Reclaiming free markets

There is no such thing as a free lunch or a free market – or so it is said.  Or a free school, come to that.

Nothing is free.  There we are, now all of us radical new economists can nod our heads sagely and congratulate ourselves on our Jesuitical understanding of the world as it is.

But, having congratulated ourselves, it may be time to think again on free trade, because all is not quite what it seems.

It is true that the survival of free markets as a philosophical concept, as we currently understand them, despite the huge abuses – from Goldman Sachs to the destruction of the Amazon rainforests – is really quite extraordinary. 

It helps of course that they have the backing of the most powerful and wealthiest corporations in the world, who can keep an idea afloat for centuries after it would otherwise have sunk in ignominy.

It was an idea that emerged from the Scottish enlightenment, with Adam Smith’s ‘hidden hand’ explaining how the decisions of millions of people can allocate resources according to need, and then supercharged by the utilitarians and ‘statists’ in the 1820s and 1830s.

It actually stretches right back to Medieval merchants, who used to use the figure zero – viewed with suspicion by the church in the thirteenth century because if its magical ability to multiply numbers in accounts by ten – as a secret underground code for free trade.

But the case against free trade from a new economics point of view is not quite as clear cut as it seems – and it may be, if we can organise the right kind of debate, that we can reinvent the idea as a core element of the new economics.

So here is my three-point defence of free trade from the point of view of new economics.

1. Free market may be an impossible phantasm born of wishful thinking among the powerful, but the opposite – closed markets – are certainly not what we should aspire to.  They are the favoured instrument of regimes like those of North Korea or East Germany that are desperately trying to reshape the world – and their own populations – along ideological lines.  They are a basic tool of tyranny.
2. The worst abuses of free markets – from Goldman Sachs to Halliburton or the other corporate monsters – are actually not examples of free trade at all.  They are examples of rigged favouritism, corporate subsidy and monopoly.  The last thing these organisations want is genuinely free markets.
3. The political concept of free trade emerged in the 1830s, not to prop up the status quo, but as the next stage in the campaign against slavery.  Campaigners saw that the rigged markets of the big food producers was another version of slavery.  What was the point of freeing people from slavery, if the prices they were forced to pay for essentials was always too much – as the American slaves found out after 1865.

None of this is to suggest that a slavish insistence on the letter of free trade, to the detriment of poor nations or communities, isn’t just as tyrannical.  What we have today, under the guise of free trade, isn’t so much free trade as compulsory trade – forced trade, as they used to called the behaviour of the Portuguese in the Far East or the British in India.

Nor do I suggest that free trade requires an end to regulation – quite the reverse.

But there is a powerful core at the heart of the original idea of free trade which has been pushed aside by the powerful.  It meant the right of equal communities to trade with each other, not the right of the rich and powerful to ride roughshod over the world.

These are contradictions in an idea that lies at the centre of the political philosophies that are broadly Conservative and broadly Liberal. 

The coalition between these two political parties in the UK might provide an opportunity to re-forge the idea of free trade into its radical roots, except that both sides of the coalition are actually rather hazy about what they meet by markets.

But there is an opportunity for the rest of us.  We need to reclaim the idea of free trade – or open markets – and use it to put a spotlight on those abuses that are undermining the ability of ordinary people to have any kind of economy of their own.

When Cardiff gives permission for yet another Tesco, and lets it corrode the small shops in another corner of Canton, that is an abuse of free markets.

When American agents raid small family farms which are involved in clubs selling raw food and unpasteurised milk to members, that is another abuse.

When we allow the banks to use public money to pay themselves vastly inflated bonuses, or when they cream off £7bn a year from our pensions in the UK, that is an abuse too.

Those are not examples of free trade or free markets.  They are perversions of the idea.  But perhaps we new economists are partly to blame, because we surrendered the idea of free markets without a fight.

It may now be time to reclaim the idea of free trade and set it to work, starting with the subsidised monopolies that increasingly rule our lives.