Monday, June 03, 2013

big fish eat little fish

The trouble with "free" markets is big fish eat little fish.

So what you end up with instead of hordes of little producers "freely" meeting the needs of "free' "consumers"is very few, very large fishes, as happened in the 1880s and 1890's and beyond.

In some markets there was only one gigantic fish left, along with a few minnows. E.g. Standard Oil; General Electric.

In others, there might be two or three: Ford Motor, General Motors, and Chrysler came to be the only real players in a market that once included dozens of manufacturers with exotic names like "Terraplane."

So the "free" market, historically speaking (as opposed to theoretically speaking), is not so free after all once it reaches the gigantism stage, as observed by every classical economist from Adam Smith through Karl Marx. Smith called the process by which this stage is reached "combinations in restraint of trade."

Imagine that. Restraints on a "free" market. just goes to show ya, there's theory, and there's practice. Do I have to tell you again what Yogi Berra said? "In theory, theory and practice are the same, but in practice, they're always different."

Theories are great, because without them there's no progress. We have to imagine a better world before we can build it, and putting theories to the test of practice makes what we call "history."

Milton Friedman was a spinner of theory. "Free" market theory tells us in an unrestrained market, free entrepreneurs compete, the more efficient producers are rewarded (with money), consumers get superior products, and here we are in utopia.

But in practice if you're big enough, you can always undersell your competitor, whom you know is producing a product superior to yours, and doing so more cheaply. You can destroy that person's enterprise simply through radical underselling. If you're big enough.

And history, including the history of the present day, reveals a different reality from what the theory says will happen under a regime of laissez faire. Personally, I'd rather live under a military dictatorship, especially when the "free" market demands we take food off poor families' tables and give the money the government saves by not having to feed them to the most "efficient" members of society.

Kinda makes you wonder who the real PARASITES are, doesn't it?

Illustration; "Big Fish Eat Little Fish," ink on paper by Pietr Brueghel the Elder, Flemish, 16th  century.


Joe said...

The "winners" make the "reality," whether historical or economic. the Oracle of Omaha has mentioned how the whole struggle is turning out.

Dave B, a.k.a. catboxer said...

Sounds interesting. What does old Warren have to say on this topic?

Joe said...

He said that the upper class is waging a class war, and winning.

The winners and reality thought was something that I took from what happens in military warfare. The concept generally applies to everything.