Aug 29 2008
Free markets and free societies may not go hand in hand
Published by Jason Welker at 12:10 pm under Basic Economic Question,Economic systems,Free Markets,Politics
Capitalism and democracy: friends or foes? | Free exchange | Economist.com
How Capitalism Is Killing Democracy – Foreign Policy (abstract only)
“Why is FREEDOM so important in a market economy? If people in society are not free, can a market economy truly succeed?”.
Friday’s class discussion focused on the different answers to the basic economic questions offered by centrally planned versus market economies.
The question I left them to ponder over the weekend had to do with an apparent paradox visible in China today: that of a free market economy seemingly thriving in a society where political and social freedoms are severely limited by the communist dictatorship. It has long been claimed that free markets will be followed closely by political freedom, and vis versa. The two are thought to go hand in hand. According to the Economist.com’s blog, Free Exchange:
The late Milton Friedman emphasized that economic freedom promotes political freedom and is also necessary for the sustainability of political freedom over time. His underlying logic is that competitive capitalism separates economic power from political power. One could point to Chile, Taiwan and South Korea as examples where Friedman’s logic seems to hold.
So if, as Friedman said, free markets lend themselves to free societies, then how has China’s thriving market economy not resulted in a freer society, even after 30 years of economic liberalization? Robert Reich, writing in the Foreign Policy Journal examines the issue in some depth:
Conventional wisdom holds that where either capitalism or democracy flourishes, the other must soon follow. Yet today, their fortunes are beginning to diverge. Capitalism, long sold as the yin to democracy’s yang, is thriving, while democracy is struggling to keep up. China, poised to become the world’s third largest capitalist nation this year after the United States and Japan, has embraced market freedom, but not political freedom. Many economically successful nations ”from Russia to Mexico” are democracies in name only. They are encumbered by the same problems that have hobbled American democracy in recent years, allowing corporations and elites buoyed by runaway economic success to undermine the government’s capacity to respond to citizens’ concerns.
Of course, democracy means much more than the process of free and fair elections. It is a system for accomplishing what can only be achieved by citizens joining together to further the common good. But though free markets have brought unprecedented prosperity to many, they have been accompanied by widening inequalities of income and wealth, heightened job insecurity, and environmental hazards such as global-warming.
What can explain the recent divergence of capitalism and democracy in countries like China, Russia and Mexico? The Free Exchange blog explains:
The cause of this divergence, Mr Reich contends, is that companies seeking an advantage over global competitors have invested increasing amounts of money in government lobbying, public relations and bribery. This process of corporations’ writing their own rules has weakened the ability of average citizens to have their voices heard through the democratic process.
So it appears that as capitalism and free markets have flourished, freedom of the individual has been trumped by freedom of the corporation to lobby and thus influence government into creating favorable environments for investment and growth, often times at the expense of society’s health and the best interests of the public as a whole. We will learn a term for this kind of activity in AP and IB Economics: rent-seeking behavior.
As firms grown larger and industrial and commercial power becomes concentrated in powerful multi-national corporations, the priorities of governments seem to be shifting away from individual freedoms and civil rights and towards the interests of the corporate world, whose money and influence run deep through the veins of the world’s governments.
So perhaps I was wrong. Maybe Milton Friedman was wrong too. Perhaps the 21st Century has bred a new relationship where free market capitalism is wed not to democracy, but to a new kind of corporatocracy, a term used by Noam Chomsky, in which governments bow not to the will of the people they govern, rather to the pressures from corporate entities. Freedom and justice for all (firms, that is). Gives you something to think about, huh
Discussion Questions:
- Do free markets lead to free societies?
- Is political freedom a prerequisite for a successful market economy?
- Has “corporatocracy” surpassed democracy as the dominant influence in the rich, developed countries of the world?
- In what ways could economic strength come at the expense of individual freedom?
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About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
Although the past has mostly seen hand-in-hand democracy and capitalism relationships, it is quite likely that a new concept of "corporatocracy" is developing. However, a period of "corporatocracy" has occurred in the past. For APUSHers, this is known as the Gilded Age. Essentially, it was a time in the United States where large corporations and companies such as Standard Oil held monopolies and economic influence so great that they could essentially swing the government in their favor. This is indeed a case of freedom and justice for all firms.
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Jacque, thanks for tying in some US History there, great point and you give the discussion real perspective! Perhaps we're just sliding into a new "Gilded Age"
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Throughout the years people had put capitalism and democracy in the same category, as they live and die together. But China had broken this rule; they’ve proved to the world that a communist country can have a capitalism economy. In my opinion, people had mixed up the concept of economy and government. Communist government system doesn’t mean communist economy. The government is just there to provide a stable economical weather, to ensure the economy develops in the right way. As long as it’s helping the economy, communism and democracy is the same
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I think that China has not turned towards democracy simply because there is no pressing reason for China to overthrow the government and install a democracy. The reason South Korea is a democracy is because even though there were a bunch of military dictatorships, eventually popular demonstrations forced the leader to start elections.
On the other hand, the Communist government in China gained popular support with Mao Zedong and the Long March and driving back the Japanese, and so far the people seem ok with their government. They have maintained some semblance of rule of law by punishing corrupt officials, and unless the government does something drastically horrible, I don't think that there will be anything as major as nationwide protests or anything like that. Historically, China has always been ruled by an Emperor, and until the Emperor lost the mandate of heaven, the people were content to live under his rule.
Interestingly enough, last year in AP Comparative Government, we learned that China does hold elections on the local level in some rural villages, so there is no denying that it is shifting towards democracy, even if it is a little bit.
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I agree that there is an increase of "corportocracy" in the 21st century. I think it plays more into the idea of Social Darwinism in which "only the strong will survive."
How "strong" or "fit" someone is in a social setting depends on how wealthy you are, how much connections you have, and so on… Focusing on the aspect of wealth, these corporations, businesses, or firms have immense amounts of wealth. All businesses want to maintain longevity as well as government thus in order for government to ensure its longevity, it must strengthen its ties with these corporations. With their money governments could use that money to gain more support from its citizens by reconstructing roads, providing welfare, and other things which might help establish legitimacy of the government. This could explain why corporations have a bigger voice in government.
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NO! I would like to quickly draw your attention to an example:
A new bill is going to be passed in congress to outlaw dumping of chemicals into lakes and rivers in America. This will cause GM to lose millions. The vote of the bill comes down to a single congressman, congressman Joe.
GM's lobbiest wants to show Joe reasons why this bill should not pass, it will cost jobs, outsourcing, etc. Fair enough, but GM's lobbiest decides he will be most persuasive if Joe visits him on the company yacht in the Mediterranean while he gives Joe a Rolex watch and feeds him caviar and champaign.
Green Peace also visits Joe… and gives him a key chain.
You are smart students, you do the math.
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A free market usually leads to a free society. China is a good exception to this rule, however, because although it has a communist government, which is supposed to have a command system, it essentially operates under a free market system now. Noam Chomsky's corporatocracy idea sounds very reasonable; the Chinese government recognizes that bending to the will of large industries is greatly beneficial, probably more so than "bowing to the will of the people," since the Chinese people have given their government no incentive to do so. The government currently does not need to placate the people, but it sees that it does need to bend to the will of large industries because doing so will benefit China's own economy.
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I once read a novel in which they talked about how the world was actually run by several international large corporations. The spark of World War II and other events were all played out by the monopolies of these large corporations. Anyway, I just thought it was interesting that it kind of related to this subject.
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A market economy is dependent upon the freedom of the people, because with the freedom comes self interest and competition. However, in command systems, where there is no competition since the government owns everything, I think that the country can still succeed without political freedom. I agree with Christina that China may be an exception to the rule that free market -> free society. Although there is no competition within China to create a flourishing market between industries, China is part of a global competition, mostly due to the high demand of their cheap labor and products. Thus, they succeed by providing and satisfying the high demand of countries like the United States. Although China may be Communist on a political standpoint, and its politics may dictate the basis in which their economy is set upon, it does not mean the economy is purely without liberty, thus the mixed economy of China today.
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The question Mr.Welker mentioned at the end of class was exactly what I have been wondering, and confused over for quite a long time. Why does China have free market when its system of government is democracy? I just could not find the solution to that question. However, after reading this article, I found a reasonable solution: China is developing "corporatocracy". Because China sees that open economy is beneficial to their nation, they yield to the will of the firms.
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In response to Jacques’ idea, I have always referred to the Gilded Age when I think about China’s political-economic ties today. It is notable that it was during the Gilded Age in which the United States increased in manufacturing efficiency with Henry Ford’s introduction of the assemble line for production, patented thousands of new inventions, doubled the average living standards. The corporatocracy America was going through left behind some of government’s responsibility to the people, such as retracting the Civil Rights movement and ensuring economic fairness and corruption-free.
This phenomenon parallels what China is going through for the past two decades. I think because China started as such an undeveloped country, the main priority as of now is to create a wealthy class led by corporations. When the economy and country strives to a certain point, people will realize about moral issues that are also important. This point of course relates the Progressive Era in America.
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It does appear as though the large corporation are dictating China's economy. I think the reason that China's economy is able to maintain itself in a so called communist economy is because China has began progressing away from the communist-like structure. As stated by others in this post, despite the fact that China still has a controlling government, China is beginning to conduct democratic-like elections in rural villages. Their democratic like progression seems to lead them to this idea of "corporatocracy", which is unlike the command economy.
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I strongly agree with the point that the 21st century is gradually progressing into a so-called "corporatocracy". The so-called market economy that China has today, is pushed by the competition by these huge corporatocracies, which generally are controlled by the government itself. Therefore, I'm not quite sure whether I would consider China's economy as entirely capitalistic, but much rather an indirect form of communism. The corporations that dominate and control China's economy today essentially represent the government, simply not directly. Therefore, it is really the government who has control of the economy. China's so-called "capitalism" does not seem to be very justified.
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China is opening its economy toward capitalism recently, giving people some freedom and the right to buy and produce as they want. As Calvin said, democracy and capitalism were put in the same category, but actually they do not belong in the same category. Economic freedom that is given by China to the people DOES NOT essentially means the political freedom. Corporatocracy is prevail in China, and the government somehow presses the people's will even if it allowed some freedom to them.
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No countries uses a pure form of capitalism or a pure command economy. Most countries use a blend of economies. Like in the United States, the government has as a hand in areas such as education. That is why there are state established colleges and scholarships in the United States. The US government does not trust the future of the country entirely in the hands of private firms. China today has a economy leaning more towards a market economyand it is moving away from the command structure slowly.
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The success of a market economy depends a lot on the freedom of the consumers. The people of China are not entirely ‘free’ under the communist political system. However, China specializes in manufacturing goods and exporting them off to countries such as the United States that have a high demand for the products. Most of the Chinese citizens, especially those still living in rural areas, are left out of this cycle of a booming economy.
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A free market is successful because the "market" decisides what needs to be produced and what is the surplus. Which still works quite well in a Communest type of economy, because the government is not telling people what do produce, they just approve/disapprove the documents.
Well, i wouldn't say that governments bow not to the will of the people they govern, rather to the pressures from corporate entities, because in China, it's different. The communist government perfectly prevents that from happening, because when anytime a company wants to produce a product, it needs to get approval from the government and all that. So then it's the corporate entities are the ones that bow to the government.
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Chomsky's idea of corporatocracy seems to hold true in the US, where lobbyists of multi-billion conglomorates have immense control over government output, but in China there seems to be a different situation. It is not so much that China is fighting corporatocracy; rather it seems that the government is so closely tied to big businesses that instead of "bending to the will" of a corporation government authorities cooperate. Think of the under-the-counter deals that go on between government officials and businessmen. Corruption weaves a web that combines government and corporation. Although this isn't exactly a corporatocracy, no matter how you look at it big business comes out on top.
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I think that part of the reason the China has become a sort of exception to the rule that democracy ties in with capitalism is because money plays such a big part in Chinese culture. Although it seems as though every society is driven my money in China as well as other Asian cultures, the people seem to give up their lives for the sake of making money. Also, in China's future it could be possible the country will become a democracy. Although that is unlikely for quite some time, I believe the capitalist economy it has will influence a possible democratic movement.
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There is always bribery in any type of society: no matter which systems the society is in. It is widely known that the rate of bribery of society is so high in China that it refuses to publish a statisfical data about this. North Korea under the command system suffers from its deep-rooted corruption makes its people suffer from starvation along with its nearly-collapsed economy. The aid from South Korea aimed for the commone people in North Korea often ends up going into the hands of the government officials.
I think that just because of the fact that the people who holds a big business use bribery for the sake of more prosperity does not mean the democracy is collapsing. There is a massive competition among sellers in makets, which prevents a particular company from holding a monopoly.
However, I believe some control from government is needed to subside one's over-prosperity. Bill Gate's Microsoft can be an example of monopoly under the market system. Although there are many competitive companies such as Apple, we can see in our real lives that literally almost everyone uses Microsoft's Windows, Internet Explorer, and Microsoft Word. I think it is the time for going into the phase of “corporatocracyâ€, however in a slow rate.
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Personally, I doubt that this "corporatocracy" is a new relationships, as previously stated by other students, but rather it has been behind the scenes , behind the eyes of the society for a long time before the government makes some mistakes, and people discover what they are up to. Large corporations and businesses are truly always the ones that hold the power – and the command system limits that power! The flexibility and "ideals" of the democratic system and free market economy is what allows this sort of "freedom and justice for all firms" to occur. China,in theory, would be able to prevent big businesses from gaining power, thus having a "corporatocracy", with the power of their government. (Disregarding the possibility of corruption and/or misappropriation of funds.)
Simply stated, democracy is always "for the people." Communism always works in favour for the government, and then (in theory) indirectly for the people. At first glance, democracy seems like the best fit for the free market economy, following one's best self-interests and freedom of choice. Nevertheless, with a free market system, does one really want a select, rich group of individuals in a firm, whose first and foremost goal is to make profit, to have enough influence to change governments, who have power over the entire nation and its population ? Or would one rather let the government govern over the all the people equally, while still maximizing self-benefit through the free market system?
Ultimately, China's pretty smart to use a mix of the free market economy and communist dictatorship. Now if they could only solve their corruption problems…
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I definitely disagree with Milton Friedman's notion of a free market. A free market doesn't necessarily make a society more free, since absolute governments also use the concept of a free market to boost the economy. They give more freedoms to large corporations to increase the economic attractiveness of their country. The individuals that form a society are still restricted in their freedom and have to compromise even more, so that the government can keep the corporations content.
That's why I think that the idea of corporatocracy is a good explanation for why societies in China etc. aren't more free, even though the country pursues the idea of a free market.
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I most certainly agree with what Christian is proposing. A free economy does not necessary promote freedom of the individual. But in my opinion, it isn't just the nations with an absolute government which show this characteristic.
I think that when a free market is introduced by a government of ANY country, it is with the intention to build up wealth. However as a nation starts to slowly attain the wealth, it is not equally distributed for all people within that nation. I think this is because all nations typically prioritize the wealth of the state and the enterprises which are involved in foreign economic affairs. Nevertheless, as the wealth continues to enlarge, and the their priorities are met, the wealth is finally shared among more members of the society.
This is evident in history as well. In the Meiji Restoration of japan for instance: Japan's main goal during its restoration was to creat a rich state and a strong military. Therefore, the government focused their spending on the Zaibatsus (national corperations) and used forced labor of the people to develop technology and production. This was certainly not in the interest of the peoples' freedom, for the working conditions were the equivalent of those during the British Industrial Revolution.
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About four days ago I sat down and had lunch with a very clever indian professor who works at princeton who told me about how in china, theres so much money being pumped into the economy and buisnesses by the government, and taht its very far from "lesseiz faire". In order to be the CEO of a big ferm, you have to be a member of the party in china. The Economy is free, in many ways, yet not in others. The government still controlls much of whats going on.
Historically, as Alex pointed out, this has been very successfull, but has nothing to do with the freedom of the people of the country.
I beleive that Milton Friedman was on the right track. What he did not take into account though, is that when the peoples of a country are all equal, in all their rights, then their is only one thing which sets them appart, and that is money. With money added to the equation, it, as a variable, throws off all of what Milton Friedman said about social freedoms. Money nowerdays equals power, and so these multi-billion dollar companies are incrediably powerfull and they can influence the government especially when they become part of them. So in a way, the society is capitalist in that their are poor and rich people and better and worse jobs in the companies, yet the economy is communist. By this I mean that the government has so much to do with the companies and vice verca that their practically nationalized and one unit. So the companies are part of the law making body, and also part of the price determining and production determining body. A governing body determining prices sounds like a very communist economy to me.
I hypothesize, (to cut a long story short) that as soon as companies have a big influence within governments, the economy almost becomes communist, slightly socialist maybe, and the freedoms of society are still there, (but undermined by wealth) yet the economy of countries we beleive to be capitalist could, according to how you define capitalism infact be more communist then we know. get your head round that?
stick that in your pipe and smoke it (even though the oppertunity cost would probably be half an hour of your time and the money you spent on tobacco and the pipe)
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I think its clear that China has a communist government, but if the government controlled the Chinese market too much, wouldn't that be bad for China's economy? Since China gains its wealth through cheap product exports, it is also dependent on buyers from all over the world and if the government determined the prices, then this would probably scare the buyers and they would shift produtcion to Vietnam or somewhere else where they can produce even cheaper. So it wouldn't be very beneficial for China, if the Chinese government didn't follow the basic concepts of a free market. I think that even in a communist country like China, there is some sort of free market.
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Discussion Questions:
Do free markets lead to free societies?
Is political freedom a prerequisite for a successful market economy?
Has “corporatocracy” surpassed democracy as the dominant influence in the rich, developed countries of the world?
In what ways could economic strength come at the expense of individual freedom?
I have to agree with the general notion of my classmates in disagreeing with friedman's biew that "free markets are wed to free societys" it doesn't seem to hold true. As Alex has so eloquently stated, a free market is intended to build up wealth by any nation and it does not matter wether this nation is a democracy or communist. The main difference is the ammount of money the government takes on the gainings of these corperations or individuals, otherwise tax.
"corotatocracy" may have surpassed democracy as the dominant influence in the rich, developed countries of the world, and if it has not yet it is in the process. An example of this could be the the U.S bail out of Bearsterns, the the company was going under the U.S governemt helped develop a buy out with J.P Morgan so that all the liabilities were taken over. In this example it is the corperations which are taking care of the nation's citizens, all the government did was act as the mediator to spur the ideas.
Economic strength could develop at the cost of individual freedom in a few ways. The example I can think of now is that an individual may be confused, while a corporation may have someone who is an economist and able to mannage people to realise their full potential of the corperation and the person. The individual has to give up his right to decide what to do in this certain situations. This is a classic example of strength in numbers.
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I do not agree with the statement that a free market goes hand in hand with a free society. In my opinion, as a matter of fact, it is the exact contrary. As people grow to gain wealth, their profits grow at an almost exponential growth: the more wealth one has, the more influence he or she has and it becomes increasingly difficult for others to compete. This is exactly what is happening in the United States. People, or what are now corporations, have grown and keep growing without any restrictions, to overshadown and encompass an entire nation. The United states is not abou thte people any more; it's about the companies. They have the pull within the government to create favourable opportunities. Freedom, ironically, has allowed corporations to take away the people's freedom. In China, the government is much more involved and so the the influence that any company can have is slightly more limited.
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I would have to disagree with christian and alex in saying that a free market does not go hand in hand with a free society. In principle once you give companys private ownership you are in fact not a communist state anymore. This therefore already shows that it is a freeer state then before. People have a right to own private buisnesses. Although china seems to be an exception showing that a communist state is still working with a free market. This rareity is only 30 years old, which is a tiny amount of time. In years to come China might turn democratic and the reason for that is through a free market. Therfore the theory of a free market and democracy goes hand in hand is true.
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Free markets may not necessarily lead to a free society in that the market may be free to buy and sell and trade but if the people who are making the goods are not educated to earn enough money to buy and sell these goods then the society as a whole is no better off. Yet alone that because the people of China are not so well educated they do not understand so well the politics of a communist country and do not speak out, therefore a communist government can longer stay in power without question, whereas an educated population is more likely to speak out against their government leading to a free society as well as a free market place.
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A free market instigates a free society but it doesn't always lead to one. Because in a free market goods may be free to buy and sell but if the labor that is making the goods is not educated enough money to buy and sell these goods then the society will not do any better than it would if it were a planned economy. Chinese people are a good example of this because they are not as well educated therefor they do not see why communism is a bad form of government so they keep living in it. But in more educated countries people will revolt against a form of government they do not approve of.
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I agree with Milton Freidman in that I think in order to have freedom in politics and society you must have a free market. If the government controlls every aspect of the people then there is no freedom and things cant grow. It has obviously worked for China because there were the third largest capitalist country in the world. I think it its good that China embraces the free market because it give their people some more freedom to do as they please.
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I can see what Finlay is suggesting and I think there is one similarity in the ways we think. I think what we're both trying to say is that a free economy may bring about social freedom, but a sufficient amount of time is needed before a nation can be officially described as a nation with free individuals.
I suppose this is due to the fact that changing an economy is quite a fundamental change for a country because there could be opposition and conflicts which arise because of discomfort. Therefore it is inevitable that the prolonged policies may have a few glitches in the beginning….
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Do free markets lead to free societies?
Is political freedom a prerequisite for a successful market economy?
Has “corporatocracy” surpassed democracy as the dominant influence in the rich, developed countries of the world?
In what ways could economic strength come at the expense of individual freedom?
I believe that generally a free market would lead to a free'er society in which the 'invisible hand' would lead the market. This applies to Adam Smiths- Laissez Faire theory or 'leave alone' theory in which the goverment would not be the controlling factor in the market but would be the opposite of a communist nation or command system.
I also believe that for a market to be considered a market economy individuals must be given the political freedom to be and have rational self-interest beforehand. They must be given the oppurtunity to maximize their utility without the over shadowing of a overcontrolling government.
I do not however beliee that 'coporatocracy' has surpassed democary in rich developed nations. I believe it has in some countries however the majority of goverments still remain under public influence rather than that of corporations.
As has been shown in many nations throughout history everything has its price. In order for a country to succeed something must give. When a country begins to succeed certain things must be given up such as land to build the olypic stadiums in Beijing. The farmers who worked on the land were forced to leave, however in doing so they allowed (perhaps unwillingly) China to bring in large investments and much economic growth. Therefore it is clear that everything has some cost.
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In my opinion, free markets and free societies can go hand in hand, because if there is a free market then government has no role other than setting boundaries. If the government only has boundaries, then people in the country are free to choose and make their own economy, based on their skill. As a result, this means that by the government not deciding as Finley stated, the government is leaving it up to the society to make their own ownership, meaning private ownership. This could be seen as not being communist anymore. Since each person has their own choice and freedom to create whatever business they want then it doesn't make it capital either. Therefore, free markets can go hand in hand with a free society.
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Is political freedom a prerequisite for a successful market economy?
There is no absolute to this question, however we can take a look at examples we have today and use our judgment. A positive example is Eastern Europe. Political freedom came with the fall of the Berlin Wall when the Soviet Union collapsed as a planned economy. With that, expectations grew and job opportunities improved immensely. This example would obviously support the question, however when looking at China it is a different story. China is a phenomenally huge country who have been able to successfully sell to the whole world. Though they have had their own problems such as pollution and often exploitation, so it's difficult to even say what the better plan is. Do we even know that China will be able to continue this path without eventually falling?
Has corportocracy surpassed democracy as the dominant influence in the rich, developed countries of the world?
Since we are looking at rich, developed countries, i would have to say no to this question. With democracy there are controls and checks regulating to make sure nobody has too much power. They can impose prices, so one group can't take over the industry. With regulations we have workers rights and such. Although there may be small occurrences of abuses, when looking at the big picture, i don't believe corportocracy has the dominant influence.
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Do free markets lead to free societies?
In my opinion, free markets do lead to free societies. Suppose ordinary people have the opportunity to start any business they please, they will be more motivated to increase their profit and make their own business grow than if it is a government owned business. It would allow them to develop their own ideas on what they think could be a profitable product and sell it at their own price. This way, ordinary people will have a greater chance to become wealthier and to improve their financial situation. Some people might simply see money as “freedom”, but by improving their financial situation, they gain social status as well. In most cultures financial success increases recognition, and that in my opinion, is a very important part to freedom.
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I strongly agree with Dimitri's point of view. A free market does not go hand in hand with a free society. Now a days governments are working in order to satisfy their biggest "client" you could say, which are large and important corporations that bring in the countries income. Personally, I believe that its true when someone's income increases so does their influence upon other people and this turns to become an example to what is happening in the United States. In order for free market to go hand in hand with a free society I believe that the government should put a type of limit to large corporations in order that the smaller one's actually have a chance to succeed and give an equal opportunity for citizens.
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Hand in hand is a wrong thing to say, i would say they play some of the same rolls. See because with a free market economy there are no rules well at least fewer rules but no boundaries. Each person is out for themselves. Since boundaries are more movable than rules it aloes the people in the country are able to choose without risk what they would like to invest in. The end product of this is a relatively high economy but everyone has a cap. A limit at which one has to stop at. But as this happens the greed starts coming out and more and more ownership is gotten. Which makes it lean away from communism. Because someone could be more successful than the other and get more money which in face is not communism at all. Thats why i think they do not go hand in hand but yes they are very very close. There still are a few little things that i don't understand so i can only tell my opinion on how much i know of this subject which is not all to much.
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In my opinon free markets do indeed lead to free society's because if someone decides to start a company, they have the right to break boundires and everything they decide is 100% their decision and not the governments. They have the ability to freely choose what to do. It enables Companys to do what ever they can to be succesful and have the greatest income possible. It helps your company become more recognizable and allows them to expand their companys to where ever they want. Free markets allow you to do what ever you want, and lets you risk what ever you want so it does indeed become a free society.
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I agree that democracies have become what Noam Chomsky called a corporatocracy. Both in developed nations and developing nations, the interests of the corporate world, that pumps a lot of money into the counties’ economy has become very influential in the priorities of the government. I disagree with Mr Reich from the article who states that “companies seeking an advantage over global competitors have invested increasing amounts of money in government lobbying, public relations and bribery.” Companies have not lobbied governments, but the governments have acted favorably to companies because they bring in a lot of money into the economy and that is why “the process of corporations writing their own rules” has happened and influenced the government. Companies have invested in promoting local events and giving money to social causes, this has made relations with the folk, which still has a say in the government, and their voice is still heard through the democratic process, and because their ideas have also started favoring the influence of corporations, the way governments work has changed.
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I believe that a government totally controlling a market doesn't work out. The more political freedom the market has, the more the economy will prosper. Here is an example of what could happen to a communist nation, like China, if the government took total control of the Chinese market. Most of Chinas economic wealth is from their vast amount of exports. If the government had full control of the market, then labor wouldn’t be so cheap in China. This would cause many buyers to look to other nation like Taiwan who sell very cheap labor. I agree with Christian E. when he says it wouldn’t be very beneficial for China to not follow the basic concepts of a free market.
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To me free markets and free societies do not go hand in hand. I agree with Bastien. In general we all ultimately depend on the government,but not to a huge extent. This is why the USSR prospered. Their way of running the economy led to their own downfall. They controlled the economy is such a way that it would grow only up till a certain limit and had no other choice but to fall back down. The only reason China is growing fast is because they are finally opening up to the world. They realised the threat that communism would have a devastating affect. If there was a thing called a totally free economy then there would be havoc everywhere. Greed for more and more money will eventually cause a downfall.
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A free market is successful because the “market” decides what needs to be produced and what is the surplus. Which still works quite well in a Communist type of economy, because the government is not telling people what do produce, they just approve/disapprove the documents.
No countries uses a pure form of capitalism or a pure command economy. Most countries use a blend of economies.
A market economy is dependent upon the freedom of the people, because with the freedom comes self interest and competition. However, in command systems, where there is no competition since the government owns everything, I think that the country can still succeed without political freedom.
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Can you help me? I'm trying to subscribe to your RSS feed, but can't seem to figure it out. Did you have that option in your blog? Really like it, BTW.
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Hello Andy. To subscribe to the RSS click on the round logo in the upper right hand corner of the blog, that will take you to the feed page. Or just put the following into your browser: http://welkerswikinomics.com/blog/feed/
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Great post, thanks for the info
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1. After reading this post it is clear that just because a country has a free market, it does not have to have a free society. Such is the situation with China, a real oximoron. Becoming the third most powerful capitalist country in the world while promoting very little social freedom does not go along with the philosophy of Milton Friedman. Such a glaringly unexpected example proves that strong theories have the capacity to be proven wrong.
2. Political freedom is not a prerequisite for a successful market economy, for as the blog said, free market economies sway the government's actions in favor of corporations and not the people. Political freedom, in this case, would take a back seat for further growth of the market economy.
3. In general, I don't believe corporatocracy has taken over the developed and wealthier countries of the world just yet. However, the cuts in government funding for social services, and such, are worrisome. If the priorities of the government do not start to focus more on the people soon, corporatocracy could be in our future.
4. Economic strength often comes at the expense of an individual, such is the case with creative destruction, trade-offs, and the job one might lose due to off-shoring.
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1. No, free markets do not lead to free societies.
2. No, political freedom is not required to have a successful market economy.
3. I do not think that corporatocracy has surpassed democracy, but I definitely believe that there has been an increase in corporatocracy.
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1. Although it is considered likely that a free market will lead to a free political society, this is clearly not true in every case. As seen in the article, China has had free market policies for quite some time and has still not adopted political freedom.
2. Political freedom is not required to have a successful market economy, as illustrated by the country of China. As Jason said, China has a free market economy that is "seemingly thriving in a society where political and social freedoms are severely limited by the communist dictatorship".
3. Corporatocracy is when the freedom of the individuals of a country is ignored and focus is instead given to the corporation "to lobby and thus influence government into creating favorable environments for investment and growth, often times at the expense of society’s health and the best interests of the public as a whole." I do not believe that Corporatocracy has taken over yet, because I am still under the impression that the United States government is focusing on creating policies that will improve our society's well being as a whole. However, that could also be naivety on my part.
4. If a country were to fully adopt the policies of "Corporatocracy" and focus completely on raising output or economic growth without considering the current needs/wants of its people in the short term, then the country would be growing stronger economically at the expense of its citizens. For example, if the government were to increase taxes at the end of this year, it would bring in a lot of money for the government in the long run, but it would be very detrimental to U.S. citizens in the short run.
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Free markets do not guarantee a free society. Nothing does. Free societies are history's spring snow flakes: rare and ephemeral.
Free societies need some type of devolution of power away from humanity's dominant forms of government, which have been dictatorships and monarchies up until the last generation.
They need the a rule of law that is not capricious and protects property rights, from both bandits and bureaucrats. It only counts if it is relatively free from corruption.
If the government has enough power and scope to pick winners and losers in the economy, you do not have a free economy. This may be an aspect of corporatocracy that Chomsky was unwilling to address. The notion that one empowers a government to rule the economy in the expectation that all of that power will be wielded by the weakest strikes me as naive. The biggest players in the economy are never free-marketers. They want the reins of the economy gathered in the hand of government, because they know they will then control that hand.
How much political freedom does a society need for a thriving free economy? I think that will depend on the history of the society. Deng Xiaoping came after Mao, so he could dole out small drips of freedom and it would seem to the populace like a great improvement. Watch China over the next 50 years, and we may see that people who grew up as semi-free autonomous actors, who make their own way in the world, demand more say in the governance of society. The "freedom" of the Chinese economy may also be overstated at times, as is their success. They are still digging out from the 20th Century, and a lot of problems have been deferred.
Russia is not a free society. They only experienced freedom while their country was falling down the well. As soon as the tumult stopped, they got oligarchs and Putin. They are a bizarre example of psuedo-capitalism as well: No one owned any property or wealth, and then they held an auction for all of the capital in the country. (I simplify.) Who was bidding, and with what? De-collectivizing has been less lethal than collectivizing, but it is still a mess.
Economic Strength at the cost of individual freedom: Not in the long term. Perhaps a command that everyone fill sandbags to keep the town from flooding might work, but if we centrally allocated peoples labor it would not be as efficient as free labor. Free people may or may not work harder than un-free people, but they sure work smarter.
Mao had an idea to launch China forward, so he took over allocation of labor and goods. I believe it was one of the largest famines in human history. And it is not just Mao. Rarely have unfree people out-produced free people. Even China had to semi-free its people in order to see gains in productivity.
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