Thursday, July 2, 2009

the free market is for chickens

have you noticed how much of a bad rap the free market (aka "capitalism") gets these days?

with the collapse of the economy, folks all over have been lambasting it.  

it's been described as a monumental failure.  it's been labeled a dead doctrine.

is it?

churchill once called democracy "the worst form of government except for all those others that have been tried."  

democracy is not the free market.  but the same thing might be said about the free market.

my best friend once joked to me that the free market is really just a system that allows me to give you my chickens in exchange for your bananas.

and it's kinda true.

the free market is really just a barter system with a twist.  

i have 10 chickens.  you have 20 bananas.  i give you one chicken in exchange for 10 bananas.  

pretty simple, right?

but say i try to give you my one chicken and you decide that you don't need it.  you really want a loaf of bread.  so therefore we're unable to work out an exchange.  

since i no longer have a means of exchange with you, we now have a dilemma, don't we? 

this is where the twist comes in:  green paper and shiny coins.

prior to the dawn of green paper and shiny coins, you and i were at a standstill.  i wanted your bananas, but you didn't want my chickens.  

but now, what i can do is give you two green papers for your 10 bananas.  and you're happy, because you can turn around and give those two green papers to mary, who happens to have a loaf of bread. 

mary then gives one of those green papers to mark, in exchange for a cup of coffee.  

mark then gives two shiny coins to joann, in exchange for a stick of gum.

sounds like a nursery rhyme, right?  

but the free market is pretty darn simple.  that's the funny thing about it.   

why would an arrangement that allows people to give each other green paper and shiny coins in exchange for chickens, bananas, coffee, and gum, get such a bad rap?

is it because some people are able to accumulate more green paper and shiny coins than others?  because all that really means is that those people are able to make more exchanges for chickens, bananas, coffee, and gum?  is that bad?

after all, what could be a better arrangement than one that enables you and i, and mary and mark and joann, to freely exchange with each other so that we can each collect precisely the number of chickens, bananas, coffee beans, and sticks of gum we want?

what could be better?

would it better if someone else told us how many chickens, bananas, coffee beans, and sticks of gum we should each have?

how about if i told you that you are no longer able to keep your 20 bananas?   you would get angry.  you would tell me that you spent lots of time and energy to grow those bananas, so what right to i have to take them from you, wouldn't you?

but what if i said that mary and mark and i had gotten together and decided that 20 bananas is more than any one person could ever need, so we're going to make you give each of us 3 bananas.  you might be a little frustrated.  you'd surely ask why.

"well," i'd say, "we all agree that we need those bananas more than you do.  and we have some friends who could also benefit from those bananas, so tough shit."  

or what if i told you that you growing your bananas is wrong, and that what you really need to be growing is olives.  "but hold on," you say.  "you may not want my bananas, but mary and mark come to me for bananas all the time.  why should i grow olives when i have people who come to me for my bananas?"  

"well," i say.  "times have changed.  feel free to continue growing your bananas, just so long as you understand that for every 10 bananas you grow, you have to give me 2 of them.  also, before you can grow more bananas, you have to fill out a banana growers request form.  this form will take two weeks for me to read, because i am a busy person."

"but i can't wait that long," you might say.  "i have to spend that time cultivating the land so that i can have the bananas ready by the time mark and mary like to have them."  

"doesn't matter," i say.  "this is what you have to do if you want to continue growing bananas."

clearly, you catch the drift.  

bottom line is that, when you break it down, the free market is simply an arrangement by which we use green paper and shiny coins for the trading of chickens and bananas.  and coffee and gum.  and even olives. 

if that's an evil system, please show me what aspect of it is evil.    

my guess is that if there's anything evil about it, it likely has more to do with the human beings who trade the chickens, bananas, coffee, and gum than it does with the actual trading arrangement itself.

but maybe i'm wrong.  

it wouldn't be the first time.  


  1. Your explanation of free trade, while correct in form and basic operational factors, is weak simply in that it separates the system and the people involved in it into two entities. one cannot exist without the other. the free trade system is a product of the people and their needs, and when people reach a certain economic point in that system they generally disregard those below them as unimportant in the functioning of that system. if everyone started off two of one thing (for example, i had two bananas, you had two lemons - i need a lemon, you need a banana - we trade), then it would work.

    there is not an equal distribution of 'bananas'. very few people control the majority of the bananas, and this is a product of a system that promotes greed. free trade promotes a certain type of greed that give the advantage to those who begin with an advantage. to become less vague, i give the example of third world debt.

    counties in africa (i can cite specific examples if need be) are in a crisis of debt to the u.s. The agreement that u.s. has worked out with these countries is that they must export a certain amount of whatever it is the produce (say olives) to the u.s. to pay off this debt. they still can't come close to producing enough olives to pay off the debt so they become trapped and their debt compounds. more so, their own people need olives, but they have since exported all theirs to the u.s., so they have to buy back the olives from the u.s. furthering their debt. its become a vicious circle. This is a simplification of the issue, but works in a certain manner.

    my main point, is that few own all the bananas, and many need them. the people that need them have nothing to barter execpt their manpower, so they work their entire life to buy the bananas they need. they remain stuck in this situation for the rest of their lives. a change has to happen to bring the system back to a level playing field for it to be a rational and reasonable means of exchange. how this will happen, i don't know. but it certainly won't happen by accepting it as something so basic that it should work. its more complicated than that. we, as humans, are more complicated than that.

  2. I have to agree with Marty. While I like many of the posts on this blog, this one struck me as seriously underdeveloped and simplistic. There are so many nuances and basic human truths you are missing! Think a little harder. Think beyond stage 1. Think beyond Thomas Sowell.