For students of Economics, there used to be a concept called ‘Free Market’. The USA was considered to be the home of free markets along with old democracies like France, UK, Japan and the like. Many economists believed that the Free Market was never born, but that is debatable.

After much thought, searching and with a heavy heart, here, I am announcing the death of free markets, and here is an obituary.

FM was never perfect and had a lot of imperfections. We had to assume that all the players were rational, had an ability to think and would always work in self interest. This was a terrible assumption – and showed in the fact that the biggest industries in the world (read US for all practical purposes) were ammunition, alcohol, sin, pharma and banking.

What really killed the Free Market? Well it is not clear, and a committee has been appointed, but largely the suspicion is on the following:

a) the stupid end user who refused to get educated about FM, and the fact that we had to assume he is literate. He was not.

b) the Corporate Short Term Oriented Greedy Executive- he was clearly filling up his salary account, Esop account, etc.

c) The street’s greed – Wall street or Dalal street was just incidental. Now they have no books and no Face to hide, but that does not seem to be bothering them.

d) The Central Bank’s ability to play with interest rates was so amazing that they could fool around with the markets, and eventually tire it to death.

e) The Governments that could print notes (which means their currencies went for a toss), and the countries which could not (they were bailed out by their vested interest partners: read Germany). They printed so many notes that the returns in Gold reached an all time high.

f) The Central Government scheme looked like Ponzi schemes, unless of course you want to call it the Madoff scheme – sheer size is far greater than Ponzi.

g) The American FED and the banks ensured that a tree costing US $ 3000 could be converted into US $ 3 Million, and they believed that was the solution. Long live Obama.

h) The Energy cartels which fixed the price of oil, coal, water and wind too. Awesome price rigging.

i) The Media’s amazing agenda driven chatter scaring people into doing completely wrong things. Awesome scare mongering. They did it during the riots, now they are doing it in the Financial Markets.

j) The Regulators amazing capacity to beat industries, and the players individually. The players have just succumbed to the pressure.

Free Market Economy. RIP.

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  1. Dr. Mohammed Ali Khan

    The Marxists were right in thinking that present-day society is characterized by power relations that systematically impoverish the lower classes while increasing the power of the wealthy. Their mistake, however, was to identify capitalism as the culprit. Adam Smith, a more observant social critic than Marx, recognized that capitalists may well be the chief enemies of capitalism. The rich often prefer to buy special government privileges rather than face the discipline of free-market competition.
    Who’s the Scrooge?
    Libertarians and Compassion
     by Roderick T. Long
    http://www.freenation.org/a/f12l1.html

     

  2. “We had to assume that all the players were rational, had an ability to think and would always work in self interest. ”

    i dont think so.this is merely the chicago/keynesian school which assumes ‘rational’ decisions. the true free market school of von Mises and Hayek have nothing to do with the hyper rational universe imagined by the chicago schoolers.the key axiom of free markets is ‘human action’ which is purposeful.but not necessarily rational and information efficient.

    my view is that freedom/liberty needs eternal vigilance.it is always under attack and is more likely to be under threat when states are strong and therefore security threats like osama or name-your-bogeyman are enough to convince the masses that the state exists for their protection.freedom is a young idea.its day will come.but probably after a lot of suffering first.

  3. Subra Sir,

    Every human & Institutions privet or government will act in their personal interest sooner or later rather than interest of larger public. It’s a first baby step towards the death of Free Markets.

    Unfortunately US is promoted as a biggest Free market in the world.

    It’s may be true on paper but worlds largest market that is currency market is manipulated by US policymaker for last 100 years in front of our open eyes & very few were able to understand that.

  4. The bottomline is that human beings have a notorious tendency to CHEAT and this is the root cause of the problem. It is not likely to improve at all in the near term. Its a cycle. U start and go around in smaller circles till u come back to the beginning.

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