Does Anyone Believe in Free Markets?

As the Trump administration tariffs went into place this week, it’s worth taking a second to think about opinions on free markets and the conclusions that can be drawn from their perceived impact on employment.

As the traditional conservative platform in America has run on mantra of free trade and frictionless capitalism, it’s worth noting that in 2016, that message lost its footing with a Republican base that is increasingly older, blue collar, working class Americans tied to specific regions. Trump campaigned on and has executed a policy aimed at recalibrating the balance of global trade in America. The logical conclusion to draw from that is that the free markets, if left to their own devices tilt towards poor outcomes for America.

High wages, high cost of living and an aging work force leave us in a position where we’re not particularly competitive with China for manufacturing and global exports. As the largest economy in the world and the largest customer for imports in the world, Trump’s approach of putting a thumb on the scale with tariffs is a strategy with a goal focused on the American worker. The goal is to try to bring back jobs. Coupled with a drastically reduced corporate tax rate that in theory is supposed to stimulate domestic investment, we have one somewhat rational approach to employment woes. Those woes being slow wage growth and reduced productivity over the last 40 years, not unemployment that is currently sitting at low, low 4%.

On the Democratic side, the two candidates that have generated the most organic, grass roots energy in the last two years have been Bernie Sanders and Alexandria Ocasio-Cortez. Both identify themselves as Democratic Socialists who advocate for social welfare programs that put a different thumb on the scale for the American worker.

If we think about what success looks like for Trump’s tariffs, it’s some increase in domestic investment and an uptick in the availability for high paying manufacturing jobs paid for by some reasonable increase in the cost of goods for the American consumer.

Failure is a trade war that destabilizes global relations and yields no meaningful economic outcomes for the American worker.

For the Democrats, success is some increase in social safety net, expansion of medical benefits, education or even a universal basic income paid for by some manageable increase in taxes.

Failure is a welfare state that stifles investment and bankrupts the country.

Both side have the same goal; make up for the gap created by the current slow growth rate of resources for Americans. Republicans lean towards the government intervention of the tariff because it puts incentive on working for the benefits and has an element of choice related to purchasing consumer goods. Democrats prefer the increase in social safety net because it redistributes resources to populations with less opportunity.

If this is now is the modern American political economic debate, what’s missing?

Free markets.

I’m not sure how many have noticed that yet.

Categories: Economics

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2 replies »

    • With all due respect, free markets are a myth. The idea of frictionless markets ignores a basic reality of human nature — greed. Every market in human history has been regulated by someone. The only question has been who? The producer? The consumer? The capitalist? The worker? Government? Unfortunately, all are subject to an ancient law: power corrupts and absolute power corrupts absolutely. Power mixed with greed leads to hording of wealth. Consolidation of wealth chokes off the economy, whether the hording is done by the people at the top or the bottom of the food chain. So, it’s a good thing free markets are not part of the discussion, since their myth only distracts us from the reality of how markets work in practice.


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