Monday, July 19, 2010

What free market?

What free market?

Congress has finally passed a financial overhaul bill. It has created a number of new bureaucracies and tightened some rules to rein in the greed of bankers and investors. Time will tell whether this new bill will do what it promises to do, namely to prevent future economic crises like the present one.

Conservatives disapprove. The large middle of the political spectrum congratulates itself. There was a great deal of handshaking, backslapping and big smiles in Congress when the bill finally passed.

The whole thing leaves us with a big question: whatever happened to the free market? For years now we have heard that unbridled capitalism, privatization -- allowing for-profit businesses to do the job of government -- and individual initiative will make us all happy and rich. The financial overhaul flies in the face of that ideology: it limits the suicidal impulses of individual bankers and investors and tries to protect the public against the workings of the free market. This bill says loud and clear: The free market without tight government supervision is a threat to our well-being.

So maybe the free market isn’t such an unqualified blessing after all? People in other countries have known for a long time that the free market preaching cannot be trusted. The United States has forced countries in Latin America, for instance, to open their markets to imports from the United States. Haiti was forced to import its rice from the US. That imported rice was a lot cheaper than what local farmers could produce. US farmers undersold the farmers in Haiti and put them out of business. Those Haitians were forced to migrate to the big cities in order to eke out a meager living in the slums of Port-au-Prince. US farmers were able to undersell Haitian farmers, in part, because the US government subsidizes rice farmers at home. Giving subsidies clearly interferes with the market mechanism. It was clear all along that the free market was a supposed blessing in Haiti but that, domestically, we didn’t really believe in it and therefore subsidize our rice farmers.

The same thing happened with export of corn to Mexico. American farmers get money from the government so they can sell their corn cheaply in Mexico which was forced to open its markets to American grains. The results were similar to those in Haiti: increased poverty.

The financial overhaul bill coming on top of the massive government bailout of big banks and large companies like GM should lay to rest any belief that the United States is committed to the free market. It is committed to the free market as long as it benefits the rich. The commitment to the free market may also be used to beat up on the poor as it did in President Clinton’s “End to Welfare as we Know it” passed in the 1990s.

The next time a large corporation or the government starts talking about the free market, listen closely to their plan. You can be sure that someone is going to lose out. How else can they make their big profits?