At the Federal Trade Commission Building in Washington, D.C. are two large statues titled “Man Controlling Trade.” They were commissioned in the late 1930’s near the height of America’s love affair with socialism and depict muscular men controlling the powerful draft horses of the market for the “common good.”
The myth that the state can control the market and make it produce what bureaucrats want and reward those whom bureaucrats deem worthy is ancient and harder to kill than zombies. Even in the 1930s intelligent people understood that free markets create wealth (reduce poverty) in almost miraculous ways. Marx admitted as much. But markets don’t make everyone equally wealthy, as the envious demand, and they don’t create the utopias of socialist fantasies. Of course, neither does socialism.
So, many people dream of harnessing the wealth generating power of markets to the socialist’s fantasies and having their Kate and Edith, too. The problem is that the power of the market lies in its being free, much as Samson’s strength was in his hair. Markets have always existed. Even the USSR had them. They have rarely been free. Freedom empowered existing markets in China to lift half a billion people from starvation poverty in a single generation.
Free markets can accomplish such miracles because prices in them reflect real supply and demand. They reward producers who meet the demands of consumers and punish those who fail. That keeps waste to a minimum. Before the advent of capitalism in the Dutch Republic of the 16th century, governments severely restricted markets through state-created monopolies, barriers to trade and guilds. That’s why humanity remained as poor as Tanzania for 10,000 years.
Of course, the state must punish those in the market who steal, defraud, enslave, injure or murder others. Markets can’t exist without those general rules. But when the state goes beyond its minimal role to “harness” the market as a farmer would a plow horse, it’s no longer free. Prices don’t reflect supply and demand and waste destroys most of what is produced. That’s the main reason the USSR and China under Mao remained so poor for decades. “Harnessing” markets is like cutting Samson’s hair; the power dissipates.
Senator Marco Rubio understands none of this. In a speech he made recently at the Catholic University of America, he called for “…harnessing and channeling that growth to the benefit of our country, our people, and our society. Because after all, our nation does not exist to serve the interests of the market. The market exists to serve our nation and our people.”
The fallacies in Rubio’s speech are packed tighter than skinny jeans, so I can only deal with a few. Let me start with the one that says markets are a different entity from the country, people and society. The “market” is us. No one in the country exists outside the market. We’re all producers of something and consumers of something. The market is merely a name we give for the process of us getting together to serve each other. So Rubio says that we don’t exist to serve each other?
Rubio made some good points:
The economic numbers tell the tale. Over the last forty years, the financial sector’s share of corporate profits increased from about 10 to nearly 30 percent. The share of those profits sent to shareholders increased by 300 percent, while investment of those profits back into the companies’ workers and future dropped 20 percent. Last year, corporations on the S&P 500 spent over a trillion dollars buying back their own shares. To take them at their word, these are the largest corporations in the world collectively saying, “We don’t have anything to invest in.” This is what it looks like when, as Pope Francis warned, “finance overwhelms the real economy.”
He says these practices cause severe problems: “The numbers bear witness to the devastation that follows. A decline in marriage, childbirth, and life expectancy. An increase in drug dependency, suicides, and other deaths of despair.”
His solutions are changes in the tax code to encourage investing in expansions rather than stock buy backs; a cooperative for investing in rare earth minerals; an industrial policy to motivate investments in aerospace, telecommunications, autonomous vehicles, energy, transportation, and housing; reforming the Small Business Administration; and providing workers with paid parental leave.
Rubio should know that we haven’t had free markets in the US since FDR became president. Carter and Reagan did not deregulate the economy and create wild west capitalism as the media propaganda wants us to believe. They merely ended FDR’s price controls. Regulations on all industries have exploded since then. The problems that Rubio sees are real, but the non-existent free market didn’t cause them. Massive increases in regulations and Fed monetary policy are the criminals.
Most disturbing to me, however, is Rubio’s assumption that bad government policies can turn people to evil and good policies can perfect us. That assumption hands the victory to socialists without a fight. For if the state can perfect people through wise policy, then we don’t need Christ or Christianity and the state needs to control every aspect of our lives to make sure it perfects the people. Socialists fabricated that nonsense in the “Enlightenment” to justify an all-powerful state.
Senator Rubio needs to learn real economics (the Austrian kind) and economic history, but more than anything he needs to get back to his Christian roots and understand that only God can perfect human nature and the state is not god.