Common Free Market Myths
There’s no denying that in recent years, the free market, socialism, economic freedom, and similar topics have become the subject of intense debate. But as any debater can tell you, no debate has any hope of accomplishing anything if we don’t first define terms. But sometimes, it can be just as helpful to define what a given term doesn’t mean.
At Gratefully Helena, we’re solidly on Team Free Market. So here are 3 things the free market is not.
1. The free market does not mean no government regulation at all.
While it is true that a truly free market must have as little government interference as possible, remember, what defines a free market is what drives the economy, i.e. supply and demand. If we take that definition seriously, then we have to exclude the possibility of a market driven by theft, corruption, monopolies, etc. This is where the government comes in. In order to have a truly free, consumer-driven market, certain elements must be protected by the law. Protection of intellectual property, for example, is absolutely imperative to a free economy.
Which brings us to…
2. The free market does not mean that the rich and powerful can take whatever they want.
Sometimes, people who want more government regulation try to say that in a free market, people are not protected from the rich. They say that business owners can only gain success by stepping on other people and stealing from others. But again, in a truly free market, anyone is free to work where they please or start whatever business they want, regardless of class. While there are certainly rich and powerful people who would love to step on others to gain success more quickly or easily, this is not a free-market principle. Rather, the free market makes it possible for anyone with a valuable skill or product to achieve success no matter their social status.
Furthermore, this phenomenon actually benefits the market, because it means that people can compete with one another. This competition drives businesses to innovate if they want to be successful.
The same is true when it comes to the labor market. If an employer is treating his workers poorly or not paying them what they’re worth, other employers who are competing for work may treat their employees better, forcing the first employer to improve his practices if he doesn’t want to lose his workers. This is another example of a consumer-driven market – in this case, the employee is the consumer, and he holds market power over the employer, who must provide value (fair treatment and wages) to the employee if he wants the employee to keep providing value (productivity) to him.
Without a free market, those employees would have fewer choices of where to work, and thereby less market power of their own. This goes hand-in-hand with Number 3.
3. The free market does not mean that only the elite can be successful.
Nor does it mean that only business owners benefit from the free market system.
One hallmark of the free market is that it must be mutually beneficial to work. As in the example above, both parties must give and receive value. One person’s value offer may be a product he developed. Another person’s value offer may be his money. Another’s value offer could be his skills. In the free market, none of them are required to offer their value without getting value in return, and each is the judge of how much value his or her offer is worth.
So whether you’re an employee, an entrepreneur, or simply a consumer, the free market system provides everyone with choices, opportunities for higher earning potential, and the freedom to determine their own priorities.
For more on how the free market works, check out The Free Market: What is it Really