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writing for godot

The Myth of the Free Market

Written by Thomas Magstadt   
Friday, 21 October 2011 11:32
With the Occupy Wall Street movement in full swing, now is the time to take a close look at the right-wing propaganda machine’s favorite canards about capitalism and the free market. In the wake of the worst banking crisis since the Great Depression and in the throes of a prolonged recession brought on by rogue financial institutions operating outside a regulatory system supposedly designed to prevent the very kind of reckless behavior and profiteering that led to the current doldrums, here is a short list of myths perpetrated by the corporate greed-is-good culture – myths that taken together add up to The Big Lie that is destroying the American economy, the middle class, and the good character of a once-great country.

Let’s begin with an axiom the US Chamber of Commerce, the National Association of Manufacturers, the major oil companies, and Goldman Sachs, to name but a few, would all wholeheartedly endorse: The free market is the best guarantee of peace, prosperity, and the greatest good for the greatest number.

Myth #1: There is no such thing as a free market, never has been, never will be. All markets are regulated, but some markets are regulated in the interest of the many and others in the interest of the few. The American economy is now clearly and indisputably regulated by the few and for the few who now control the wealth of the nation.

Proof: The top 20% own all but about 15% of the privately held money and assets in this country. The top 10% of taxpayers owns roughly 72% of the wealth and over 90% of the stocks, bonds, and mutual funds. Between 1981 and 2005, federal taxes on business declined 43 percent. Corporate income taxes accounted for about one-quarter of federal revenues in 1950; today, corporations contribute a mere 6% to the Treasury.

Myth #2: Market economies are hardly a guarantee of peace. The United States boasts by far the world's largest military establishment. Much of the money spent in the name of national security and war-waging goes to private corporations through hundreds of thousands of procurement contracts (around 400,000). For FY2002 through FY2008, nearly half of all federal expenditures went to eight federal departments and agencies involved in national and homeland security – including the servicing of war-incurred debt.

Proof: We are currently fighting two protracted wars we initiated (Afghanistan and Iraq) and we are actively involved in a third (Libya) - but, at least, Washington did not start that one. Not counting the intelligence services and "black budget", the US accounts for 43-45% of total world military expenditures every year. According to the prestigious Stockholm International Peace Research Institute (SIPRI), the United States accounted for $19.6 billion of the $20.6 billion global increase in military spending in 2010 – fully 96% of the total. The "military-industrial complex" has corporate and defense tentacles reaching into virtually every political
constituency. DOD alone maintains nearly 5,500 bases and military sites in the U.S. and around the world

Myth #3: Market economies are based on competition and therefore guarantee efficiency and prosperity.

Proof: At least 95 percent of the national debt is war-related. The Defense Department absorbs 25-30 percent of the federal budget, depending what is counted and who's doing the counting. Two-thirds (68 percent) of all federal government civil and military employees are involved in national security and war related activities. If you add the $100 billion or more for the two wars we are still fighting, the $80 billion for the intelligence budget, and various other defense-related expenditures, that figure is actually much higher – roughly one-half the entire federal budget for the period 2002-2008.

Myth #4: The Constitution prescribes that corporations are no different from natural persons, with the same right to freedom of speech and expression as you and me, which means, among other things, that Chevron and WalMart can spend as much money as they please to manipulate public opinion and influence the outcome of elections.

Proof: The Constitution does not declare that corporations are individuals. Rather, it was a notoriously misguided decision of the Supreme Court handed down almost a century after the Constitution was written and ratified.

Not until 1886 in the case of Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394, did the Court make this astounding discovery! Never mind that it is preposterous to equate natural person and corporations: the 1886 decision is the jurisprudential sledgehammer which the Supreme Court - most recently the ultra-conservative Roberts Court - has used to smash all federal legislation aimed at limiting corporate campaign spending to bits.

It's true that in theory a democratic state will naturally make laws and regulations in the interest of the many, not the few. In practice, however, it clearly does not work that way in the United States anymore.

The extreme costs of political campaigns combined with the extreme inequality in wealth means that a very few individuals who control vast amounts of money can make or break virtually any candidate for high office, including incumbents. If you don't believe me, ask former Senator Russ Feingold of Wisconsin – a latter-day Solon who tried to reform our disastrous campaign finance laws and was defeated in 2010 by Ron Johnson, a business executive and prominent member of America's entrenched plutocracy, who poured eight million dollars of his own money into winning a Senate seat.

Conclusion: A vibrant market economy will not be long-lived or “sustainable” in the absence of smart regulation designed to accomplish two primary aims – wealth creation and social justice. In the pursuit of wealth and justice, it is the role of the state to balance these two aims.

Regulation is not the enemy of incentive, invention, or innovation. Nor is it incompatible with progress, profits, or personal gain. In a properly ordered republic, business makes the money and the government makes the rules. If the federal government persists in allowing oil companies, investment banks, and front groups for billionaires to make the rules, the markets will not function, competition will languish, the economy will continue to recede, and the rich will get ever richer – a formula for the death of the middle-class and the American Dream. your social media marketing partner


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+2 # DakotaKid 2011-10-22 11:45
visit the author's website at
+1 # remoran 2011-10-23 09:36
Good article but there is no mention of transparency, the key to having a viable open market system that's fair and unbiased. The net works because the tech standards are open, the same concept should apply to governance, finance and business. Without that one essential, there is no real chance for true reform or equality.
0 # DakotaKid 2011-10-23 14:20
Right on! Thanks, TM
0 # Steven Matherly 2012-07-26 05:48
Mr. Magstadt: Good article. It reiterated and spelled out what "progressives" already know or should know by now. Thanks for putting it succinctly.

What I would really like to hear from you (and other RSN writers) is what we're going to do about it. Perhaps you address it in other articles - I'll look around some more on this site.

I am all for local currencies and local food and ethical consuming and saving the whales. I love a good protest (I'll be at the DNC in September)and I'm encouraged by the Occupy movement. However, what I'd really like to see is a "fill the jails" kind of movement like MLK and Ghandi used. The Occupy folks in Oakland may have been a little too tolerant of "diverse tactics" but they had the right idea with the "General Strike".

The way I see it the system is set up for "legal" protests that are mostly ignored and now are being criminalized. In my humble opinion we need to re-learn the lessons of the old left and the labor movement.

Thanks again for the good article.

Steven Matherly
Durham, NC

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