Instead of free markets the US has inequality, monopolies, and wealth extraction
Dean Baker is a Senior Economist at the Center for Economic and Policy Research (CEPR)
Cross-posted from the Center for Economic and Policy Research
We all take for granted that Donald Trump lies as easily as he breathes. But most of us still expect better from folks like the op-ed editors at the New York Times and Harvard history professors. Unfortunately, that expectation does not seem to be justified.
The NY Times gave Harvard history professor Sven Beckert a lengthy column in which he spread the usual self-serving lies promoted by advocates of neoliberalism. The basic point in Beckert’s telling is that neoliberalism was about leaving things to the market:
“For decades, Democrats and Republicans, economists and commentators, agreed that trade was good and tariffs bad. The state provided an institutional framework in which markets operated, but there was no place in markets for active political involvement. Efficient production was globally integrated and talk of embedding supply chains within states was parochial, even retrograde. Independent institutions that were insulated from politics, like the Federal Reserve, were seen as pillars of American capitalism. Year after year, politicians, bankers and economists reaffirmed their almost religious belief in the merits of markets at a pilgrimage site high in the Swiss Alps: the World Economic Forum at Davos.
“The neoliberal revolution emphasized deregulation, freer trade, central bank independence and globalized production chains. It downplayed the importance of borders.”
As regular readers know, the idea that economic policy over the last half century was about leaving things to the market is a sick lie. A really important aspect of economic policy was making patent and copyright monopolies longer and stronger.
On what planet are these government-granted monopolies “leaving things to the market?” Did Professor Beckert, and his editor at the Times, somehow not notice the large and growing importance of these monopolies in the US and world economy? Is the $700 billion (2.3 percent of GDP) the United States will spend this year on prescription drugs and other pharmaceutical products not important enough to merit attention?
How about the huge fortunes amassed by Bill Gates and many others as a result of these government-granted monopolies. Are we supposed to pretend that this is just the natural working of the free market?
By my calculations, these government-granted monopolies almost certainly steer well over $1 trillion a year ($8,000 per household) from the rest of us to the small groups in a position to benefit from them. And yeah, there are other ways to provide incentive for innovation and creative work, even if the New York Times won’t open its pages to anyone talking about them.
And these monopolies are not the only notable way in which governments intervened in markets in the last half-century. While we did look to eliminate barriers to trade in manufactured goods, costing millions of jobs and putting downward pressure on the pay of non-college-educated workers, there was no effort to promote free trade in the services of physicians, dentists, and other highly paid professionals.
As a result, doctors in the US earn an average of more than $350,000 a year, twice as much as their counterparts in other wealthy countries. How can someone taking a big view of the US economy in the last half century fail to notice that we increased protection for more than 1 million highly paid workers, even as we eliminated barriers that protected lower-paid workers.
What are the free market rules for labor-management relations? Does the free market say that unions can’t have secondary boycotts? (They are banned here, but not in many other countries.) How about restricting freedom of contract so that workers are prohibited in many states from signing contracts requiring that all workers who benefit from a union contract pay a representation fee (a.k.a. “right to work”)? That’s the free market?
And how did making a huge program like Medicare more inefficient, by opening the door for private insurers, fit with the claim that politics had no place in economics? We can ask the same about the bailouts of the banks in the financial crisis in 2008-2010 and again on a smaller scale in 2023. And our “independent” central bank would have circulated a digital currency, like Brazil, giving a huge whack to the waste and profits of a bloated financial sector, if it was concerned about efficiency instead of responding to political pressure from the financial industry.
I could (and have) go on. The rules of corporate governance that allows CEOs and other top executives to rip off their companies, and skew the pay structure, were not dictated by the market. The special treatment that Mark Zuckerberg and Elon Musk’s social media platforms get relative to print or broadcast media as a result of Section 230 was also not the result of the market.
It should be abundantly clear to anyone with their eyes open that the last half-century was not about pushing the free market. It was about pushing policies designed to redistribute income upward. The claim that it was all the free market was a lie to make the policies more palatable. After all, it is much easier to tell workers losing their jobs or taking big pay cuts that it was the market that did it, rather than policies designed by the rich to screw them.
I realize that you can’t say this in the pages of the New York Times, but the soaring inequality in the last half-century was not something that just happened. It was by design, and any serious discussion of the economy has to recognize that fact.
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