FREE MARKETS AND FREE SOCIETY

 Is there, indeed, a correlation between free markets and free society, at least in the way free societies start, that is, with a free market? This point is not altogether facetious. My central point running throughout this section that free market, in today’s regulated capitalist economies, is wishful fiction at best, on the part of the champions of laissez-faire, does not skip over the well-established fact that all these regulated economies had started with a much greater degree of market freedom than the society would later allow. Perhaps, the celebrated European socialism could not have happened without its original struggle against the heartless capitalist, exploiter of the masses, maximizer of profit at any cost, le bête noire of Karl Marx, Pierre Joseph Proudhon and Charles Dickens (may the countless hosts of fighters against the evils of unrestrained capitalism forgive me for picking out just these three!)?

The main proponent of the market freedom equals social freedom theory is Milton Friedman, but the roots of this theory have been observed by the theory’s proponents in much earlier times.

World’s GDP per capita shows rapid upsurge since the beginning of the industrial revolution. Theorists and policymakers in predominantly capitalist nations have emphasized capitalism’s ability to promote economic growth, as measured by the GDP, capacity utilization or the standard of living. This argument was central to Adam Smith’s advocacy of letting a free market control production and price, and allocate resources. Many have noted that the increase in global GDP over time coincides with the emergence of the modern world capitalist system. While measurements are not identical, proponents argue that increasing per capita GDP is empirically shown to result in improved standards of living, such as better availability of food, housing, clothing, health care, reduction of working hours, freedom from work for children and the elderly. Proponents also believe that capitalist economy offers greater opportunities for individuals to raise their income through new professions or business ventures than other economic forms. They believe that this potential is greater than in traditional feudal or tribal societies, or in socialist societies.

Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Hayek coined the term catallaxy describing what he saw as the phenomenon of self-organization underpinning capitalism. From this perspective within the process of self-organization the profit motive has a key role. From the transactions between the buyers and the sellers price systems emerge, and the prices serve as the signal as to the urgent and unfilled wants of people. The promise of profit gives entrepreneurs incentive to use their knowledge and resources to satisfy these wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.

Milton Friedman has argued that the economic freedom of competitive capitalism is a requisite of political freedom. Friedman argued that centralized control of economic activity is always accompanied by political repression. In his view transactions in market economy are voluntary and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminishes the power to coerce. This view was allegedly presaged by Hayek and Keynes, both of whom may have pointed out that capitalism is vital for freedom to survive and thrive. (Summarized from Wikipedia.)

Later on, I will explore this web of connections more thoroughly, checking out whether Hayek and Keynes (the latter in particular) have indeed been precursors of the Friedman view, rather than simply put forward something that can be subjected to a variety of interpretations.