About This Blog

Ludwig von Mises (1881-1973) was the greatest economist of my time. His greatest works can be accessed here at no charge.

Mises believed that property, freedom and peace are and should be the hallmarks of a satisfying and prosperous society. I agree. Mises proved beyond a shadow of a doubt that the prospect for general and individual prosperity is maximized, indeed, is only possible, if the principle of private property reigns supreme. What's yours is yours. What's mine is mine. When the line between yours and mine is smudged, the door to conflict opens. Without freedom (individual liberty of action) the principle of private property is neutered and the free market, which is the child of property and freedom and the mother of prosperity and satisfaction, cannot exist. Peace is the goal of a prosperous and satisfying society of free individuals, not peace which is purchased by submission to the enemies of property and freedom, but peace which results from the unyielding defense of these principles against all who challenge them.

In this blog I measure American society against the metrics of property, freedom and peace.

Thursday, May 3, 2012

The "Free Market" R Us!

Yesterday Bird Dog over at Maggie's Farm posted a link to JR Nyquist's cogent article, "Saving the Free Market," which references Ludwig von Mises' book: "The Anti-Capitalistic Mentality." I've discussed this brilliant book here on several occasions.

Mises spent a lifetime studying, explaining, defending and advocating something called the "free market." I often wonder if the man on the street really understands the concept.

Bird Dog's post pulls the following quote out of Nyquist's article:
According to Mises, “The profit system [of the free market] makes those men prosper who have succeeded in filling the wants of the people in the best possible and cheapest way.” The free market is a daily plebiscite, he explained, in which “every penny gives a right to vote … who should own and run the plants, shops and farms.” Rather than giving everyone an equal share in running the economy, the free market places in charge those best able to provide for the many. In this arrangement, everyone must produce. Everyone buys and sells. “This is what the modern concept of freedom means,” noted Mises. “Every adult is free to fashion his life according to his own plans.

This quote, of course, accurately describes the workings of the free market, but it really doesn't say what the free market is. Some would read the paragraph above and be filled with cynicism and horror. They might argue:
"The profit system" is rigged in favor of the 1%, the big, wealthy corporations that create our consumer society. The rich and powerful corporations fill the airwaves with advertisements that make people want to buy stuff they don't need. Then they exploit our cheap labor to build the stuff. Then they sell it back to us in big, corporate, box stores at exorbitant prices we can't afford.

We might be able to vote with our "every penny" on who runs things, but the fat cats are voting with dollars not pennies. They always win. A rich man may be able to "fashion his life according to his own plans," but the poor man is trapped. Markets may be "free," but they are definitely unfair.

To understand what the free market really is we must cast aside the rhetoric and the economic jargon. Forget words like profit, loss, supply and demand. Forget the big concepts like the economy and the market place. Ask yourself some basic questions instead, like:

Is the money I earn mine?

Most Americans would answer, of course, it is mine. Whose else would it be? Well, it might be the landlord's. He takes a huge chunk of it every month. Or the grocer's. Or the shoe store owner's. Or Uncle Sam's. He takes his share before you ever see your paycheck.

Upon reflection, it should be easy to see that some of these individuals don't really take your money. You voluntarily give it to them in exchange for things you need and want. If you don't like the things they give you in exchange for your money, you can change trading partners, i.e., rent from a different landlord, buy from a different grocer or patronize another shoe store. However, your relationship with Uncle Sam is a bit different.

Uncle Sam confiscates his share of your paycheck without asking and gives you in return...well, what does Uncle Sam give you in return? Roads? Police services? Fire services? Schools? Not really. These things are given to you in return for your taxes by local cities and towns. What do you get in return for the tax money you send Uncle Sam in Washington, DC?

While you're thinking about that, ask yourself what your options are if you're dissatisfied with the things you're getting back from Uncle Sam. You can't buy military protection from another Uncle. You can't mail your first class letters from another Post Office. You can't patronize another Medicare store or Social Security office.

The truth is where Uncle Sam is concerned you have no choice in the matter. You're stuck with the stuff your parasitic Uncle wants to give you in return for money he takes without asking.

So I ask again: Is the money you earn really yours?

It should be obvious that the answer is no, at least not the part confiscated and used by Uncle Sam.

The next question to consider is: Which do you prefer? Owning and controlling your own money? Or having it confiscated by someone else who may or may not give you something you want or need in return?

Most people are most satisfied owning and controlling their own money. They are most comfortable making their own decisions about what to buy and from whom to buy it.

Of course it's not an either-or proposition. Obviously, the United States swings both ways. On the one hand, you send a big chunk of money to anonymous bureaucrats in Washington DC who do with it as they please. On the other hand, you get to own and control what's left.

But, then again, it's not really that simple. Because the more powerful these anonymous bureaucrats become the more rules and regulations they pass, rules and regulations that tell you under penalty of the law how you can or cannot spend the portion of your money you got to keep for yourself.

If the portion of your money you own and control is actually controlled by Washington rules and regulations, who really owns your money? The answer should be obvious. You don't. Uncle Sam does.

So what is a free market? It's not Uncle Sam and his faceless minions doing what they want with money they've confiscated from you. It's YOU, doing what YOU want with money YOU earned -- with absolutely no interference from Uncle Sam. 

Now I've got another question for you: How large is the free market in the United States? That is, how large (or small) is that portion of the money you earned that Uncle Sam let's you keep and that you get to spend exactly as you want to spend it without interference from Uncle Sam?

50%? 40%? 20%? I can't tell you. You have to tell me. Maybe a quick check of your federal, state and local income and property tax returns will help you decide. If you're a numbers person, maybe the graph below will help. Of course the graph only shows the growth in the portion of your money Uncle Sam controls. It doesn't show the portion of your money your state, county, and local politicians control. But you get the point.

As the graph shows, the size of the free market in the United States has been dwindling drastically over the years. At the turn of the century individuals in America got to own and control over 90% of the wealth they produced. They got to spend that wealth on themselves and their families exactly how they wanted and with whom they wanted. Uncle Sam owned and controlled less than 10% of the wealth they produced.

Today Uncle Sam owns 40% of the wealth individual Americans produce, and he controls considerably more. After the new Affordable Health Care for America Act (ObamaCare) fully kicks in, and local, county and state controlled wealth is added, Uncle Sam and company will control well over half of all the wealth produced by individuals in these United States. The free market -- in other words, YOU -- will own and control what's left, maybe 40%! The trend is clear. The free market in this country is going, going, gone.

The very saddest part of this story is the ending. Many, many individuals in this country are pleased to see the free market disappear. They do not want to be part of a free market. They want Uncle Sam in all his reincarnations to spend their hard-earned money for them. These naive and trusting souls apparently believe that politicians are more responsible, more honest, more hard working, more productive and more caring than they themselves are providing for themselves in a free market.
I don't believe it for an instant. Do you?

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