IF ONLY THE MARKET WERE FREE
Critics of the free market like to point to “market failures” to prove that the freedom of the market must be limited by government intervention. There’s one enormous flaw in this argument; the market is not free. Since government was invented, there has always been economic intervention. Examining each and every so-called failure, it soon becomes obvious that it was caused by the intervention of the powers that be. However, at this point, I will try to show first what a truly free market would be like, and the many benefits it could bring us.
In a free market there would be no interference with our personal choices, or our voluntary economic exchanges, trades, or agreements with other people. There would be no price controls, wage controls, interest controls, rationing, protective tariffs, or taxes designed to influence our economic choices. There would be no involuntary transfers of wealth from taxpayers to politically favored groups or causes.
And above all, in a free market, there would be no interference in our choice of what to use as money and there would be no government control of the money supply. Money is indispensible for the functioning of the specialization and trade of our complex economy, which is the only way that billions of people can survive in this world. Since the dawn of civilization, governments have taken control of the definition and supply of money in order to tax us by stealth.
The only involvement of government in a free market would be to protect us from robbery, theft, embezzlement and fraud. The government control of the money enables government to engage in all of these, and influences every economic choice we make.
SO HOW WOULD THE FREE MARKET WORK?
The fundamental rule in a free market is that every exchange is voluntary for each party to the exchange, with no coercion by either party or any third party.
Since each party makes the exchange voluntarily, there is one unavoidable conclusion; each party wants what he gets more than what he gives. That means that each party to the trade profits by the exchange.
This brings up a second unavoidable conclusion; any outside intervention in this exchange can only reduce the satisfaction of one or both parties to the exchange. The free market gives each of us free choice to get the most of what we want within our means.
WITH WHAT RESULTS?
The Free market directs every aspect of production to give consumers what they want most, within their means. Ever changing prices direct the constantly changing allocation of materials, capital and labor; industries and methods and products and services keep changing to adapt to the changing wants of consumers. Each worker adapts, learns new skills, changes jobs, and increases his income by adapting to consumers’ wants.
WHAT ABOUT MONEY?
From the dawn of history, people have selected the stuff they use as money for convenience and reliability. The end of the free selection process has everywhere brought us to the selection of precious metals, usually gold, silver, and copper. These metals were usually formed into coins to assure a uniform weight of metal.
Metal coins worked reliably in the market until governments took over the business of minting coins, and then found ways (clipping and debasing) to tax their citizens by stealth, by reducing the value of each coin. Money became even less reliable when Banks substituted banknotes for coins and then proceeded to issue extra (counterfeit) banknotes. Since then, the amount of money in circulation has always varied unpredictably, making the value of the money unreliable.
But in the free market, counterfeiting or debasing money would be considered theft and not tolerated. The money would be reliably stable, unadulterated at the whim of governments or bankers.
This would drastically change the business of banking. Banks, unable to earn money by collecting interest on counterfeit money, would simply be in the business of transferring ownership of the money stored in their vaults. They would have to earn a living by charging fees for the safe storage of coins and fees for the bookkeeping chore of recording the transfers. And you and I would no longer share in the loot from fractional reserve banking. We would instead pay for the safe storage of our money and for the convenience of paying by check, banknote, debit or credit card, or electronic transfer, rather than carry coins for all transactions.
The financing of business and personal loans would also be very different in a free market. Money for loans would come from savings built up by people living well within their means. Borrowers would have to pay sufficient interest on the loan to induce people to put off consumption in order to save. Money could no longer be created out of thin air for a loan, and thus loaned at an artificially low interest rate.
In the free market, loans would not affect the amount of money in circulation, as the lending of counterfeit money would. The lender abstains from buying now so that the borrower can spend now. Thus the value of money would be much more stable and reliable than in the counterfeit economy.
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