewhat predictable:

    1) There is no free market in the United States. That's just an illusion created by those in charge to make us think that we have some control over our economic lives.

    2) Until we have serious campaign finance reform, viable alternative political parties, public funding for elections, and a truly progressive tax system, multinational corporations will continue to control our economic and political futures and the poor and middle classes in this country will continue to suffer.

    3) None of this will happen unless people take to the streets the way they are in Europe, cause major social disruption, and demand change. That's why movements like OWS are so incredibly important. So tell your students to get involved:


  3. Russo's argument is based on false premise; to begin, he fails to define his "Free Market"; to which definition does he here prescribe?

    "Free Enterprise" is a label that I dropped on the Net some ten years ago, the result of the study of colonial economic growth; not to say that I was the first to coin the term, merely that I felt it a more accurate or apt reference to one's ability to freely seek entrepreneurship; there are many societies that do not permit this, some are economically totalitarian, others like the British have historically employed the political economy, a political mercantilism, which the British have traditionally labeled as "Free Market." Is this the free market to which Russo here refers, and if not, could he be more specific? All logic begins and rests with definition; let us begin with a definition of terms.

    I love Free Enterprise but do not be mislead - an nondiscriminatory equality of access to entrepreneurship does not mean unlimited entrepreneurship, or that I am possessed of the Libertarian view - there is need of regulation; many consider, for example, thievery their preferred form of economic logic - I cannot condone a legitimized non-restriction here, likewise I would not legitimize through non-regulation the free marketing of black market items.

    Russo rails against the corruption of the money mongers; he rails against the greed that allows many to take far more than their share, and I think this is an important distinction; it's not self-employment or unlimited access of entrepreneurship, and it's not the failure of regulation - it's the sense that the BIG have "cheated," usurped a nondiscriminatory equality, by creatively circumventing regulation or utilizing the political avenue to gain unfair advantage through the creation of more favorable conditions.

    This allowed them, for example, to market the Sub-prime... and all of these investment vehicles, as recreated, exist even now. I think to some extent that politicians are generally limited in scope of knowledge; for that reason it becomes far easier to just physically attack the rich in frustration. But throwing stones, or even chucking bombs at them, will not be successful because economics is an apparatus that lives outside ourselves; it cannot be controlled. It was this very fact that gave birth to the American economy through the "illegal" import of wealth.

    Dana Davis, Jr.

  4. When the fuck has there ever been a free market in the entire history of the human race?

    It doesn't exist.
    It has never existed.
    ...and it sure as shit will never exist.

    This entire discussion presumes something that is a corporate fiction. There simply ain't no such thing as a free market. So all of you are just blowing smoke out of your asses with this debate.

    1. It's not so much 'fiction' as it is 'modified'. Based on post industrialization, the realities of inherent greed, other anti-social behaviors and the reality that capital accumulates more capital.

      If there ever was a free market, or more free market, maybe there was. Back in the 1800's. But it's not 1850. We aren't a simple agrarian society anymore. It's the 21st century post industrial global age. The simple rules back then aren't sufficient for today. Free Market Lovers just don't understand this for some reason.

      Of course, if you're a Libertarian, Anarcho-capitalist, right wing neo-lib batshit crazy Ayn Randian - then you believe that a free market is somehow a cure to greed, anti-social behaviors and capital accumulation in the post industrial age. And some believe these things - unrestrained - are actually good things. It's really quite sick, twisted, patently absurd and stupid.

      Even Adam Smith knew better, well before the industrial age. But the neo-libs have turned Adam Smith into a socialist/communist.

      Adam Smith believed that government has a role in providing certain public goods for the benefit of society. Like schools, infrastructure, and social welfare. He supported progressive taxation and regulation. The very things that the Libs and neo-libs rail against.

      "It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion." Adam Smith, Wealth of Nations.

      ''When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.''

      A free market would do nothing but allow tyranny by corporations. And it's the corporations, and other Free Market Pushers, that want people to hate on government. It's serves their purposes to weaken government. As they weaken government, their power grows.


    2. A "free market" is an impossibility as long as humans are involved.

      It's a construct of man, therefore controlled by man and NEVER "free".

      If you refuse to accept that fact, you are doomed to repeat yourself.

    3. Perhaps we could understand how the free market got its name .. if we would look at ..what came before 'Free Market' ? was there a time when the seller was not able to freely set his price to what ever he wishedfor? To me , a free market simply means there are no limits to the amount of profits that can be gained.. when customers are scarce the markets will lower their profit gain .. when customers are plentiful .. markets will raise their profit gain .. having an item that is in strong demand , means profit gain can be set very very high .. simply put, when the customer has more money to spend , the markets will raise their profit gain.. the customer has a choice .. pay the high profits or go without. And if they decide to go with out the economy recesses ..and possible jobs will be lost .. in this the customer' shoots himself in the foot .. it could be his job that is lost.. but ultimately it is the markets that have their hand on the dial .. they are the ones setting the profits ..thus controlling the economies future.. Question: should the markets have such power over the economy as to create recession by their own greed for profit?

      I see the future of the 'free markets' becoming regulated so that customers are not forced to either pay the high profits, or go without.. I see the profits being regulated to maintain an equilibrium amongst commerce and the economy.


    4. “Profanity is used by people who have little to say, but demand that others listen to them.”


      “Profanity is a speaking habit akin to peppering a tasty meal with bits of excrement.”

      To wit: learn how to express yourself like a human being - or stay off these boards.

    5. actually, profanity has a long and proud history in political discourse. it can actually be quite an effective way of drawing attention to your ideas and expressing contempt for bourgeois values. although I don't agree with anonymous's conviction that there is no such thing as a free market, i certainly think he has the right to expression his ideas any way he wants to. or don't you believe in freedom of speech?

  5. Mike, you are, of course, correct in your analysis. But I am increasingly finding this sort of exchange unsatisfying. The country is moving toward class warfare. People will be hurt. Action is required.

    It's not that difficult to understand the solutions, but very difficult to create the political will. Thus, the number one job is campaign finance reform. Since the Supreme Court has already screwed that up, we need to change the Constitution. That mean votes of 3/4 of the state legislatures.

    Once done, the new Congress can:

    1. Forgive me (cut corporate taxes).
    2. Invest heavily in infrastructure.
    3. Cut loopholes out of the IRS by simplifying the tax code.
    4. Implement term limits.

    1. I completely agree with you about your proposed solutions to this problem. But the first thing we need to do is educate the next generation of citizens to understand what the important economic and political issues facing our country are. That's why I think a discussion like this one is so important. Even when the debate gets a bit nasty, it is still definitely worth having, because it can help to open up minds.

      I'd rather have students screaming and cursing at one another in the classroom than have a bunch of silent but polite drones who couldn't care less about the big issues.

    2. from 1776 to 2012,,,the republicans and the Democrats have ran against each other every four years,,they always point out that they will "fix the big mess"and make you see that they are the best choice.,,,that is 236 years they were going to fix it,,,"is it fixed?",,,,,now if you graduate and open a business and hire a manger named iamsoandso to run it for you and after four years you find you are almost bankrupt you will pull him aside and say"iamsoandso,im gonna have to let you go",,then you hire iamnotsoandso,,to manage it for you but after four years you find you are further in dept. so you say to iamnotsoandso,,"nothing personal it's business" and let him go,,then you hire iamsoandso,,and give him another try but after four years you let him go for the same reason,,and rehire iamnotsoandso,,,,and you go for your life time and then will your business to your children and they every four years hire and fire iamsoandso and iamnotsoandso,,,and this goes on for lets see now 1776 to 2012,,,hmm,, that's 236 years,,,,and these two have not made you a profit,,,eventually you will pull out their files and go back to their resumes,,and think wow 236 years of saying "i can do it",,,,and also 236 years of poor performance,,,then you sit back and scratch your head and think,,"wow without gov. bailouts i would have crumbled years ago",,,,,,,but see your up against the wall.,,and you think "ding,ding,ding,,,i have two applicants who have the best qualifications for the job,,but are not willing to actually do it,,,",,,,then it will hit you you'll think,,,"oh,there's an art to looking at resumes,,,your not looking for who is qualified to do the job ,,,you are looking for who is willing to actually do it",,,,,,,,,

      thank you for considering my application and resume,,,,"iamsoandso@?,gov"

    3. What you perceive of as economic problems, though, whether real or fictional, are largely the result of just two things that have very little to do with politics - access to China as the ability to outsource our manufacturing, and our labor, for the import of less expensive and more competitive products to our own national and regional markets, and two, computerization which has exponentially multiplied our ability to conduct transactions.

  6. The closest thing to a Free Market that exists today is with the Internet. eBay, Craigs List, Auction sites, very little in the way of taxation or laws. A great deal of commerce is being conducted this way.

    It is an excellent experiment in markets as we can track it from it's inception. There is very little regulation and taxes, and as long as we can keep the ISP's from controlling content, it is the only chance for the world to experience a true Free Marketplace.

    The cost of entry for a business is an internet connection and a computer. Globally almost anybody can be an entrepreneur.

    - Geo

    1. But it is not necessarily a good market - and state taxes are finding their way into the E-market.

      In many respects the E-environment is like the Wild Wild West - more then a little chaotic.


    2. I never implied good or bad.... mostly unregulated... as long as the ISP's are kept out of it. I think that it is a good experiment in market systems as we can track this one from birth.

      The Free Market IS chaotic.

      - Geo

    3. I did not intend to suggest that you considered it a good market or a bad market. I was just making an observation based on my opinion.

      A free market would be chaotic by it's very nature of being free - still we do not have that - a free market.


    4. On the Internet? I think its closer to a Free Market than any other system on earth. All a person needs to become an entrepreneur is Internet access and a computer. The cost to enter the market is negligible and people around the world can participate with no central authority interfering.

      - Geo

    5. I agree with Geo that the rise of the Internet is actually quite a positive development. Before the Internet came along I would never have been able to start my own business. I would have needed to take out a business loan (which I probably wouldn't have been able to get), set up an expensive brick and mortar operation, and have huge overhead costs. With the Internet I was able to start a business and begin selling items (books) almost immediately and for a relatively small cost.

      There's definitely much more opportunity and freedom on the web today than there is on Main Street. But you do have to contend with the anything goes, Wild West environment on-line.

    6. I believe that Lenin probably best described modern American capitalism, when he wrote,"A democratic republic is the best possible political shell for capitalism, and, therefore, once capital has gained possession of this very best shell ... it establishes its power so securely, so firmly, that no change of persons, institutions or parties in the bourgeois-democratic republic can shake it." (_The State and Revolution_)

      Since the capitalists own the state, there is no free market; the bourgeois government regulates the economy for the benefit of the capitalists and to perpetuate the exploitation of the working class.

      Ample proof supports this conclusion in just the last decade: bank bailouts, auto-maker bailouts, etc, all at the workers' expense, while the workers gained nothing in return. Jobs are scare; foreclosures continue; health care is still pay on demand; hunger is rampant; over 46 million people at or below the poverty level.

      The free market exists only in propaganda, while the workers continue to plod on for decades with a minimal gain or even a decrease in real wages. The free market is little more than a linguistic tool to excuse further subjugation of the workers.

  7. Lots of reading here...wow...

    First, let me say that I am a member of my own political party. The party is unnamed but its only platform is common sense - applied equally to each and every issue after careful examination of facts. Most people, probably have never encountered this party. I believe government exists to provide services that the general public or private, non-government subsidized industry cannot. Most people will disagree with my sacrilegious belief that the highly revered Founding Fathers aren't the best source of knowledge for how to govern a country.

    We need to scrap the idea that we can "fix" the things that our representatives have broken. Everyone blaming corporations is aiming their blame at the wrong target. The representatives we have in congress broke things that allowed the corporations to do what they do. Hiding money in other countries in "illegal tax shelters" is technically legal in probably 30 things in the tax code. Again, a tax code written by logical people and broken over time by crooks and idiots.

    The "fix" is to completely overhaul how we as a people, require our government to operate. Two year terms for all of congress, and no reelections; thus no need for campaign finance reform. Congress needs to be an attainable, and prestigious position like it was in the old days of Rome. Anyone should be able to make a run at a seat at the table. As another new requirement, congress members must agree to a code of conduct (not unlike any job any of us common folk must agree to for our own jobs). Members are expelled for breaking this code. We see a picture of you stumbling out of the bar at 4am with a woman that isn't you wife on the cover of Vanity Fair or Facebook, you're out. You get a DUI, you're out. You get a payoff or we find out your nephew works at the construction company you just approved a contract for, out. With the billions of people living here, surely we can find a few moral, intelligent humans to keep representing us. Oh, and you don't get to go home for the summer until you pass a budget. We work that like the Catholic Church - lock everyone in a room, take a vote, and keep going til they agree. Simple, common sense...

    On to the free market...I agree that the free market is the way to go. Those who work hard and have good ideas benefit. The issue is how to deal with the lazy and/or stupid and the people that cannot work hard or form good ideas. Much to the dismay of those against handouts, the free market needs to have the ability to support certain people. If the market cannot sustain their support, the government must step in and provide the services they require. I think the market can become a lot more free if there isn't the issue of government corruption.

    Im sure there is ton more to debate on all of this..

    1. It's nice to see that at least one college graduate hasn't lost his ability to engage in independent thought! I agree with your ideas about reforming Congress, but I don't think that it's going to happen any time soon. Not as long as the two parties in power have a vested interest in keeping things exactly the way they are. Perhaps the only solution is to vote every single member of Congress--Republican and Democrat alike--out of office, and start anew. At least the new folks voted in will know who they have to answer to.

      Nice post, Mike!

    2. @Mike:

      You wrote:
      "We need to scrap the idea that we can "fix" the things that our representatives have broken. Everyone blaming corporations is aiming their blame at the wrong target. The representatives we have in congress broke things that allowed the corporations to do what they do. Hiding money in other countries in "illegal tax shelters" is technically legal in probably 30 things in the tax code. Again, a tax code written by logical people and broken over time by crooks and idiots."

      That is only half the story. Lobbying allowed corporations to 'break' the system. Lobbying allowed those with money to have more say and influence over my representative in Congress than I, the constituent, does, or my vote does.

      Congress is to blame, but so is industry. Congress and Industry are in bed together, which is the worst of all worlds. Lobbying although allowed in the Constitution is the loophole that has been unfairly exploited and has tarnished our government with money. Billions have been spent to influence 525 people.

      ~ geo

    3. I agree. In my view we have two wings of the same corporatist party running the country. As Ralph Nader once said, we should just call them the Republicrats.

  8. Why do libertarians like Salute and McNamara continue to spot the tired old mantra that free markets will solve all of our problems? It's as if all we need to do is get government out of the picture and everything will be magical and beautiful.

    We've had almost 40 years of free market bullshit and what is the result??? The poor are getting much poorer, the middle class is stagnating, and the rich are getting much richer.

    Maybe McNamamra should forget what his old charlatan professors taught him at the University of Chicago and try to look a bit more objectively at the world around him. If laissez faire capitalism is so fabulous, then why do we have more inequality, child poverty, uninsured people, and crime in this country than in any other developed country in the world? His ideal system doesn't seem to be working very well.

    1. Libertarians assume that everyone who lives within a capitalist system is happy about it. Ask the one-half of Americans who earn less than $26,000 per year if they're real excited about our economic system. Ask the 1 in 7 on food stamps, the 49 million who have no healthcare, the 22% of our children who live in poverty. The college students going into debt to get a basic education. Hey, you guys happy to live in this capitalist economic system?

    2. What?? We have NOT had free market capitalism for the last 40 years! I am not advocating the status quo. I am advocating a change to free market capitalism, which we have not had since Mike's favorite president imposed the New Deal upon us, greatly increasing the size of government in our life, as refected in numerous government interventions which are certainly not free market (e.g., minimum wage laws intended to help poor people leading to greater unemployment of them, federal mortgage loan guarantees leading to the housing bubble and foreclosures, federal student loan guarantees leading to students being burdened with opressive debt and increases in tuition which far outstrip the pace of inflation, rent controls leading to reduced housing, price controls leading to scarcer supplies, stimulus and bailouts leading to debt crises and bubbles, antitrust laws supposedly intended to foster competition instead leading to government action against more succesful companies instigated by competitors who can not competer in the makerplace, the machinations of the Federal Reserve leading to the suppression of interest rates, less savings, and massive declines in 401K and pension fund values, etc., etc., etc.).

    3. I find it very interesting that liberals and conservatives look at the same thing--the U.S. economy--and see two completely different realities. Liberals complain that, since the time of Uncle Ronny, there has been such deregulation, slashing of government programs, and tax cuts for the rich that we are basically already living in a libertarian’s dreamland. The consequences, of course, have been the gross economic inequality that liberals, like myself, find deeply troubling.

      All of my conservative and libertarians fiends, however, look at the same reality and see it completely differently. Despite what has been going on since the 80s, a libertarian like Tom still thinks that we need to slash the size of government even further, cut government regulations on business even more, and probably (although he doesn't say this) give even more tax cuts to those who are benefiting most right now--the top 10%, whom he would probably describe as the nation's great "job creators." This, he most assuredly believes will jump-start the economy, allow wealth to trickle down to everyone, and reposition the U.S. once again as the economic leader of the world.

      Now let me say, that I admire Tom very much. He is a thoughtful and consistent libertarian (a rarity in the U.S. right now). He's opposed to what he calls crony capitalism (what I would call corporate fascism), and would probably eliminate all government subsidies to huge corporations. I think he also sincerely cares about those who are suffering the most from our current economic crisis, but honestly believes that the cause of their suffering stems from too much government rather than from an eroded safety net, the decline of unions, and gross income inequality.

      Of course, I disagree with his position completely, but I respect the fact that he has a well thought out and consistent point of view. The question that I struggle with is how are we as a nation to bridge the divide that separates a libertarian like Tom from a liberal like myself. We have our own economic realities, our own sets of data to back up our claims, and our own collection of "experts" to call upon to support our positions. Given this state of affairs, any kind of compromise between our two camps seems almost impossible.

      In the end I think that libertarians like Tom will win this battle. Liberals are far too inept to coherently explain and defend their economic vision, and too cowardly to stand their ground in the face of opposition. We also lack the discipline that we need to "stay on message" all the time the way conservatives and libertarians do. So my guess is that during the next decade government programs--especially those designed to aid the poorest Americans--will be slashed even further, they'll be more tax cuts (including for the richest Americans), and much less government regulations to control corporate malfeasance. But I'm also convinced that this kind of approach will eventually backfire and will inspire even greater activism on the part of young Americans than we've even seen with Occupy Wall Street.

      So, although I think that libertarians will win the short-term battle of ideas during the next decade, they will most assuredly lose the war!

    4. This comment has been removed by the author.

    5. Sorry Anonymous, but you cannot claim that we've had 40 years of any one economic policy, let alone free market, and then want to be taken seriously in your understanding today's business climate. The economy in the past 40 years has been transformed so dramatically, the past and present landscapes are barely related. And, every year we move further from laissez faire. What we have is not free market, because it's impossible. What I am advocating for is the implementation of MORE free market transactions and less hostility towards small business. Part of the problem is that we (business professionals) are so tied to the government. Look at the billion dollar industry of congress lobbying. How are so many people making a living off of influencing government policy if it has no bearing on US Business?

    6. My above comment was deleted because I was reminded that my stated goal was to have a civil discussion and I violated my own rules by bashing Republicans.

      Oh well, I never claimed to be perfect, but someday I might eventually be able to learn from my mistakes!

    7. "we haven't had a free market in 40 years."

      let's accept this as true for the sake of argument. And let's also accept salute's contention that we need to stop government from interfering with business.

      does this mean that we should just eliminate all environmental and safety regulations? if we want a truly free market, shouldn't we just let business decide for itself how it wants to operate, and face the consequences.

      if a business pollutes the environment or creates an unsafe environment for its workers, won't it ultimately hurt the business' bottom line if this information gets out to the public?

      greed then is the best possible way to guarantee that business behaves responsibly - not government regulation. right or wrong?


  9. American style capitalism, was built on cheap oil.

    Of all written above, I don't think anyone mentioned energy. Energy and climate change are the two variables not discussed above....Cheap energy is the reason for modern life, and climate change could put the commodity food system at risk.

    Capitalism, regulation, state control, corporatism, campaign finance,...are all part of the equation to greater and lesser extent dependent on place. But, Mike Russo asked for my view, and here it is...We're all dancing on the head of a pin, and asking how many people are dancing....

    1.The whole of modern life was built on "cheap" hydro-carbons, and now those hydro-carbons are becoming less cheap, and more expensive to secure. The power of the fossil fuel lobby, warps policy globally.

    2. food. Climate change and demand is putting price pressures on commodity food.

    3.growth. EU and US will not be drivers of economic growth...But they could help to capitalize the developing world, where growth trends are stronger.

    4. Climate change and securing energy supply are expensive geo-political wild cards.

    solutions---subsidiarity (local control where possible)-solidarity (hand ups where possible, hand outs where necessary(distributism (wide spread ownership of means of production)-and ecologic conversion of the economy.

    the present model, has provided 50% unemployment for young people in Spain-wars for oil-booms and busts, wide spread economic stagnation, and widespread disconnect from powerful structures and global actors.

    1. I think that you are underestimating the renewable energy market. As the price of fossil fuel energy increases, renewable's become more viable. The cheap price of coal and the lack of sufficient battery storage is what's keeping renewable energy currently at bay.

      In the very near future this is going to change. I'm more worried about the availability of clean drinking water than energy.


    2. hi Geo...here is a link regarding Germany generating 50% of their entire electricity demand one sunny day last month. http://insideclimatenews.org/breaking-news/20120527/germany-sets-solar-power-record-50-electricity-demand

  10. I'm wondering how free our markets really are, given the economic policy dictation of national security and the potential that some individuals making decisions in and for the markets may also be employed by the pentagon.




  11. After reading both the Brooks and Stiglitz articles, as well as the responses eluded from Russo’s request for an honest dialogue, I am even further entrenched in my progressive beliefs as a pursuant of social and economic justice. The best way to get some one more impassioned in what they believe in is to challenge that belief. In hindsight, a dialogue such as this should be approached by a position of neutrality. If we pose that our society is a marriage of liberalism and conservatism then just as in any intimate relationship there will be a struggle for power between the parties. Using political, economic, ideological and historical rhetoric to display our knowledge and understanding of the viewpoints which we already identify with seems wasteful. No marital argument in history has been brought to a compromise based on both people being firmly unwilling to gain a better understanding of the other’s position. However, unless we are willing to metaphorically divorce and have the next civil war, it seems Russo is right in requesting some healthy dialogue be held.
    This being said, even the most empathetic, and reasonable student of social work finds many things fundamentally wrong with Brooks’ article. Brooks defends the top 1% and their earnings by claiming that they were legitimately earned. The corporations, oops, I mean the “people” that earned this money to put them at the top 1% of the economy in the United States manipulated the constitution in order to achieve this. To me, and to others in the progressive arena, this is seen as a dishonest means of “achieving the American dream.” Now, in coming from a place of understanding, and empathy, I gather that the 1% who have gathered their wealth from means of corporate personhood would feel proud of their achievement, and hard work. Brooks goes on further to state that, “for 40 years, between 60 percent and 70 percent of Americans have chosen ‘hard work’” over a handout. It should be noted that these 60-70% of Americans may have a much different definition of what “hard work” truly means. For some it could mean working in a coal mine, being a civil servant, working in the service industry, joining the military, educating children, counseling addicts, etc. For others, “hard work” could simply mean finding ways of recycling the wealth to only those who already find themselves in the top 1%. Unfortunately, while this wealth is hoarded and recycled through the accounts of the 1% the crippled majority is left to fight over the scraps and point the blame to red-herrings such as, illegal immigration, out sourcing, the drug war, and the war on terror. If I had more time, and less graduate work to complete before the semester was over I would go into a detailed dialogue about why I think such topics should be considered red-herrings for the American public. However, since I do not have the time to do so, I will wrap this up by saying that I think Russo poses an accurate theory on why there has been no quality discourse between these two opposing ideological view points; we are speaking different languages to one another. There may not be a compromise to be had; these values become the core of who we are. You would not ask somebody of another religion to forsake their beliefs for your own because this would be unethical, and people feel the same about their political ideologies for the most part.

    1. Since we are in agreement, I can only say that I find your analysis brilliant. It's nice to know that there are social worker students who actually have an understanding of economic and public policy issues!

  12. The whole debate of Capitalism versus Socialism, individualism versus collectivism, free market versus government is just distracting the attention away from the real issue, which is interest on money. Supporters of Capitalism will argue that the problems are caused by government intervention in the markets. Proponents of Socialism will argue that the problems are caused by too little regulation of the markets. Both arguments seem reasonable but they conflict.

    The real cause of the problems lies in the nature of our money system in which interest on money is charged. Interest causes wealth to concentrate as the poor pay interest to the rich. Interest can therefore be seen as a tax on poverty to the benefit of the rich. The following example demonstrates this and also that interest on money is unsustainable and leads to crisis:

    If someone brought a 1/10 oz gold coin to the bank in the year 1 AD, and the money remained there until the year 2000 AD, collecting a yearly interest of 4%, the amount of gold in the account would have been 3.6 * 10^31 kilogramme of gold weighing 6,000,000 times the complete mass of the Earth.

    If interest is charged on a limited scale or over a short timeframe then those problems do not surface. Interest is an insidious process. Over time it is inescapable that it reduces large numbers of people to a state of servitude to the money lenders. This is a long term development that transcends the life span of a human. Interest is the main reason why a number of civilisations have failed and why Western civilisation is about to fail. Therefore all interest is usury and the current financial system is a usury financial system. Interest is also the cause of inflation as more and more money has to be created to keep the economy going.

    More information can be found via the underlying link:


    There is also a method to end the current system by the superior efficiency of interest free money:


    There is much to tell but it hardly interests anybody as most people are caught up in their own thinking, whether it is leftist/liberal, socialist, conservative or libertarian. But a few people can make a difference and start a revolution by implementing the idea.

    Bart klein Ikink

  13. The thing is, yes, we do have much too much regulation, but some regulation has enjoyed a good history ... like Glass Steagall, giving us 70 years of stability in our financial sector--far outperforming our pre-New Deal (much more laissez-faire) banking system. In the aggregate, sure, I could easily conceive that the ratio of bad regulation to good regulation is at least 10 to 1. In other words, for every good/relevant/productive [well designed] regulation we implement or restore, there'll be at least 10 bad regulations we could dispense of.


  14. Is the Market Free? If the market doesn't allow capitalists [the 1%] to play it can't be said to be free. It has allowed them and now they own it and it can't be said to be free. Is this really a paradox or is it a symptom of cultural schizophrenia? Is there a difference between that sort of mental illness and Orwell's “doublethink?” If not schizophrenic, are we at least paranoid and delusional to believe that free market capitalism is not an oxymoron?


  15. Two points I'd like to make.
    First Banks are being given trillions of dollars through bail outs quantitative easing and 0 percent interest rates. That is money being taken from the system. that is stealing. That is not innovation ,smarts, or entrepenurship.

    Second American jobs are being shipped overseas. It does not matter from the US standpoint whether that benifits the net wealth in the world (i.e is global free market). That destroys the free market in the US because there is no longer a true free exchange of goods in services within the US
    It seems to me that a reasonable free market would then have the following properties

    1) Banks do not get taxpayer money, free printed money, or special interest rates. In fact taxpayer money does not flow to banks period but back to the taxpayers (it's their money)

    2) Companies do business in such a way that all workers earn
    reasonable wages, both here and in the US. Not poverty level wages.

    3) Any country which participates in this Global Free Market
    provides a market for goods equal to that of every other country for goods produced by the WORKERS of every other country. Notice I did not say by the companies.

    I guess what I'm trying to say then is that a true free market is fundamentally an environment where there is a fair and equal exchange of goods and services between citizens plus the ability to incorporate. That means within the borders of the free market a test worker should be able to provide a certain service, say service X with the same compensation in different parts of the system. If this is not the case, then in reality the system is working in some way to impede the free flow of goods and services, and its really NOT a free market, subtracting out geographic factors such as lack of farmland or hydroelectric power in some countries and so on.