Free markets:
There's another factor that one must consider with current "Free markets", and that is one of currency availability.
Currency is really just a good, like any other-- Excepting that it does not (currently) have an intrinsic value unto itself. Its "Value" is derived from what it represents, which, in a highly specialized society with strong stratification, happens to be the promise of any other good or service attainable within that society. Since goods are obtained through the service of another, this can be further simplified (for the most part; Real estate is purchasable, but not able to be created) as being simply, "Services". Currency represents service, either for the service itself, or for the product produced through that service.
But again, Money is just a good; a commodity-- something to be traded. Like all commodities in a free market, it has supply and demand at work. This is why currency values fluctuate throughout the day when measured against other currencies.
What are the other implications of this?
Well, you have things like:
Inflation-- As the supply of currency increases, the value of that currency goes down.
Deflation-- As the supply of currency goes down, the value of that currency goes up (as long as the currency is tradable)
And of course, the many myriad ways in which these two come to be and interact.
The most poignant, IMHO, have to do with "Market growth".
As a market grows, more consumers and more producers are engaging in market activity. This basically means that more people are exchanging currency for services. As a consequence of increased market availability, the usual consequence is that more humans get made, because resources are plentiful. This causes the value of currency to go up, as demand for currency increases, and supply remains static. (New bills dont get printed the exact moment babies get born; bills being printed are a separate process entirely-- OR, if some tangible medium with natural scarcity is used, such as gold, more gold has to be mined, in order to avoid the resulting deflation.) This means that the supply of currency has to go up as well, or there wont be enough supply, and market activity will drop due to increased costs of transaction.
Traditionally, "More people" was a good thing(tm), because it meant more suppliers of specific or specialized goods, giving wider variety of craftsmanship, wider variety in artistic license, and overall wider selection of crafted goods (and services)-- That is, as long as human supply did not outstrip carry capacity for food production, and other essential infrastructural services. This is why a free market is actually synonymous with many small and independent suppliers of goods and services, vying for the exchange of currency. As the number of people goes up, the number of goods suppliers is supposed to go up as well.
But that doesn't sound like what we have right now, does it?
Take for instance-- Cellphone makers. How many are there? Oh-- Many hundreds of thousands, if you count individual employees-- But those are not the actual "Makers" in our market. Those are people who are trading service in making components of cellphones for currency, not agents that engage in the manufacture and sale of whole cellphones as a craftsman's trade. No- For that, we have "Non-real people" who are the craftsmen, and they are easily counted. Major players: Apple, Samsung, HTC, Nokia, Blackberry, Motorola/google, LG, Sony, and Microsoft. For a global market with some 7+ BILLION actors engaging in commerce, with very high demand, why are there so few cellphone "craftsmen?" Moreover, why does this number seem to be SHRINKING, while total market size is GROWING, with a growing population?
The answer is very simple.
Just like communism has its niggly little things that make it not workable as a system in the long term, Free Market capitalism also, is not workable in the long term, because of its own little niggly things.
One of which, is its reliance on endless growth to attempt to outpace consolidation of wealth, And the other is the lack of any intrinsic method to prevent market capture.
A commonly cited principle of modern inflationary currency, is that inflation works against the hoarder. This is true!
Say, I am a wealthy SOB, and I somehow manage to cabbage up 90% of the money in a given locality. Instead of investing that money, I hoard it. It does not go into a bank, because that is an investment (believe it or not)-- No, it goes into a safe, or a mattress. The money still in circulation becomes deflated, because of the lack of liquidity in the market. To overcome this, the government prints more bills, causing inflation. Now, instead of holding 90% of the currency, I hold maybe, 50%, because the government printed exactly the amount of money I have hoarded, to return liquidity to the community. My hoard has been reduced in value nearly 50%! It takes twice as much money now for me to get the same hookers and blow I used to! Oh, the humanity!
Because free market capitalism is BASED on stratified economics, with a stratified social structure, there is built in incentive for people of high "Status" (have lots of currency) to aggressively accumulate more currency to outpace inflation. If they didnt, they would lose their status just from inflation alone! The faster they can accumulate wealth, the more influential they are, and the higher their status!
This is why there are so few "Craftsmen", and so many "bondsmen" in our current "free market". The "Craftsmen" are compelled to overtake the market, or be crushed by it, the bondsman needs currency just to live, and inflation is driving both to either capture more and more of the market, or to reproduce and drive more market activity to stay afloat.
The inevitable conclusion here, is that many small craftsman will emerge, initially. These craftsmen will vie with each other for market share-- Who makes the best, who makes the most-- who can make it cheapset-- etc--- Initially, the markets they serve will be small-- maybe a few hundred people, tops. Small businesses. The barrier to entry into this early market is low. People can either become such a craftsman, and sell direct- or they can choose to work for another craftsman for a wage, and maybe learn their trade in the process.
The evolution of this early market then starts to change. As craftsmen compete with each other, the quality and value of the products they make goes up. This makes a natural barrier to entry for new craftsmen, so the rate of new craftsmen entering the market slows down accordingly. (It is hard to make quality swiss watches, after all.) So, for a new craftsman to enter the market, he first must hone his skill somehow, without a reliable market in which to sell his product. The solution? He works for an existing craftsman, as a bondsman-- for a time, until he can master the craft. Now you have a craftsman, with an army of subordinates, which he can direct to further increase his market share, by freeing up his own time. Eventually, this craftsman does not even need to know the craft-- he just needs to know how to direct his army of subordinates. After this point, it is no longer feasible for an individual bondsman to become a new craftsman. The door is shut. An individual cannot compete with the industrial output of an army.
Now the market has begun it's vicious cannibalistic feeding frenzy. Craftsmen seek to steal away the labor and resources of other craftsmen, to steal away their market share, and in so doing, grow faster against the tide of inflation, working against them. Some may enter into "Gentlemen's deals" not to "poach" each other's labor, since the labor is now exclusively where the skill in the actual manufacture of the craft comes from-- The craftsman is now a totally virtual entity-- managed by managers. As these virtual entities consume more and more of the market share, the bondsman becomes more and more beholden to them, as the number of sources where they can obtain vital goods diminishes, and as their own need for currency increases with the rising inflation-- intended to counter the growth of these virtual actors.
The eventual conclusion to this, is for a single entity to capture 100% of the market, and become completely immune to inflation. We know such entities as "monopolies".
Free market capitalism, when coupled with inflation, produces monopolies. There is no invisible hand in any stage but stage 1-- The manouverings of the virtual entities and consortia actively suppresses any such action.
This is why mature markets REQUIRE regulation, and things like anti-trust, and why provisions like copyright and patents must NOT be used as weapons to bar the entry to market of new competitors.
The problem, is that before the monopoly stage-- When there is an oligopoly instead-- A simple consensus between the major actors can have profound power to compel a government to action. "Do this, or we will take our business elsewhere-- You can find somebody else to provide clothes to your 500 million citizens!" Since small clothiers cannot possibly meet such demand, (and since these large virtual actors have captured such unimaginably large shares of the market) government has to capitulate to them, or be crushed with logistical failure. This forces government to have to work with these large businesses in an unfair way, in every sense of the term unfair.
This means you have to catch free market capitalism in stage 2 of its evolution, in order to regulate it effectively, and keep it from becoming a monster. However, at that stage, the free market true believers have not yet been given proof in the pudding that their system will lead to disaster, and they view such regulation as onerous. After all, they NEED to continue this path to keep their precious status in the society, in the face of the growth of the society! If there are enough of them, and they are influential enough, in anything but a dictatorship with a free market, they can circumvent the enactment of these needed regulations, and grow to become unstoppable terrors.
If you dont, then these agencies grow massively disproportionate power over the people they employ, and the governments that host their actions.
At the oligopoly stage, you have only a small handful of options.
1) Enact the regulations to neuter them anyway, regardless of their threats-- and suffer the economic downturn as the system has to reboot at stage 1, now with a huge population.
2) Try to arrange some kind of truce with limited regulations to maintain stasis quo (What the US did)
3) Throw in the towel, and allow big business to own government, and dominate all other's lives.
Option 1 leads to civil collapse and possible revolution as people's needs stop being met.
Option 2 leads to fascism, as government and corporate powers unite with common purpose.
Option 3 leads to feudalism, and plutocracy.
Unrestrained capitalism? Pick from the list above.
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Topic: Communist Fortress (Read 10810 times)