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International Update
First appeared in print in The Rhinoceros Times, Greensboro, NC
By Orson Scott Card January 13, 2003

Government and the "Free Market"

Now that we have a completely Republican government ensconced in Washington, and most Democrats roll over and play dead whenever "the Free Market" is invoked, we face a serious risk of having our economy wrecked the way the IMF has been wrecking economies around the world.

I speak, of course, of the worship of the "Free Market" and the firm belief that in order to make things better, all you need to do is (a) deregulate and (b) stop taxing rich people so much.

Now, the American economy is one of the great social miracles of all time. It is the reason -- the only reason -- that we can afford to be "the world's only superpower." We have so much wealth here that even our poor people are better off than the middle class in many other countries.

But when people start telling you that the reason we're so prosperous is because of "the free market," hold onto your wallet.

The "free market" is only a philosophical concept. It has never actually existed in the real world, because the rich and powerful have always found a way to rig the system so that they and their friends are largely protected from the free market.

Government regulation of the market is the only means yet found to extend to the great mass of people the same kind of protection from the cruelty of the free market that the rich and powerful have always received.

And when the right balance between market regulation and market freedom is found, our economy prospers so much and so long that we have enough surplus to feed the poor, make the rich richer, sustain the infrastructure, pay for government waste, and even fight a war or two.

So let's look at some of the myths that Republicans and free market Democrats so fervently believe in, and see why we must be very careful to make sure we don't "improve" our economy straight to hell.

Deregulation. It's absolutely true that a lot of our regulatory agencies had gotten way out of hand in the 70s and 80s, and needed to be reigned in. They were stifling the ability of businesses to make rational decisions, and they were raising costs without providing much in the way of benefits.

But that didn't mean that all regulations needed to be swept away -- only the ones whose costs were greater than their benefits.

The proper role of regulations is to guarantee certain minimal public benefits. By compelling all businesses to meet those standards, no business is able to gain a competitive advantage by hurting the public good.

For instance, if we did not have laws forbidding child labor, then there would be no shortage of parents willing to let their little children do unskilled labor for ridiculous wages -- because in truly marginal families, the few dollars their children earned could make a significant difference in the family's fortunes.

Minimum wage laws, safety regulations, and laws protecting unions all serve the same purpose: To keep businesses from profiting by making the lives of the Americans who work for them more miserable.

Regulations also protect consumers from shoddy products that we have no ability to research on our own. The FDA, for instance, tests drugs to make sure that our medicines are both safe and effective. Because they have the power to keep dangerous or worthless medicines off the market, we are able to trust the products we buy -- and only companies that research and sell good medicines are able to compete in the marketplace.

These protections are not without cost. Good medicines reach the street much more slowly than they otherwise would. Some families that need the money their children might have earned have to resort to welfare. Unions can become too powerful and raise wages so far beyond fair market value that our products can no longer compete abroad. Minimum wages can keep some unskilled workers from finding paid employment.

But we absolutely know that reasonable regulations in these areas are essential for our country to function -- because history has shown us what America is like without them. Back when strikes were illegal, back when sweatshops kept children in slave-like conditions, back when patent medicines could sell you tapeworms as a weight-loss method or put cocaine in bubbly drinks, back when people could work twelve-hour days and still starve, we hated it so much that we elected politicians to change things.

All these regulations came about because conditions without them were intolerable. We throw them away now at our peril.

Anti-Trust Laws. The natural movement of the free market is toward monopoly. And monopoly is bad for the entire economy, not just the industry where a monopoly is achieved.

I've heard the elaborate arguments of those who believe that either (a) monopoly is not that bad or (b) the free market will "eventually" get rid of monopoly, but the historical fact is that monopolies -- even when supposedly run "for the public good" -- lead to incredibly wasteful business practices and hugely inflated prices.

The fact is that monopolies are the way rich people protect themselves from the free market at the expense of the general public. And anti-trust laws are the people's way of breaking up monopolies so that free market forces can continue to work to our benefit in every sector of the economy.

When the same person tells you that deregulation is good and anti-trust laws are bad, he is not a supporter of the free market, he is a supporter of people getting rich at the public expense.

AT&T was a huge monopoly that people believed to be essential to the public good. But when AT&T was broken up, the result was vast improvement in service and an increase in profits. (Now, of course, the FCC has introduced telecom industry "deregulations" that are actually maddeningly harmful new regulations in disguise -- but that's another issue.)

If you want to know what America would look like without anti-trust protection, you have only to look back at the old Soviet Union. The USSR never had communism, though it was ruled by the Communist Party. The actual economic system was state-owned monopoly. It was as if Microsoft ran every business. Which is, of course, what Microsoft would attempt to do if the government didn't block it.

Like regulations, anti-trust laws should be reluctantly invoked, but rigorously applied.

Trickle-down. When Republicans warn about how "unfair" it is for corporate profits to be taxed twice, please keep in mind that we're all double-taxed -- taxed when we earn our money, and taxed when we spend it. There's nothing "unfair" about taxing those who can afford it more than those who can't, however we divided it up and at whatever point we choose, as a people, to collect it.

After all, the rich are those who have benefitted from our economy out of proportion to their contribution. Yes, investors take risks. But then, schoolteachers and garbage collectors also make sacrifices to keep our whole economy going, and the sacrifice of the "risk-takers" is not somehow more worthy than the sacrifice of those who accept careers that eliminate all possibility of wealth.

The theory of reducing taxes for the rich is that the rich are the ones most likely to invest their money and therefore "create jobs."

This is, of course, bogus in the extreme. What creates jobs is demand, and while investment in startup companies can create new jobs, ultimately who pays for those jobs is the vast consuming public -- the people who aren't rich.

And much if not most of that vast surplus of money held onto by the rich does not go into anything that benefits the public.

When a rich family builds a ten-million-dollar house, the free-marketeers would be quick to tell us that all those ten million dollars go to pay the wages of workmen and thus benefit the economy.

True enough. But if that same money built twenty half-million dollar houses, or a hundred hundred-thousand-dollar condos or apartments, then not only would all that money go back into the economy, but also the result would be twenty or a hundred families with housing they could afford.

In other words, money isn't just money -- it's also the benefits that the money can bring to the lives of the people.

There's plenty of room to have some wasteful spending by the rich. But it's pure fiction that the rich spend their money more for the public good than regular people do.

Rich people are rich because they have their hands on the reins of power -- the power to make more from the labor of others than the laborers themselves make.

Does that mean the rich should be punished for being rich? Of course not. Nor should their wealth be confiscated -- nations that have tried that only discovered that very soon the wealthy found ways to move their wealth offshore, which really is destructive to the economy.

But at this moment, it would be hard for anyone to make the case that the current level of taxation causes hardship among those making more than, say, half a million a year.

And when I hear people argue that "since the rich pay most of the taxes, then cutting taxes merely lets them keep more of their own money," I have to answer, "since the rich skim vast amounts of money from the labor of the working class, charging them higher tax rates only returns to public control money that is out of all proportion to their contribution to society."

Money is a way of storing and transferring labor. When one person makes a million dollars and another person makes twenty-five thousand, you can count on it that the guy making a million did not work forty times harder or contribute work worth forty times more to society as a whole.

The enormous economic power of the United States came about because we tamed the free market to work for the benefit of all the people, not just a few.

If we want the luxury of being able to protect the world from the terrible weapons of madmen, while continuing our normal lives here at home, it would be a smart idea not to mess too much with the balance between free market and regulation for the public good.

Economies run on a combination of labor and trust -- trust that money will hold its value, that jobs will continue, that bills will be paid, and that corruption will be kept to a minimum.

America is astonishingly free of corruption, both in government and business, precisely because most people believe in and practice fairness in their business dealings. Regulation is a creation of that American insistence on fairness.

Regulations and taxes and anti-trust laws work together to keep any one group from over-exploiting the system for their own benefit, at the expense of the rest. While these are in balance, trust continues and the economy thrives.

There is room to wiggle a little bit this way or that. As long as we always leave ourselves room to wiggle back when we discover that we've gone too far.

It ain't broke. So put away your chainsaw and your sledgehammer, and keep the dogmas of your "free market" religion to yourself.

Copyright © 2003 by Orson Scott Card.

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