The Debilitating Myth of the 'Free Market' Alternative
by Robert Freeman
Common Dreams: 8/24/09
When choosing a pet, do you prefer unicorns or bunnies? I prefer unicorns
because, though bunnies are undeniably snuggly, unicorns have a much better
color. That lustrous pink fur beats out dull brown every time. And if you
can get one with wings - well, how can floppy ears compete with that? It
isn't even close, is it?
This is something like what the healthcare debate is about. It's not about
real alternatives. Rather, it's about the choice between a realistic
alternative that can actually extend coverage while lowering costs - the
public option - and a fantasy: the "free market" option.
And health care is only the most readily available of industries that
illustrate our fatal fetishistic fixation with the "free market" myth. Our
thrall to that myth makes it impossible to have a rational debate about
almost any economic issue. For vast swaths of the U.S. and global economies
bear as much resemblance to "free markets" as do unicorns to real pets.
There is, for example, no free market in health care. Most markets for
health insurance in the U.S. are dominated by one or two players. They
easily collude to keep prices high, choices low, payouts at a minimum, and
new competitors from entering. This is exactly what both common sense and
economic theory would predict when few firms dominate a market. Economists
call it "oligopoly."
Hospitals operate as oligopolists as well. I live in a small town in
California. It doesn't matter to me that there are many thousands of
hospitals across the country. The "relevant" market for my health care
needs extends only a few miles. For most people in America, there are at
most two "competitors" in the hospital delivery business, if that. This is
not a competitive market. The lack of true choice and the vendors'
incentives and ability to collude, make a mockery of the idea of "free
markets."
Or consider the pharmaceutical industry. Though there are many firms, the
vast majority of the prescriptions, sales, R&D, and profits are controlled
by very few companies. In many critical drugs, because of our patent laws,
there is only one provider. And George W. Bush passed a $700 billion health
care law that specifically forbade the U.S. government from using its buying
power to secure lower drugs prices for government purchases. So much for
the rigor of competition.
There is simply no effective competition in these markets and the results
show it. The U.S. spends twice per capita what other industrial nations
spend on health care with inferior outcomes. Adam Smith, the founder of
modern economics, foretold this when, in 1776, he wrote in The Wealth of
Nations, "People of the same trade seldom meet together, even for merriment
and diversion, but the conversation ends in a conspiracy against the public,
or in some contrivance to raise prices."
So what is the point in even arguing about "free market" alternatives? It
is like arguing for unicorns as pets. It is fantasy. When raised to a
matter of policy prescription, it is worse. It is social psychosis.
The fact of such social psychosis is not an accident either, and it, too,
derives from the same narrow ownership and control of a vital industry.
Only thirty years ago, the media industry contained over 50 independent
companies delivering television, radio, newspapers, and magazines. Today,
there are five giant conglomerates that control more that 80% of all the
media sales in the country.
These media conglomerates are owned by a very small, very wealthy elite
whose interests lie not in promoting democracy in political markets or
competition in economic ones, but precisely in preventing them. Their aim
is to divert attention from the staggering concentration of wealth at the
top of the economy and the steady impoverishment of all the rest. They tout
the sham rituals of democracy such as town hall meetings precisely to
disguise the takeover of real government by large corporate interests.
Meanwhile, the constitutional protections of civil liberties for the people
are quietly, slowly, relentlessly dismantled.
The power and collusion of the media oligopoly were never better illustrated
than in the run-up to the Iraq war. We now know that all of the putative
justifications for that war were false. None of that mattered. The
neo-conservative political elite and their wealthy capitalist masters wanted
a war so they manufactured one with the help of their hirelings in the
mainstream media. Truth had nothing to do with it. Indeed, alternative
voices, those that actually spoke the truth, were ruthlessly, viciously
mocked and suppressed.
The entire country was frog-marched into a nakedly illegal colonialist
takeover of a sovereign country that had not attacked the U.S., had not
threatened to attack the U.S., had no interest in attacking the U.S., and
had no capacity to attack the U.S.
Such is the power of controlling one of the most influential industries in
the world, that you can, at will, manufacture a war that will expend
trillions of dollars, raise the price of oil, and increase government
deficits - all to your benefit. Or, in the case of health care, that can
elevate moronic screamers to the level of cultural prophets or anoint six
senators representing 3% of the country to prevent real competition in
markets that you also control.
This narrow control of critical markets extends far beyond just the health
care and media industries. It applies to industries across the entire
economic spectrum.
There are only a handful of companies selling soda pop. There is
essentially only one company selling desktop operating systems. Two
companies sell more than 90% of all batteries. Three companies sell over
80% of the beer, cigarettes, and breakfast cereals consumed nationally.
Only two companies in the world sell large airplanes for commercial travel.
Only two companies make the microprocessors that power PCs or the switches
that power national-scale telephone networks.
In watches and clocks, railroad engines, jet engines, integrated oil
production, sporting goods, musical instruments, motorcycles, man-made
fibers, tobacco, music, wireless phones, chemicals, vitamins, industrial
process control machinery, satellites, pharmaceuticals, networking
equipment, and many other industries, fewer than six firms control virtually
all of the entire world's production!
Such levels of "industrial concentration," as it is called, have never
existed before in the history of the world. It reflects the consolidation
of the world's wealth into the hands of a very small plutocratic elite which
manage the world's commerce among themselves, for themselves. And this
concentration is growing rapidly. This is part of what the recent trend
toward "globalization" is all about.
The big players in major countries have "gone global" by buying up or
shutting down smaller players in other countries. In 1973, $75 billion was
spent by international companies buying up other companies that competed
against them in foreign markets. By 1993, that figure had soared to $500
billion and by 1999 had risen still another five-fold, to $2.4 trillion. It
continues to increase still today, creating a global marketplace in which
more and more industries are dominated by fewer and fewer larger and larger
companies.
The result is an extraordinary transfer of wealth and income from consumers
and the middle class to monopoly producers and their owners. In 2007, the
top 1% of the U.S. population owned 60% of all business assets. Meanwhile,
the bottom 50% of the population owned a mere 2.5% of such assets. The
bottom 40% owned nothing. U.S. income distribution has become more unequal
than at any time since 1928, just before the Great Depression. In the ten
years between 1996 and 2006 two thirds of all the growth in the entire U.S.
economy went to the top 1% of income earners.
This is far more akin to a feudal world than it is to "free market"
capitalism. In this, the real world, a very few ultra-rich families - think
of the Bourbons, the Tudors, or the Hapsburgs - own everything, including
the government, and everybody else owns nothing, save the labor they must
render to their wealthy overlords in exchange for the right to live.
This has profound implications for the efficiency of the economy. There is
simply not enough purchasing power in the hands of consumers to clear
markets of goods. In the past three decades, this shortfall in demand has
been compensated for by the government running massive budget deficits. The
national debt has grown 10-fold in the past 30 years and is forecast to
double again in the next ten. The burden of paying for that debt will
enslave working Americans for generations to come, effectively, forever.
And as much as all of this is a matter of economic concern, it has grave
implications for the viability, indeed, the survival of democracy. When
extreme size becomes extreme wealth, and when global economic power is
exercised as preponderant national political power, how do we insure the
survival of democracy?
Democracy depends on "one person, one vote". The motto for monopoly
capitalism might well be, "One dollar, one vote." The two institutions -
democracy and monopoly capitalism - are incompatible. The one will
inevitably destroy the other. This is what Supreme Court justice Louis
Brandeis meant when he wrote, "We can either have great concentrations of
wealth or we can have democracy. But we cannot have both."
Large corporations are able to exercise extraordinary political influence
through campaign contributions, lobbying, and control of the media. By
these means, they are able to have legislation enacted that favors
themselves over the public: trillions of dollars sluiced to themselves
through "bailouts;" guarantees against having to actually compete;
differential tax rates on capital versus labor; environmental regulations
that go un-enforced; etc. This, of course, only further accelerates the
concentration of private wealth and political power into narrow hands with
the consequent further erosion of democracy.
How do we balance the democratic rights of individual citizens and the
economic rights of small consumers when political and economic giants stride
the landscape, concerned only with their own self-aggrandizement and almost
inevitably hostile to the interests of the larger public?
In the case of an oligopolized media fomenting ignorance, hatred, and
resentment in the place of knowledge, discourse, and deliberation, how can
we even know what we need to know to operate a civilized country? There can
be neither informed consumer choice in economic affairs nor consent of the
governed in political. And that is precisely the intent.
Since the answer to these questions will effectively decide the future of
democracy, it may well be the most important economic policy question facing
America today. Of course, Americans love everything free: land of the
free, home of the brave; let freedom ring; live free or die; buy one get one
free. That's why it's so hard to shake the illusion of free markets: we've
centuries of indoctrination into the idea of their existence as synonymous
with our own. Myths die hard, the more so, those at the heart of our
cultural identity.
But we expect children to grow up, to stop believing in unicorns. We need
to hold the same standard for ourselves as citizen-adults. We should use
the chimera of "free markets" in health care to keep the spotlight on all
such industrial concentration. It is not glamorous or sexy, like unicorns,
but it is ever so much more real and ever so much more at the heart of our
nation's survival.
Robert Freeman writes on history, economics and education. He can be reached
at robertfreeman10@yahoo.com.
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