How Free Markets Make Our World A Better, Friendlier, and Safer Place
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Free Markets - making friends with neighbors
Free markets are equivalent to neighbors trading vegetables for fruit at a garden gate.
An insightful quote from one of the greatest economists of the last century:
"The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another." - Milton Friedman
And an eloquent summation by an earlier great economist.
"When goods do not cross borders, soldiers will." - C. F. Bastiat
Governments do not create free markets.
Trade agreements, financial interventions and bailouts, national trade agencies, regulations, and tinkering with money supply and interest rates by central banks destroy free markets. Every government program interferes with and adds injustice to what we humans would do naturally. Too big corporations, institutions, agencies, and monopolies are created and protected by these and other government actions. Open international trade that could ease tensions and propel abundance instead becomes a lever to war.
"In a free society the state does not administer the affairs of men. It administers justice among men who conduct their own affairs." - Walter Lippmann
After elections, politician's promises quickly change from "Yes We Can" to No You Can't - only government action can. Regulations and interventions will then stymie needed change. Political ideals encapsulated in slogans like change and hope; turn into propaganda campaigns to change the nature of hope. A functional and fair basis for international trade, liberty, is not considered.
Free markets are like free people; they are adaptable and self-correcting. International trade can either benefit all people, or disproportionately a group of entrenched elites. Using complex rules, international trade is currently played as a zero sum, win-lose, antagonistic game. The only victors are the scheming and well connected - everyone else loses.
"When governments intervene and regulate - they decrease the biodiversity of the economic ecosystem, resulting in a limiting of natural selection within commerce." - Allan R. Wallace
We are born willing to share; as long as the benefit we receive is greater in our personal perception than a benefit we offer. Free trade is two individuals each benefiting themselves, based on their unique value systems; money, knowledge, self worth, safety, and all other values can be enhanced within a direct trade. In a free market, we will not engage in an exchange unless we see a benefit for ourselves.
Both parties in unregulated markets profit. That is how free markets create wealth rather than transfer and diminish wealth. Logically this is obviously true, but it is still emotionally uncomfortable to accept and implement free market win-win-win solutions. Allowing both abundance and freedom would be a sea change that lifts all ships.
It is naught, it is naught, saith the buyer: but when he is gone his way, then he boasteth. - Proverbs 20:12 - The Bible
There is one constant. When economies fail, governments that destroyed open trade will blame free markets and their own pseudo-laissez-faire policies. Ever more frantic rain dances of intervention and regulation will be demanded - promising redemption from the sere financial landscape their prior actions created.
"Free trade is not based on utility but on justice." - Edmund Burke
Finally, the ruling elite will demand ever more power for themselves. As government powers expand; the more it will take forcefully, the less it will share back grandly. (this process has started, the results will be ugly, your future is at risk)
Contents at a Glance
- Tariffs, subsidies, and trade restrictions help the politically connected few and hurt everyone else.
- "It is dangerous to be right when the government is wrong." - Voltaire
- Let's Race - But In Which Direction?
Tariffs, subsidies, and trade restrictions help the politically connected few and hurt everyone else.
"A government which robs Peter to pay Paul can always depend on the support of Paul." - George Bernard Shaw
With Tariff protections a native shoe industry can produce poor quality shoes, raise the price 80%, and still be competitive. The local manufacturers have no incentive to invest in a better product, and outside producers will improve processes while the locals do nothing but profit - for a while.
Everyone that wears shoes suffers higher prices and lower quality. With no incentive to improve, the native shoe makers fall behind in world markets. Eventually they are so far behind that their government is forced to drop the tariffs - and the native shoe industry dies.
Short term politically based gains were stolen from the many for the benefit of a few. In the long term the few will also be sacrificed.
"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil." - C. F. Bastiat
A basic economic rule: every government action will eventually bring the opposite of the desired effect.
It is only by inaction, by refusing to interfere with voluntary exchange, that governments can promote justice and prosperity. Even rules and benefits passed to assist business or customers are counter-productive; leading to malinvestment and fraud. Regulation is a dangerous tool, to be used mainly to ensure the sanctity of commitments, and that sparingly.
Sadly many leaders view themselves as law makers, and so are constantly looking for more laws to make. "Individuality is the aim of political liberty. By leaving the citizen as much freedom of action and of being as comports with order and the rights of others, the institutions render him truly a freeman. He is left to pursue his means of happiness in his own manner." - James Fenimore Cooper
Another benefit of free markets and cooperative self interest can be demonstrated with shoes. Even as the Soviet Union made poor quality shoes for its citizens its bureaucrats would not admit the errors or seek outside suppliers. Free markets in contrast provide wide ranges of quality and price as individuals compete according to their personal insights of business processes.
Some capitalist shoe makers will be wrong and go out of business - but all consumers may share the value of their under pricing or high quality before they depart. Others will take their place and continue to drive overall quality higher and prices lower by constantly introducing new technologies and procedures.
"Only among free men do pioneers emerge." - Leonard Read
Market driven improvements are undiscovered and unwanted by central planners; controlled markets always favor the well connected few and hurt everyone else. Central planning can't understand a simple pencil, much less design an automobile - only natural enterprise has that power.
Oh, and government keeps the tariff money as another form of hidden taxes.
"Often the masses are plundered and do not know it." - Bastiat
On The Wealth of Nations (Books That Changed the World)
"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice.." - Adam Smith
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Who are these anonymous power brokers determining the legal size of holes in Swiss cheese or the definition of a breath mint?
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"It is dangerous to be right when the government is wrong." - Voltaire
"A nation of sheep will beget a government of wolves." - Edward R. Murrow
Bureaucracies that sprang to life from the fertile soil of economies of scale are doomed. We are leaving behind the bureaucratic one size fits most society and entering an individualistic self-tailored society.
Technology is empowering individuals to run their own lives.
Do not expect bureaucracies and governments to shrink and die gracefully. They will do anything to retain every bit of power they have. That includes taking you down with them.
"Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master." - George Washington
"Political power grows out of the barrel of a gun." - Mao Zedong
"A little government and a little luck are necessary in life, but only a fool trusts either of them." - P. J. O'Rourke
Be careful out there - to bureaucrats you are just a number to be exploited and toyed with, and then tossed aside.
"Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone." - Bastiat
As governments fight liberty to retain power and special privileges we might anticipate the return of famines and plagues that had been controlled or eliminated under natural individualistic enterprise. Hence a squeeze on free markets may ignite a disaster for the earth.
"People who create things nowadays can expect to be prosecuted by highly moralistic people who are incapable of creating anything. There is no way to measure the chilling effect on innovation that results from the threats of taxation, regulation and prosecution against anything that succeeds. We'll never know how many ideas our government has aborted in the name of protecting us." - Joseph Sobran
Our future is a race between catastrophe and innovation; only individual initiative can inspire the innovation needed.
Let's Race - But In Which Direction?
Regulations and taxes are but two of the tools used to stop prosperity.
"If your compulsory schooling has made you uncomfortable with the concept of capitalism, use the words 'creative enterprise' instead. This is much the same as the American political center calling themselves 'progressives' rather than socialists." - Allan Wallace
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Sovereign Speculator - a blog
"Giving money and power to government is like giving whiskey and car keys to teenage boys." - P.J. O'Rourke
"Men naturally rebel against the injustice of which they are victims. Thus, when plunder is organized by law for the profit of those who make the law, all the plundered classes try somehow to enter, by peaceful or revolutionary means, into the making of laws. According to their degree of enlightenment, these plundered classes may propose one of two entirely different purposes when they attempt to attain political power: Either they may wish to stop lawful plunder, or they may wish to share in it." - Bastiat
The Sovereign Speculator has been supplanted by a combination of BFuniv at twitter and financial Squidoo lenses - but the archives are still valuable.
Fetching RSS feed... please stand byPeace, commerce and honest friendship with all nations; entangling alliances with none. - Thomas Jefferson
The basis of American wealth was the free market ideals that shaped its founding.
- "The more corrupt the state, the more it legislates."
Tacitus: 55 BC - "When buying and selling are controlled by legislation, the first things to be bought and sold are legislators."
P.J. O'Rourke - A wise and frugal government which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.
Thomas Jefferson - "When under the pretext of fraternity, the legal code imposes mutual sacrifices on the citizens, human nature is not thereby abrogated. Everyone will then direct his efforts toward contributing little to, and taking much from, the common fund of sacrifices. Now, is it the most unfortunate who gains from this struggle? Certainly not, but rather the most influential and calculating."
C. F. Bastiat
- Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others?
Thomas Jefferson
Life Is Not Linear
Our primitive understanding of complex systems make economic projections and actions dangerous. Sadly, math based government models provide illusionary knowledge that leads us to complacency.
Central planning can't manage an evolving world that it is grossly inadequate to understand. Only free markets, where individuals are allowed to adapt to local conditions, have the ability to improve our world
Governments in decline increase manipulations while proclaiming all actions are for the common good.
Government never furthered any enterprise but by the alacrity with which it got out of its way. - Henry David Thoreau
"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced. If the nation doesn't want to go bankrupt, people must again learn to work, instead of living on public assistance." - Marcus Tullius Cicero
Cicero was an alarmist. So am I. Just because the Roman Empire was seen to be in decline does not mean they had the will to reform. Central government is the ultimate extension of tragedy of the commons - when everybody is represented by government, nobody is. Government then exists to perpetuate itself and grow, each politician looking to their own welfare.
"IT has not happened, does not mean IT will not happen. When the fire department tells you your untrimmed weeds are a fire hazard, they are not wrong because your house has not yet burned down." - Allan Wallace
Free trade is fought mainly through politics by those seeking personal gain and power at the expense of everyone else. Politicians, a few workers, and some incompetent companies prosper for a while - everyone else is made poorer.
To repeat the reasonable assertion of Walter Lippmann, "In a free society the state does not administer the affairs of men. It administers justice among men who conduct their own affairs." We are competent to conduct our own affairs and we can learn what we need to know.
As we slide deeper into depression expect the howls of self-serving dogs demanding protection to increase.
Value is a word defined and re-defined by economists and politicos. Use your own definition of value. In buying a pair of shoes, would you find them more valuable to their use if they were built by the labor of a hundred disinterested make-work employees, using hundreds of hours of time - or by a single craftsman using care to produce a product in pride? Which would you likely pay more for?
Value is determined in an open and free market by individuals like you making independent choices. Any rules, regulations, treaties, special interest deals, etc. only make determining value more difficult, and add injustice to the many.
Expect politicians to capitalize vocal social leverage, demanding support for the hundreds of incompetents. They will proclaim you and I are demanding new trade agreements, and renegotiation of old trade programs. They won't consider eliminating barriers to our entering into mutually beneficial agreements with neighbors.
We will all be hurt.
explore the economic realities of natural enterprise
Be part of a better future.
Markets will solve problems if left alone; governments will enslave if given opportunity.
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages." - Adam Smith
The world is in transition - you can help avoid a vicious change and also assist in the creation of a virtuous social cycle.
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What about exploited labor and sweat shops?
Be a good neighbor, "By virtue of exchange, one man's prosperity is beneficial to all others." - Bastiat
As to foreign sweat shops, if it is forced labor, it is horrible.
If it is a choice made by locals like "Las Chicas Bravas" because it is better than their other options, it is great. Japan was once a nation of sweat shops - their prosperity today is due in large part to step by step gains of competition. Kites rise against the wind, not with it.
If your choice is to face starvation working in fields all day or gain a living wage, however small, working in a factory - you must be free to make your own choice. If you ee your children leaving to become servants in another town or country, and a job could keep them happily at home - you rejoice.
"No one should have to be locked into whatever job someone else assigns him, if he doesn't want it and can find other work he likes better." - Christopher Stasheff
As more factories are built to take advantage of cheap labor, competition will raise the wages. To deny labor the right to chose is to steal hope.
That is why liberals and unions are in bed with each other. Unions want to guarantee their income at the cost of others, liberals want to protect the poor at the cost of the poor's freedom of choice to improve their own lives. Like many liberal ideas, it sounds and feels good, and has very bad long term consequences.
"The urge to save humanity is almost always a false front for the urge to rule." - H.L. Mencken
I see no advantage to protecting a high paying job if that protection keeps the world's poor from earning enough to live; and everyone else from getting a product less expensively.
There is a choice. We can allow everyone the freedom to pursue wealth, or we can be like the Former Soviet Union; where without incentive the people pretended to work, and the state pretended to pay them. The end result was everyone suffered.
We need to allow growing abundance. Open and free international trade expands everyones wealth; control, tariffs, and taxation diminishes overall wealth, freedom, initiative, innovation, and peace.
Individualistic enterprise within open markets allows hope that you or your children can, with effort, be much better off than you are now. That is why America was once thought to have streets paved with gold. As government programs have grown in number and size, that hope has steadily diminished.
"Away with the whims of governmental administrators, their socialized projects, their centralization, their tariffs, their government schools, their state religions, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations! And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works." - Bastiat
Under unfettered capitalism the rich get richer and the gap between rich and poor increases. But the poor will also get much richer. The end result is that the poor can improve their lives and the lives of those they care about - and isn't that a worthy goal?
That will only happen if we can get and keep government out of our business.
A Basic Truth
"No nation was ever ruined by trade."
Benjamin Franklin
Free societies are prosperous societies.
Free markets allow everyone to seek their own best interests - improving their lives, the lives of those they are close to, and by extension, all of us.
"Civilization's development has always been initiated by individuals balancing demands within their intimate groups, and personal needs for independence and identity. Social engineers and central planners always error at this point. What they endeavor is to convert humankind from small, intimate, flexible tribes to a collective with one mind (their mind of course).
They want to make all the complex human herds and packs composed of individuals into a single hive of drones. They have always failed, they will always fail; for outstanding individuals will continue to emerge - imagining and accomplishing exceptional goals - changing everything."
Allan Wallace
Your comments will add another opportunity for readers to compare and contrast ideas. Let us know what you have learned or what bothered you most.
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Reply
- BFuniv.com BFuniv.com Aug 17, 2009 @ 8:23 pm | in reply to Spook
- It will take time. We are at the beginnings of a new era, our efforts are establishing foundations to build replacements for crumbling bureaucracies. Todays post on Seth's blog shows that efforts like BFuniv are having that desired effect.
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Reply
- Spook Spook Aug 17, 2009 @ 6:05 pm
- I couldn't follow the Iacocca video but I remember a time when the Japanese car industry was giving the American one a real thumping. The American government intervened as unconditional war conquerors and stymied it. I see all the great American car industries have reverted to the same boat. History has a way of repeating itself. I'm with you all the way but still think as individuals we have left it to late.
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Reply
- California_Dreamin California_Dreamin Apr 28, 2009 @ 2:01 pm
- I have lived in Japan for the past 20 years. This country does not believe in free trade. The Japanese believe that "Japan is a small country with no natural resources." Therefore it is put at a natural disadvantage and must export or perish. The Japanese do not see trade as a "win-win" situation, they see it as a zero-sum game.
I don't agree with that attitude, but the truth is they've been beating our pants off. I was born in 1960, and I can remember watching the news on an American TV when I was a kid. There are no American TVs now, and there may soon be no American cars. Japanese car makers now have about half of the American market. All foreign makers combined have only managed to capture 4% of the Japanese car market. More people should have listened to Lee Iacocca. What he is saying in this video is absolutely true.
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Reply
- amandascloset0 amandascloset0 Jan 8, 2009 @ 2:55 pm
- Another very well written lens! I so enjoy reading your lenses! So thorough and well done! Thank you for posting this. Not a fun subject but a very real and very serious issue that we either deal with or subject to.
Thanks again, 5 stars, fav'd!
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Reply
- Squidoo-Pat Squidoo-Pat Jun 16, 2008 @ 11:13 pm
- I love the Edward R. Murrow comment. That's exactly what has and is happening. More and more people are becoming weak knee'd sheeple.
A few weeks ago they had a news story where an old man was walking across the street and got hit. People who were walking down the sidewalk saw what happened and just kept on walking leaving the old man to lay half dead in the street! Finally some "brave" people went over to try and assist him. He ended up dying. People are so weak, scared and idiotic they couldn't figure out to go and help a man who just got hit.
If this is the current state of the American character-America is cooked and done.
Thanks for educating people on what is really important.
Challenge your assumptions.
We all have errors in our world view. The only way to discover truth is to challenge our own beliefs.
Your most important business ideasTo be wealthy within a just nation is an honor, in an unjust nation a foul stench.
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"Socialism needs capitalistic market forces to feed and sustain itself. This is mainly why that ideology has spent decades to fight its own shadows and demons. " - SB Kayser
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by BFuniv.com
Allan Wallace trains visionaries.
Allan is Rector of Bastiat Free University, and author of Speculation Rules.
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