The End Of Free Markets?

Last month, Time Magazine published an article asserting that the “free market” was effectively dead. The author then went on to speculate over what might (For the record, I’m pretty skeptical of definitive pronouncements of this sort–as I used to tell my students, the real world is considerably more complicated than that.)

Time’s conclusion was evidently prompted by a recent meeting in the White House between President Biden and the CEOs of some of America’s largest companies, attended by the head of the U.S. Chamber of Commerce (whose “presence was enough to rock the political landscape” according to the article.)

“Washington’s most powerful trade group is having a political identity crisis,” wrote Politico. Two weeks later, a group of 150 CEOs, unaffiliated with the Chamber, followed suit, throwing their weight behind Biden’s COVID relief bill, which sailed through Congress. They have been similarly supportive of the additional $2 trillion the administration has now proposed for infrastructure spending – but they unsurprisingly don’t want corporate tax rates to be the means for paying for it.

The article went on to say that corporate America’s support for public investment is not a new or temporary phenomenon–rather, it’s evidence of the “most profound realignment in American political economy in nearly forty years,” and it cites the rise of ethno-nationalism on the right and democratic socialism on the left as evidence of a widespread disillusionment with conventional economic wisdom.

For the record, the “conventional economic wisdom” being undermined has only been conventional for some 40 years.

The article traces the evolution of free market absolutism, and acknowledges that prior to the 1970s, most economists had advocated fairly robust government action—countercyclical fiscal spending, management of the currency, tactical protectionism—to create long-term prosperity. The emergence and influence of what the article calls “free market apostles” changed that, and led to what we now call Reaganomics–the notion that virtually any government regulation of the market is unhelpful, if not illegitimate. (This required some cherrypicking of Adam Smith, but hey…)

Interestingly, in what may be the most insightful portion of the article, it connected this shift to an anti-government “free market” philosophy to racial politics. The need for government to take a “hands off” approach coincided with federal efforts to ameliorate some of the most egregious economic effects of state-sanctioned racism.

In any event, while the article argues that public and expert opinion have swung against what it labels “free-market orthodoxy,” what is actually happening–at least among people who are concerned with such things– is a return to a much more nuanced understanding of market economics.

Virtually all rich countries today have mixed economies, in which certain services are “socialized”–i.e., provided communally by government–and others are left to a market subject to reasonable regulation. Americans love “either/or” politics–it’s either capitalism or socialism, freedom or tyranny. That makes for great sloganeering, but bad politics.

The issue isn’t free markets versus socialism. The actual issues confronting policymakers are much more nuanced, and fall into two broad categories: 1) which services ought to be provided by government, and which should be left to the market? and 2) what regulations are needed to ensure the proper operation of that market and which are counterproductive? Just how “free” should markets be?

People of good will will have different answers to those questions, and it would be nice if the ensuing arguments were evidence based–although I’m not holding my breath.

I do know that those evidence-based conversations are not encouraged by headlines suggesting that a new emphasis on anti-trust enforcement or other regulatory activity is tantamount to the end of the free market.


  1. There’s never been a “free” market. That Smithian term has been used and abused to favor one political view or another. As many of us on this blog have so often wailed about, a creature like the late (Thank you.) Milton Friedman was bound to raise his fetid head and codify destructive capitalism.

    How about if corporate America paid SOME income tax? Imagine that. Scalia said corporations are people, so people pay taxes, right? So, why aren’t fabulously successful and wealthy corporations who pay their executives more that the Queen of England has in her jewel case paying their fair share of taxes? Oh. Right. The stockholders. Or maybe it’s the wretched private owners like somebody named Koch.

    Free market my ass. To corporate America “free” means paying no taxes for the privilege of doing business. This isn’t new. People have been writing this story since the 15th century.

  2. I’d have to read the article to understand their context for meeting with the pro-capitalist Biden, especially the US Chamber.

    I know that what happened in Georgia and what is happening in other red states is causing concerns for the capitalists. They had to take a stand against racist policies or face protests by young customers. The Boomers, once the largest market force for capitalism, are dying off, and the second-largest segment is considerably more aware of racial issues.

    CEOs are risk managers, and now they find themselves navigating the end stages of capitalism, or should I say the end stages of crony deregulated capitalism on steroids. I’m now seeing memes blaming Biden for the inflated costs of goods and services, which the FED Chairman says are temporary supply chain breakdowns due to reopening the economy. In other words, he’s not raising rates or stopping the free money that’s been pumped into the oligarchy to keep her afloat.

    You’re going to see a bill coming out of the Senate, which is socialism for chip manufacturers so-authored by our very own Todd Young, so be prepared for an Indy announcement shortly. Nevertheless, it is accompanied by anti-China rhetoric, so the masses won’t see our taxpayer dollars in private businesses as they did with vaccination patents. We socialize the costs while privatizing the profits. This is NOT capitalism. We’ve been doing this for decades through the university systems, but now it’s direct like Obama did.

    p.s. The world is even stranger than I thought. I have some reading to do this morning. If John gets on later, I’d appreciate a few words about the Unification Church as a replacement to Christianity. They are building a giant complex in Texas for “patriots. Apparently, this group was heavily involved with 1/6 insurrection. I think I know why the GOP used the filibuster to block the commission because what’s about to become public even made my jaw drop. And yes, QAnon theories are central to the story, and so is Trump And, so is Mike Pence. ;).”

  3. I admit to having little understanding of the workings of “free market” and the connection to taxes and the economic control over all our lives. I can’t remember who it was in the past few years (prior to or shortly after Trump’s intrusion into our very existence) that this country was nearing becoming a corporation. It appears to me with my lack of knowledge that this has happened as we concentrated on staying alive during this Covid-19 Pandemic.

    What I do understand is that soaring costs of every product and service available to us, with many items no longer on store shelves and services difficult to find, and produce with little if any taste or nutrition value to put healthy food on our tables have become our way of life in America. The health care corporation with Big Pharma leads that parade as we struggle to find basic health care to survive current conditions.

    To quote Vernon; “Free market my ass. To corporate America “free” means paying no taxes for the privilege of doing business. This isn’t new. People have been writing this story since the 15th century.”

  4. I agree that broad pronouncements are unhelpful and the choice between socialism and capitalism is a false one. We are, and always have been, a mixed economy. But we’ve lost the balance between the two. Well regulated markets produced stunning improvements in our daily lives, especially in the immediate post war period. Since the 1980s the government has not done its job of regulating the economy or investing in education, research, and infrastructure or in providing a reasonable safety net for the disadvantaged. We have allowed the pernicious shareholder-only ideology to take hold and supported this by our securities laws. As a result, a majority of our young people now have a greater respect for “socialism” than “capitalism.” One observer recently noted that we were much closer to Denmark in structure in the 1950s than we are today. Maybe we ought to look back for our future?

  5. The best analogy I ever heard for capitalism and its free markets was it’s like fire. We need it because of what it produces, but it must be contained and controlled or it will totally consume us.

    The control mechanisms are the government and the free press. They got overtaken by the flames in the ’70s and ’80s.

    The fire has been out of control and consuming us for over forty years…

  6. I’m not an economist, but I do know that SCOTUS has held that corporations have the free speech rights of individuals. So they should have the responsibilities, too, and pay taxes.

  7. The only markets that have operated with virtually no regulation in this country are those of illicit drugs. But they still don’t operate as truly free because specific markets by geography, drug and customers are divided up and savagely defended by violent means. Such is essentially the manner of how all US markets have operated for well over three centuries except that in most, but not all, cases political favors and not guns are the weapon of choice used to enhance and defend an economic producer’s access to a market, its revenues, or its income.

    Forty years of predatory capitalist Reaganomics barely put a dent in this model for all the hoopla it generated on both ends of the political spectrum where corporatist Dems and Republications in Congress sell snippets of specialized IRS tax code in exchange for filling campaign coffers. Our own very President, who I admire in many ways, operated as a shill for one of the most predatory industries in human history: credit cards.

    In my view the saddest thing about Trumpism is that many of its adherents were led to believe and still do believe that their guy would put an end to such a system run by a cabal of self-serving, over-educated and effete elites and replace it with one that supported regular people and run by regular people. It will go down as one of the greatest acts of populist fraud in world history, right up there with Mussolini and Hitler.

  8. You say they cherry picked Adam Smith, but it’s more like they took a hatchet to him. Conservatives have a bad habit of misreading the classics, and that includes the Constitution. They cherry picked it until 2017, then they took a hatchet to that as well. It’s sad that there are virtually no repercussions for the wielders in either hatchet wielding event.

  9. Capitalism is the most powerful economic engine ever built. Put it in a vehicle called a country and you get a very powerful country/economic system… but install it without brakes or a steering wheel, without means of controlling it’s rate of speed or its direction, and you get a very dangerous—even suicidal—thing indeed.

  10. From the Sheila’s blog, “They have been similarly supportive of the additional $2 trillion the administration has now proposed for infrastructure spending – but they unsurprisingly don’t want corporate tax rates to be the means for paying for it.”

    As usual Corporate America wants all the goodies but, does not want to pay for it. Corporate America is like the petulant child in the toy store who wants all the toys and expects the parental units to pay for it.

    We know that many of our largest corporations pay little or no Federal Income Taxes. There seems to be a plethora of tax loop holes that allow this situation to continue. Then you factor in an underfunded under staffed IRS and you have the “perfect storm”. This situation is not new. Occasionally, you may hear or read about someone in the House or Senate who wants to correct this. The corrective action goes no where.

    The power of the Oligarchy reigns supreme.

  11. Todd not only can the fire consume us, it is consuming the earth due to our consumptive habits.

    Free markets without regulation simply create monopolies ie Amazon. In health care, the big health care systems are gobbling up small county hospitals. Our health care system is a health care crisis system,not a public health, prevention system. Prevention of disease is not near as profitable for the health care industry. But for other industries who need a healthy labor force, it is very costly.

    Because our government and health care industry failed to regulate pharmaceutical companies, we now have an unprecedented # of people hooked on opioids, dying from overdoses of fentanyl/heroin.

    And, I agree, if corporations are people, they need to pay taxes like the rest of us citizens. We also need to close the loop holes on wealthy people who store their money in banks outside of the U.S.

  12. Aside from Vern’s macro treatment of the “free market” economy as never having existed, Todd’s observation that “We socialize the costs while privatizing the profits” is key to the myth of capitalism as the sole proprietor of allocation of risk and distribution of income in OUR economy.

    The capitalists and (worse) their financiers what with talk of the world’s first trillionaire, paying no taxes, and their propaganda that only private enterprise should in the natural order of things do allocation and risk and distribution of income are falling on deaf ears of youth who (unlike those of us who were not taken in by the lessons of the infamous royal grant of monopoly to East India Tea to do all business in the Indian trade unimpeded by competitors via a royal cut of the profits and an early Sherman by Parliament), are ready to increase the socialist increment to our mixed capitalist/socialist economy, and some of such youth are ready to chuck the capitalist side of such current equation altogether.

    That, in my opinion, would be a mistake, as history has shown that pure socialism has its demerits as well. Until some Piketty or Stiglitz can conclusively demonstrate a system superior to the one we have now I am for the current admixture of capitalism and socialism but with a much greater emphasis on public regulation of how we are to end wage and wealth inequality to the benefit of all of the participants in our economy and not just the greedy few and their Wall Street financiers.

    As Todd infers, supra, socialize the profits with a view toward ending wage and wealth inequality. To what degree so as to leave those with capital continue to take risks in such an adjusted “free market” economy? I leave that up to number crunching economists such as Krugman. Will such a plan placate youth who are not buying the “socialism is bad” label? Perhaps, perhaps not, but future adjustments in policy can be made to suit the times.

  13. Conservatives, starting with Friedman, view a well functioning market as free from taxes, free from regulation (that does not favor them ), freedom to pollute, and ideally, free from competition. That is why they spend large fortunes on lobbyists who strive to deliver those results. Time Magazine need not speculate on what will replace it – it has already been replaced to the satisfaction of the Bezoses and the Kochs. Since free-market orthodoxy is such an incalculable boon to the oligarchy, they should quietly honor it by paying at least a fraction of their share to keep it running within a system in which they control practically everything of any importance.

    If the 150 CEOs don’t care to pay for the enormous bounty they enjoy, they need to be briefed on what their fate might be when China takes over the world economy and their role in preventing that outcome. Most of these CEOs are paid in the neighborhood of tens of millions for maintaining quarterly profits, and will go along with whatever is necessary to avoid any diminution of that number.

    Sheila- I’m relieved to hear you aren’t holding your breath awaiting evidence-based solutions.

  14. Alfred Chandler was a professor at the University of Delaware and regarded as the Dean of business historians in the 1960-1990 period. He maintained that the major thrust of big business was to” replace the invisible hand of the market with the visible hand of management .” Adam Smith is crying in his grave.

  15. free of taxes market eh,Vern? id point out how free the market has become,as to American jobs sent packing to china,third world countries, who are doing the same work, for a free market,theirs.
    the defined word of free, with no charge,gratis. no one speaks of how, American investors have dominated the market,by buying up a product line and sending the jobs to cheaper labor,or, how they use our markets here in America to fatten themselves by the lack of taxes,and tax enforcements. whenya see those barkers hawking wares on T.V. how much in taxes do they pay,for the representation our goverment grants the, and a so called, free market. the rich only pad this with their own investments thru other entities,and scams. how much of that money gets offshored,and tax havened with the queens? seems no matter the who, if ya got money, this goverment has just the tax haven for you….
    at 66 im back on the road construction end of infrastructure..
    new bumper sticker on my jacked up 4 wheeler:

    my living wage
    supports your main street
    infrastructure jobs now!

  16. I have always thought it odd how some people (Friedman, et al.) believed that government couldn’t be left on its own and embraced “checks and balances”, but believed that the economy would somehow magically take care of itself.

    Our “best of all bad choices” for government had three branches for “checks and balances”; once our economy imperfectly imitated that with a mix of business, unions, and government. Of course, for the Reaganomic proponents, economic “checks and balances” meant government checking union power and shifting the balance to pure pro-business.

  17. I haven’t been following Sheila (and all of you other commenter/followers) long, and had nothing succinct or sufficiently original to add to this thread, but I did want to say *thank you* for making me feel sane again.

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