Why “free market” capitalism cannot last long.

Here are a series of illustrations I have made to demonstrate why capitalist economies that are supposed to be free markets inevitably degenerate into fascist-corporatist tyrannies that deprive the people of freedom of choice in the end.

Stage one: Here is a free market economy represented by dozens of small circles, each circle representing a small business. Of course, some of them are more successful than others, but no single business dominates the industry and there is plenty of competition. Note that three such businesses have been singled out and designated “A”, “B”, and “C”.

Stage two: After a period of time, many of the small businesses have collapsed and the remaining ones have tended to grow larger and more powerful. Companies “A” and “B” have merged and this soon enables the new company “AB” to becomes more powerful still, and it begins to crush its competitors.

Stage three: Another generation or so has passed. Now companies “AB” and “C” have merged together, forming an even more powerful union. Meanwhile, the forces of competition have served to eliminate most of the smaller companies we saw earlier. However, a new company, named “D” has been established, showing that at this time there is still room for innovation and diversity, which is the essence of freedom.

Stage four:  Sadly, company “D” isn’t able to last long, and it is soon bought out and taken over, resulting in company “ABCD”, so powerful that it eventually forms a virtual monopoly, and other companies are at a total disadvantage and will never have a chance to rival what ABCD has gained.

There are four lies that “free market” advocates tell that need to be slammed down.

First, they claim that in a free market it would be a simple matter for people dissatisfied with a company to start and run one of their own. But in the present American system, the vast majority of new businesses that are established fail within a few years. The reason is simple: the already established and larger companies are always able to take advantage of their larger capital and the fact that people are already familiar with them to crush their new and smaller competition.

Second, it is not government action that creates corporatism out of free market economies. Rather, it is the already formed corporatism that prompts government to prop up failing giant corporations due to a recession. Why? Because if those corporations go out of business, millions of people would be thrown out of work, reducing economic activity further. That’s exactly why both Presidents Bush Jr and Obama chose to endorse corporate bailouts; if they had not, we would most likely be in a Second Great Depression now with even less competition than before as bankrupt companies are bought and taken over by bigger ones.  A better policy would have been for government to prevent those corporations from growing so big in the first place……but then we wouldn’t have a free market.

Third, socialism or communism as envisioned by Karl Marx was not supposed to be a one-man dictatorship. Stalin and many of those who came after him were responsible for that perversion, not Marx himself. In reality, Marx wanted a collective rule that would actually be more like a democracy, with the workers (which he assumed would be the vast majority in any industrial economy) ruling through elections in both the government and the corporations. This was what would later make possible the gradual dissolving of the state leaving only the worker run companies. The reason “Communism” failed was because after the death of Lenin in 1924, real Communism was never tried. No one-man totalitarian state can be rightfully called Communist or Socialist. It’s Fascism instead!

Fourth, the whole point of democratic socialist, liberal, or progressive politics in industrialized countries is to prevent a disruptive revolution by the workers against the capitalists by gradually making reforms to keep the workers happy. By opposing them, Conservatives like Presidents Reagan and both Bushes, along with their Republican allies in Congress, were setting the stage for the actual long-term downfall of America through their idiotic short sighted policies to disempower labor unions and deregulate Big Business.  This in turn, will actually INCREASE the likelihood of a real Communist revolution later! The repeated cycles of economic surges (which enrich those who are already wealthy) followed by recessions (which hurt the middle and working classes the most) can only weaken capitalism until it falls. The outsourcing of manufacturing by American companies to other countries like China for their cheap labor only delays this gradual breakdown, while threatening the independence of America. China’s lax labor, safety and trade policies have resulted in a great many inferior products being shipped over here. Meanwhile, millions of Americans can no longer get manufacturing jobs and end up with lower paying ones, locking them into dependence on Chinese goods. Thus American consumers are forced to keep buying the Chinese made products when they wear out.

Wake up, Americans! We need liberalism, socialism, and progressivism NOW. Free markets in a  strict sense are a dream, never a reality that we can have forever.

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3 thoughts on “Why “free market” capitalism cannot last long.

  1. “the whole point of democratic socialist, liberal, or progressive politics in industrialized countries is to prevent a disruptive revolution by the workers against the capitalists by gradually making reforms to keep the workers happy.”

    Have you looked at “Death of the Liberal Class” by Chris Hedges? He makes a very similar point and slams Clinton (and now Obama) for merely perpetuating the Reagan and Bush short-sightedness.

    I really liked how you point out the looming consequences — staunch conservative ideology ultimately does cause a backlash and revolution. The pendulum swings but the “tyranny” looks so much the same…

    • The sad thing is that Karl Marx actually thought a violent uprising by the workers was a GOOD thing and pushed for it, leading later Communist revolutionaries like Lenin and Mao to set up political parties of full time professional activists to force such a revolution, even in countries like Russia and China that did not yet have lots of heavy industries. Thus, Communism became self-defeating, like capitalism is. If Marx had been a liberal, a progressive, or a moderate socialist and said of the workers’ revolts, “This is what will happen if reforms are not made and we must prevent this,” then the entire history of the 20th Century might have turned out a lot different.

  2. Pingback: Free market economy « Verbum Sapienti

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