147 Free Market Capitalism - Why do some hate it so much?

Is it because they do not understand what it means? 

Defining the free market system

The market system has spontaneously developed through the ages in much the same way as language and law. It was not planned or designed (not like the other contrived economic systems) – it is the result of what social scientists call “spontaneous order”.

Looking at the system there seems to be a number of building blocks that keep the system in place – here they are:

1^st Building Block: Institutions

The features that make a particular society “free market” as opposed to socialist or “mixed” is the degree to which it upholds the institutions that protect:

•             Private property and private property rights

•             Consent as the basis of agreement between individuals and groups

•             Minimum intervention from the state in the private affairs of people

These institutions typically include a free press, an independent judiciary, an effective and uncorrupted police force and a vibrant civic community.

2^nd Building Block: Government upholds rights

In a market economy

•             the government simply allows & protects the private ownership of property

•             the right to the voluntary exchange of labour, goods and services between consenting participants

•             there is no fear of confiscation through taxes and expropriation for the common good

•             willing buyers and sellers meet in an unfettered marketplace

•             the value of goods and services are determined by buyers and sellers that are allowed to trade freely

•             goods are traded without subsidies and price controls, and tariffs are absent

•             no special licenses and controls are forced onto business.

So, the involvement of the state is limited to one of overseer and not a participant and there are various checks and balances in place to limit the actions of the state and to keep the government small.

3^{rd t} Building Block: Free trade

In such a free market economy

•             People own the factors of production and trade with their property and labour in any way they see fit

•             Participants do not act in a way that would infringe on others to behave in a similar way; and if they do there are remedies that they can apply emanating from an easily accessible and unbiased legal system

 4^th  Building Block: Honesty

•             Excluded from relationships is the use of force or the threat of force (or acting in a fraudulent way)

•             Individuals take responsibility for their actions and cause no damage to others lives and property (again, if they do, there are remedies available to arbitrate and compensate).

•             There is a free movement of people, goods and services (not like in Apartheid South Africa where free movement was severely restricted)

•             The role of the state is not to promote the interest of any one group (not like the current dispensation in many countries where there are legislation that stipulate certain group rights).

•             The government sees its role as the protector of property rights of all – an ultimate arbitrator

•             The constitution and laws value individual liberty and the rights of groups to promote their groups as long as it does not done in a way that it offends basic human and individual rights.

•             Economic growth is high is because of having low tax and simple and fair tax regimes – this has become evident in countries such as Ireland, Mauritius where taxes have been reduced and the import processing zones instituted in many countries, where tax rebates and other tax incentives have led to increased economic activity

•             People spend more time and effort on creating wealth through productive means than on efforts to protect themselves from the tax authorities

•             Government upholds a policy of protecting the value of the currency and therefore takes no inflationary actions. Less effort is spent on speculative endeavours.

•             Nobody is granted any special privileges on the basis of race or gender

•             No special subsidies, tax concessions, import controls, tariff protections granted to favour some special interest groups

•             Political power and influence is curtailed to the essential services of foreign relations, the army, the judiciary and internal safety and security and perhaps a few others

•             Rules are kept simple and understandable

•             There is no unrealistic building, zoning, and other restrictions on trade

•             No costly processes involved in setting up of businesses, the subdivision of land and the meeting onerous regulatory requirements.

•             You normally have a society where the government allows communities a bigger say in those decisions that affect them directly.      

5^th Building Block: Actions driven by self interest and markets

•             The individual is the main actor in Capitalism – the individual is not sacrificed for group interests – all relationships are voluntary with no force or fraud. All transactions are beneficial to both consenting parties. The market and market prices prevail in allocating resources amongst the members of society.

With this overview of the Free Market system, you should be in a better position to judge to what extent a particular arrangement or policy can be regarded as Free Market, “mixed” or Socialist in nature. 

C.M. Heydenrych 2015