No economic system in history has ever been as successful at creating wealth, encouraging trade, and creating prosperity within the population, as the Free Market. The exchange for greater benefit is a natural instinct of humans, an instinct which needn't be taught. It just happens. A child may trade a ball for another child's book, and because of inequality of wants, one values the book more than the ball, therefore creating value, and leaving two people with more wealth than they had before the trade, a win-win situation. And so this system of free trade goes on, to grocery stores, corporate boardrooms, and the garages of mechanics. The Free Market is what modern civilization is built upon, and we can, and should, continue to rely on it in the future.
What Makes A Free Market?
A free market , put simply, is a market of any size that is running with zero intervention from any third party. For example, where there is government taxation, tariffs, minimum wage, welfare/redistribution, or any other economic intrusion, it is impossible for there to be a free market. A free market also is not present if force is used to make profit, as the trade is then involuntary and therefore does not generate wealth for both parties, but instead for only one, a win-lose situation. Currently, on our planet anyway, free market does not exist, except for in some owner-less territories. A free market is better for everyone, and here is how:
The Free Market Is Economically Superior
Monopolies Cannot Occur
Many People Believe that in a free market, monopolies will dominate an industry. They believe that the monopolies will raise prices and rip-off the consumers. This cannot occur in a truly free economy. If their are many big companies all competing in one industry, automatically prices are driven down through competition because if they do not lower prices in comparison to each other, they will lose the business of the consumers and therefore suffer losses. In order for a monopoly to occur, a company must buy out another, which can only happen if they have enough funds to do so. To get these funds, the company must either raise prices on all of their products, or reduce payouts to its shareholders, etc. Both of these options immediately put the company in a dangerous situation as they will begin to suffer losses. Lets say that the company does successfully buy out the other, well, now there is only one less competitor and still many left to be bought out. Because of this, the other companies are worth more, and to buy them means to put yourself into an even more drastic competitive disadvantage. The end result of this plan is a mountain of debt for the company, and the eventual collapse of it. Monopolies have only ever occurred when governments partner with private companies in order to use law to restrict other independent companies. This has happened many times, especially within the car industries and the healthcare industry.
Collusion Cannot Occur
Collusion is when all the companies in an industry band together and agree to raise their prices at the same time. This means that consumers have no choice but to buy products at an unreasonable price. If collusion were to occur, each and every company still has an incentive to drop just a little bit below the set collusion price. If one company does so, they are still making a lot of money, but they will become the dominant company in the industry and will take all of the business away from the other competitors. When this happens, all of the companies will immediately begin to collapse their prices, and resume fighting each other for the consumers business. Throughout history, where collusion has taken place, this has always been the case. The only time where collusion has successfully taken place and customers have been robbed, is when governments bail-out important companies and allow them to continue. This, however, is not a free market system.
Many More Reasons
The free market is economically superior in many other ways, such as the lack of a minimum wage, therefore making it easier to afford to pay workers, and allowing for the creation of more jobs, meaning less unemployment. The lack of government-corporate partnering means that prices will only ever be as high as is affordable by the companies, meaning that customers will always be getting the best value for their money. In a free market, the best interests of a company, is the best interests of the consumer.
The Free Market Is Morally Superior
Many people say that a free market is all about greed, and the hunger for money and power, however, these statements are false. The free market is morally superior to any other system, because all actions between individuals are voluntary, no choice is ever enforced upon an individual. The system is based upon the non-aggression principle, the idea that all aggression is unjustified, and therefore immoral. If a pair would like to make a trade, that is fine, whether it be apples for pears, or sex for cocaine, all is acceptable as both parties are fine with it. Now, compare this to a socialist type economy. The government is taxing its citizens, many of whom are paying involuntarily, as the government threatens its citizens with arrest and imprisonment if they do not pay their taxes. Immediately, the non-aggression principle of the free market is broken, and the economy is being interfered with by a third party.
Win-Win
All trades conducted in a free market system will only occur if the trade is in the best interests of both parties. If both involved in the trade are not profiting out of it, the trade will not occur.
Examples Of Free Market Success
My favorite example of free market success is the comparison between Hong Kong, and China. When China became communist and their free market evaporated, they quickly began to see extreme economic failure. Their little brother to the south was meanwhile still under British rule, and the circumstances were very different. China had a vastly superior amount of natural resources, while Hong Kong had almost none at all. Generally, a countries wealth can be very dependent on its natural resources. The Chinese were starving, while the Hong Kong locals were creating business between each other, satisfying the needs of their fellow population. Hong Kong erupted into a small business economy, and even today, Hong Kong's goods and services market is among the cheapest in the world.
The free market is an incredible force. We have the ability to use it, but we just have to realize its potential first. With the way that global economies are going as of now, it may be necessary not to implement a full free market, but at least make our markets more free.
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Very well written and explanative post. I like the way you make a statement and follow it up with verification or at least a well thought out explanation.
That's kinda the beauty of voluntarism though: it's common sense. The only form of government, the only types of interactions with total moral justification and universally knowable principles. Excellent post.
Thanks for the feedback. A lot of the time people can't fathom a free market working effectively. It is the only type of market that can actually last forever without having massive economic hardship (although depressions will still occur, they won't be nearly as bad). I agree with you! Voluntarism is based on common sense and is the only system that avoids aggression.
People have been taught to believe and trust in the state, (despite nearly every one of us having at least a few major objections to their methods of rule!) for protection and sustenance really. At least to some degree.
So even though most could find the answer on their own if they spent some time in deep thought over it, most again, do not and therefore believe that the "common sense" is to fall in line and let the state ru(i)n their lives.