The most important single central fact about a free market is that no exchange takes place unless both parties benefit. – Milton Friedman
In basic economics, students learn about Keynesian theory and monetary theory, which are theories of John Maynard Keynes and Milton Friedman respectively. Both of them are well-known figures in the world of Economics, which greatly shaped the Fed’s policies as we know it today. Few know about it as a general knowledge, but Milton Friedman is one of the main opposing forces of Keynesian theory.
Keynesian theory proposed for the government to take charge and be active in leading the economy to a better place. Its fiscal policy is about the governments spending money (note: printing money) on various projects, so that people have jobs and income, which will lead to spending and resulting in a better economy. This gives the government the power to take control. While it may seem to be a normal thing in Asian countries, this is significant in the West and especially America, where freedom is a big thing. It gives the government a legitimate reason to take charge and be in control.
Milton Friedman’s monetary theory sought a free market play with limited government intervention through the control of money supply, interest rates and taxation. In this case, Friedman’s theory put down the government and aims to give power to Corporate America.
In my article Theories and Reality, I mentioned that social theories such as economics theories are backed by parties who benefit from it. Many times the truth does not matter. Keynesian’s fiscal policy have resulted in high inflation as what we have seen today, as it did during the Great Depression for the period it was used, but textbooks conveniently leave that out.
To quote another recent example for illustration, Anthony Fauci who is Chief Medical Advisor to the President of United States, spewed so much nonsense on the effectiveness of Covid-19’s vaccine, that despite millions of people taking the vaccine, the vaccine programme remains a total failure. Many people still died and even more got infected. Yet the US Government and governments around the world endorsed it, because it fits their agenda. Let me put it in another perspective. If today you have gone to the doctor and got the full dose of Hepatitis A vaccine, then went out travelling overseas. During the course of travel you ate some contaminated food and unfortunately got Hepatitis A and nearly died. Will you leave it as that, or will you go complain or even sue the doctor?
In the course of human history, we have always seen government officials colluding with businessmen. Politicians are people with power, and businessmen are people with money. Those who have achieved power first will naturally seek money after that, while those who achieved wealth first will set their eyes on power. That is why these 2 parties are made for each other. Yet, just because they are mutually beneficial to each other does not mean they do not want to swallow the other whole.
Since we have briefly discussed Keynesian theory before, today we will talk more about the free market.
On first look, it seems that the free market is the right way to go. Willing buyer, willing seller. Everybody is free to buy what they want at a reasonable price set by the market. At least that is what it is supposed to be like on paper. The truth is the free market will always produce a few big corporations which will kill off the rest, after which they will monopolise the market. Once a company has monopoly in the market, the market price is the price set by the company.
In this case, the concept of willing buyer, willing seller is but a hypocritical show. We take the plane industry for example. Airlines either buy from Boeing or from Airbus. Despite multiple critical and even dangerous issues plagueing the Boeing planes, the lack of choice has resulted in many passengers flying in a Boeing product. Will you rather fly in a Comac C919 made by the Chinese? Not every airline buys a combination of Boeing and Airbus planes. Some fleet are made up entirely of Boeing. Even if a particular airline has a combination of both Airbus and Boeing, it is not like they will rotate both Airbus and Boeing to ply the same route. Now in the free market there is this choice: Fly in a Boeing or find alternate routes of transport either by land or sea. Is there a choice? Yes, technically we have a choice.
In South Korea, the economy and business sector are dominated by the chaebols (a large industrial South Korean conglomerate run and controlled by an individual or family) that most people have no choice but to work for them. Their terms and their conditions, at a market salary controlled by them. Take it or go without a job and starve to death. In Milton Friedman’s words, if there is a transaction, it means that both parties benefit. In this case, the company benefits from cheap labour while the employee benefits by not starving to death. Win-win.
But if everyone says that free market is the way to go, yet one is unable to progress in life in this free economy, then whose fault is this? This is when successful people will come out and say that they started off poor in their garage but worked hard over the years to finally achieve their success. The underlying message will still be: the reason you are poor in this free market economy where everyone has an equal chance is because you are incompetent. This somehow overlaps with the concept of meritocracy too, but I will not go into this today.
The free market assumes everyone has equal opportunities without considering certain advantages such as family background and wealth, access to critical information within a small circle, corruption in the higher levels etc. In actual reality, the free market is a free-for-all battle royale where the strong eats the weak and dominate the rest. Commoners with no natural advantage are faced with obstacles so high most of them are doomed to fail.
If you have come to believe you are incompetent, you will be very sad, frustrated, angry, disappointed and all sorts of negative emotions. That is bad. The society cannot function if everyone is depressed and without hope. You will need some chicken soup. Financial success is not everything. Happiness is. Success comes in different forms and times. Some take a longer time to find success like Colonel Sanders, some find achievements in building a happy family. Everyone is successful in their own way. And with that, people become numb and deceived as they get reaped off repeatedly and unknowingly by the very system they come to believe in.
Note here that I am not saying that financial success is everything. A happy family, time to chase after one’s own dreams, the energy to engage in a personal hobby is good. Everyone is different and everyone has different goals. But there is a difference in knowing what is going on and still choosing not to chase after money, as compared to not knowing what is the reality and live a life dictated by the system designed to reap off you.
If one day when there is a crisis, whether it is a personal one like cancer or a big one like war, when you have spent all your money or lost everything in the black market, the free market will continue to bleed you dry till the very last drop, just one step away from death. Or perhaps we are more valuable in death, for our organs are worth something.
The free market will always present you with choices. Even if one of the choice is death, it is also a choice. We have choices, we are free, and in every transaction both parties benefit.
Nothing in this world is perfect. Not a full left or right winged government, not a planned economy nor a totally free market economy. Everything when taken into an extreme produces negative effects. Public goods under the control of the government and private goods by the free market is not ideal, but still a good balance for most. Afterall, we do not want to be like the Americans who would die under the weight of medical bills or have their imprisonment terms extended unnecessarily because Corrections Corporation of America (CCA), now known as CoreCivic, needs the profits. Neither do we want to be like China in 1950s, where there was no choice nor freedom in what we work as, eat, buy or use.