IdeaLog

Promote “fair markets,” not “free markets”

Posted on March 9, 2015

Last week’s column bemoaned the fact that average Americans believe unquestioningly in “free markets,” even though there are no such things. Indeed, every market relies on a dense web of laws and regulations. Subsidies, loopholes, grants, contracts, trade policy, labor law and inconsistent enforcement all warp markets. To say the words “free markets” is to perpetuate a dangerous right-wing myth.

So promote “fair markets,” not free markets. Can this expression help persuade voters? Yes it can. For example, voters already prefer “fair trade” to “free trade.”

More important, every time we say free markets we hurt the progressive cause. Persuadable voters keep two somewhat-contradictory economic concepts in their minds. The words free markets evoke the conservative belief that governments should stay out of the economic sphere and let markets work things out. The phrase fair markets, in contrast, reminds voters of their firm belief that our economic system is rigged to favor the rich and powerful, and that governments should do something about it. We must reinforce the progressive concept, not conservative one.

Beyond pure messaging, “fair markets” should mean something substantive. It should reflect a philosophy. Progressives need to promote worldviews, not just words.

When we say fair markets we are declaring that the proper role of government is to act as a counterweight on the scales of justice so that weaker individuals and organizations compete on a reasonably equal basis against powerful ones. Put more simply, governments should promote level playing fields. In many cases, this doesn’t require more government involvement, it requires less—taking away the subsidies and other unfair advantages that some individuals and businesses enjoy over other individuals and businesses.

While Americans understand that markets are rigged, they have no idea how they got to be rigged or how to un-rig them. And the problem is more complicated than just making markets fairer for some players vis-à-vis others.

A fair market system would encourage profits based on the creation of real products and services, while discouraging the kind of market-warping that is endemic on Wall Street. The argument for capitalism is that by harnessing individuals’ economic drive, all of society is enriched by their hard work and innovation. But society does not win—in fact, it loses—when people get rich by gaming the rules, by exploiting tax or regulatory loopholes, by dismantling viable companies, or by creating scams that aren’t technically illegal but should be. This is how people like Mitt Romney got so rich, and if America is to offer economic opportunity to all, we have to stop that kind of financial manipulation.

A fair market system would be better than the present system at lowering prices and spurring innovation. That’s because the current rigged markets weaken competition. When a company makes its money by having unfair advantages over its competitors, it has little incentive to “build a better mousetrap.” In fact, the current economic system gives corporate leaders and their right-wing cheerleaders a strong incentive to focus on corrupting the system rather than offering consumers a better or cheaper product. So they corrupt.

A fair market system would recognize and reward real risk-taking far more than the easy investments of the rich. When a small businessperson takes a risk, it is a serious matter. If she opens a new store or expands a product line, it might bankrupt her. Small businesspeople risk their own well-being; they put their own livelihoods on the line. When today’s multinational CEOs make an investment, they are merely risking a bit of other people’s money. And when they screw up, they often have golden parachutes that leave them personally rich(er). Big businesses should make money, obviously, but they don’t need and shouldn’t get special treatment.

Finally, a fair market system would attack the wealth gap. You have probably seen many versions of a chart demonstrating that over the past 35 years wages have failed to grow with national productivity. Workers create wealth, but nearly all of the increase has been pocketed by the rich. Americans don’t understand the enormity of the problem or how it happened, but they do believe they’re not getting their fair share. And they’re right. Today, the richest one percent of people own over one-third (35 percent) of all the combined wealth in America—stocks, bonds, businesses, real estate, cars, jewelry. The richest five percent own nearly two-thirds (63 percent) of all the wealth. Just the Forbes 400 wealthiest Americans alone are worth more than all 41 million African Americans in the U.S combined.

Progressive economist Dean Baker has summarized the situation better than I can:

The market is just a tool, and in fact a very useful one. It makes no more sense to lash out against markets than to lash out against the wheel. The reality is that conservatives have been quite actively using the power of the government to shape market outcomes in ways that redistribute income upward. However, conservatives have been clever enough to not own up to their role in this process, pretending all along that everything is just the natural working of the market. And, progressives have been foolish enough to go along with this view.

Let’s muster a little cleverness of our own—reject the language of free markets and embrace the progressive principle of fair markets.