[p2p-research] article: Markets vs Free Markets by Center for a Stateless Society

Sat Apr 10 15:38:08 CEST 2010

great editorial marzio, thanks!

Kevin,

could you ask Anna if we can republish this on the p2p blog?

much appreciated!

Michel

On Sat, Apr 10, 2010 at 5:28 PM, MARZIO VENEMAN <max.rythmos at yahoo.com>wrote:

>
>  Dear subscribers P2P
>
> With reference to this recent article, I take pleasure informing you as
> follows:
>
>
>
> http://c4ss.org/content/2165
>
>
>
> Libertarians throw the phrase “free market” around a lot, but the important
> word among those two is *free*.  Markets, per se, are really an
> after-thought. It’s not as if we don’t want freedom in our non-market
> activities.  We want to have freedom, in all ways, including in our “market
> transactions”.  The word market confuses a lot of people because they
> imagine “markets” to be an institution, a thing that one can point to and
> say “this is a Market”.  But we don’t mean it that way, really.  There’s no
> such *thing* as a market.  It’s just a catch-all term to cover the sum
> total of all exchanges.
>
> The only alternative to a market is to have rationing by command.  One
> monopoly with control of all goods who hands them out to people according to
> a scheme that monopoly has planned out in advance.  A situation where there
> is any sort of trade at all, is technically a market.
>
> Now it is true that any exchange leaves people better off than they would
> be had they not made the exchange, or they wouldn’t do it.  This even
> applies to a simple robbery.  When the robber says “your money or your life”
> and you hand over the money, at the time, you felt that that was the better
> option.  *However*, this is where context comes in.  To paraphrase
> Lysander Spooner, one must question how the robber came into the position to
> offer you that exchange.  For another oft used example, when the sweatshop
> owner offers people a job under terrible conditions, and they take that job,
> certainly, to them, it was better than not having that job.  Simply banning
> that transaction will leave those people with even worse options to
> survive.  But again, what must be questioned is how the sweatshop owner came
> into the position of making that offer.
>
> When the politicians and media pundits talk about “market-based solutions”
> or “markets” at all, one must wonder what sort of markets we are dealing
> with.  Almost certainly not “free markets” for many, many reasons.  The
> biggest culprit here, and the one that is the least visible to most people
> is the banking system, with central banking as it’s lynchpin, the piece of
> the machine that holds the whole thing together.  Even people that complain
> about “the Fed” generally see the problem with it being “inflation”, meaning
> price inflation.  The part that is less seen is how the banking system as we
> know it creates oligopoly/oligopsony, meaning a market with a few large
> producers who are able to wield unnatural control over buying labor and
> selling their products.
>
> A fiat currency, that is to say a currency not backed by anything in
> particular except the government forcing people to use it, floats against
> the value of all goods and services that can be bought with that currency.
> As more currency enters the system, the marginal value of each unit of
> currency goes down.  This is ordinarily seen in the form of price inflation,
> but that depends on how quickly goods and services are being produced in
> relation to how quickly currency is entering the system.  Either way though,
> X amount of currency will buy less if there is 10000*X amount of currency
> than if there was 1000*X.
>
> Now when a bank lends currency to a large corporation, to a great extent
> (95-99%), that currency is “produced” out of thin air.  A number goes into a
> ledger, and now *poof* that account has, say, 100 million dollars in it.
> This currency doesn’t really exist in the system until it is spent.
> Whatever that corporation spends that money on, it has essentially stolen
> from everyone else who is holding an amount of that currency.  Assuming the
> loan is going to be paid back, then it is the bank who has stolen it.
>
> (If I rob your house and lend the money I steal to someone to buy a lamp,
> who does the lamp actually belong to?)
>
> Whoever sold the corporation whatever it bought benefits a certain amount
> from that new money as well.  They are getting a signal that there is more
> demand for X, and will raise their prices.  They in turn will spend that
> money, etc… Whoever sees that money last, will benefit least because prices
> have already gone up to match the new level of currency.
>
> To simplify this model, you can see it as a redistribution of purchasing
> power.  Those who borrow the most gain the most, and those who save, lose
> the most.  In the end the banks themselves gain the most because they get
> all of that purchasing power back and then some, *as long as interest
> payments are able to keep up with inflation*.  This forces the banks to
> make sure that interest rates are high enough to account for inflation, or
> they will lose purchasing power in the long run.
>
> But this leads to a situation where those who establish themselves early in
> a market are able to compete for banking dollars better than late comers.
> Plus, the money they got was more valuable than the money the late comers
> got.  This leads to an ever escalating “barrier to entry” as the fixed costs
> of doing business rise and rise.
>
> This alone eventually creates oligopoly, with no other intervention.  To
> make it worse, almost everything that the government does either destroys
> capital outright, inhibits new capital formation, or controls how capital
> can be transferred.  This makes the marginal cost of capital higher, which
> benefits the existing owners of capital at the expense of everyone else.
> This artificial scarcity of capital creates an artificial abundance of labor
> relative to capital, which leads to unemployment and low wages.
>
> Regulation is a big part of this scheme.  The regulatory state as we know
> it was created by the progressive movement in the late 1800s and early
> 1900s.  Though the mythology of American history implies otherwise, it was
> well known at the time that this would create oligopoly.  Oligopoly was
> promoted as a more “rational” way of having markets than the “chaos” of free
> markets.  Of course once you establish oligopoly, regulation becomes
> “necessary” in order to prevent the oligopoly from completely screwing
> everyone else over.  It’s a chicken-egg type of self-fulfilling prophecy.
>
> If it came to pass that the only beverage suppliers, including water, were
> CocaCola Inc and PepsiCo, and it was impossibly expensive for anyone else to
> *legally* provide beverages, there would be a good case to be made to
> regulate those companies in order to prevent them from selling us sewage at
> 10 dollars a bottle.  There would certainly be a black market in water,
> which the “law and order” types would cry about.  The quality and price of
> that black market water would be questionable and people would be killing
> each other over turf.  There would probably be some right wingers at that
> point saying “let them die of thirst” but in this case, the left-wingers
> would be right, *in context*.  But one must again question how such a
> situation came to pass.
>
> One of the major forms of oligopolistic regulation and one of the most
> obvious is the idea of “intellectual property”.  Copyrights and patents
> directly establish oligopoly, if not monopoly, for a certain amount of
> time.  Patents at least are fairly limited in their time and scope.  But
> copyrights are essentially perpetual for the purposes of any human
> lifetime.  And the precedent has been set of extending copyright terms
> indefinitely, specifically to protect copyrights already held by big
> business. (see Disney for an example)
>
> After the fact of establishing this system of oligopoly, the government
> then will step in and subsidize those at the bottom of this
> government-created pyramid in order to prevent mass starvation and riots.
> Interestingly enough, this subsidy also creates a barrier to entry in
> markets, by putting a floor on labor costs, making oligopoly worse, and
> pushing more people down to this floor in the long run.
>
> Eventually the logic of this system leads to a sort of Kapitalist Leninism,
> in which there is one large producer that sells everything and employs
> everyone who is employed and everyone else is on welfare.  The movie Wall-e
> showed this sort of “business communism” pretty well.
>
> Right wingers talk about “markets” all day long, but to a large extent,
> what they oppose is merely the welfare part of the system.  They oppose the
> redistribution from the rich and middle class to the poor, but not the
> redistribution from the poor and middle class to the rich.  If one takes
> their ideology to its logical extreme, we would have the banks owning
> everything, maybe the top 10% of all workers in each field would have a job
> and everyone else would be forced to join the military or starve.  This
> military would necessarily be employed to protect “private property” from
> looters and rioters, so the common man would be forced to kill his neighbors
> or be killed by them.  The Kapitalist Leninism of the liberal consensus
> almost looks good in comparison.  This is what so-called liberals or
> progressives envision when you say the term “free markets” or “capitalism”
> to them.  Neither the “left” nor the “right” as we know them today
> understands or opposes the mechanism of oligopoly, they’re just fighting
> over how the spoils are spread around.
>
> To our descendents who will live in a free society, “Dilbert” wouldn’t make
> any sense.  No one could stay in business doing those things, because
> someone else would rise up to challenge any business run so poorly.  “Office
> politics” would be impossible because you’d lose money, and there wouldn’t
> be endless reams of financing and “bailouts” to keep you in business.
> Capital would grow horizontally and organically, because there would be an
> incentive to save.  This would lower the price of capital and make
> businesses more and more competitive, in wages, prices and product quality.
> Without banks redistributing capital to the core and without the government
> raising the barriers to entry, “big business” as we know it – oligopolies
> who decide who is employed and who is unemployed, who produce shoddy
> products with poor customer service because “where else are you going to
> go?” would be impossible.  This is why the “free” part of the phrase free
> markets is much more important than the market part.  We already have
> markets.  What we don’t have is freedom.
>
>
> I trust this information is sufficient for your purposes, in case you
> require any additional details, please do not hesitate to contact the
> undersigned.
>
>
> Yours sincerely,
> Cordiali Saluti
>
>
> Marzio Veneman
> The Netherlands
>
>
>
>
>
>
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