Free Market Fundamentalist

“Free market fundamentalist.” Funny little phrase isn’t it? I heard it on the radio this morning.  It co-mingles the invisible hand of God and the invisible hand of the free market – as if the universe had been created by the great clock-maker who wound it up and walked way. Adam Smith was actually trying to apply this image of natural forces to his thoughts about commerce.

Almost twenty years ago, I tried participating in my local government. I had just bought a house in a new development and discovered the city planners had done nothing by way of preparing for the population boom the building permits they granted would eventually cause. This was bad, but not enough to draw me out beyond my day-to-day concerns of providing for my very young children. Then I discovered a developer was applying for another permit for new construction, which would further burden the insufficient infrastructure of the area. They must have known residents would resist their application because they complied with the public notice requirements in much the same way a mime would entertain on a darkened stage.

Nonetheless, someone noticed and started talking about it. Within a day, a clear majority of the affected residents had signed a petition to block the permit. Remember, this was pre-internet. People walked the neighborhoods, knocked on doors and talked about the issue. Residents packed the planning commission’s public hearing; chiefly raising objections about the developer’s plan to extract value from the land without contributing to the infrastructure changes they necessitated. The residents were accused of being greedy and classist.  Their objections were dismissed. The planning commission approved the permits as if no discussion had taken place, no petition submitted.

I found the whole process discouraging and confusing. For years I thought perhaps I was actually viewing the problem from a greedy and classist perspective. The developers’ spun the homeowners’ objections as a fear that their high-density ‘affordable’ housing plans would lower existing home values. Now I understand this to be a classic example of projection. Had they not feared a reduction in home values themselves, they would have developed a balanced distribution of luxury and affordable housing from the start. I had taken the children with me to the hearing. Afterwards, I felt relieved they were too young to understand how democracy failed to work in that instance.

I was at the time a strong believer in free-market capitalism. What I didn’t understand at the time what that free-market capitalism is a myth. Individuals do not make informed economic decisions based on self-interest. First, individuals are rarely aware of all of the details surrounding their economic decisions. Second, individuals are sometimes coerced into making economic decisions against their self-interest. Finally, because we are human, we sometimes make economic decisions to benefit a third-party rather than ourselves.

I had also never considered capitalism a threat to democracy. For some, this threat is so obvious it does not bear discussing. For others, the discussion itself is threatening.  Capitalism is sacred and patriotic and I might just be a communist if I suggest otherwise.

Capitalism is a huge threat to democracy. For-profit entities must try to remove all barriers to profit maximization. Democratic governments, by nature, to protect constituents, regulate commerce and those regulations create barriers to profit maximization. The tension is built in. Unfortunately, economic power trumps populist concerns; most especially because economic power can be used to discredit or mask populist concerns.

The inertia of economic power is probably the reason we still talk about “invisible market forces” causing market corrections and assuring free trade. If you had considerable economic power that depended on the majority of people believing you deserved that power wouldn’t you invest in educating the population about the system (the science of economics) that affirms your economic power as justly conferred to you?

Advertisements