A Free-market advocate response to the obvious problems in modern economies often boils down to government (how surprising). Government is corrupt, corporations purchase governments, governments use regulations to enforce monopolies. Let’s put aside the fact that this argument is rarely supported with solid evidence, and let’s suppose that it’s the government that makes us shop at Wall-Marts, Microsoft, Apple and Nike. Let’s even put aside the VERY questionable thesis that governments have some sort of monopoly on power crony-ism, and the probability that when propaganda power is for sale and transparency up to the whim of corporations the corruption at every level would increase, not decrease.
What would happen in a Free Market lacking regulations?
Let’s take an expensive, high-tech item with very high start-up costs, like microchips. There is almost no threat of competition, because the start-up costs involved in producing this product, as well as the gap in technology to be surmounted are so vast.
At best there will be a very small number of serious competitors who will find it to be beneficial to all to collude and control prices. This maximises profits for the (naturally arising) cabal, and minimises the risk of catastrophic product failure.
Even so, there’s also a lot of non-techy stuff sold which doesn’t have high research costs… so a large part of the economy doesn’t have this problem! Actually, brading and control of distribution networks work much the same; to produce brand awareness takes enormous amounts of money, and small competitors will in all likelihood struggle and at best be forced to cooperate with larger corporations, to be bought up or snuffed out at a whim. Having a very powerful distribution network enables a corporation to suffocate smaller competitors and gives the large corporation a huge stick to whack anyone who dares support the competition. This happens now, and it would happen in Free Markets.
It is perfectly natural for Free-Market competitors to engage in a cannibalistic cycle of mergers until only huge, near-omnipotent monoliths remain, and I’ve never heard a coherent argument to why this wouldn’t be the case.
The thesis of Free-Market competition may hold for no-brand socks and muesli but it does not hold for real economies.
I have a counter-hypothesis. It is not regulations or governments or unfree markets that create monopolies, it’s the unequal distribution of power. The less equally power is distributed, the freer the more powerful they are to abuse their power, the smaller the number of equals they have to cooperate with (yes, it makes a difference whether you have a cabal of 10 or a cabal of 10000), the more able they are to game ANY system to gain yet more power.
A ‘Free’ Market is a way to distribute power through property. Unfortunately, built in to the idea is the accumulation of property, and there are mechanisms to aid the accumulation of property of the wealthy in basic economics (economics of scale, for example) and basic psychology. In the long run, a ‘Free’ market is an increasingly poor way of distributing power equitably and leads to increased monopolies, crony-ism and corruption.
Representative democracy is a way to distribute power through politics. While in theory at least less susceptible to the accumulation of power, the use of money from rich families to their children and from business to favoured candidates creates an unequal distribution of power that too worsens as democracy grows more stale and intertwined with Big Business.
Together they are still better than picking just one, because distributing power twice is better than doing it once, even if the distribution mechanisms are all increasingly failing. However, the only true solution is to aim at a distribution mechanism that seeks to distribute power equitably and that has safety mechanisms that mean that it does not decay in its ability to do so over time.
Could such mechanisms be built into representative democracy or free market economics? Perhaps… for example, an equal start for all children (100% tax on inherited property – no inheritance) would go some way towards creating such a system and it would not take away from the freedom of the market itself, but of course it would create problems for classical economists who cannot understand humans except as rational sociopaths interested only in the accumulation and passing on of property. Also, it seems a certainty that those who manage to accumulate large amounts of power in their lifetimes will seek to create new mechanisms by which it can be passed on, corrupting the system.
Equality (not the straw-man version where we have bakers cure cancer and scientists sweep streets, but equality of status and an equitable share in the decisions of society) and Freedom go hand in hand, and these siblings are the only long-term cure to corruption, crony-ism and monopolies.