I am no economist, and to those that say “don’t write then” or “you don’t know what you speak of”, I’d like to respond with; I am informed enough about the subject and posses the common sense to write the following words.
The idea of a free market originates from Friedrich Hayek back in the 1800s when there were two main ways of organizing the economy; the centralized and the “free market” approach (also called liberal, capitalist, etc). The idea Hayek favored is that a government, or some other centralized entity, cannot decide what gets produced and how much of it gets made. He was pretty much discussing tangible, real things being produced. His premise was that the market decides on what and how much gets produced, and it does this based on the price. In other words, demand directs the supply.
This theory is good when the market indeed decides on its own and does this based on the real price. The problem today is that the price does not represent the real price. And the market does not decide on its own.
The cheaper the better
There is something called an “externality” – a fancy name for “things we don’t include in the price but that have a non-direct-monetary cost yet we do not add it to our accounting books”. Everything that gets manufactured has an externality. In the West we tend to account for these externalities but we don’t call them such. These are health insurance, social security, taxes, cost of living, use of specific processes for production as required by regulation.
But when things get produced in China or elsewhere these externalities do not get accounted for. Most factory workers in China do not have health insurance and social security. Most companies that operate in China do not have strict regulations to safeguard their workers, environment, society where they operate.
It is for this reason that during the last 15 years things have become cheaper. This is also why we throw away things (this system needs to keep going, if things don’t break it stops). We have given birth to a system that is flawed from within, that exploits people and their labor and gives us a false sense of progress because we can buy things. One day China will indeed move up the “ladder of progress” and the West will find that it cannot continue living with its habits: like changing phones every year. A fact that is happening as some manufacturing jobs are returning to the United States.
But there is an example much closer to home. Spain is a huge importer of fruits and vegetables here in Switzerland. These imports are cheaper than Swiss ones. But, what is not included in this price is the intensive processes used that degrade the land, and above all the underpaid labor of illegal immigrants from Africa that get no health insurance or any social security. Once you add those, Spanish produce stops being competitive and becomes expensive (it might help bring down their unemployment when you think about it).
To those that argue: the illegal immigrant should be happy he has a job, the fact is that these people live in horrible conditions, and most of these countries end up depending on remittances from abroad. This dependency has dire consequences for the countries. If South Korea depended on remittances it would never have become 13th world economy. I see it in my country where there is no incentive to change anything, and cafes are full of people during weekdays, not working (it might cost Switzerland a lot more to build roads and buildings if the labor was properly accounted for in the price instead of using Kosovar and Portuguese labor). There are many sides to this coin and unfortunately most westerners having never been immigrants cannot see the implication.
In addition to this, today’s “free market” takes away from your own surrounding. When you buy the Spanish tomato you are taking income away from your neighbor in Switzerland or just across the border. I believe most reading this would not be happy if their neighbor bought produce or services that come from somewhere else. If you are in Geneva and you are a farmer, an IT nerd, a lab professional, a tailor, a student, a beer producer, a nanny, or anything, you would not be happy with others taking your job. So don’t do it to others. Note that most of those jobs will be done by non-Swiss people, so don’t understand this along nationality lines, but on actual physical-place-basis (i.e. people living and working around you). Also, most reading this would refuse to live in a place that gets poorer. Consequences to this are heavy but only an open mind can fathom them.
The fact is we need a new form of a free market. One that takes into account these externalities. We cannot have perpetual growth, especially when the additional monetary profit comes from loosing resources that cannot be replenished. If progress is measured by growth, does it go on growing when everyone is a billionaire? We have reached an unprecedented standard of living in the West, and the only thing that can go on improving is if we have robots doing our jobs (but then we get fat and lazy).
A free market that decides what to make
The fact is today we consume produce and services that we do not need. The list is too long to name. Also, these things are responsible for a lot of jobs and herein lies the problem. I come from a culture, or you could say a time, when you exchanged money for something real; a product or a service. A shoemaker to fix your shoe, an accountant to do your accounting, a farmer to sell you the apples, etc.
And this is the entire problem. Today’s free market is a house of cards that has to keep giving you new things to consume, new sources of profit are needed. Things you do not need are sold to you. It has to constantly improve on something in order to stay afloat.
The only improvements that can be made to something is those that improve the efficiency of tangible things (speed and safety of a car or train or airplane, power of a computer, etc), those that improve on the technology and health, everything else is akin to selling you air.
A real free market
We have to figure out how to build a sustainable free market, where companies are indeed free to invent, produce, but where the basic elements that make us human are not exploited to the end. A free market where growth is measured on technological inovation (improvements in health, communication, space, etc) while not eating at its own base.
I am not a leftist or a communist, nor a rightists or a capitalist, nor e centrist for that matter. I am nothing of the sort. Best you could call me is a Common Sense-alist. Wanting to see a sustainable free market is not dogmatic environmentalist or socialism, and wanting to see a free market is not exploitive capitalism.
I am advocating for thinking and using the brain, for buying from your neighbor because you share the same context of living and for not abusing and exploiting – fairness I guess.
An interesting thing happened these last couple of days. It relates to the social media and how it can be used as a reliable metric for the real world events.
a very special experience, unforgettable