The Debilitating Myth of the 'Free Market' Alternative
by Robert Freeman
www.CommonDreams.org
http://www.commondreams.org/view/2009/08/24
When choosing a pet, do you prefer unicorns or bunnies?
I prefer unicorns because, though bunnies are
undeniably snuggly, unicorns have a much better color.
That lustrous pink fur beats out dull brown every time.
And if you can get one with wings -- well, how can
floppy ears compete with that? It isn't even close, is
it?
This is something like what the healthcare debate is
about. It's not about real alternatives. Rather, it's
about the choice between a realistic alternative that
can actually extend coverage while lowering costs -- the
public option -- and a fantasy: the "free market"
option.
And health care is only the most readily available of
industries that illustrate our fatal fetishistic
fixation with the "free market" myth. Our thrall to
that myth makes it impossible to have a rational debate
about almost any economic issue. For vast swaths of
the U.S. and global economies bear as much resemblance
to "free markets" as do unicorns to real pets.
There is, for example, no free market in health care.
Most markets for health insurance in the U.S. are
dominated by one or two players. They easily collude
to keep prices high, choices low, payouts at a minimum,
and new competitors from entering. This is exactly
what both common sense and economic theory would
predict when few firms dominate a market. Economists
call it "oligopoly."
Hospitals operate as oligopolists as well. I live in a
small town in California. It doesn't matter to me that
there are many thousands of hospitals across the
country. The "relevant" market for my health care
needs extends only a few miles. For most people in
America, there are at most two "competitors" in the
hospital delivery business, if that. This is not a
competitive market. The lack of true choice and the
vendors' incentives and ability to collude, make a
mockery of the idea of "free markets."
Or consider the pharmaceutical industry. Though there
are many firms, the vast majority of the prescriptions,
sales, R&D, and profits are controlled by very few
companies. In many critical drugs, because of our
patent laws, there is only one provider. And George W.
Bush passed a $700 billion health care law that
specifically forbade the U.S. government from using its
buying power to secure lower drugs prices for
government purchases. So much for the rigor of
competition.
There is simply no effective competition in these
markets and the results show it. The U.S. spends twice
per capita what other industrial nations spend on
health care with inferior outcomes. Adam Smith, the
founder of modern economics, foretold this when, in
1776, he wrote in The Wealth of Nations, "People of the
same trade seldom meet together, even for merriment and
diversion, but the conversation ends in a conspiracy
against the public, or in some contrivance to raise
prices."
So what is the point in even arguing about "free
market" alternatives? It is like arguing for unicorns
as pets. It is fantasy. When raised to a matter of
policy prescription, it is worse. It is social
psychosis.
The fact of such social psychosis is not an accident
either, and it, too, derives from the same narrow
ownership and control of a vital industry. Only thirty
years ago, the media industry contained over 50
independent companies delivering television, radio,
newspapers, and magazines. Today, there are five giant
conglomerates that control more that 80% of all the
media sales in the country.
These media conglomerates are owned by a very small,
very wealthy elite whose interests lie not in promoting
democracy in political markets or competition in
economic ones, but precisely in preventing them. Their
aim is to divert attention from the staggering
concentration of wealth at the top of the economy and
the steady impoverishment of all the rest. They tout
the sham rituals of democracy such as town hall
meetings precisely to disguise the takeover of real
government by large corporate interests. Meanwhile,
the constitutional protections of civil liberties for
the people are quietly, slowly, relentlessly
dismantled.
The power and collusion of the media oligopoly were
never better illustrated than in the run-up to the Iraq
war. We now know that all of the putative
justifications for that war were false. None of that
mattered. The neo-conservative political elite and
their wealthy capitalist masters wanted a war so they
manufactured one with the help of their hirelings in
the mainstream media. Truth had nothing to do with it.
Indeed, alternative voices, those that actually spoke
the truth, were ruthlessly, viciously mocked and
suppressed.
The entire country was frog-marched into a nakedly
illegal colonialist takeover of a sovereign country
that had not attacked the U.S., had not threatened to
attack the U.S., had no interest in attacking the U.S.,
and had no capacity to attack the U.S.
Such is the power of controlling one of the most
influential industries in the world, that you can, at
will, manufacture a war that will expend trillions of
dollars, raise the price of oil, and increase
government deficits -- all to your benefit. Or, in the
case of health care, that can elevate moronic screamers
to the level of cultural prophets or anoint six
senators representing 3% of the country to prevent real
competition in markets that you also control.
This narrow control of critical markets extends far
beyond just the health care and media industries. It
applies to industries across the entire economic
spectrum.
There are only a handful of companies selling soda pop.
There is essentially only one company selling desktop
operating systems. Two companies sell more than 90% of
all batteries. Three companies sell over 80% of the
beer, cigarettes, and breakfast cereals consumed
nationally. Only two companies in the world sell large
airplanes for commercial travel. Only two companies
make the microprocessors that power PCs or the switches
that power national-scale telephone networks.
In watches and clocks, railroad engines, jet engines,
integrated oil production, sporting goods, musical
instruments, motorcycles, man-made fibers, tobacco,
music, wireless phones, chemicals, vitamins, industrial
process control machinery, satellites, pharmaceuticals,
networking equipment, and many other industries, fewer
than six firms control virtually all of the entire
world's production!
Such levels of "industrial concentration," as it is
called, have never existed before in the history of the
world. It reflects the consolidation of the world's
wealth into the hands of a very small plutocratic elite
which manage the world's commerce among themselves, for
themselves. And this concentration is growing rapidly.
This is part of what the recent trend toward
"globalization" is all about.
The big players in major countries have "gone global"
by buying up or shutting down smaller players in other
countries. In 1973, $75 billion was spent by
international companies buying up other companies that
competed against them in foreign markets. By 1993,
that figure had soared to $500 billion and by 1999 had
risen still another five-fold, to $2.4 trillion. It
continues to increase still today, creating a global
marketplace in which more and more industries are
dominated by fewer and fewer larger and larger
companies.
The result is an extraordinary transfer of wealth and
income from consumers and the middle class to monopoly
producers and their owners. In 2007, the top 1% of the
U.S. population owned 60% of all business assets.
Meanwhile, the bottom 50% of the population owned a
mere 2.5% of such assets. The bottom 40% owned
nothing. U.S. income distribution has become more
unequal than at any time since 1928, just before the
Great Depression. In the ten years between 1996 and
2006 two thirds of all the growth in the entire U.S.
economy went to the top 1% of income earners.
This is far more akin to a feudal world than it is to
"free market" capitalism. In this, the real world, a
very few ultra-rich families -- think of the Bourbons,
the Tudors, or the Hapsburgs -- own everything,
including the government, and everybody else owns
nothing, save the labor they must render to their
wealthy overlords in exchange for the right to live.
This has profound implications for the efficiency of
the economy. There is simply not enough purchasing
power in the hands of consumers to clear markets of
goods. In the past three decades, this shortfall in
demand has been compensated for by the government
running massive budget deficits. The national debt has
grown 10-fold in the past 30 years and is forecast to
double again in the next ten. The burden of paying for
that debt will enslave working Americans for
generations to come, effectively, forever.
And as much as all of this is a matter of economic
concern, it has grave implications for the viability,
indeed, the survival of democracy. When extreme size
becomes extreme wealth, and when global economic power
is exercised as preponderant national political power,
how do we insure the survival of democracy?
Democracy depends on "one person, one vote". The motto
for monopoly capitalism might well be, "One dollar, one
vote." The two institutions -- democracy and monopoly
capitalism -- are incompatible. The one will
inevitably destroy the other. This is what Supreme
Court justice Louis Brandeis meant when he wrote, "We
can either have great concentrations of wealth or we
can have democracy. But we cannot have both."
Large corporations are able to exercise extraordinary
political influence through campaign contributions,
lobbying, and control of the media. By these means,
they are able to have legislation enacted that favors
themselves over the public: trillions of dollars
sluiced to themselves through "bailouts;" guarantees
against having to actually compete; differential tax
rates on capital versus labor; environmental
regulations that go un-enforced; etc. This, of course,
only further accelerates the concentration of private
wealth and political power into narrow hands with the
consequent further erosion of democracy.
How do we balance the democratic rights of individual
citizens and the economic rights of small consumers
when political and economic giants stride the
landscape, concerned only with their own
self-aggrandizement and almost inevitably hostile to
the interests of the larger public?
In the case of an oligopolized media fomenting
ignorance, hatred, and resentment in the place of
knowledge, discourse, and deliberation, how can we even
know what we need to know to operate a civilized
country? There can be neither informed consumer choice
in economic affairs nor consent of the governed in
political. And that is precisely the intent.
Since the answer to these questions will effectively
decide the future of democracy, it may well be the most
important economic policy question facing America
today. Of course, Americans love everything free:
land of the free, home of the brave; let freedom ring;
live free or die; buy one get one free. That's why
it's so hard to shake the illusion of free markets:
we've centuries of indoctrination into the idea of
their existence as synonymous with our own. Myths die
hard, the more so, those at the heart of our cultural
identity.
But we expect children to grow up, to stop believing in
unicorns. We need to hold the same standard for
ourselves as citizen-adults. We should use the chimera
of "free markets" in health care to keep the spotlight
on all such industrial concentration. It is not
glamorous or sexy, like unicorns, but it is ever so
much more real and ever so much more at the heart of
our nation's survival.
Robert Freeman writes on history, economics and
education. He can be reached at
robertfreeman10@ [1].
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