Free-market ideology (Neoliberalism)54 min read

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Understanding
Free Market Capitalism
– beyond ideology –

Table of Contents

  • Introduction
  • Free Market Capitalism – Claims and Results
  • The Claims of Free Market Ideology
  • A Closer Examination of the Claims and Results
  • Other Features of Markets
  • The Market Nexus
  • The Market as a System – consequences
  • Corporations and Markets
  • Footnotes
  • Bibliography

Introduction

The US economy has not delivered good results for poor, working, and middle class people over the last 40 years. Incomes have stagnated or fallen across the board for over 90% of the population while the size of the economy grew by more than 270%. Virtually all of the gains in income and wealth went to a very small slice of the population. The job market and general living conditions for the young entering the workforce in the last twenty years and for middle-aged workers has deteriorated significantly in terms of stability and opportunity. The natural environment continues to degrade, our infrastructure is crumbling before our eyes, and basic services like education are failing us and simultaneously becoming more expensive at the post graduate level.

Free Market or Neoliberalism – terminology

The term “free market” is used here in favor of the term “neoliberal” because this later term is confusing. The “liberal” in neoliberal has nothing to do with how the word liberal is used today in the US. Rather, it refers to a 19th century usage. This reference backwards may be satisfying to academics and policy wonks, but it remains obscure to the rest of us. So, we will use “free market”. Those who prefer “neoliberal” can substitute it throughout for our preferred term.

Beginning in the mid-1970s, coming into full force in the 1980s and continuing to this day, we have conducted an experiment in free market economics that was promoted as a liberating force to improve everyone’s opportunities and increase incomes[1]. The argument was that if we took the shackles of government off the productive forces of society the economic pie would grow more rapidly and every boat would rise with this tide of prosperity. The rich would get richer but everyone right down to the bottom would benefit. President Reagan famously declared in his 1981 Inaugural Address “…..the government is not the solution to our problem; government is the problem.” What followed then was a wave of deregulation, in airlines, telecommunications, and most prominently, for its depth, the financial sector[2]. Unions were actively discouraged. Significant changes in the implicit bargain between employer and employee have changed working conditions to such and extent that workers, whether blue collar or white, are explicitly disposable. In the last years this has become celebrated as the new “gig” or “uber” job market.

Over the past 40 years and more the phrase “free markets” has come to be used as an all purpose verbal jujitsu to explain, excuse, justify or obscure much of what is going on in the US economy, politics, and society as a whole. Without a doubt we live in a capitalist world. There is no serious alternative economic system through which we might organize human affairs to produce better results. But, “free markets” as a system of economic thinking and political rhetoric and propaganda is greatly harming our ability to see the capitalist world as it is and solve the problems of how our economy is working. This essay is an exploration of the fundamentals of how capitalism works as seen for the most part from the ground, from the perspective of a citizen participating in the economy. Though we will reference academic economists and historians throughout, this is not about their views; it is about how we, the participants, think and talk about capitalism. And, the discussion is frankly not narrowly about economics. Without considering how the economy is embedded in society and especially the role of the state, there is no way to understand it and see it as a comprehensible social system. Thus the term “political economy”. The rich and corporations have always understood the economy as a political economy. They have no doubts that the government is an important element of capitalism. Lobbying in Washington alone is a $3.2 billion dollar enterprise employing over 11,000 people.[3]

My intention is to clear away the tangle of free market rhetoric and contribute to a clearer understanding of the principle features of capitalism. What does “free market” mean and how can evaluate its claims? What are the key features of market capitalism, how do corporations fit in, what is the role of government. The examples will mostly come from the US experience, but throughout the broader international scene will be present.

Understanding free market ideology and developing a clear critique based on the realities we live in is not an academic thought exercise. Most of the people running the world’s governments and corporations use free market ideology to shape, explain, and justify their policies. We live in a free market world.[nextpage title=”Free Markets – Claims and Results”]

Free Market Capitalism – Claims and Results

“The free market will sort this out, if politicians would just let it. Left free, the market will provide the greatest benefit to workers, employers, and consumers, while allowing charity as well. It would all happen faster if politicians stopped imagining that they are the cause of everything. – John Stossel[4].

 

“The solution is clear: Government must stop creating barriers to opportunity for so many Americans, especially the least advantaged. We must end government’s ability to enrich the well-connected few.

Instead, we must fight for principles that enable everyone to find fulfillment and success, and a level playing field where all are treated equally.

Such principles made America the envy of the world. And it’s these principles which we need to promote and defend so that everyone can experience the benefits of a free society.” – Charles Koch[5]

 

“ObamaCare has revealed the painful consequences of placing our faith in big government. Government’s ambitions may be limitless, but its abilities are not. The free market, when allowed to function as intended, has no such limitations. It has an inexhaustible ability to empower our people and meet their needs.” – Senator Marco Rubio’s website[6]

 

“Too many small businesses are being crushed by encroaching regulations. We need to get the government out of the way so the people can do what they do best — innovate, expand, and create new jobs.” – Senator Ted Cruz[7]

 

Free market ideology is associated with Libertarianism, parts of conservatism, Milton Friedman[8] and the Chicago school of economics, Ayn Rand[9], and more recently the billionaire Koch brothers, among others. Most Republicans and many Democrats[10] hold free market views. There is no single definition of free markets rather a spectrum of views. For example, with regards to the role of government some free marketers allow for the value of anti-trust laws like the 1890 Sherman Anti-Trust Act to rein in monopolies, while libertarians argue that government has almost no role outside of police, armies, and courts to defend private property and contracts. Some Libertarians advocate the privatization of police and roadways and virtually every other sphere of government activity.[11]

[nextpage title=”The Claims for Free Markets”]

The Claims of Free Market Ideology

“Capitalism is often defined as an economic system where private actors are allowed to own and control the use of property in accord with their own interests, and where the invisible hand of the pricing mechanism coordinates supply and demand in markets in a way that is automatically in the best interests of society. Government, in this perspective, is often described as responsible for peace, justice, and tolerable taxes.”[12]

This academic description is a reasonable starting point to explore the claims of free market thinking. Here is a list of some of the important explicit and implicit principles and claims:

  • Private property and enforceable contracts between private individuals are required
  • Individuals are at the center of the system; Individuals enjoy maximum freedom and opportunity within the market system
  • Markets arise naturally
  • Market mechanisms coordinate supply and demand automatically
  • Markets assure optimal growth of income and wealth – this is the source of the trickle down economics of the past 40 years
  • Markets make the best decisions about resource allocations based on prices
  • Market prices reflect the true value of products and services
  • Government interventions lead to inefficiencies, rigidity and cronyism favoring the politically powerful over the individual actors in the marketplace
  • People are highly motivated by money. This is an implicit widely claim.[nextpage title=”Examine the Results”]

A Closer Examination of the Claims and Results

Private ownership of property and enforceable contracts between actors in he economy are widely accepted as both required and a positive feature of the capitalist economy. These are really cornerstones of the flexibility and innovation that are such positive features of market capitalism. On first glance private ownership of property seems to be so completely commonplace to be unremarkable[13]. However, ask where did it come from and then, why is ownership in so few hands?

Some disputes arise about the boundaries of property. Long ago ownership of human beings was found to be unacceptable and banned.[14] The ownership of public utilities like the water supply arouses concerns too. Overall, private ownership of property is an accepted positive fact.

Similarly contracts are seen as a positive structure. They provide a reliable common platform on which business is conducted. Everyone has fairly easy access to a widely understood set of rules around which their is broad compliance. The enormous advantages are obvious when observing the capriciousness and corruption of a business environment such as in Russia and a number of other countries. It must be noticed though that when there is a political and economic imbalance between participants contracts are not value neutral.[15] A rich person or corporation has, relative to the poor or middle class litigant, virtually unlimited resources to conduct legal battles. Even assuming the poor or middle class person has the knowledge of how to pursue an action, the forces opposing them can simply out spend and out wait them.

This is a window on a primary problem with the Libertarian and conservative world view. In this view all individuals are equal and have complete autonomy and capacity to achieve their highest dreams and levels of achievement. The Horatio Alger model, hard work, grit, determination, and natural intellect will win out. Or in a typical restatement of this American trope by Senator Paul Ryan, ”….work hard, play by the rules, you can get ahead. That’s the American Dream.”[16] This takes no account of the actual facts of the impact of a person’s accident of geography, race, gender, and/or class to either buoy opportunities for the rich or grossly limit the same for the rest. When you consider the historically high levels of income and wealth inequality in the US today combined with persistently low levels of social mobility[17] the free market picture of the heroic individual competing in the marketplace strikes one as a recipe to continue these patterns.

The free market focus on the individual as the center of the economy and society defies how human beings have acted and organized themselves for all of known history. This notion of individuals as autonomous, self optimizing economic agents is the creature of the market itself. This is part of the transformation of humans into commodities that are employed as easily replaceable cogs in the market labor system. Human beings have always been social creatures embedded in complex relations and the economies employed for sustenance never had a market mechanism like that which has evolved over the last 250 years. Production was driven by other social arrangements.

Wage labor, even in its salaried variants, as well as in its more recent temporary worker variants (consulting, 1099 contract workers, and the gig economy) is not the source of freedom as promised by free market ideology. It is the source of regimentation and control by the corporation over when, how and with whom people spend their working time. It is also the source of a great deal of fear and uncertainty. Being fired or laid off is a constant cloud hanging over every employee. This is a far cry from the free market fantasy of the empowered, voluntary participant in the market system.

As noted earlier market capitalism requires that money, natural resources and human beings be turned into commodities that can be traded. This works well for the commodities produced by the economy, but as Polanyi argues in his discussion of markets and the fictitious commodities, labor and natural resources, the control of these latter two by the markets is both morally offensive and practically destructive[18]. The dynamics of market capitalism unbounded by any controls and regulations lead inevitably to the pillaging of the environment and degradation of human beings. This is not the result of some evil impulses by the owners of capital. It is an inescapable result of the competitive structure of markets. As we will see later, individual owners, companies, in the market must try to avoid every cost possible in order to maximize profits relative to their competitors. In the absence of countervailing controls by the government market capitalism will be ruthlessly pollute the environment and exploit labor. The history of capitalism is filled from its beginning to the present moment with the results of this structural process within markets.

In reading descriptions of markets by free marketers, conservatives and most liberals, markets appear to have arisen by some natural foreordained process. These denatured markets have never existed. They are presented as part of the furniture in the rooms of our culture and societies and this leads us to accept them as permanent. The history of the development of market capitalism, most obviously in England and other parts of northern Europe in the late 18th century and into the 19th century at a global scale, is very different. Filled with conflict and drama. It reflects a close and dependent relationship between the state and private ownership[19].

In order for market capitalism to function three elements must be available as commodities offered for sale and purchase on the market: raw materials, human wage labor, and money. None of these arose spontaneously.

In the case of human labor, the Enclosures Acts of the 18th and 19th centuries [??? Check on dates???] in England created a mass of agricultural wage labor that was transformed into the urban industrial labor force as the cotton industry gained scale from the 1750s onward. But, it is in the area of the raw material cotton where the government and private ownership worked most closely. No cotton was grown in England nor anywhere in Europe for that matter. It was the transformation of cotton production predominantly in India and America where cotton as a commodity became available for purchase in reliable and growing streams. Here the expansion of the British Empire by force of arms was critical to the expansion of the cotton industry. In the case of US cotton, government support for slavery and its expansion to the western portions of the American South almost from the signing of the US Constitution to the Civil War was critical to the explosion in the cotton industry not only in England and the rest of Europe but significantly in the American North.

This very brief sketch of just a portion of the history of global cotton only hints at the many ways in which the state has played an ongoing critical role in the development and functioning of capitalism[20]. Later in this essay we will explore the role of the state in further detail. Suffice for the moment to note that government has been intertwined in a critical fashion throughout the history of capitalism. There simply is no capitalism without the state actively involved.

Another claim of free market ideology is that markets are self-regulating and self-optimizing in delivering the goods required by people and generating ever larger wealth and prosperity. This claim is perhaps the most amazing of them all and defies the actual life experiences of every person alive during the capitalist era. The Great Recession starting in 2008 and continuing in many ways to this day is just the most recent example of how poorly markets self-regulate let alone provide optimal economic performance.

Academic economists recognize this. Joseph Stieglitz[21] wrote in his Forward to Polanyi’s The Great Transformation[22]:

Today, there is no respectable intellectual support for the proposition that markets, by themselves, lead to efficient, let alone equitable outcomes. Whenever information is imperfect or markets are incomplete—that is, essentially always—interventions exist that in principle could improve the efficiency of resource allocation. We have moved, by and large, to a more balanced position, one that recognizes both the power and the limitations of markets, and the necessity that government play a large role in the economy, though the bounds of that role remain in dispute. There is general consensus about the importance, for instance, of government regulation of financial markets, but not about the best way this should be done.

If you need further evidence of how poorly markets regulate capitalist economies without government interventions read Manias, Panics, and Crashes: A History of Financial Crises by Kindleberger[23]. Originally published in 1978 and now in its fifth edition, it provides a sometimes amusing but mostly grueling tour through the history of capitalism’s ups and downs. And we have all lived through the financial debacle of 2008 whose consequences are still with us. Almost no one saw this disaster before it occurred and the very free market policies that created it have persisted and limited the recovery by insisting on little government action beyond the extension of vast oceans of money to the financial system to keep that sector afloat. These policies socialized the financial system’s losses through bailouts while insisting that individual debtors had to suffer the consequences.

[find data on unemployment and under emeployment from 1970 to date]

Rational optimal resource allocation is another claim for free markets. There can be no doubt that in many dimensions allowing markets, particularly the financial markets as allocators of capital to new and existing enterprises (through loans and stock) to evaluate the merits of companies and technologies works quite well. The notion that government could make the myriad of decisions and coordinations required with efficiency and competency is not believable[24]. In this case the collective wisdom of the market is quite obvious and effective.

Nevertheless, there are significant gaps in resource allocation (investment) that must be filled in order for human society to continue. For instance public health, education, housing, roads and transportation infrastructure[25], policing, court system, water and sewer, electricity, telephone and Internet, fundamental scientific research, environmental quality, and others are examples of what are frequently referred to as public goods. The private sector simply does not and will not undertake sufficient investment in these areas to sustain the society.

The rich are perfectly capable of spending $40 to $50 thousand a year to educate each of their children. Every rich enclave has private schools for their children. There are no private schools for the children of families who live on that same amount of money and significantly less[26]. To take housing as an other example. It has been and continues to be true that the private sector on its own has not over the past 100 years produced enough livable housing[27] for the poor or even the middle class. Since the Great Depression government has stepped in through direct construction in the case of the poor and working class and the hidden subsidies of the tax system and government loans to developers for the middle class.

Electric and telephone service in rural and poor areas of the US is a creature of government intervention. The Rural Electrification Act of 1936 brought electricity to areas that were not served and doubtless would not be served today if we depended on the free market. The government made a decision that electricity was a basic requirement for every American and implemented a system of loans and incentives to provide it largely through rural electric cooperatives. We await a similar decision today over access to Internet services and more broadly upgrades to these services to bring us up to world standards. The telecommunications industry will not fill this gap partly because of dispersed demand and partly because they have an effective monopoly in most regions of the country so market competition will not drive further investment.

A further claim of free market ideology is that market prices are the embodied truth about the value of products and services. The notion here is that the mass of individuals making rational judgments about what to buy produce prices that accurately reflect the ultimate value of the product or service. First, the advertising and marketing machinery of capitalism long ago perfected the techniques to manipulate and shape the tastes and demands of consumers. The rise of sugar in the American diet following WWII is an example of an extended campaign both in the mass media and academic scientific literature[28] to change eating habits to consume more sugary items produced by the food industry. To say that this change in eating habits is the result of rational choice based on accurate knowledge of the facts is clearly not true. Very arguably this change in diet has produced the wave of diabetes that is plaguing the population[29].

The final claim of free market ideology is that government interventions lead to inefficiencies, rigidity and cronyism favoring the politically powerful over the individual actors in the marketplace. For most free market ideologues there is an underlying assumption that government is inherently wasteful, sluggish, and bureaucratic. The overall free market strategy is to have a little government as possible.

As noted earlier in the discussion the emergence of 19th century capitalism government has been present and critically involved in the development of market capitalism from the very beginning and continuously ever since. To speak of capitalism without speaking of the state is historical nonsense.

One could mention the development of railroads, highways, airplanes, most of modern medicine, telecommunications and more as examples of how government action created technologies, made early investments (think land give-aways to the railroads in the 19th century), or created demand. As an contemporary example, the current Apple iPhone is built on technologies developed by government action[30]. Computer chips, capacitive sensing, multi-touch screens, GPS, voice recognition, the Internet, lithium-ion batteries, LCD displays, signal compression, and more, all of these were invented directly by the government or under contract to the government. Although the private sector is quite good at bringing technology to market once it has been developed, basic science and engineering that requires years if not decades of work to bear fruit will not and cannot be undertaken by the private sector. Capital with that kind of patience and capacity for risk taking only exists in the state.

A final note about government participation in capitalism is the use of tariffs to protect and shape the economy. Nation states have used import tariffs and taxes from the very beginning of the capitalist era to protect local manufacture from the challenges of outside competition. The US has done this and continues to do so. Tens of thousands of items are subject to tariffs. Here are a few: synthetic outerwear – 28.2% tariff; wool clothes – 25% tariff; most vegetables – 20% tariff; most auto parts – 25% tariff; canned tuna – 35% tariff; Chinese tires – 35% tariff.[31] Free marketers consider all tariffs to be government intrusion in the market. This applies under the banner “free trade” that calls for complete freedom to buy and invest across international borders. Governments have used tariffs to protect nascent industries from foreign competition on the grounds that without some initial price protection the industry would never achieve sufficient scale to be competitive. In some case governments have acted because they believed that a developing and sustaining a particular industry was in the national security interests. Early examples in the US are the Tariff Acts of 1818 and 1824 that taxed cotton, wool, iron, and other items. This was explicitly to protect domestic industry from the British trade dumping practices.

We will continue to discuss the role of the state in markets in further detail when we come to the financial sector later in this essay.

Money is widely believed to be a major incentive for human behavior. This belief certainly extends well beyond free market thinking. Business

[nextpage title=”Other Features of Markets”]

Other Features of Markets

Now we will expand our discussion of market capitalism to some features that are intrinsic to its structure and function but are not claims of free market thinking per se. Market prices do not reflect what economists call “external costs”. External costs are costs imposed upon a third party when goods and services are produced and consumed. A more direct explanation for this is that all businesses are working to get someone else to pay for part of what they are doing, and the more the better. This is a central inescapable dynamic of the market system. Examples of this market dynamic are all around us and new ones arise every day. Here are a few examples.

The mining industry has been and continues to externalize the costs of their extraction work. From the oil sands of Canada to coal mining in China and now the abandonment of coal mines in Appalachia in the US, the environmental costs avoided by the mining companies are enormous and the long term damage to the earth obvious.

The rise of the automobile is a good example of what came to be an enormous global industry has gotten other people to pay for a significant portion of their costs. No road system existed suitable for cars in 1910. The auto industry left it to government to build the enormous road system we use today. The air pollution produced by cars and trucks caused a large increase in heath problems. Again, not a cost borne by the industry. You can extend this thinking on your own.

An external cost that is much in the news now is the CO2 emitted by carbons-based energy sources. Another external cost example is the mountains of excrement created by industrial scale meat production. Further are the distortions in agricultural production caused by the demand for cattle feed to supply this industry. Phosphate runoff from agricultural fields and the resulting algae blooms are a regular feature of news reports. Or, consider the costs to put computers, printers, TVs, etc in landfills when they get outmoded or stop working.

The cost of labor is frequently partially externalized. Historically capitalists have been able to pay workers below a sustainable living wage by off loading, externalizing, some of the cost to society as a whole. In this scheme private enterprises depend on government and private charities to fill in the gaps in income, mostly through food and housing subsidies. Recently, large retailers, food chains, even colleges, have come in for criticism for exactly this practice that forces workers to seek public assistance like food stamps to make ends meet[32].

None of these external costs are included in the price in the market place though very arguably someone, maybe our grandchildren, will pay ultimately through degraded living conditions and/or taxes. Your can think of the externalized costs of private production as a socialized cost[33] or as a private tax placed on all of us by the private actions of business. The brute fact of the matter is that the dynamics of private markets require every individual producer to shift as many costs as possible to be external. If you don’t your costs will be higher than your competitors and generate lower resulting profits. Only in the presence of government laws and regulations will everyone in the market be required to include these socialized external costs as part of their internal cost of production and produce a level playing field.

Another feature of market capitalism is disembodied production. When you buy produce at a local farmer’s market, for example, you meet the farmer. In many cases you drive by these truck farms on your way to work or on errands. You know something real about who is producing your carrots. When you buy milk images of cows munching in fields belies the actual factory conditions. Farm workers harvest our vegetables and fruit today under much the same conditions that existed in the 1950s and 60s when then young TV journalism brought us the documentary Harvest of Shame.[34] They remain invisible to us when we make our selections in the supermarket. Similarly, the clothing that we purchase is typically manufactured in sweatshop conditions that we only hear about when some disaster strikes.

Market capitalism aggregates resources from around the world, produces on a global scale, and transports the production to market on a scale only hinted at when you see a picture of a container ship more than a four football fields long or happen by container terminals like Elizabeth NJ, Long Beach CA, Hong Kong, or Singapore. When we admire a new car (of almost any brand) we cannot imagine that its components, roughly 30,000, are manufactured on three or more continents and assembled in two or more factories by workers in very varied working and living conditions. Disembodied production allows, perhaps forces us, to treat these products as just objects disconnected from any social reality that brought them into existence.

The misapplication of markets can lead to perverse outcomes. In our day to day thinking about markets we imagine a trip to the grocery store, department store, or the hiring of a local contractor to fix a roof. In these situations we think that we know what we need and believe that the products and services on offer will fulfill our requirements. Some of the transactions are very simple, others like the employ of a roofer a bit more complicated. What is the reputation of the roofer? How long will the materials last? Will the roofer turn up when promised and clean up thoroughly when done? And so on…..

The US healthcare market is an extremely important system for each of us and our families. We expect it to help us keep healthy and its is close to 1/5 of our economy. Despite its name, healthcare, the structure of this market is not about healthcare at all. You might think that when you visit a doctor, clinic, or hospital that the providers are incentivized by the healthcare market to produce health, yours narrowly. But that is not true in some pretty profound ways. Payment in the healthcare market is not for producing better health for you. Payment is for services, procedures, tests, workups, consults, devices implanted and otherwise, and so on. If you are lucky some of these may make you healthier, but the healthcare system is not paid for your health, it is paid by the number and alleged sophistication of the procedures you undergo.

To make the healthcare market even less likely to produce health for you is that no one in the system is responsible for your health except you. You are faced with the insurmountable task of understanding and making decisions about illnesses and treatment strategies that requires a decade or more of medical training and experience to master. And, you are doing this under the emotional stress of worrying about your own health or the health of a family member.[35]

Now, assuming that you do figure out the best strategy of treatment, ask your doctor how much it costs. Turns out they have no idea. Ask the clinic or hospital and you will be faced with a myriad of questions about health insurance plans, deductibles, co-payments, etc. Then, you need to check that all of the providers are acceptable to your insurance company, or that the drugs or medical devices are covered, and so on. So, if you are tracking along with the theory of the rational customer in a market place making well informed decisions, you are now completely at sea. You came needing health and found a market dedicated to selling you procedures with inadequate knowledge of how and what to choose amongst them and no prices[36].

Private health insurance companies, whether non-profit for for-profit only gain revenue, profits and power by increasing spending on healthcare. There is a negative incentive for them to try to control or decrease healthcare spending. They only gain their profits and operating margins based on a percentage of the total dollars flowing through them. Controlling healthcare costs reduces profits.[37]

How did we come to have a healthcare market like this? Most of the rest of the developed world long ago figured out how to produce significantly better health outcomes at 30-40% less cost[38]. Our system arose over time after WWII as a result of decisions and forces in many different sectors making decisions that met some immediate need but never added up to a coherent healthcare system focused on delivering health. This is not a moment to delve into that history because it is a large topic and not germane to this discussion of free markets. Suffice it to say that our healthcare market did not arise naturally but rather through the interplay of government, large corporations and labor unions.[39]

This brief excursion to our healthcare market illustrates that markets are not natural, they are structured with incentives and outcomes that may not be as useful or obvious as buying carrots. Second, consumers and participants in this market cannot evaluate the outcomes nor the prices for any given situation. Prices are set by healthcare providers, doctors, hospitals, insurance companies, pharmaceutical companies and others. Consumers have no useful influence over prices. Every other developed country recognizes this truth about the healthcare market. Using a range of tools these countries essentially set a price or budget for healthcare and the healthcare system works within those constraints. And, it must be noticed, all of them deliver significantly better health outcomes than the “free market” US healthcare system while spending 30% and more less than us.[nextpage title=”The Market Nexus”]

The Market Nexus

All of this can be distilled to a few key concepts that reflect the actual operations of the market. Every business in the market must utilize these to survive and grow. The root equation is quite simple: Sales minus Expenses equals Profits. So, fundamentally the game is simple and ineluctable. Increase sales and decrease expenses or you won’t survive long.

First, finding or creating customer demand is a central activity. Marketing, using all of the public relations, advertising, and more recently web-based tools of social media and consumer tracking, is carried on with the scope and scale of a military campaign. The results are ever present in our day-to-day lives.

Second, decrease expenses. This focuses on externalizing costs, getting someone else to pay. Where possible due to weak regulatory and legal structures this will involve outright coercion and thievery. Pay wages as low as possible. Provide the least expensive working conditions. Ignore heath and safety issues. Design products that meet the lowest possible standards – these mostly driven by competitors performance. Emit pollution from the production processes. Companies will carry out this expense externalization process to the extent that laws and regulations as enforced allow them. In fact they are forced to do this because if they don’t maximize their expense reduction their competitors will. Failure to maximize in this will likely lead to failure.

Third, use government to change the conditions in the market or alter the rules of the market. Weaken or avoid environmental regulation of pollution. Degrade opportunities for workers to form unions. Deregulate financial markets to allow fraud and excessive risk through leveraging other peoples’ money. Directly buy elections and purchase the government policies. This may seem to be a characteristic of third world countries but there can be no doubt now in the age of unlimited money in US politics that this has become a reality. And so on.

A key to understanding the behavior of market participants is to see these three tools are required elements of every business’s strategy. To the extent market participants are allowed to use these tools, every player will be trying to maximize their effectiveness. These are not optional strategies. Survival and growth require that business use the tools available to increase sales and decrease expenses.

A lesson here is in the phrase, “to the extent market participants are allowed to use these tools”. As early as the 1820s the British government passed labor laws restricting the employment of children in the burgeoning cotton mills of the time. This over the objections of the mill owners who like the pliability of children and their cheap wages. In the US in the 1930s laws were passed establishing the 40 hour week and overtime pay. No business here or in UK would think it feasible to undo these constraints on the labor market.[40] As the economist Robert Reich has said, “we get the markets[nextpage title=”The Market as a System – the consequences”]

The Market as a System – consequences

As we have seen the free market vision of the capitalist market system as a self-directing, self-optimizing environment of maximal personal freedom is a fantasy. But there are features, beyond those we have already touched on, of the market system as it actually functions that are troubling. The development of the outputs, goods and services, of the market system is driven by chaotic forces that are reinforced by the marketing tools of businesses themselves and furthered by their capacity to influence (control) government policies and regulations to protect market positions. Market capitalism is not driven by a value system that responds to the actual needs of humans as individuals nor to the societal needs of human beings. Rather, markets respond to and drive ever greater consumption to meet the aggregate needs of businesses to increase their sales. With the power of marketing they continually beat the drums of consumption and even create demand for products and services for which no demand exists nor any rational analysis would require[41]. The market system does not provide many activities and goods required for human reproduction and sustainment such as housing, education, recreation, social interaction and bonding. Combine these failures with the flood of consumption necessary to keeping market capitalism going and one sees an economic system that is not only unstable and environmentally predatory but also not providing much of what is needed to sustain human life.[nextpage title=”Corporations and Markets”]

Corporations and Markets

The free market model of capitalism does not mention corporations as participants in markets. The usual descriptors are “private actors” or “people”. The free market model envisions lots and lots of suppliers trading in a marketplace with a large number of buyers. This despite the fact that one of the earliest and most celebrated private actors in capitalist history, The Dutch East Indies Company (Vereenigde Oost-Indische Compagnie, also simply VOC), was a limited liability company established in Amsterdam in 1602.[42] This new form of organization protected individual investors by limiting their personal liabilities in case of the failure of the corporation to only the monies they invested. This freed investors from the nightmare of personal bankruptcy. This business form allowed corporations to aggregate large sums of capital and attain a scope and scale unheard of and impossible through individual or family business structures[43].

 

The growth and size of VOC hints at why corporations now dominate the capitalist world.

 

Statistically, the VOC eclipsed all of its rivals in the Asia trade. Between 1602 and 1796 the VOC sent almost a million Europeans to work in the Asia trade on 4,785 ships, and netted for their efforts more than 2.5 million tons of Asian trade goods. By contrast, the rest of Europe combined sent only 882,412 people from 1500 to 1795, and the fleet of the English (later BritishEast India Company, the VOC’s nearest competitor, was a distant second to its total traffic with 2,690 ships and a mere one-fifth the tonnage of goods carried by the VOC. The VOC enjoyed huge profits from its spice monopoly through most of the 17th century.[44]

 

In 2000 a study[45] found the following about the role of corporations in the global economy:

  1. Of the 100 largest economies in the world, 51 are corporations; only 49 are countries (based on a comparison of corporate sales and country GDPs).
  2. The Top 200 corporations’ sales are growing at a faster rate than overall global economic activity. Between 1983 and 1999, their combined sales grew from the equivalent of 25.0 percent to 27.5 percent of World GDP.
  3. The Top 200 corporations’ combined sales are bigger than the combined economies of all countries minus the biggest 10.
  4. The Top 200s’ combined sales are 18 times the size of the combined annual income of the 1.2 billion people (24 percent of the total world population) living in ”severe” poverty.
  5. While the sales of the Top 200 are the equivalent of 27.5 percent of world economic activity, they employ only 0.78 percent of the world’s workforce.
  6. Between 1983 and 1999, the profits of the Top 200 firms grew 362.4 percent, while the number of people they employ grew by only 14.4 percent.

Beyond the sheer scale and bulk of corporations in the capitalist economy, they act in ways that further defy explanation by the free market model. Prices are supposed to be set by the independent actions of a large number of participants each of whom is acting on the basis of their own best interests with comprehensive knowledge of the products and services being traded.

Corporations contain within their borders much of the productive capital assets of the world. As such the deployment of this capital is subject to the internal plans and objectives of the company. No intermediation by markets is involved[46].[nextpage title=”Footnotes”]

Footnotes

[1] This experiment was not limited to the US. Great Britain and many other developed countries undertook similar policies with similar overall results.

[2] Deregulation did not begin abruptly under Reagan. Changes to regulation of railroads and trucking took place in the early 1970s. The anti-trust case that lead to the break up of the AT&T telecommunications monopoly in 1984 began at the same time. Nevertheless 1981 marks the beginning of a broader effort to deregulate. Various sectors of the economy.

[3] (Akerlof and Shiller 2015)

[4] (Stossel 2014) The Free Market Is the Best Antidote to Poverty, Left free, the market will provide the greatest benefit to workers, employers, and consumers. by John Stossel – Accessed 2/19/201

[5] (“Charles Koch: ‘We Are Doling Out Welfare for the Wealthy’ | TIME” 2016) accessed 2/21/2016

[6] https://marcorubio.com/sidebar-featured/marco-rubio-health-care-obamacare-repeal-replace/. Accessed 2/21/2016

[7] https://www.tedcruz.org/issues/jobs-and-opportunity/ accessed 2/20/2016

[8] (Friedman 2002) Capitalism and Freedom: Fortieth Anniversary Edition

[9] (Rand et al. 1986) Capitalism: The Unknown Ideal

[10] For example, President Bill Clinton embraced free market thinking. He signed the Commodities Futures Modernization Act 2000 and the Gramm–Leach–Bliley Act 1999 that set the table for the speculative outburst leading to the Great Recession of 2008. He is also responsible for a free trade agreement NAFTA and he “reformed” the welfare system by imposing work requirements and limiting how long welfare recipients could remain on welfare.

[11] It can’t go unobserved that Libertarians share one utopian objective with Marxists, the withering away of the state.

[12] (Scott 2008) “The Political Economy of Capitalism” by Bruce R. Scott. Harvard Business School Working Paper draft 07-037 (2006)

[13] See (Linklater 2015) Andro Linklater, Owning the Earth: The Transforming History of Land Ownership, Reprint edition (Bloomsbury USA, 2015) for more on the relatively brief history of private ownership of the earth and the connection with capitalism.

[14] Of course slavery in various forms persists in many forms throughout the world despite these legal bans. Trafficking in women for sexual slavery is widely practiced.

[15] Contracts are widely used as tools of those who prey on the weaker in society. The NY Times reported on 2/21/2016 about a new scam to entangle low-income home buyers in contracts that are designed to be manipulative and coercive. (Goldstein and Stevenson 2016)8/30/16 4:37 PM accessed 2/21/2106

[16] at a Kemp Forum on Expanding Opportunity – A special presidential-candidate forum on poverty 1/9/2016. https://www.aei.org/events/expanding-opportunity/

[17](Leonhardt 2014) Leonhardt, David. “Upward Mobility Has Not Declined, Study Says.” The New York Times, January 23, 2014. http://www.nytimes.com/2014/01/23/business/upward-mobility-has-not-declined-study-says.html.

[18] see Chapter Six in (Polanyi 2001) Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. 2 edition. Boston, MA: Beacon Press, 2001.

[19] This discussion reflects (Polanyi 2001) Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. 2nd edition. Boston, MA: Beacon Press, 2001; (Beckert 2014) Beckert, Sven. Empire of Cotton: A Global History. First Edition edition. New York: Knopf, 2014; (Baptist 2014) Baptist, Edward E. The Half Has Never Been Told: Slavery and the Making of American Capitalism. New York: Basic Books, 2014.

[20] This is precisely why it is deceptive and useless to talk about economics without including the sociopolitical environment and roles of the state. Thus we have preferred to speak of “political economy”.

[21] (“Joseph Stiglitz” 2016) https://en.wikipedia.org/wiki/Joseph_Stiglitz. Nobel prize winner in 2001.

[22] (Polanyi 2001) Polanyi, Karl (2001-03-28). The Great Transformation: The Political and Economic Origins of Our Time . Beacon Press. Kindle Edition.

[23] (Kindleberger and Aliber 2005) Kindleberger, Charles P., and Robert Aliber. Manias, Panics, and Crashes: A History of Financial Crises. 5th ed. Wiley, 2005.

[24] The state planned economy of the Soviet Union is an example of the enormous difficulties of coordinating a complex economy. The lack of reliable prices led to an inflexibility and rigidity that produced a whole underground economy that worked to fill in for the lack of markets.

See (Rutzgaier 2016) “The Shadow Economy in the USSR : A Survey of Soviet Research” by Valeriy M . Rutgaizer. https://www.ucis.pitt.edu/nceeer/1992-900-03-Rutgaizer.pdf accessed 12/3/2015.

[25] As noted earlier Libertarians even argue that roads can be subject to market control. See (W. Block 2014)“The Privatization of Roads and Highways” by Walter Block © 2009 by the Ludwig von Mises Institute https://mises.org/library/privatization-roads-and-highways accessed 2/2/2016 and Carnis, Laurent. “Rothians versus a Rothbardian.” Review of Walter Block’s The Privatization of Roads and Highways, Human and Economics Factors and Gabriel Roth, ed., Street Smart, Competition, Entrepreneurship, and the Future of Roads. Quarterly Journal of Austrian Economics 14, No. 1 (Spring 2011): 130-140.

[26] in 2015 the Federal Poverty Level for a family of four is $24.250 per year. 50 million Americans live below the Federal poverty levels.

[27] For those who might argue that the hovels of the share cropping South or urban slums of the North are adequate I lay down the Rawlsian (or Christian Biblical one, …however you want people to treat you, so treat them…Matthew 7:12 in New American Standard Bible) challenge to take up a place in this housing and see if it fits your sense of “adequate”.

[28] In the early 1950’s Coca-Cola paid the chair of Nutrition Department at Harvard Medical School $5000 to write an article for McCalls magazine touting “soda, ice cream or a Coke” as an appropriate snack for teenagers. (Schatzker 2015) “‘Soda Politics’ and ‘Saving Gotham.’” The New York Times, November 20, 2015. accessed 11/22/2015.

Also see: (Nestle 2015) Nestle, Marion. Soda Politics: Taking on Big Soda. 1 edition. Oxford UK: Oxford University Press, 2015.

[29] See (Akerlof and Shiller 2015) Akerlof, George A., and Robert J. Shiller. Phishing for Phools: The Economics of Manipulation and Deception. Princeton: Princeton University Press, 2015 for more on this and other examples.

[30] This discussion depends largely on: (Mazzucato 2015) Mazzucato, Mariana. The Entrepreneurial State: Debunking Public vs. Private Sector Myths. Revised edition. New York, NY: PublicAffairs, 2015.

[31](Lubin 2016) http://www.businessinsider.com/americas-biggest-tariffs-2010-9 accessed 2/21/2016

[32](Cohen 2016) http://www.nytimes.com/2015/04/13/business/economy/working-but-needing-public-assistance-anyway.html accessed 6/6/2015 and (Ritholtz 2013) http://www.bloombergview.com/articles/2013-11-13/how-mcdonald-s-and-wal-mart-became-welfare-queens accessed 6/6/2015

[33] Don’t confuse “socialized” with “socialism”. Here we are speaking of costs and risks that have been laid at the door of government and society as a whole. This is exactly the same meaning as the complaint about the 2009 bailout of Wall St. by the Federal government. The profits of Wall St. were kept in private hands while the losses became public property or socialized.

[34] (CBS 2016) “Harvest of Shame” – https://www.youtube.com/watch?v=yJTVF_dya7E accessed 8/19/2016.

[35] (Akerlof and Shiller 2015) George A. Akerlof and Robert J. Shiller, Phishing for Phools: The Economics of Manipulation and Deception (Princeton: Princeton University Press, 2015).

[36] We won’t enter into the argument that health is not a commodity like others since it is so intimate to our existence and therefore not subject to rational analysis like buying a car.

[37] Many people think that non-profit companies/organizations are not concerned with profit. This is wrong. Every organization must take in more money than it spends. Otherwise it cannot survive. Beyond maintaining the day-to-day operations the organization must invest for future growth. The difference between for-profit and non-profit organizations is how the profits are distributed and how the assets are dealt with.

[38] Recent data shows US last among 11 developed countries in healthcare outcomes and first in cost. in 2011 we spent $8,508 per capita 2.5 times more than the number one performer UK($3,405) and 50% per than number two, Switzerland. CITATION?

See (Davis et al. 2014): “Mirror, Mirror on the Wall, 2014 Update: How the U.S. Health Care System Compares Internationally.” http://www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror. Accessed 2/23/2016.

[39] See (Field 2014) Field, Robert I. Mother of Invention: How the Government Created “Free-Market” Health Care. OUP USA, 2014 for a full discussion of the history.

[40] Of course, these same companies have moved much of there production to countries where such restrictions don’t apply, e.g. China, Bangladesh, Vietnam, etc.

[41] The bottled water industry was created in the 1970s to replace, in the markets where it started, a public water supply that was ubiquitous and safe. The industry sells a product that is no better than public water at hundreds of times its price and creates a waste stream of plastic bottles that number in the many billions every year. See (P. H. Gleick 2010) Bottled and sold: the story behind our obsession with bottled water and (P. Gleick 2016) Bottled Water Sales: The Shocking Reality

[42] Not to get ahead of our exposition, but note that VOC held a government enforced monopoly on spice trade activities for 21 years. From even these early moments government and markets went together.

[43] (Achbar and Abbott 2003) Watch the documentary, The Corporation, here: http://www.snagfilms.com/films/title/the_corporation (payment required) 2 hours – good introduction. Marred by the use of an extended metaphor of the corporation in psychological terms as a psychopath. This distracts from the structural and functional characteristics required of capitalist market participants.

[44] (“Dutch East India Company” 2016) “Dutch East India Company,” Wikipedia, the Free Encyclopedia, accessed August 16, 2016, https://en.wikipedia.org/w/index.php?title=Dutch_East_India_Company&oldid=734724820.

[45] (“Top 200: The Rise of Corporate Global Power – IPS” 2000) “Top 200: The Rise of Corporate Global Power – IPS,” Institute for Policy Studies, December 4, 2000, http://www.ips-dc.org/top_200_the_rise_of_corporate_global_power/. Accessed August 18, 2106.

[46] (Chang 2012, 207–208) 23 Things They Don’t Tell You About Capitalism by Ha-Joon Chang[nextpage title=”Bibliography”]

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[1] This experiment was not limited to the US. Great Britain and many other developed countries undertook similar policies with similar overall results.

[2] Deregulation did not begin abruptly under Reagan. Changes to regulation of railroads and trucking took place in the early 1970s. The anti-trust case that lead to the break up of the AT&T telecommunications monopoly in 1984 began at the same time. Nevertheless 1981 marks the beginning of a broader effort to deregulate. Various sectors of the economy.

[3] (Akerlof and Shiller 2015)

[4] (Stossel 2014) The Free Market Is the Best Antidote to Poverty, Left free, the market will provide the greatest benefit to workers, employers, and consumers. by John Stossel – Accessed 2/19/201

[5] (“Charles Koch: ‘We Are Doling Out Welfare for the Wealthy’ | TIME” 2016) accessed 2/21/2016

[6] https://marcorubio.com/sidebar-featured/marco-rubio-health-care-obamacare-repeal-replace/. Accessed 2/21/2016

[7] https://www.tedcruz.org/issues/jobs-and-opportunity/ accessed 2/20/2016

[8] (Friedman 2002) Capitalism and Freedom: Fortieth Anniversary Edition

[9] (Rand et al. 1986) Capitalism: The Unknown Ideal

[10] For example, President Bill Clinton embraced free market thinking. He signed the Commodities Futures Modernization Act 2000 and the Gramm–Leach–Bliley Act 1999 that set the table for the speculative outburst leading to the Great Recession of 2008. He is also responsible for a free trade agreement NAFTA and he “reformed” the welfare system by imposing work requirements and limiting how long welfare recipients could remain on welfare.

[11] It can’t go unobserved that Libertarians share one utopian objective with Marxists, the withering away of the state.

[12] (Scott 2008) “The Political Economy of Capitalism” by Bruce R. Scott. Harvard Business School Working Paper draft 07-037 (2006)

[13] See (Linklater 2015) Andro Linklater, Owning the Earth: The Transforming History of Land Ownership, Reprint edition (Bloomsbury USA, 2015) for more on the relatively brief history of private ownership of the earth and the connection with capitalism.

[14] Of course slavery in various forms persists in many forms throughout the world despite these legal bans. Trafficking in women for sexual slavery is widely practiced.

[15] Contracts are widely used as tools of those who prey on the weaker in society. The NY Times reported on 2/21/2016 about a new scam to entangle low-income home buyers in contracts that are designed to be manipulative and coercive. (Goldstein and Stevenson 2016)8/30/16 4:37 PM accessed 2/21/2106

[16] at a Kemp Forum on Expanding Opportunity – A special presidential-candidate forum on poverty 1/9/2016. https://www.aei.org/events/expanding-opportunity/

[17](Leonhardt 2014) Leonhardt, David. “Upward Mobility Has Not Declined, Study Says.” The New York Times, January 23, 2014. http://www.nytimes.com/2014/01/23/business/upward-mobility-has-not-declined-study-says.html.

[18] see Chapter Six in (Polanyi 2001) Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. 2 edition. Boston, MA: Beacon Press, 2001.

[19] This discussion reflects (Polanyi 2001) Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. 2nd edition. Boston, MA: Beacon Press, 2001; (Beckert 2014) Beckert, Sven. Empire of Cotton: A Global History. First Edition edition. New York: Knopf, 2014; (Baptist 2014) Baptist, Edward E. The Half Has Never Been Told: Slavery and the Making of American Capitalism. New York: Basic Books, 2014.

[20] This is precisely why it is deceptive and useless to talk about economics without including the sociopolitical environment and roles of the state. Thus we have preferred to speak of “political economy”.

[21] (“Joseph Stiglitz” 2016) https://en.wikipedia.org/wiki/Joseph_Stiglitz. Nobel prize winner in 2001.

[22] (Polanyi 2001) Polanyi, Karl (2001-03-28). The Great Transformation: The Political and Economic Origins of Our Time . Beacon Press. Kindle Edition.

[23] (Kindleberger and Aliber 2005) Kindleberger, Charles P., and Robert Aliber. Manias, Panics, and Crashes: A History of Financial Crises. 5th ed. Wiley, 2005.

[24] The state planned economy of the Soviet Union is an example of the enormous difficulties of coordinating a complex economy. The lack of reliable prices led to an inflexibility and rigidity that produced a whole underground economy that worked to fill in for the lack of markets.

See (Rutzgaier 2016) “The Shadow Economy in the USSR : A Survey of Soviet Research” by Valeriy M . Rutgaizer. https://www.ucis.pitt.edu/nceeer/1992-900-03-Rutgaizer.pdf accessed 12/3/2015.

[25] As noted earlier Libertarians even argue that roads can be subject to market control. See (W. Block 2014)“The Privatization of Roads and Highways” by Walter Block © 2009 by the Ludwig von Mises Institute https://mises.org/library/privatization-roads-and-highways accessed 2/2/2016 and Carnis, Laurent. “Rothians versus a Rothbardian.” Review of Walter Block’s The Privatization of Roads and Highways, Human and Economics Factors and Gabriel Roth, ed., Street Smart, Competition, Entrepreneurship, and the Future of Roads. Quarterly Journal of Austrian Economics 14, No. 1 (Spring 2011): 130-140.

[26] in 2015 the Federal Poverty Level for a family of four is $24.250 per year. 50 million Americans live below the Federal poverty levels.

[27] For those who might argue that the hovels of the share cropping South or urban slums of the North are adequate I lay down the Rawlsian (or Christian Biblical one, …however you want people to treat you, so treat them…Matthew 7:12 in New American Standard Bible) challenge to take up a place in this housing and see if it fits your sense of “adequate”.

[28] In the early 1950’s Coca-Cola paid the chair of Nutrition Department at Harvard Medical School $5000 to write an article for McCalls magazine touting “soda, ice cream or a Coke” as an appropriate snack for teenagers. (Schatzker 2015) “‘Soda Politics’ and ‘Saving Gotham.’” The New York Times, November 20, 2015. accessed 11/22/2015.

Also see: (Nestle 2015) Nestle, Marion. Soda Politics: Taking on Big Soda. 1 edition. Oxford UK: Oxford University Press, 2015.

[29] See (Akerlof and Shiller 2015) Akerlof, George A., and Robert J. Shiller. Phishing for Phools: The Economics of Manipulation and Deception. Princeton: Princeton University Press, 2015 for more on this and other examples.

[30] This discussion depends largely on: (Mazzucato 2015) Mazzucato, Mariana. The Entrepreneurial State: Debunking Public vs. Private Sector Myths. Revised edition. New York, NY: PublicAffairs, 2015.

[31](Lubin 2016) http://www.businessinsider.com/americas-biggest-tariffs-2010-9 accessed 2/21/2016

[32](Cohen 2016) http://www.nytimes.com/2015/04/13/business/economy/working-but-needing-public-assistance-anyway.html accessed 6/6/2015 and (Ritholtz 2013) http://www.bloombergview.com/articles/2013-11-13/how-mcdonald-s-and-wal-mart-became-welfare-queens accessed 6/6/2015

[33] Don’t confuse “socialized” with “socialism”. Here we are speaking of costs and risks that have been laid at the door of government and society as a whole. This is exactly the same meaning as the complaint about the 2009 bailout of Wall St. by the Federal government. The profits of Wall St. were kept in private hands while the losses became public property or socialized.

[34] (CBS 2016) “Harvest of Shame” – https://www.youtube.com/watch?v=yJTVF_dya7E accessed 8/19/2016.

[35] (Akerlof and Shiller 2015) George A. Akerlof and Robert J. Shiller, Phishing for Phools: The Economics of Manipulation and Deception (Princeton: Princeton University Press, 2015).

[36] We won’t enter into the argument that health is not a commodity like others since it is so intimate to our existence and therefore not subject to rational analysis like buying a car.

[37] Many people think that non-profit companies/organizations are not concerned with profit. This is wrong. Every organization must take in more money than it spends. Otherwise it cannot survive. Beyond maintaining the day-to-day operations the organization must invest for future growth. The difference between for-profit and non-profit organizations is how the profits are distributed and how the assets are dealt with.

[38] Recent data shows US last among 11 developed countries in healthcare outcomes and first in cost. in 2011 we spent $8,508 per capita 2.5 times more than the number one performer UK($3,405) and 50% per than number two, Switzerland. CITATION?

See (Davis et al. 2014): “Mirror, Mirror on the Wall, 2014 Update: How the U.S. Health Care System Compares Internationally.” http://www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror. Accessed 2/23/2016.

[39] See (Field 2014) Field, Robert I. Mother of Invention: How the Government Created “Free-Market” Health Care. OUP USA, 2014 for a full discussion of the history.

[40] Of course, these same companies have moved much of there production to countries where such restrictions don’t apply, e.g. China, Bangladesh, Vietnam, etc.

[41] The bottled water industry was created in the 1970s to replace, in the markets where it started, a public water supply that was ubiquitous and safe. The industry sells a product that is no better than public water at hundreds of times its price and creates a waste stream of plastic bottles that number in the many billions every year. See (P. H. Gleick 2010) Bottled and sold: the story behind our obsession with bottled water and (P. Gleick 2016) Bottled Water Sales: The Shocking Reality

[42] Not to get ahead of our exposition, but note that VOC held a government enforced monopoly on spice trade activities for 21 years. From even these early moments government and markets went together.

[43] (Achbar and Abbott 2003) Watch the documentary, The Corporation, here: http://www.snagfilms.com/films/title/the_corporation (payment required) 2 hours – good introduction. Marred by the use of an extended metaphor of the corporation in psychological terms as a psychopath. This distracts from the structural and functional characteristics required of capitalist market participants.

[44] (“Dutch East India Company” 2016) “Dutch East India Company,” Wikipedia, the Free Encyclopedia, accessed August 16, 2016, https://en.wikipedia.org/w/index.php?title=Dutch_East_India_Company&oldid=734724820.

[45] (“Top 200: The Rise of Corporate Global Power – IPS” 2000) “Top 200: The Rise of Corporate Global Power – IPS,” Institute for Policy Studies, December 4, 2000, http://www.ips-dc.org/top_200_the_rise_of_corporate_global_power/. Accessed August 18, 2106.

 

[46] (Chang 2012, 207–208) 23 Things They Don’t Tell You About Capitalism by Ha-Joon Chang