The free market message promoted by business interests not only embodies unrealistic, idealised assumptions about how humans actually behave but also promotes an ideal for how societies should be organised. It assumes that in capitalist nations communities are little more than a collection of individuals who always act rationally to maximise their self-interest, which is usually a material/economic interest. They are buyers and sellers in the Market and they participate in a rational, impersonal way to get the most they can of what they want for the lowest price. They compete to do this rather than cooperate or collude. These one-dimensional individuals are not constrained or motivated by morality, nor a sense of duty/obligation, nor community expectations and norms. They do not seek other non-material goals nor do they act altruistically.
This ideal of buyers and sellers freely competing in the Market to achieve their self-interest is considered to be the best of all possible worlds, ‘a prescription for a socially and ethically desirable’ world. Adam Smith was the first in a long line of economists who argued that the pursuit of economic self-interest by businessmen served the public good. He claimed that even though a businessman ‘intends only his own gain... he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.’ Thus the selfishness of the businessman in trying to get rich is beneficial to society, including workers and consumers:
It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.
Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of society, which he has in view. But the study of his own advantage naturally, or rather necessarily leads him to prefer that employment which is most advantageous to the society.
The free market gospel claims that the Market is able to perfectly match production to consumer demand without the need for centralised planning, whilst keeping prices close to the cost of the most efficient production, and whilst encouraging innovation to extend the choice for buyers. It achieves this through competition.
Free market missionaries declare that the Market is democratic because it is driven by individual choices; it is efficient because of competition between sellers; and it is non-discriminatory because the price mechanism is impartial when it comes to colour, gender and race. Choice, competition and efficiency ensure everyone is better off because the economy produces all the goods that people want at the lowest possible price and available resources are supposedly fully and efficiently utilised.
The ultimate test of general welfare within this view is of course wealth, where wealth refers to the bountiful ‘production and sale of marketed goods and services’. Wealth is the goal because, as noted, each individual seeks only his or her own material self-interest. The need for cooperation and mutual support in healthy communities is ignored as is the role of government in a well-functioning economy.
Issues of wealth distribution, the market power of large producers, collusion between producers, and the power of the wealthy to monopolise resources for themselves, disappear into the small print of free market scriptures. These assert that, despite evidence to the contrary over the last few decades, as a nation gets wealthier the wealth will ‘trickle down’ to the poor because it is invested and spent and therefore more jobs will be created and everyone will benefit.
The idea that capitalism is about extracting wealth from production and systematically channelling it into the hands of a minority – and that wealth is used as a means to acquire social and political power – has no place in the free market scriptures. Economic texts treat excess profit as an aberration resulting from imperfections in a market not yet in equilibrium. They claim that the accumulation of profits is not at the expense of others in society but in fact enriches everyone because it is those profits, when invested, that create even more wealth.
The greed of the individual, far from being the sin that it was in the traditional religion, is necessary to the functioning of the Market. Market gospel says that any activity that makes a profit must serve society and so must be morally right. This portrayal of the Market as a social ideal has suited business interests, who have promoted it and extended it to mean that all business activity is in the public interest and any restriction or regulation of business is undesirable because it distorts the free market.
In this view government intervention in the management of the economy is unnecessary and unwise because the Market is a self-correcting mechanism. Competition is supposed to guarantee that those who raise prices to take unreasonable profits will be priced out of the market by others who charge less. Those who pay workers low wages will lose workers to those who are willing to pay higher wages. And these market transactions are carried out freely and voluntarily because people are free to pursue their own interests without interference or coercion. They can choose their jobs and they can choose the products they will buy.
The Market will find a natural equilibrium between prices and demand, between wages and employment levels, and that equilibrium is optimal, correct and just. Similarly if someone sells shoddy or dangerous goods then their reputation will be soured or they can be sued for the damage that ensues. Therefore there is no need for quality, price or wage controls, nor other government regulation of economic activity – hence the Free Market.
Whereas the term ‘capitalism’ denotes a particular form of social and political organization, that can be critiqued and compared to other forms of organization, the Market is presented by business people and economists as a ‘natural’, innate, spontaneous form of human activity with its own immutable natural laws i.e. Market Forces. When the real world does not conform to these laws business people and economists refer to deficiencies and deformities in particular markets rather than discrepancies or incongruities in the Market view of the world.
Business people have set out to conflate the individualism of the Market – that is, the individual’s freedom to choose goods and a job – with the individualism that Anglo-Saxon cultures traditionally valued, which is a broader political concept altogether. Similarly they correlate business freedom with economic freedom, and economic freedom with political freedom. They call consumer choice ‘consumer democracy’ and equate it with political democracy. They claim that ‘shareholder democracy’ ensures business enterprises are democratic and accountable.