What do you think???

[Birthday]

I just got home from an economics seminar that will continue through the day tomorrow. I went there because my kids, whom I am homeschooling, are participating in this seminar. It is on Free Market Economics. Now, as you know, lots, but not all, of homeschoolers are very right wing, people who want minimal government involvement in people's lives, etc. Okay. I want a bit of balance from you tonight because the information I received today actually made sense. According to what we heard today, the free market allows for the most growth and prosperity possible. The lower the taxes, and the lower the involvement of the gov't in regulation of businesses, the greater the prosperity. There were plenty of examples: India (loaded with govt intervention and bogged down), Hong Kong (where there is a high density population on a rock of an island - no govt. intervention, and tremendous prosperity, etc. One of the questions I asked was if more is necessarily better; if richer is better. Of course, to an extent, it is. But what do all you experts out there say? It seems to me that when you don't have regulation,, you are stuck with polluting companies, abuse of workers, etc. Help!!

[Warpy]

1. That is how some of it has worked for other countries

However, how well has it worked for the US? Have our jobs stayed here, or have workers overseas being paid wages in cheap currencies gotten them all? Has loosening regulations resulted in safety in food, medicines, and things like toys? Think very carefully about what lax regulations and a lack of protectionism have done to this country over the past few decades. Has moving industry to countries with no labor or environmental laws really benefited them that much?

I would suggest reading "The Myth of Free Trade" by Ravi Batra. It's an easy read that picks apart all those right wing arguments you've heard tonight.

The bottom line is that free trade has benefited a lot of the third world by providing limited prosperity. However, it has been a disaster for the first world.

[Birthday]

3. Thanks.

I am going to go right now to our public library site and see if they have that. I appreciate the recommendation. Have a great weekend!

[143tbone]

2. I think you just answered your own question. n/t

[Beregond2]

4. For me, the primary problem with free market capitalism is:

in the long run, it concentrates capital, and hence power, in fewer and fewer hands. This is a huge threat to democracy. What has the history of the past thirty years in this country been but a demonstration of that fact? What is the current financial crisis about but that?

The perfect balance between free enterpise and state regulation has yet to be achieved. It is a dance that continues.

[elleng]

5. Beregond2 is correct;

Wes Clark has said, "Free markets, in order to be free, must be properly regulated."

http://securingamerica.com/ccn/node/16571#comment-328645

[AdHocSolver]

6. What they call "Free Markets" are NOT free markets. They are corporate cartel agreements.

Free markets, by definition, are markets where NO single entity or group of entities, whether among buyers or sellers, controls the quantity offered for sale or the quantity to be purchased. New buyers and new sellers can enter the market at any time with products that are comparable in form or function to compete with goods already offered for sale. The "price" of any good is set where "demand", the amount of money buyers are willing to spend, equals "supply", the amount of goods sellers are willing to part with for that amount of money.

What they call "free markets" are markets controlled BY and FOR the benefit of the multinational corporations such as NAFTA, the World Trade Organization (WTO), the International Monetary Fund (IMF), the World Bank, and many others. These are corporate cartel agreements designed to PREVENT competition and prevent actual "free trade".

Much of the poverty in the Third World today is caused by the corporations using these agreements and organizations to rob these countries of their resources using a new version of colonialism.

The "prosperity" belongs to the corporations and their executives. The "poverty" belongs to the workers and the masses.

A lack of regulation in China gets you melamine poisoning in food, lead paint on toys for American children, some of the worst smog in the entire world, and sweatshop labor, including child labor, that earns as little as fifty cents an hour, and some of the worst poverty in the world. A lot of the goods supposedly made in Hong Kong were actually manufactured in China and resold with a Hong Kong label.

Regulation, properly designed, is used to ensure that no cartels can take over and abuse the market mechanism. The purpose of regulation is similar to the umpire in a baseball game or the referee in a basketball game, to make sure the rules are being followed and make decisions about the game.

If you want to gain more knowledge about economics, get a college text for Economics 101 and check out the definitions for competition, supply, demand, trade, market, "free trade", monopoly, and so on. The leaders of that seminar are playing fast and loose with the economic terms.

One needs to understand the terms and definitions they base their arguments on to really challenge what these seminar leaders are saying. The stock answer you would get from them (if they don't throw you out) is, "If you ask a question like that, you don't really understand the subject matter."

At least, that was the kind of answers I got in my economics classes when I pointed out these discrepancies between theory and reality. I still managed to earn a degree in Economics.

[bhikkhu]

7. But where there is not growth, "free market" = cannibalism

If you want a primer on how the free market can completely and utterly fail, rear about the Irish Famine, circa 1840. A couple of million died in abject anonymous misery of starvation, all in accord with pure free market principles. Another couple of million survived only by relocation to our own fine country.

If that's not sufficient (and it has been sufficient for most since that time) there are nevertheless many other examples, if need be.

[tama]

11. When there is no growth

when the global limits of growth have been met, the globalized system based on continuouss (exponential!) growth collapses.

To understand where we are at this moment, that must be understood and internalized. This IS "harmageddon"...

[HamdenRice]

8. It sounds like most of what they were offering was free market mythology, not free market fact

First of all, most of their examples are just flat out myths. One of the fastest growing economies in the world right now is China -- a socialist market economy. It is in many ways highly regulated (even if quality control tends not to be). Hong Kong has been a "free market" in some sectors, but under British rule it was always highly regulated in others -- much more highly regulated in general than US capitalism.

The idea that government intervention, taxation and spending drags down the economy is flat out wrong, and has been proven wrong ever since John Maynard Keynes wrote his "General Theory of of Employment, Interest and Money," published in 1936. Basically, the question is not whether taxes and spending are good or bad; it is the precise ratio of them and what that ratio should be given the overall growth rate of the economy. Republicans pretend to be anti-Keynesians, but with their massive deficits, they are the biggest and most wreckless keynesians of them all.

As for regulation, here is a simple analogy that should be able to penetrate the thickest free market skull:

Consider the difference between basketball and hockey. Both are highly competitive, efficient sports. In one sport, if you so much as touch an opposing player the wrong way, you will be penalized with a free throw by the other side. In the other sport, jersey-grabbing punching sessions to mutually enforce limits on violence are widely tolerated. The rules of different sports (or markets) create the game, but rarely stifle or end the game.

Capitalism requires rules as much as any game. Contracts for example need to be enforced. They can be enforced by courts, or they can be enforced by one taking a sledgehammer to another guy's plate glass window. Allowing one businessman who is party to a contract to sledgehammer another businessman's property hardly makes the "competition" more efficient or productive; in fact, it is easy to see that without rigid rules or "regulation" (of basketball or contracts) self-regulation (jersey grabbing/punching or sledgehammering) becomes extremely destructive and wasteful.

[Birthday]

9. I want to thank you

The seminar ended this afternoon at 4. So, all day the kids were in various classes. There was a woman from Hungary who flew in to teach in part of this seminar. She talked about life in Hungary under Soviet authority, lack of incentive, poverty, lack of choice, etc. Then she did a class activity. Tell me, if you would, what you think about this. And if you have suggestions for other activities, please feel free to make them. Okay. So, she put a bunch of paper clips on a large piece of paper. She told the kids that she would give them a piece of candy for each paper clip picked up in the first minute, and in the second minute, she would give two pieces of candy for each paper clip picked up. Within a short time, well within the first minute, some of the kids had grabbed up the all the paper clips. In so doing, they damaged the large piece of paper that the clips were on. The kids got their piece of candy for each clip, and that was that. The damage to the paper was discussed; she described that as the "tragedy of commons", the paper, representing the environment. Is "tragedy of commons" a known economic term?

The next time they tried this, many of the kids had a segment of the paper identified with their initials as "their own". Then, down went the paper clips. This time, the kids all waited till the second minute and picked up their clips, the paper clips on "their own land", and got two pieces of candy for each clip. Now, some kids got nothing. Bummer. But the paper looked perfect. So, the environment wasn't damaged by fighting over what was available. Her point was that, while each of the kids "owned" their segment, they harvested successfully from their little plot. But when there was not private ownership, there was lots of damage. What about the kids that got nothing? In the real world, that could be a hungry family. She said that charities, families and religious groups should help out, not the government. She focused on the idea that government intervention reduces incentive and creates dependence. I can't completely disagree with that, but if we have no gov't. safety net, then what about the people who have no one to help them.

I totally agree with the quality control comments above. Clearly, there are tons of examples of corporations that are more than willing to pollute until they are forced to stop, clean up and pay restitution (that is never really true compensation). The idea of jobs going overseas, didn't worry the teachers at this seminar. We were told that jobs are infinite. But workers have to be nimble and willing to retrain, etc. I don't know. This just seems so theoretically interesting, but practically disastrous. I think that, while, fundamentally, prosperity benefits people, we have to be doing more than simply pursuing wealth, because, clearly, people are going to be left to suffer. Are we just not supposed to care?
:shrug: :shrug: :shrug:

[GeneCosta]

12. In a logical system

ie socialism you would find the third alternative: cooperate together, split the amount of candy fairly, and then look for more candy.

Also, it should be noted that Hong Kong isn't too capitalist. There is no such thing as "land ownership." It follows Henry George and institutes land rent. The government owns all the land.

[Rupert Giles]

10. On capital

Capital moves to where it can grow the most in the shortest time. In a free market economy capital can grow much and fast because the whole society is open for capitalist expansion. That does not however mean that it will create a long term stable growth that benefits society as a whole, nor will it benefit the environment.

States turn to a free market economy to attract international capital, but the more states that turn to this strategy the more it develops into a 'race to the bottom': "Come here instead! We demand even less pay for the same work! We tax you the least! We won't interfere at all!"

And free market economies are generally quite crappy at creating long term stable growth, it is far better at moving around capital and creating fictious values than satisfying actual needs.