Free Market Economics, History, Thoughts

Of late, I have been following, as most American’s have, the reports, commentary and opinions in the political sphere regarding the economy.  The strongest, or more accurately, most clarion voices in this discussion have been those on the political right calling for “free markets” while those on the left focusing on protecting the poor, the elderly, the vulnerable desiring “fair share” economics (at least, at this moment, this is the core of what I am hearing; thus, putting a label on it is very hard at this point, making it muddled, and thus less clarion).  This has gotten me thinking, more about the former position than the latter, and its place in history.

What this got me thinking about is when in history have we seen a pure free market economy in action?  I will not sidetrack into what a “free market” economy is except to say that it, in its purest sense, is one based on individual sovereign right to act/own things, in which the exchange of goods and services are evaluated, developed and done based on individual perceptions between the parties involved without any outside influence or stricture.  So when did this occur in history?  When was the golden era of free market economics that we can look back on with longing eyes?

I would posit that perhaps one such era was circa 600 AD in Northern and Central Europe.  I use this point, given that by this time, the last vestiges of Roman governance were void and the collection of tribes and government control of commerce was nearly non-existent.  Coinage, the medium of trade in the Empire, was still around.  However, there was no central system to provide controls on the use of coinage or even determine its value.  It was also an era well before the Carolingian dynasty started by Charlemagne, lulled Europe into feudalism and the manor system of much study in our high school history classrooms.  It was a period when what you could get for something was what you got.  It was a time when the rules were what you made, and your power to enforce them was based on your ability to garner support, by charisma, the sword, or whatever means you might have.  Save for familial relationships, you were unbound to stake claim to what was yours (or you supposed it to be) or to stake out to a new place so long as you had the means to carry you.  There wasn’t taxes in the sense we know them, however if you sought security or other things from someone to protect you from the bands of thugs that abounded, you would pay a portion of your bounty to one who could prevent their stealing.  Matters of justice and equity were resolved in the most basic of manners, retribution or revenge, until the rounds of which lead to exhaustion of family lines or physical separation and/or settlement between the mutual parties.  I could dive into a satirical painting at this point, but I am trying to be quite serious.  In the utter chaos of the loss of Roman administration and before secular or religious administration could take hold, this period was one where there was the true unfettered interference of government, government of any type.  A “free market” economy?

In putting this example forward, and admittedly it is an extreme case and somewhat still flawed, I am trying to provide the purest example of what the logical conclusion of a fully free market economy would be.  I would not say, in any way, that I think this is the best system or that it worked well.  Nevertheless, it was an economy, for its time, which was without stricture of false markets created by floors or ceilings imposed by governments, without tariffs protecting the weak from the strong, and it was fully functional for a period of years.  I for one would not want to go back to that kind of system, nor do I think those that purport to support “free markets” want that kind of system in reality, but it is the consequence that their rhetoric is calling for.

I could cite other more modern examples (perhaps an ironic but good one might be Afghanistan from 1991 to 2001, or numerous African cases), but I think the point is made that no one, if you think about the inevitable conclusion, wants pure free market economics.  Businesses want to have predictability and stability in financial markets and laws that give them a shield of corporate protection.  People want to have a reasonable expectation of stability and support to ensure contracts are honored and equity is established between parties, never mind wanting safety for themselves, their progeny, their liberties, and their property.  Thus, enter governments, that have existed since time immemorial that regulate the transactions of groups and individuals to provide this level of protection and stability, especially after having gone through the dark ages of chaos that nearly every society has encountered at one point or another in its history.  So order, order established by some form of government, is good for the development of an economy, one has to submit.  Thus, fully free markets are not what are desired, but disciplined markets with relatively free actors are desired.  The degree of discipline in the market and the relative freedom of the actors is still left for conjecture as to the right mix, fully submitting that fully controlled economic systems are just as inadequate as full free market economics (e.g. Soviet market control, state controlled feudalism, etc.).

I will be the first to admit that I do not empirically know what the right balance is.  One cannot discount the individual actor and their rational or illogical/poor choices (the Austrian school) nor can one deny that there are trends that ring true about supply, demand, price controls and tariffs (Keynesian economics).  I submit that both sides have Pollyanna visions of their positions.  The right, that everyone will act in a way as to not damage others and everyone will be able to have equal opportunity; the left, that the government will not quash the individual actor and that people will be equally industrious in their pursuits.  My thesis was what was a “free market” economy that I can draw from history, and what does it mean.  I have not even entered into a religious or moral argument as a part of this effort.  Regardless, however, I do not look with longing eyes on the closest to pure examples that I can think of for “free markets”, so I am not sure that a golden era exists for them.  While I could do a similar analysis for controlled economics, and find it equally undesirable, it really is already in evidence given our very near-term, bipolar, communism – democracy struggle of the latter half of the 20^th century.  I cannot speak for the left of the political spectrum, but I do not hear rhetoric for state controlled economics like the rhetoric I do for “free markets”.  I would beg those that are supporting “free markets” to be careful that they do not destroy the centrist disciplined economy with relatively free actors that truly uplifts all.