I’ve reviewed (and highly recommend) 23 Things They Don’t Tell You About Capitalism by Ha-Joon Chang, but I’ve always meant to do more blogging on the details. For one thing, the layout of Chang’s book is such that it is conducive to blogging. Taking it bit by bit is also useful for digesting the (ridiculous) mythologies that surround the religion of capitalism. There is such a staunch reverence for capitalism that it’s helpful to take it in small bites.
Perhaps the greatest myth about capitalism is the idea that capitalism is a form of free market economics. We are told that markets should be free, that real capitalism is about a truly free market, and if we want to practice pure capitalism and good economics, then we will make the market free, truly free, because free markets make everything fair, gives everyone a chance, makes everything a level playing field.
There’s just one thing, one little problem here. There is no such thing as a free market. And actually that’s a pretty big thing, and in fact it’s the first “Thing” in Chang’s 23 Things They Don’t Tell You About Capitalism.
Here’s Chang, and here’s what they don’t tell you about the “free market”:
“The free market doesn’t exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How ‘free’ a market is cannot be objectively defined. It is a political definition. The usual claim by free-market economists that they are trying to defend the market from politically motivated interference by the government is false. Government is always involved and those free-marketeers are as politically motivated as anyone. Overcoming the myth that there is such a thing as an objectively defined ‘free market’ is the first step towards understanding capitalism.”
In the same way that you wouldn’t play a game without rules, there are myriad rules and regulations required to make a market work, at least in a modern economy. Of course for a capitalist regulations are the root of all evil, but this is nonsense. Try playing tennis without any rules. One could complain that the net and the lines on the court are restricting free play, but in reality it is these very rules and regulations that make the game possible.
Likewise, there are many rules for fair play, in the game that is economics, in the game that is the market. Were the market to be truly “free,” using unpaid child labor would be A-Okay, and there would be no restrictions on drugs or the sales of weapons. Everything would be fair game.
So why is it that the pious apologists of capitalism never mention this? Why is it that so many who defend capitalism fail to take this (very simple and obvious fact) into consideration? It’s one of those things that’s hidden in plain sight. So obvious that we miss it.
We accept the legitimacy of certain regulations so totally that we don’t see them. More carefully examined, markets are revealed to be propped up by rules – and many of them. (Chang)
Here’s a short list that I compiled, from reading Chang and simply from taking eight and half minutes to jot down a few of the regulations that most people take for granted:
- Environmental regulations
- Laws restricting (or banning certain) abortion procedures (in a truly “free” market, doctors would not be prohibited or restricted in providing abortion services)
- Child labor regulations
- Bans on selling narcotic drugs, like meth. (And I might mention that a positive side effect of regulating meth is that it makes for great TV, i.e., we can watch characters like Walter White try to beat the system.)
- Bans on selling human organs
- Bans on selling electoral votes
- Bans on selling government jobs
- Bans on selling judicial decisions
- Bans on trading in firearms or alcohol.
- Medicines must be explicitly licensed by the government, upon the proof of their safety, before they can be marketed.
- Licenses are required for professions that have significant impacts on human life, such as medical doctors or lawyers.
- The stock market regulates trade: not just any one can show up at the NYSE
- Immigration is strictly regulated, and in this way the labor force is restricted, whereas if commerce were truly free, a company could bring in workers from around the world and pay them .25 cents per hour — or they could just go back to the slave-trade days and steal people from other countries and keep them in slavery as workers.
- The central bank determines interest rates.
- The money supply is closely monitored and decisions are made to ensure that currency remains stable. Even the very idea of money itself is a government intrusion into the free market. In a truly free market, there would be no government sponsored currency.
And that’s just a list to get us started.
Obviously there will be some of the above regulations that some would argue are unnecessary and actually hinder economic activity. But that’s the point, indeed that’s precisely the point: economics is as much political as it is anything else.
Unless you’re willing to live in a purely anarchistic society where there is no rule of law, then you have to abandon the notion that a truly free market exists. It doesn’t, but that’s a good thing.
Environmental regulations ensure that we have clean air, water, and soil, and they (ought to) ensure that we don’t send whole species into extinction, as we are doing now, for example, in the sixth great mass extinction of species, which is being caused by human industrial destruction of habitats and ecosystems.
There is no free market, but that’s a good thing. It’s a good thing to ban child labor. It’s good that we have regulations that ensure that commercial airplanes follow rigorous safety codes.
There is no such thing as a free market, because the market is not just how we do business, it’s about how we do society. Economics is political, and politics is about how we treat each other and the cultural values that we believe are important, because the economy is not merely about producing great wealth, it’s about how we do business, and how we as a society conduct business is perhaps the most telling factor of who we are as a culture and as a people. As Jesus noted a few thousand years back, where your treasure is, there your heart will be also.
Note: The author, Ha-Joon Chang, is himself a capitalist (unlike me), but his project is to be realistic about what capitalism is and how it works.