Wednesday, July 11, 2007

Free Market Tyranny



It admits no thought other than its own ideology. Those who question or critique it are promptly denounced. It is the very world we live in today, the world of Free Market fundamentalism. There is a radical zealotry that runs through it.

Now some American economists are beginning to question how their discipline is taught in universities and practiced in Washington. From the International Herald Tribune:

"There is much too much ideology," said Alan Blinder, a professor at Princeton and a former vice chairman of the Federal Reserve Board. Economics, he added, is "often a triumph of theory over fact."

Blinder helped kindle the discussion by publicly warning in speeches and articles this year that as many as 30 million to 40 million Americans could lose their jobs to lower-paid workers abroad.

Just by raising doubts about the unmitigated benefits of free trade, he made headlines and had colleagues rubbing their eyes in astonishment.

And free trade is not the only sacred subject, Blinder and other like-minded economists say. Most efforts to intervene in the markets - like setting a minimum wage, instituting industrial policy or regulating prices - are viewed askance by mainstream economists, as are analyses that do not rely on mathematical modeling.

...as issues like income inequality, free trade and protectionism have become part of the presidential candidates' stump speeches, more thinkers have joined the debate.

In addition to Blinder, other eminent economists like Lawrence Summers and the Nobel Prize winner George Akerlof have pointed out what they see as the failings of laissez-faire economics.

"Economists can't pretend that the consensus for free markets and free trade that existed 30 years ago is still here," said Robert Reich, a public policy professor at Berkeley who served in President Bill Clinton's cabinet.

Part of the reason is the growing income inequality and dislocation that global markets and a revolution in communications have helped create. Economists who question the free-market theories "want to speak to the reality of our time," Reich said.

Meanwhile, critics have also pointed out the limits of standard cost-benefit accounting to measure items like the cost of inequality or damage to the ecosystem.

5 comments:

Anonymous said...

The "Fedual" system is alive and well. If anyone thinks that North American cannot become a third world, they better think again. Just spend a year in Asia and understand why.

Mike said...

There are a great many of us on the left-libertarian spectrum who do not consider NAFTA or anything like it "free trade" - it is highly regulated, cartelizing treaty meant to benefit certain industries and corporations. It is not "free trade" - a real free trade agreement could be written on a napkin rather than a tome of laws.

The same for "free market" - there is so much interference at the behest of corporations and trade is not truly free. Don't even get m e started on the barriers to entry that these guys put up.

No, the status quo is not free trade nor a free market, no matter how much the vulgar-libertarians and corporatist try to say it is.

The Mound of Sound said...

Power to the People, Mike. I can dig it!

Anonymous said...

the funniest thing about economics is it places far more emphasis on theory than on empiricism. the main assumption in economic theory is of a free market characterized by perfect competition. problem: there has NEVER existed in reality a market characterized by perfect competition. as such, the prescriptions proferred are suspect at best.

canuckistanian

The Mound of Sound said...

You're right, Canuck. I did micro-and macro- in undergrad and loved it. It was like a Meccano set where you looked at the pieces and figured out what they would look like when assembled. It all made sense in a post-war industrialized America model and, even then, only on the strength of a host of artificial assumptions. But times change and classical economics can't accomodate change.