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How big business undermines the free market.
The FT has the best mainstream media take I have seen on something I have been saying for a long time.
The two key points are these:
- Business friendly is not the same as market-friendly: in fact they are usually opposites. Given that Adam Smith pointed this out a long time ago, one would have thoughts governments might have noticed by now…
- Rent seeking though lobbying, and the “business friendly” policy of governments around the world, has seriously undermined free markets.
Producers are intrinsically anti-market: or rather, everyone wants a free market, but not in their own industry (and people are endlessly ingenious in coming up with reasons why their own industry should be an exception).
Big businesses have the clout to influence regulators to do things their way. They are not unique in this respect: consider the EU region of origin rules which are designed to make it harder to compete with wine makers and farmers. However, it is the influence of big business that is most damaging and dangerous, because it reaches all parts of the economy.
Comments(5)
I was struck by the article too. The last line particularly: “The essence of a free market economy is not that the government does not control it. It is that nobody does.”
It reminds me of Simon Johnson’s article in the Article likening the financial crisis to emerging market crises.
If capitalists, bankers and executives, have seized control of the markets and are in effect, oligarchs then stimulating the economy is just dealing with the symptoms.
The logical conclusion is that governments ought to be breaking up banks and even businesses that have got too big for their boots. No?
I certainly agree- but the trouble is though that big business is caught up with industrializtion, which also in ant free market, and governemnt are torn then between material progress and ethics on freedom (smith also did not like machines, and china but also the nineteenth century show what political oppression, and lack of free market can achieve – empire was a coercive market after all).
The free market is then not a pure thing, but merely a constellation an excuse or metaphor or fig leave or partial explication, and a horridly complex structure.
Or Am I revealling myself as a sad old marxist?
Matthew, the European Empires were not free market, but they compensated for reducing the wealth of the world as a whole, by shifting the wealth to the conquering countries, and, in particular, certain groups within those countries.
A free market is not pure, the government should try and make it as close to pure (perfect competition) as possible.
Richard, yes we would have a much better economy if big businesses were broken up, and various other barriers to competition were dealt with. I am planning a post on my own modest proposals…
[…] of the reasons for thinking that we need reforms. the crisis of capitalism goes much deeper: the influence big business has on governments (and the warped policies this leads to), increasing central control of the economy and the general […]
[…] of the reasons for thinking that we need reforms. the crisis of capitalism goes much deeper: the influence big business has on governments (and the warped policies this leads to), increasing central control of the economy and the general […]
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