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The case for free-markets: look to history

    In the current climate, it takes a brave person to make the case for real free-markets, as opposed to heavily government regulated economies.

    That's why Deirdre McCloskey's essay from a couple of weeks ago is such a refreshing read.

    McCloskey challenges what she calls the narrative of 'High-Liberalism' that has developed since the 1880s, which runs something like this:

    "Modern life is complicated, and so we need government to regulate.  Government can do so well, and will not be regularly corrupted.  Since markets fail very frequently the government should step in to fix them.  Without a big government we cannot do certain noble things (Hoover Dam, the Interstates, NASA).  Antitrust works.  Businesses will exploit workers if government regulation and union contracts do not intervene.  Unions got us the 40-hour week.  Poor people are better off chiefly because of big government and unions.  The USA was never laissez faire.  Internal improvements were a good idea, and governmental from the start.  Profit is not a good guide.  Consumers are usually misled.  Advertising is bad."

    McCloskey highlights many examples of where this narrative is wrong, and offers her own story:

    "No.  The master narrative of High Liberalism is mistaken factually.  Externalities do not imply that a government can do better.  Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers.  Efficiency is not the chief merit of a market economy: innovation is.  Rules arose in merchant courts and Quaker fixed prices long before governments started enforcing them."

    She recognises that people might disagree with the premise of her argument, but suggests that history is on her side:

    "In the 19th and 20th centuries ordinary Europeans were hurt, not helped, by their colonial empires.  Economic growth in Russia was slowed, not accelerated, by Soviet central planning.  American Progressive regulation and its European anticipations protected monopolies of transportation like railways and protected monopolies of retailing like High-Street shops and protected monopolies of professional services like medicine, not the consumers.  “Protective” legislation in the United States and “family-wage” legislation in Europe subordinated women.  State-armed psychiatrists in America jailed homosexuals, and in Russia jailed democrats.  Some of the New Deal prevented rather than aided America’s recovery from the Great Depression.

    Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.  Minimum wages protected union jobs but made the poor unemployable.  Building codes sometimes kept buildings from falling or burning down but always gave steady work to well-connected carpenters and electricians and made housing more expensive for the poor.  Zoning and planning permission has protected rich landlords rather than helping the poor.  Rent control makes the poor and the mentally ill unhousable, because no one will build inexpensive housing when it is forced by law to be expensive.  The sane and the already-rich get the rent-controlled apartments and the fancy townhouses in once-poor neighborhoods.

    Regulation of electricity hurt householders by raising electricity costs, as did the ban on nuclear power.  The Securities Exchange Commission did not help small investors.  Federal deposit insurance made banks careless with depositors’ money.  The conservation movement in the Western U. S. enriched ranchers who used federal lands for grazing and enriched lumber companies who used federal lands for clear cutting.  American and other attempts at prohibiting trade in recreational drugs resulted in higher drug consumption and the destruction of inner cities and the incarcerations of millions of young men.  Governments have outlawed needle exchanges and condom advertising, and denied the existence of AIDS...."

    Her list of examples of government failures around the world through centralised planning or control is exhausting to read.

    So why does the idea that 'government must act' still prevail in many areas of our lives?

    It's time for advocates of free-markets to reestablish themselves in the battle of ideas. Far from being ideological, the case for freedom has modern history on its side.

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