Traduction du texte en Français: L’intervention du gouvernement ; le pourfendeur du marché libre
There is no doubt that I am a supporter of the free market – all the amazing benefits which come from it and the overall successful implementation around the world of the system.
So what is this? Well there are many interpretation of what exactly the free market economy is. This is my definition of the free market economy though – “It [the free market economy] is an economic system which is guided by the invisible hand which is controlled by natural market forces. This hand in the market is self regulating and determines in essence what will and wont survive”.
Before you say it – “Look, the free market failed in such and such a year, in such and such a place”. My response is no – it did not fail. Why so? Well the concept of the free market is that it works without external intervention in the markets forces. What would this external intervention be?
If we look at the most recent world economic crisis (which many nations are still working out of), we will see that the leader of the recession – The United States of America’s government began interfering in the economy. When government begins to regulate banks (look at the Clinton years and the 2000’s recession), problems begin to occur. The obvious example of this would be the government forcing banks to offer loans and mortgages to people who are unable to afford the repayments. When interest rates are artificially altered (as often they are), this leads to a state in which credit often becomes so easily accessible. This will without a doubt lead to a peak of what we call a bubble. This bubble is inflated through the affordability of debt.
Then what happens? Well the bubble essentially pops and the markets go into free fall. Government at this stage (which has done enough damage), attempts to fix things by making credit more expensive (lifting the interest rates), this creates the situation in which debt becomes overwhelming and debt repayments in essence are not met. Logically, this leads to the repossession of individuals, corporations and other bodies possessions. Corporations which expanded due to the availability of cheap credit now are forced to lay off large numbers of staff members which lifts the unemployment rate.
Many economist then suggest that government will introduce social welfare programs and projects (such as done in the 1930’s with the Great Depression) which will make the recession dramatically worse and more drawn out. Now that it is rather evident that this failure of the free market system, in fact is not a product of the free market philosophy, but rather an interference from external factors of the market, we are able to look at the benefits of the free market economy.
The free market economy in essence is a market system which regulates itself. It has no government intervention and is free of all forms of external intervention. This market system is driven of the natural forces of the market, self interest, competition and supply and demand. Such a market system is often referred to as the laissez-faire approach.
This invisible hand in the economy ultimately is controlled by the forces of supply and demand and in a situation of excess of the provision of supply – it results in a certain action. What is this action? The simple answer to this is that there then is an excess of supply of the certain product which leads to a reduction in the retail price, which in essence leads to a reduction in revenue generated from the sale of the good or service. This is the perfect example of how the market is controlled by the natural forces of supply and demand and also how they regulate the market.
This market system is driven off healthy competition. Competition is what creates the best product for a consumer. It is clear that people living in markets which are monopolized are receiving a less than satisfactory end good or service from the provider of the good or service. Why is this so? Well companies who operate in the imperfect market have no competition. This means they are the price choosers and they in essence are making the choices about the quality of the end good or service. This leaves a situation in which consumers are powerless. In the free market, the economy is driven by the perfect market in which consumers own the factors of production and they are the price choosers.
This means that the consumers have full knowledge on the possible goods and services that they could receive from alternative providers and this becomes for corporations – the battle for the revenue from the consumers. What does this lead to? Well it leads to a situation of healthy competition and this is better for the consumer. The consumer now has the option to choose a homogenous good or service from a wide array of corporations all competing to make the best good or service for the lowest price.
Self interest is the driver of any economy. I would like to clarify what this means to me. I look at this and think – thats greed. Then when thinking about it – why does anyone work hard? Most people will answer – in order to future myself, my position, my business and so on. The free market economy has the ability to cleanse out the weaker elements and in doing so – it often has affects such as business going bankrupt. This must happen – business must not be propped up by government. Those employees at such companies can go onto working for other organisations which are more powerful or they can – most importantly as it is the driver of economic growth in the world – start up their own business which is driven by the same forces of supply and demand and it powered by innovation which leads to new products. Necessity is the mother of invention, however this cannot go without innovation and dedication.
The free market, because it works on self interest, is where the worlds greatest inventions and products come from as they are environment which are supportive of such growth. The country that runs the most of such principles is the United States of America – however they have even failed at doing this in its purest form. In conclusion – ask yourself which nation has made the largest number of breaking news technologies? Then ask – what economic / government style was ruling at the time. More and more, we are seeing communist nations (which by no means are free market economies) – leaning towards a more free market approach. They are backed by the free market nations – what would China be without the United States (or other free market like nations) consumption?
They would in essence be nothing!
Noel I am ignorant on this subject I can not deny this. However, I have heard others spoke of this. Most if not all have said basically same thing as you., The government needs to keep out of the “free market”.
This being said its not going to happen. Liberals believe the government is the solution to the problem. If someone does not agree with liberals they seek and destroy their enemies. Liberals have actually been oppressors of freedoms and liberty. Lyndon Johnson, former president of the United States, signed the Civil rights legislation for his own political gain and the political gain of the Democrat party.
Okay I spoke too much. take care. Davide
L’article que vous avez écrit est fort intéressant et est une très bonne description de ce système économique : le marché de libre économie. Vous avez habilement montré à l’aide d’exemples simples, ses rouages mais aussi je dois le dire, ses failles. Mais surtout, vous nous avez permis de saisir les limites d’un tel système. C’est d’ailleurs pour cette raison que beaucoup de gouvernements ne le jugent plus adapté à la situation économique mondiale actuelle.
En effet, à l’heure où l’on parle de mondialisation, où une puissance économique se mesure non plus à l’échelle de quelques grandes entreprises, mais à celle d’un Etat, quelle est vraiment la place du marché de libre économie ?
Au travers de l’actualité économique, l’on s’aperçoit en effet qu’il faut toute la puissance d’un Etat, souvent seul capable d’aider à la création de sociétés industrielles compétitives au niveau mondial, en y injectant ses propres capitaux et la volonté, la capacité d’intervention forte de son gouvernement, à même de les soutenir, pour se faire entendre et rivaliser avec ses autres partenaires économiques.
Cependant, les gouvernements, s’ils sont les garants de la stabilité économique de leurs pays, doivent par ailleurs être à même d’assurer une protection sociale aux citoyens et travailleurs et cela passe par la régulation des marchés et aussi par un droit de regard sur l’activité des entreprises ; veillant à tout licenciement abusif, toute collusion dans l’intérêt des consommateurs etc…. C’est ainsi que
l’ Etat a obligé certaines entreprises à baisser le prix de revient d’un bien ou d’un service jugé abusif tout en étant à même de soutenir financièrement certaines d’entre elles momentanément en difficulté, évitant ainsi des licenciements avec comme on le sait, des reclassements dans d’autres secteurs déjà souvent en crise.
L’intervention des gouvernements en la matière semble désormais nécessaire et est souvent souhaitée par les partenaires sociaux.
Il ne faut donc pas voir que les avantages pécuniaires qui découlent du marché de libre économie ; il est raisonnable de bien en évaluer la contrepartie.
Plus que jamais préoccupé par la situation économique mondiale actuelle, je pense qu’il faut aussi avoir une autre vision de l’Economie ; celle qui sait intégrer l’homme au cœur de l’entreprise et qui les soutient.
N’est-ce pas là un vrai défi ?
more post damn it
This is a very well written, thought out analysis of laissez-faire economics, but using another economics principle I would like to suggests an idea. We must look at the opportunity cost of each decision as choosing one path, one idea, for every decision leads to waste, poor choices, and ultimately a failed system. (This can be seen in almost every pure system in the world from pure communist Russia, to the free markets of Hong-Kong) The governments, the people must look at each decision and “pick and choose” from each system. The health care of the liberals, the business taxes of the conservatives, and the education of the Cubans. The point is I believe there is no “one size fits all” approach to anything.
I agree with that Matt