Freeman

ARTICLE

Market Closed!

JULY 01, 1971 by PAUL L. POIROT

This little piggy went to market. But the market was closed—in­definitely—by order of the gov­ernment.

There had been a lot of com­plaints about the market:

·     It takes a person at his word and holds him responsible for his ac­tions.

·     It allows unwanted resources to go unclaimed and unused.

·     It permits scarce and valuable resources to be owned and con­trolled by the highest bidder.

·     It allows foreigners to compete on equal terms with domestic suppliers and buyers.

·     It lets prices for goods and ser­vices rise or fall in response to demand and supply.

·     It permits people to hire or to work for one another on terms mutually agreeable.

·     It lets buyers and sellers use any­thing they please as money.

·   It lets the owner consume, save, offer for sale, or otherwise use, waste, pollute, or abuse his prop­erty as he chooses.

·   It allows a person to succeed or fail in accordance with his deci­sions and actions.

·   It allows a person to specialize in any business or profession, or to live a life of self-subsistence, as he chooses.

·   It allows people to congregate in centers of trade and culture.

In short, the market respects the dignity of every human being and lets him do just as he pleases with what is properly his own, leaving him free to reap the bene­fits and suffer the consequences of his own actions.

A market economy can hardly be described as a natural develop­ment, such as might be found among plants, bees, birds, or ani­mals in the wild. It is the result, rather, of human reason applied to the problems of the individual in society. The theory or premise behind the market is that the most practicable and desirable form of society is one that maximizes per­sonal freedom of choice and mini­mizes violence among men. Inso­far as possible, let man do as he pleases, acting alone or in strictly voluntary association with others. And this is the purpose of the mar­ket: to facilitate voluntary asso­ciation and trade.

However, by definition and by nature, a voluntary association is unable to police itself, has no means of enforcing the rules of the association within its own membership and no means of pro­tecting itself from nonmembers. The market, for instance, has no market method of coping with a buyer or a seller who resorts to coercion or fraud to effect a trade, no way to keep the market open and operating in the face of those who would close it by violent methods.

So, the human reason that calls for a market economy, in order to maximize the exercise of personal freedom of choice, also demands a framework of government, a gov­ernment strictly limited in scope and function to policing the mar­ket, protecting the life and prop­erty of everyone who comes to trade in peace, and making sure that no person or group is per­mitted to block any peaceful trader from the market. This appears to be the minimum governmental force required to police the market and thus maximize the freedom of the individual, release his crea­tive energies for peaceful produc­tion and trade, reduce his incen­tive and temptation to resort to violence to obtain or defend what he wants.

In other words, the optimum re­lease of creative human energy requires a framework—or perhaps a leavening—of organized police power, a government of strictly limited scope and purpose to mini­mize violence among men. If this reasoning be correct, it suggests a corollary proposition: Any expansion or extension of govern­mental force beyond the minimum required to police the market nec­essarily and inevitably drives in­dividuals and groups to acts of violence against one another. Such aggravated violence involves de­struction of human and other re­sources that might otherwise have been turned to peaceful and con­structive use.

The Ultimate Intervention

Such was the situation on the fateful day our hypothetical "little piggy" went to market and found it closed. Not satisfied with the risks and pressures of open com­petition, this and that person and group had sought and obtained government intervention in its own behalf:

·         Protection against foreign suppliers of goods and services.

·         A special license or exclusive trading privilege.

·         A right to strike and keep com­petitors from taking the job va­cated.

·         zoning ordinances to force neighbors to keep their distance.—unlimited supplies of money and credit.

·         Fair trade laws to prevent price cutting.

·         Minimum wage laws.

·         Laws to hold prices up, or to hold prices down.

·         Rent control laws.

·         Low-cost public housing projects.

·         Guaranteed income in old age, or at any age.

·         Free schooling, medical care, dental care, legal aid, food stamps.

·         A little privilege here, a little pressure there, and so forth and so on.

Yet, the more the government is asked to intervene on behalf of some persons and groups at the expense of others, the more diffi­cult it is for anyone to compete in the open market to serve himself by peacefully serving others. No sooner is a special privilege granted by government to a par­ticular person or group than other persons or groups begin fighting to obtain "their fair share." And whatever the grant of privilege or power, it is never enough; the beneficiaries demand more, and turn to violence to get it.

From Violence to Famine

The market cannot cope with violence, which destroys savings and investments, tools and facili­ties of production, the incentive to specialize and trade. This coer­cive detour of the market leads back toward conditions of famine and starvation chronically suffered by slaves, serfs, and socialists. People unfree or unwilling to com­pete in the market for possession and use of scarce resources inevit­ably find themselves trying to sub­sist on rations. Instead of faring each according to his ability and his effort, each hopes to share ac­cording to his need. The individ­ual ceases to be responsible for what he produces or consumes; these choices are made for him by someone else. He stands to gain or lose nothing by producing more or less. Nor is it to his advantage to save, since his savings would be confiscated. The share rationed to him is in proportion to his lack of productivity. When violence closes the market, famine cannot be far behind.

One need not rely on theory or imagination to test the procedures and effects of closing the market.

In the Communist Manifesto of 1848, Karl Marx drew up the blue­print, spelled out various of the most important measures "to cen­tralize all instruments of produc­tion in the hands of the state." The blueprint has been followed, the measures applied, in Russia, China, Cuba, and other lands. The markets have been closed, dis­placed by coercive collectivism. And the inevitable consequence in each case has been degrading poverty and famine.

In a sense, and in the light of the trend of developments in the United States in recent decades, Marx seems to have been remark­ably prophetic in his list of ten steps toward compulsory collec­tivism. On the other hand, it should have required no great flash of insight by some genius, even as far back as 1848, to foresee what might be some of the consequences if a system of coercion were to displace the market system of open competition and voluntary ex­change.

Experiences in Agriculture

In any event, whether or not Marx realized what he was doing, understood what he was saying, or knew where his ideas were leading in 1848, there would seem to be little excuse for confusion about the results of coercion in the latter part of the twentieth century. Indeed, one need not look beyond quite recent domestic ex­periments and experiences in agri­culture for necessary proof of the failure of coercive practices and the reasons why nothing is to be gained by any person or group through further ventures in that direction.

What, for instance, have the cotton growers of the United States gained for their efforts over the past fifty years to get more for their product than the competitive market would allow? True, they have gotten some sub­sidy payments from taxpayers, but along with the subsidies have come stringent government regulations and controls and quotas and re­straints of one kind and another. The values of quotas and allot­ments have been built into the price of the land to which they are tied, and that higher priced land carries ever higher taxes. Further, the withholding of American grown cotton from the market has opened the door inadvertently, not only to foreign growers of cotton but more especially to domestic producers of rayon, nylon, and a host of other synthetic fibers. In­stead of competing in the open market, American cotton growers are finding themselves more or less bound and gagged on an arti­ficial political pedestal, their own political power dwindling and no bright prospect of a large bloc of satisfied consumers from whom political support might be forth­coming.

Similar, if not identical, experi­ences could be reported for Amer­ican growers of wheat, corn, to­bacco, rice, peanuts, sugar cane and beets, various fruits, vegeta­bles, nuts, and other specialty crops under marketing orders, agreements, or cartel grants of one kind and another. Nor does the attempted producer-monopoly seem to hold up with greater success when bolstered by international commodity agreements such as those for wheat, cotton, sugar, coffee, and so on. The mathematics of political power simply doesn’t work out right to give a relatively small group of specialized pro­ducers a great and generous hand­out from a larger group of frus­trated consumers.

A Cauliflower Cartel

Aside from the political imprac­ticality, consider the simple eco­nomics of the producer-cartel or monopoly. For the sake of argu­ment or illustration, let’s suppose there are 1,000 growers of cauli­flower in the United States. Why shouldn’t they form an association for the more orderly marketing of high quality cauliflower? In other words, put their heads together and form a monopoly in order to hold supplies from the market and thus obtain higher prices!

Of these thousand growers, one of them is the largest and one the smallest commercial producer of cauliflower in the nation. And there’s every likelihood that the larger one achieved his position through efficient production. Chances are that the relatively few of the very large growers are the low-cost, efficient ones, whereas several of the smaller producers may be operating at no profit, per­haps at a loss. (Size, of course, does not necessarily mark suc­cess; the point is that some grow­ers are more efficient than others.) Of the thousand growers, no doubt the majority of smaller producers would be very happy to see the few larger ones cut back their out­put. But why should any large, efficient grower want to thus re­strict trade or take himself out of the market? And if he did, what would stop 10,000 other farmers from trying to supply the cauli­flower market he had just vacated? Of course, a law would be needed to prohibit cauliflower production by those who could show no pre­vious records of production. And it also would be necessary to pro­hibit imports of cauliflower from abroad, if the domestic monopoly were to be effective.

So, there would be production and marketing quotas for each of the 1,000 privileged growers, not to mention endless quality controls and other governmental rules and regulations. An efficient cauli­flower grower should want no part of any such "protective" arrange­ment. And if he only knew it, neither should the inefficient loser among the growers wish to be artificially shielded from or blinded to his failure. Far better to know the truth, so that he might turn his labor and other resources immediately to something more potentially profitable to him than cauliflower growing.

Finally, it is not to be supposed that a cauliflower monopoly begins and ends with cauliflower growers. This coercive action affects other persons and groups, some seeking a comparable special privilege for themselves, others seeking oppor­tunities to return to the open mar­ket. If all the devious consequences of coercive intervention could be foreseen and understood, it seems unlikely that mature and responsi­ble adults would ever want to try to price themselves out of the market.

Free Market: Who Needs It?

Many people will not be greatly concerned about the producers who may suffer as a consequence of closing the market. Their professed concern is rather for the poor. Who cares about a few producers, some of whom had accumulated sizable fortunes! Why keep the market open for that type of person? Why not try some form of profit-sharing or dividing the wealth or other so­cialistic program to give the mil­lions of the poor a better chance?

The fact is that the successful businessman or entrepreneur prob­ably would make out pretty well for himself under any system. Whatever "the rules of the game," he’d find his way toward the top. And, sad to say, the poor within a market economy would still be the poor, for the most part, under any other arrangement.

So, it is the poor who stand to lose the most, comparatively, as a consequence of closing the market. The competitive market economy is the only system that channels the creative efforts of the most aggres­sive and capable individuals into serving the needs and wants of the poor. That is really why we can’t afford to let the market be closed.

ASSOCIATED ISSUE

July 1971

ABOUT

PAUL L. POIROT

Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.

comments powered by Disqus

EMAIL UPDATES

* indicates required

CURRENT ISSUE

December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION

Essential Works from FEE

Economics in One Lesson (full text)

By HENRY HAZLITT

The full text of Hazlitt's famed primer on economic principles: read this first!


By FREDERIC BASTIAT

Frederic Bastiat's timeless defense of liberty for all. Once read and understood, nothing ever looks the same.


By F. A. HAYEK

There can be little doubt that man owes some of his greatest suc­cesses in the past to the fact that he has not been able to control so­cial life.


By JEFFREY A. TUCKER

Leonard Read took the lessons of entrepreneurship with him when he started his ideological venture.


By LEONARD E. READ

No one knows how to make a pencil: Leonard Read's classic (Audio, HTML, and PDF)