Your Mom’s A Blog

The following post is broken into 5 parts that may be read from the top to the bottom.  The breaks in pages may not be logical, they are just there to provide natural stopping points.

Since the election of President Obama the other side has been continually grumbling about socialism and the end of the American “way of life.”  These complaints are most likely not very serious; they are simply the kind of thing that one party says about the other party.  In the United States socialism is generally synonymous with bad government and/or loss of freedom, at some level.  I rarely hear anyone talk about socialism in any very intellectual way; it is more like a curse word or profanity that gets peppered into political rhetoric to emphasize a point.

I have decided to take a moment and discuss the fact that every social and economic structure is flawed in some way.  I’ve chosen to pick on the idea of a free market because it seems to be so heavily idolized by so many people.  Before I begin I will take a brief moment to say that the free market is nominally a great way to move capital quickly and make any form of trade comparatively simple.  Currently, some form of a free market economy is, arguably, the best economic system is place.  With these praises out of the way, there are some serious flaws that we should not forget.

What is a free market? A free market system generally means a system where all facets trade (price, supply, demand, etc.) is unregulated by government.  Extending this idea, a free market is a system where ‘natural’ occurrences and interactions between those involved in the system dictate prices, etc.  We might also expand the definition to say that this is a system using some form of money as a means of exchange, as opposed to some barter system.

So what is wrong with a free market system?  The first obvious answer, demonstrated throughout history, is a tendency toward inequity.  This seems counter-intuitive and indeed many people argue that the system is inherently equal, but that is simply not always the case.  Theoretically, anyone can participate in a free market.  Anyone can grow food and take it to market, make some product and sell it, or provide some service for a fee.  The problem is that capital begets capital and no capital begets nothing.  “Ex nihilo, nihil fit.”  From nothing, nothing comes.

You can’t come to the free market with nothing.  There must be, at the very least, an investment of time and energy, if not actual capital to able to trade on the free market.  Assuming a person has no capital to start out; the only thing they can bring to the free market is their labor.  The free market usually drives down prices.  It does this by allowing anyone to buy from the person offering the lowest price.  In a free market the person offering the lowest price for their labor is the most desperate person.  The desperate tend to be more concerned with survival than haggling for the best wage.  As a result the labor is artificially undervalued, which pushes down the value of other’s labor.  As a result, which history has shown again and again, the free market favors those who can wait the longest.  The people who can usually wait the longest are those with money, vis-à-vis, those who don’t have to worry about starvation, having no place to live, no clothes, etc.  Thus, a free market system can easily favor those who already have money.

The result of favoring those with more as opposed to those with less is a large disparity between the wealthy and the poor.  The rich become richer because they can turn a profit on their capital, the poor become poorer, because the rich can wait them out and drive down prices.  This isn’t always the case.  During the time of the Black Death huge portions of Europe’s population died over the course of a few years.  As a result there was a drastic labor shortage.  Europe at that time being primarily an agricultural society needed agricultural workers.  The smarter of the wealthy classes offered more money for the same labor that the peasants had been doing and thus drew more peasants to them.  This allowed the lords to continue business as usual while depriving their neighbors of the labor they needed to thrive.  As a result many peasants moved into the middle class and some even into the landed class.  This is a perfect example of the free market working for the mutual benefit of all and it required the greatest pestilence in European history to make it work.

As a brief aside, don’t believe the wealthy didn’t try to get wages frozen at pre-plague levels.  They did just that in many parts of Europe.  Some were nominally successful in that the ruling class agreed to freeze wages.  Since there was no way of enforcing these decrees it had little effect.  This simply illustrates that rich and poor alike are ready to abandon the free market system when it doesn’t serve their needs, the wealthy just have more power to change it.