Swans Commentary » swans.com January 30, 2012  



Peddling The Ideal Of Free Markets


by Harvey E. Whitney, Jr.





Inflating Reagan's Legacy

(Swans - January 30, 2012)   For a party that is diametrically opposed to inflation, the GOP never tires of inflating Ronald Reagan's legacy and accomplishments. I got a kick observing the Iowa Republican presidential primaries as the candidates sought to lay claim to Ronald Reagan's legacy by either proclaiming the evils of government or trying to cast themselves as "true" conservatives. I find it strange, considering that I was only a teenager when Reagan was in office, that the candidates, much older than I am, should have a more obscure memory of Reagan than I do. Reagan first and foremost worked with Democrats who controlled Congress during the 1980s -- remember, deregulation would not have happened under Reagan without a compliant Democratic Congress -- and only rarely was he polarizing. Nevertheless, the image Reagan cultivated of the black welfare queen as a picture of what was wrong with government was one of the lowlights of his presidency as well as his initial nonchalance towards the escalating AIDS crisis (Reagan's nomination of arch conservative Robert Bork to the Supreme Court was also a particularly divisive episode during the Reagan era). But the most disturbing chatter that I've heard from most of these candidates on the campaign trail emphasizes the sanctity of the free market, even as the likes of Newt Gingrich rightly criticize Mitt Romney's record at Bain: a record that involved making investments in companies that could turn a profit by laying off workers.

Freer Markets, Acceptable levels of Unemployment

The problem of this election year is twofold. First, the presidential candidates (this includes the current White House incumbent) are all running along the lines that the freer the markets, the better the economy: that basic government controls, such as environmental and financial regulations and what government spends to keep a level playing field and protect consumers, are the sources of our economic woes. While Gingrich and Obama operatives have tried to invoke Romney's record at Bain (as well as his comments about enjoying having the ability to fire employees at will) to derail his candidacy and show that he is out of touch with people struggling to find work in this economic environment, they make such criticisms out of convenience and not for any deep felt concern for the American worker. President Obama has shown that he will gladly provide tax cuts to corporations and the wealthy as long as he can obtain extensions in unemployment benefits. But this merely puts a longstanding problem on hold without addressing it with any seriousness: that businesses are intent on maintaining low hiring levels while still being given tax breaks.

In essence, both parties want to give businesses, corporations, and the wealthy carte blanche in tax cuts and tax loopholes for the sake of encouraging them to hire workers but as we have seen in the previous Bush administrations, businesses, corporations, and wealthy individuals did not necessarily feel the need to invest in new workers even if they had the capital. They could simply sit on the capital that they had saved or accumulated through these tax incentives or hire workers who would work at far lower wages than Americans (i.e., foreign workers in countries that have far lower minimum wages). What must be addressed in this election season if it is to have any import is why businesses have come to view American workers an expense and not an investment.

Second, all of the candidates, in their fervor to mandate austerity measures to rehabilitate the economy, still conceive of capitalism as a well-built mechanism that has time and time again, under the right conditions, brought about economic equality or has provided the best outcomes to the greatest number of people. This utilitarian conception of the market is without much in the way of historical exemplar or anything conclusive in its favor. The post-World War II boom of the American economy was largely aided by the reality of a depressed Europe whose industries were still licking their wounds from a war that had barely touched America's shores. America's prosperity did not in and of itself raise the prosperity of post-war Europe but was rather dependent upon the lack of industrial competition in not only Europe but also Asia after the war. Because American industries had little global competition after the war, they flourished.

During the Reagan boom, tax cuts did increase consumer spending, which in essence allowed the economy to grow, but workers still lost their jobs because Reagan era policy allowed companies to relocate overseas to lower production costs. Companies like General Electric, with whom my mother worked for over twenty years, closed their factories stateside to move production overseas to prosper. So while there was prosperity during the '80s, those workers who lost their jobs when manufacturers went overseas did not prosper.

The Clinton boom really had nothing to do with his economic policies (and recall that Clinton did raise taxes), and while those policies were business friendly, the dot.com revolution was the real engine of economic growth, growth that eventually came to an end because tech enthusiasts and speculators thought that online businesses would eventually put out of business brick and mortar businesses and lead to indefinite growth. But such enthusiasts never anticipated the response of some brick and mortar businesses to claim a presence in cyberspace to shore up their bottom line. While we know well of the casualties of the dot.com boom, some businesses (Barnes and Noble immediately comes to mind to me as a retail unit that thrived during the dot.com boom) weathered out the increased competition from online retailers that had never established a longstanding brick and mortar presence.

But considering that this was also a boom era, there were still losers: workers who did not benefit from the boom.

Many people tend to forget that increasing automation went along with the dot.com era of Internet growth: software could be counted on to do the work of humans. I never really thought, when I was in graduate school in the mid-90s, that telephone registration with an automated system was groundbreaking but it was, and the human cost was that the university no longer had to hire part-time workers to register students in person. We often tend to forget that with any economic boom (and technology of some kind is usually at the center of it) that while it may create a new class of laborers or specialists who work with that technology (recently, economists have referred to them as "knowledge workers") it thereby makes another class of laborers obsolete. Not everyone during the Clinton era benefited from the dot.com/automation boom and the digital divide still exists, as it existed then, in underdeveloped countries and among the poor in developed countries who do not have access to high speed connections or at the rudimentary level, knowledge needed to operate a computer.

Unfortunately, the presidential candidates and policy makers in Washington have bought the suggestion that there is not only an acceptable level of unemployment but that such a level can be raised. Back in the day, 5% unemployment was viewed to be synonymous with a healthy economy. Now it appears that the political establishment wants to settle on 7 or 8%. This is perhaps why Washington has entirely given up on achieving a bipartisan approach to solving the jobs crisis and instead is falling back on theoretical arguments that view freer markets and greater austerity measures as magic bullets for bringing about an acceptable level of unemployment. So we are looking at a gloomy picture of capitalism: that it cannot or should not try to achieve full employment.

The market as mechanism metaphor simply seems to be a timeworn cliché that cannot be extended in any practical sense. We would not allow a driverless lawnmower, no matter how efficiently it operates, to run down a hill into a crowd of people. Likewise, we should not allow a market economy to operate according to its own whims -- there would inevitably be human costs.

In a free market. . .

In a free market (which itself is an abstract idea), competition would not exist. Government, stripped of its power to make the market competitive and humane towards its consumers, would allow monopolies to emerge. Monopolies would then seek to stamp out competition not through the quality and affordability of their products or services but by the power and capital that they have already amassed. Think about it. The independent coffee shop, for example, has become nearly extinct these days because companies such as Starbucks have the capital to build cafés nearly anywhere, even in places where profit is hard to come by.

In a free market, industry and business can without scrutiny or limitation curry favor with government to secure advantageous policies, often at the expense of the voter and our notion of representative fairness. Campaign donations from big business, we have learned, pave this road to inequality.

In a free market, merit is never an asset in and of itself. While the talk of the presidential candidates with respect to jobs has been that workers need more training to obtain the jobs that do exist (Gingrich's solution to black unemployment has been for African American children to take janitorial jobs to learn the values of work -- as if they are naturally allergic to work as opposed to children of other races), labor markets tend to be far from upholding the ideal of merit or competency. The specter of networking diminishes the importance of merit because it places more importance upon one's social contacts than actual skills or knowledge. I always like to point out that at my undergraduate alma mater, most of the kids already came from wealthy families that made their children get a college degree as a prerequisite for joining the family business or getting an invitation to join the family's networking circle of well-heeled or well-connected social contacts.

In a free market, a responsibility to society is always suspect because it is assumed that such responsibility must always decrease profits. In a free market, businesses would be even more inclined to pollute our air and water often because they would not be held liable for any damages or loss of life such practices would inevitably cause.

We have much to consider when these presidential candidates peddle the notion of free markets, as if it is a virtuous set of conditions and relations that would benefit everyone or the greatest number of individuals. The current economic recession, instead of giving our leaders a chance to re-evaluate and correct exuberant government favoritism toward businesses and corporations, has instead generated an unsubstantiated need for more laissez-faire economics. The results of the upcoming election will undeniably show whether we have learned anything about the consequences of free-market capitalism, the causes of the recession, and whether there is a viable alternative to viewing human beings as disposable and social responsibility as optional.


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About the Author

Harvey E. Whitney, Jr. is a doctoral candidate in history at Florida State University and teaches medieval and modern global history at Howard Community College in Maryland. To learn more, please visit his Web site at http://hewhitney.com/.   (back)


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Published January 30, 2012