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 Free Market Fallacies

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PostSubject: Free Market Fallacies   Thu Oct 25, 2018 10:08 am

Eric Schlosser, in “Reefer Madness”, wrote:
”The chief business of the American people is business,” President Calvin Coolidge once said.  The quote succinctly expressed his worldview.  Coolidge believed that small government was always the best government, that corporations should remain unfettered by regulation, that taxes should always be low.  His presidency lasted from 1923 to 1929.  It was era in which free market values reigned supreme.

The Great Depression left Coolidge’s reputation in tatters.  He became a figure of ridicule.  He was widely remembered as one of America’s worst presidents — until January of 1981.  That month a portrait of Thomas Jefferson was removed from the Cabinet Room at the White House and replaced by a portrait of Calvin Coolidge.  The newly elected president, Ronald Reagan, considered him a personal hero.

Advocates of the free market must confront the fact that Adam Smith's invisible hand has always been celebrated far more in theory than in practice.  Alexander Hamilton's Report on Manufactures, an early blueprint for America's commercial development, praised Smith's thoughts on specialization but ignored his faith in the free market.  On the contrary, Hamilton urged the federal government to play an activist role in creating an urban, industrial society.  The railroad construction that later provided the foundation for nineteenth-century economic growth was subsidized by massive federal land grants, as was the settlement of the American West.  The tariffs that protected American manufacturers for decades after the Civil War had more in common with mercantilism than any of Smith's notions about free trade.  The twentieth century continues along the same lines: the New Deal rescue of capitalism [after Coolidge's failure of Free Market capitalism], direct government investments in industry during the Second World War, the highway-building of the Eisenhower era, the military spending responsible for our current dominance of aerospace, computer, and software industries.  For some reason these facts are not mentioned in current debates over economic policy.

The period of America's greatest economic supremacy -- from the early 1950s until the late 1960s -- was marked by high income taxes, vigorous antitrust enforcement, and unprecedented levels of union membership. [emphasis added]

The idea of the marketplace as the fullest expression of democracy has a strong appeal, but it assumes that economic motives are the only human motives.  If money making were all that mattered, there would be no nurses, teachers, poets, farmers, soldiers, police officers, or professors of medieval literature.  The minimum wage, the abolition of child labor, and the creation of worker safety and environmental laws all express moral impulses that the market has neglected.

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