Friday, April 24, 2015

Capitalism and the Democratic Economy

Voting consumers

This post isn't meant to be some sort of manifesto or earth-shattering thesis. I'm just throwing ideas and cliches at the wall like so much spaghetti.

In the United States we like to think of ourselves as a free market oasis, with over-regulated Europe and statist China our imperfect rivals. Rather than an oasis, it's a mirage. While the political stage has conservatives bleating about job-destroying regulations and progressives screeching about Wall Street fat cats, in actuality we have good ol' fashion capitalism with a smattering of government overreach.

A lot of people commingle capitalism with free markets. So too, a lot of people advocate government intervention "when markets fail". Since it's allergy season my vision may be a bit blurry but here's how I see it.

Capitalism runs counter to the free market. If they could, capitalists would be monopolists each and every time. Capitalists do not want to compete; competition thins profits. Every time I hear some chamber of commerce say they're for competition I want to kick them in the shin; they want new members. Incumbent businesses have no interest in rivals; they want to offer their goods and services at the highest possible price to maximize profit.

Government intervention also runs counter to the free market. I think many progressives see government as a foil for greedy capitalists. But intervention raises questions. What is the proper level of profit? Should firms make any profit? How many firms should there be?

What we've got here in the United States (channelling my best Strother Martin) is a mash up of free market, favoritism (a.k.a. crony capitalism), government intrusion, and monopoly/monopsony. We have free markets when no firm(s) dominate, the barriers to entry are low, and consumers have broad choices and lots of information. We have favoritism when government "picks winners" or when producers lock out newcomers via collusion or government restriction; my last post about raisins offers one example. We have government intrusion (usually on the large scale) when it constrains competition to garner tax revenue (think cable and wireless taxes) or for some policy goal (e.g., Tennessee Valley Authority). And we have monopoly (one seller) and monopsony (one buyer) when government is weak or fails to enforce free markets.

Like I said, I don't have a theory to defend here but would like to have us focus on a democratic economy. God knows our democracy isn't perfect but as Winston Churchill said, "Democracy is the worst form of government except for all those other forms".

Just as gerrymandering hatefully constrains competition, we must work toward more producers in all markets. Just as voter restriction laws are wrong headed, we must work at getting as many consumers as possible to market. Just as the major political parties shamefully codify their dominance, we must oust favored industries from the role of puppeteers. And we must never have consumer pay tribute to a few firms just so government can feed itself.

Ugh. Sorry about that last paragraph – a bit too "manifesto-y". My point is that voters and consumers are the only ones who matter. Conservatives and progressives both get it wrong: it's not about too much government regulation or too little government protection. It's about markets and government of, by, and for the people.

Gee, that sounds kinda familiar ...