The market economy is akin to nature. Government intervention in the market is comparable to the destruction of the natural environment and should be avoided. Nature untouched by the human hand is great. The fury of the elements dwarfs human power. Essentially, that is the opinion of free-market advocates, who may be described as “economic ecologists.”
On the other hand, Keynesian economists say the uncontrolled market is plagued by imbalances and instability. In their opinion, government intervention in the market through fiscal and monetary policies is essential to reduce unemployment, curb inflation, correct trade imbalances and tame boom-or-bust business cycles.
Free-market advocates criticize Marxist and Keynesian economists for being arrogant and abusing intelligence. They argue that it is best to leave everything to the market, while recognizing the limits of human intelligence. In their opinion, an almighty government, an imaginary goal, should not be pursued.
A laissez-faire market economy is said to have existed in England between the 1840s and the 1870s. John Maynard Keynes’ booklet warning against laissez-faire was published in 1926. Three years later, Wall Street crashed, and the Great Depression set in in the early 1930s. After that, industrial countries of the world implemented Keynesian economic policies until the mid-1970s.
It was not until the 1980s that laissez-faire policies were revived in the United States and Britain under the leadership of then President Ronald Reagan and Prime Minister Margaret Thatcher.
John Gray, a British historian specializing in political thought, does not regard the free market as natural. In his book “False Dawn,” Gray wrote: “The free market is not, as New Right thinkers have imagined or claimed, a gift of social evolution. It is an end-product of social engineering and unyielding political will. It was feasible in 19th-century England only because, and for so long as, functioning democratic institutions were lacking.”
Gray added, “The implications of these truths for the project of constructing a worldwide free market in an age of democratic government are profound. They are that the rules of the game of the market must be insulated from democratic deliberation and political amendment. Democracy and the free market are rivals, not allies.”
Free-market advocates talk about “reform” when they intend to create a laissez-faire economy. But free-market reforms tend to benefit only a small number of the privileged. The majority of people, the poor, suffer from such reforms.
High growth in a free market could increase the income of the poor slightly. However, market freedoms are bound to cause the income gap to become exceptionally wide, as occurred in the U.S. and Britain during the 1980s and 1990s. The poor are likely to have felt poorer since the feeling of wealth and poverty is relative. Thus a democratic vote is certain to reject market freedoms.
Few predicted problems stemming from market freedoms — such as a widening income gap, deterioration in the quality of public health care and education, and the decline of the traditional family system — while laissez-faire reforms were being implemented in the 1980s. Thatcher became the icon of the global market economy.
Gray also wrote, “In the normal course of democratic political life, the free market is always short-lived. Its social cost are such that it cannot for long be legitimated in any democracy. This truth is demonstrated by the history of the free market in Britain.”
As if to prove the truth again, the Labor Party won a landslide victory in the British general election in May 1997. The majority of British voters rejected Thatcherism, or the free-market economy, because it was incompatible with democracy.
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