Wednesday, January 16, 2019

The Case for Clear-Market Capitalism: Why Free Markets Are Supposed to Clear

     Truly free markets are supposed to clear.
     In a free market system, firms that overproduce would not be saved, nor bailed out, nor protected, nor have their assets' value held aloft, through government intervention.

     Even if the Federal Reserve is supposed to act as a clearing house for bad loans, then it should only be in an emergency. And that should not mean that government in general should act as a clearing house, to help push overproduced products on people at inflated prices.
     Yet government does this; through 1) eminent domain, 2) taxation, and 3) spending that arguably stolen “tax revenue” to create programs tying consumers' financial futures to those of favored firms.
     Those programs include the F.D.I.C., through which taxpayers are made responsible for insuring producers' bank deposits. Additionally, our money is spent paying people to enforce legislation – and government contracts – which award favored firms all sorts of exclusive privileges and monopoly rights, including the right to sell in foreign markets unobstructed, and the right to unlimited profit (through the “right of increase”; the right to earn more and more each year).

     In real free markets – that is, in free and clear markets; in the absence of subsidies or bailouts or taxpayer assistance of any kind - the prices of overproduced goods drop.
     That's because keeping prices high would be unprofitable for the producer, and unaffordable for the buyer. Even if buyers could afford overproduced goods, then the mere knowledge that the good is overproduced, will lead the buyer to conclude that purchasing at a high price only benefits the producer and seller, not himself. Most importantly, there would be no way to force anyone to buy anything at a higher price than they can tolerate.
     As an example, in grocery stores, when customers aren't buying as much of a particular food item as the store anticipated, then the store will mark the price down, in order to accommodate the lower demand than they expected, while still selling something. The “price signals” which are sent - by the store marking the price down, and by the consumer choosing to buy something only when the price gets low enough – are communicated to other buyers and sellers. As a result, either less of the item is ordered, or the same amount is ordered so that it won't rot on the shelves.
     It is interesting to think about how, rather than to simply lower their price, food items are sprayed with chemicals, in order to preserve them. The effect is that they can stay on the shelves longer, without the appearance of decay. But industrial food preservatives are often toxic, so the idea that the goal of food preservation is solely to keep us healthy, is far from an accurate picture of what's going on. The purpose of food preservation - including the use of bleach in meat processing - is to keep items on the shelves longer, without losing value, through retaining solely the appearance of healthfulness.

     When they are allowed to clear, truly "free and clear markets" allow the prosperity that comes from from prices falling slowly over time. When markets clear, supply and demand curves are actually allowed to meet; so that an amount of demand can be satisfied with an equal amount of supply, and prices reach an equilibrium (that is, a “clearing price”), and stabilize.
     Then people can more easily afford to buy goods, but also plan their lives more easily, thanks to that price stabilization (although this is not to say that in free markets, fluctuations in price and supply wouldn't happen; they would, but they would be more tolerable).


     Free markets result in free stuff. Don't just “free the markets”; clear them! And do it without the government's “help”.





Post-Script:

     For those wishing to learn more about market clearance, and the notion that "free markets result in free stuff" (or even "full communism"), please read the following book and articles:

     - Principles of Economics, the 1871 book by economist Carl Menger (especially the section "The Theory of Price"). A PDF file of the book is available here: http://mises.org/sites/default/files/Principles%20of%20Economics_5.pdf


     - "Advocates of Freed Markets Should Support Anti-Capitalism" (2010), by Gary E. Charter, at:
http://c4ss.org/content/1738

     - "Who Owns the Benefit: The Free Market as Full Communism" (2012) by Kevin A. Carson, at:

     - My 2016 infographic "Government is the Source of Corporate Privilege", at:
http://aquarianagrarian.blogspot.com/2016/04/government-is-source-of-corporate.html

     - My 2017 article "You Don't Need Money to Live", at:

     - My 2017 article "A Market-Oriented Solution to High Health Insurance Costs", at:
http://aquarianagrarian.blogspot.com/2017/02/a-market-oriented-solution-to-high.html

     - My 2017 article "Markets and Socialism Can Both Lead to Free Housing", at:

     - My 2017 article "Supporters of Free Markets Should Oppose Gifts of Privilege to Property Owners", at:
http://aquarianagrarian.blogspot.com/2018/12/supporters-of-free-markets-should.html




Originally Written on January 16th, 2019
Edited and Expanded on January 17th, 2019
Post-Script Written on January 17th, 2019

Published on January 17th, 2019




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