The underlying premise of the free market goes something like this: The magic of the market is good for everyone. Market players know what they're doing. If we leave market players alone, their efforts to make money means they will try and please customers. As a group, then, market players end up doing what's best for society.
History and current events tell us the thinking behind this logic is wrong. Big time.
The reality of our world tells us that the logic behind this story line is misleading and, quite frankly, simplistic. Worse, it's part of a big lie that keeps our world off balance.
INNOVATION AND WEALTH REQUIRE MORE THAN FREE MARKETS
How do we know that free markets are not necessary for innovation and market success? Simple. All we need to do is look to history. Communist Russia beat the United States into space with Sputnik in 1957. This was a technological stunner that left U.S. politicians and the American public asking what happened.
Not enough for the free marketeers? Check this out. The most popular gun in the world, the AK 47, was created by a communist tank commander after he was wounded in battle.
Then we have the incredible story behind the rise of the microchip and the birth of the Silicon Valley. As I pointed out in an earlier post, while the private sector did some great stuff, it was the demands of the Cold War and government dollars that made it all work.
Without NASA, the Cold War, and the willingness of the U.S. government to purchase new transistors and, later, microchips, that were 50 times more expensive than the products that preceded them, Fairchild Semiconductor might have failed, while the story of the Silicon Valley might have taken another turn.
The point is innovation, market success, and even the acquisition of wealth require much more than having an idea, hard work, or freedom.
Then we have the side effects of capitalists gone wild, which demonstrate that deregulated markets (or no regulation) may do more harm than good.
Today we live in a world where pharmaceutical companies artificially jack up prices because they can. Included here is the case of a Veterans Administration scientist developing a cure for hepatitis that was sold to the private sector, and is now out of the reach of veterans because it's priced at $1,000 a pill.
For their part, many of Wall Street's biggest firms went nuts after being deregulated and blew up the economy in 2008. After blackmailing the U.S. government and getting the U.S. Congress to deliver the Mother of All Bailouts, America's largest financial firms have lived off of government life support for the past 7 years because of bailouts, cross-party transfers, government subsidized loans, and legal cover.
All of these government escorted programs (and subsidies) have allowed the financial sector to continue creating and selling complex financial products that have more to do with wealth extraction than they do with wealth creation.
What we know now is that free markets offer no guarantee that being the first to build great products (like satellites), or that those with wealth (Paris Hilton) actually did what's necessary to earn it. So, yeah, "free markets" may help but they are no guarantee that innovation and creativity will follow. There are many other factors at work when it comes to what drives the human spirit.
This brings me to the story of Clair Patterson and his fight to demonstrate the dangers posed by the amount of lead in our environment.
THE BIG LIE OF CORPORATE AMERICA DOING THE RIGHT THING
Let's start with this. Clair Patterson was a geochemist. He was the first to use lead to understand and determine the age of the earth (4.5 billion years old). In the process of his studies Patterson learned that industrial-based levels of lead on the planet had grown dangerously high for humans and the environment. So, yes, human activities have an impact on our world.
There was just one problem. Lead helped to eliminate the pinging and knocking noise in high performance engines. People with big cars and big engines were in no mood to have their high performing engines sound like diesel engines as they flew down the road. Worse, the petroleum industry didn't like the idea of having to find a replacement for their product - tetraethyl lead- and especially didn't want their products associated with klunky-sounding cars.
So the petroleum industry went after Patterson and his work.
The petroleum industry, who had once supported his research, immediately cut off Patterson's research funding. Then they generally made his life more difficult by funding scientists who would challenge Patterson's findings at every turn. This went on for decades. Patterson's professional networks were impacted too. He was excluded from the National Research Council panel on atmospheric lead contamination, in spite of being the world's leading expert on the topic.
The fact that the petroleum industry would go after Patterson, in hindsight, is simply mind blowing.
Think about it. If people didn't know before recent events in Flint, Michigan they know now that lead is toxic to many organs and tissues, like the heart, bones, intestines, and kidneys.
We also know that lead interferes with the development of the nervous system, which makes it especially toxic for children. Finally, we also know that people who work with lead over extended periods exhibit personality disorders, and even go mad. And just like none of this mattered in Governor Rick Snyder's free market experiment in Flint, Michigan, none of this mattered to market players in the petroleum industry in the 1960s.
The petroleum industry did what many profit-centered industries do as a matter of course: They tried to discredit the science, and the scientist, with the goal of short-circuiting government regulations they knew would follow.
CONCLUDING THOUGHTS
What's presented above is a far cry from what free marketeers claim. Specifically, their argument that allowing market players to do what they want will work to the consumers benefit is not necessarily a truism. Nor does it follow that market players doing their own thing automatically advances the human condition.
Fortunately, the science behind Clair Patterson's work would eventually compel the government to ban lead from gasoline and other industrial products. The impact has been nothing short of phenomenal. Apart from the improved health benefits associated with organ, tissue, and the nervous system we are now learning that banning lead in gasoline has had another broader societal impact.
Two years ago, writing for Mother Jones, Kevin Drum reported that new research is increasingly pointing to lead as the real villain behind violent crime, lower IQs, and a surge in ADHD cases throughout America and across international borders.
The real takeaway here is that market players do NOT always do the right thing, even when they are presented with the evidence.
But this should not come as a surprise.
Free markets are no guarantee that you will get there first, that you will have the best product, that the rich will have earned what they have, or that market players are inclined to do the right thing. Slavery was justified in America's "free market" economy, while family wage laws insured that women and children would always earn less than a man during America's industrial revolution.
Think about this the next time someone wants to tell you about the power and moral superiority of free market economies.
P.S.: For those of you looking to learn more on this topic, you should take a look at Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues From Tobacco Smoke to Global Warming. The authors show how specific industries financially backed efforts designed to undermine transparency and muddy the waters of established scientific facts. It really doesn't matter that individuals, society, or the environment were going to be harmed in the process. If science got in the way of profits industry was going to go out of its way to discredit the science, and the scientists.
I might even write a short review of The Merchants of Doubt here. Stay tuned.
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