Is "Free Market Fundamentalism" a Myth?

Apologists for the American Bipolarchy like to argue that it was natural for the country to be split between two great political parties because the great political questions are of an "either-or" nature: large or small government; state or federal predominance; high or low taxes. One such divide, in theory, separates those who believe in the sufficiency and efficiency of free markets from those who believe government regulation necessary to a just society. While Republicans, conservatives and libertarians rail against "socialist" government controls over markets, Democrats, liberals, progressives and those further left rail against a "market fundamentalist" ideology that supposedly animates the right.

The left is used to dismissing the former charge as nonsense -- especially socialists who see Democratic regulations as far short of the ideal. It's more unusual for a writer from the left to dismiss the latter charge of "market fundamentalism" as nonsense. That's what Dean Baker does in the Spring issue of Dissent. I mean that literally.

"Progressives have wailed against 'market fundamentalism' for the last quarter-century," Baker writes, "They complain that conservatives want to eliminate the government and leave everything to the market. This is nonsense. The Right has every bit as much interest in government involvement in the economy as progressives. The difference is that conservatives want the government to intervene in ways that redistribute income upward. The other difference is that the Right is smart enough to hide its interventions, implying that the structures that redistribute income upward are just the natural working of the market."

Examples of upward redistribution include the bank bailouts and, most relevantly to current policy debates, a patent monopoly system that allows exclusive patent holders -- the pharmaceutical companies -- to charge far more for drugs than they could in a truly competitive market. In such a market, Baker writes, competitors would drive prices down by marketing their own versions of generic drugs. Baker calculates that doing away with patent monopolies might cut the collective cost of prescription drugs by 90%.

"The idea that a 'free market' is allowing some people to get incredibly rich and causing other people to be poor of financially insecure is nonsense," Baker resumes. In the case of patents, government intervention was justified as an incentive for research, but corporate research itself is arguably redundant given what the government spends on medical research. Baker proposes replacing patent monopolies with a "prize" system that would pay patent holders for the right to release their products into the generic market. This would be a case of changing market rules, which are made by government, not nature, to ensure "better distributions of income." If greater competition benefits the most people, a progressive government should structure markets to encourage competition. Baker takes this premise to a daring extreme by suggesting that Americans be allowed to buy into the vaunted health-care programs of other industrialized nations. While the idea seems far-fetched if it means ordinary Americans making regular trips to Europe, Baker's point is that competition with the existing American health-care system should result in reducing that system's own prices. Republicans might make arguments against such a proposal, but they wouldn't be able to argue in the name of free markets.

Baker claims that progressives only make Republicans look good in the eyes of some people by calling them "free market fundamentalists" He writes: "There are no free market fundamentalists in this debate, just conservatives who want to pretend that their rules are the natural working of the market." Whether he includes libertarians in this statement is unclear, but even leaving them out, I'm not sure if Baker is right. There may have been a void separating reality from propaganda when progressives first posited the existence of these fundamentalists, but nature and "the market" alike abhor a void. My impression is that there are "free market fundamentalists" out there. They are the naive populists in the tea party movement, those to whom the bailouts of 2008 revealed the existence of a "crony capitalism" abhorrent to their own ideals of rewarding success and punishing failure. They denounced the collusion of Big Business and Big Government while retaining an ideal of a free market in which Big Business would not be able to bend the rules in order to save itself from the consequences of bad decisions. The flaw in their assumption is the notion that dismantling Big Government would effectively deny Big Business any means to cheat. This assumption fails to consider the possibility that Big Business itself (or "power" or "wealth") calls Big Government into being for its own reasons rather than those of the bureaucrats and regulators these "fundamentalists" despise. The politicians Baker criticizes may well be hypocrites, but there are true believers on the ground all over the country, and abandoning the critique of "free market fundamentalism" simply because some exponents are liars can only allow a misguided mindset to spread among voters, where it can hurt progressives the most. Baker makes a good case for directing the critique more accurately, but he doesn't prove that the "myth" can be safely ignored.