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Mainstream, Vol XLVII, No 35, August 15, 2009 (Independence Day Special)

Free Market—Disinformation of the West

Wednesday 19 August 2009, by D G Bokare


There is a constant effort to say the economy of the developed nations is in reality a free-market economy. This is not said by any ordinary person but even by recent Noble Laureates like Amartya Sen, Joseph E. Stiglitz and others. We cannot say that they have not read the economics textbooks or they have forgotten what they learnt and taught in the classes of economics. In case of Amartya Sen, one can say that he is infatuated by the knowledge of the West. Indian economists as well as other social scholars take pride in quoting these and other economists of the West while writing essays in economics wherein West’s “free market” is liberally quoted while eulogising the material progress of the West. I can understand when the government economists hide their ignorance by taking shelter behind while seeking to propagate the programmes under the capitalist economic system in India especially since the 1990s. I have seen even textbooks in economics of graduate level studies in our country wherein the authors quote the West’s economies as ‘free market’ economies. It only means that we have over time developed some sort of inferiority complex in not knowing what free market means in real terms. Those opposing capitalism also quote these words ‘free market’ in their essays.

There is a strategy of the West to brainwash the new entrants into the academic field, particularly more in the USA. The economists have surrendered their own academic independence and of knowledge while working there as students or teachers. This is sufficiently supported by Noble Laureate Paul Samuelson. He writes, among other things, on “kept men” in American university education in The Collected Scientific Papers, Volume III (pages 607 to 609):

Although the thought would spoil digestions at a downtown eating clubs, the economist has always played the role of interpreter to the academic community of businessmen and of material activity generally.

He further says:

Economists who are known to be radical are less likely to be courted by Business School deans and are less likely to succumb to available suitors…. The man who adores the business is likely to lose objectivity. And the men who hate business is also handicapped in being objective. Neither Casanovas nor misogynists are apt to make cracker-jack obstetricians. (Source: as
quoted in Hindu-economics, page 375)

This kind of distortion in academic circles in the West is primarily responsible for selling false things to the world.

In the West, many economists have written a large number of books on this single subject of free market. Right from Adam Smith this topic is more freely discussed while differentiating monopoly from free market. Still it is intentionally propagated that all the developed economies are practising free-market systems. This is nothing but systematic efforts of selling capitalism under a false name of free market competition to all the countries across the world, and more particularly after the collapse of Marxian economics. Our present UPA Government has also joined the game of the West since the 1990s and the selling the same spurious medicine to our educated people. We ignore the economic laws, which differentiate between monopoly and free market economies. In free-market conditions we would never come across a situation that is dominated by a few sellers.

How the prices are decided in the market is the most important criteria in the free-market economies. This has never existed in the past and is also not available anywhere in the world. Professor Paul Samuelson writes in his 13th edition of Economics (page 39):

A market is an arrangement by whose buyers and sellers of a commodity interact to determine its price and quantity.

When we look at the present price-decisions we find that the price of the industrial commodity is decided not between buyers and sellers in the market but in the producer’s factory. On the contrary, prices of agriculture produce are decided not in the farmland but in the open free market between buyers and sellers after necessary negotiations. Who decides the price of the industrial product? Of course, the monopolist and not a free marketer.

Let us look at what the big names in the realm of economic systems say about this.

Adam Smith defined monopoly as under:

1. People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

2. A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufacture.

3. The monopolists, by keeping the market under-stocked, by never freely supplying the effectual demand, sell their commodities above the natural prices, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rates. The price of the monopoly is upon every occasion the highest, which can be got. Natural prices can be taken, not upon every occasion indeed, but for any considerable time together.

Though the economists from the West eulogise Adam Smith’s contributions to the field of economics, they intentionally overlook his thoughts on the free-market philosophy. E.A.G. Robinson is another senior economist who has very clearly distinguished various forms of monopoly marketers. (Refer chapter 12 on Robinson on page 401 by Earnest Mandel in his book Marxist Economic Theory) He lists gentlemen’s agreements, cartels, pools, holding companies, etc. as the components of monopoly in the market systems. This list is further elaborated in recent time by adding patents, copyrights, limited liability joint stock companies, IPRs, trade unions, trademarks etc.

What do we see in the Indian agriculture marketfields? The farm produce is brought in large quantities by a large number of producers. The prices of these produce are negotiated and also fixed in the marketplace itself, barring where the support prices are decided by the government to ward off any exploitation by monopolists. It is, therefore, called the nearest approximation of the free market. Can we say this about industrial products across the world? The answer is positively NO. How then can we call the present market system as a “free-market” system?

The criteria of free market are decided by the following elements responsible for such a free competitive market system.

1. There should be no privileges (patents, copyrights, trademarks, limited liability companies etc) bestowed upon by the government-made laws on any section of the market players.

2. There should be a large number of buyers and sellers in the marketplace and all should have equal economic status.

3. No player will have any influencing powers for deciding quantities and prices of the marketable products.

4. Prices must be decided in the marketplace only by mutual consent of both the parties to the transaction.

PAUL SAMUELSON writes about the effects of free competition: The prices of products are forced downward and eventually those come down to the cost of production of the products. He also adds to say that ‘competitive market is an ideal device for efficiency in allocation of resources’. But he warns everyone that such an ideal free market will never exist. This is only a one-sided view, which is not supported by any economic theory. This is nothing but intentional disinformation to protect capitalism at any cost. There is no economic theory for monopoly, saying that it works universally and eternally. The end of the monopoly market economies is, therefore, not avoidable.

Charles Gide has been quoted on free-market competition by Dr M.G. Bokare extensively in his book, Hindu-economics (page 64), since Gide was found faithful in fearlessly stating in his textbook the following:

1. It adopts production to consumption.

2. It stimulates production.

3. It causes gradual lowering of prices and tends to cheapen goods in the interest of all persons.

4. It affects progressive equalisation of economic conditions by reducing profit and wages to nearly the same levels in all industries.

No monopolist in such a situation would ever like this result for remaining in the business. He, therefore, has to have legislative privileges to protect himself from such a negative effect. We experience this kind of uneasiness during the period of recession. Lower profits in this period shake him. This necessitates him and his colleagues in similar businesses to protest before the government and pressurise (even some time threaten) it to legislate in favour of privileges. Today we are witnessing this in the current economic meltdown in the developed economies. Big corporations are threatening their local governments to be ready to face consequences if their requests for bailout packages are refused. They are aware that true free-market conditions would finish them once and for all from their existence. Today’s efforts in these economies are towards protecting the monopoly market conditions at any cost. It is, therefore, natural to see monopolists in deep trouble when a true free-market system exists in any capitalist economy. True free-market system will disintegrate the monopoly hold on capitalism and commence decentralisation of the entire economic activity. The effect will be like earthquake to the capitalist economic system. That will also be the end of capitalism itself.

Pope Benedict-16 has said in his recent Encyclical released on July 7, 2009 that capitalism is now “obsolete”. While talking on free market he called for the creation of a model of market economy capable of including within its range all peoples and not the better-offs (that is, monopolists). As such he is looking for an alternative economic system built around the human being and a truly free-market mechanism. He also says that in and of itself, the market is not, and must not become, the place where the strong subdue the weak. This is coming from the highest office of the large Catholic population of the world. He is expressing himself very boldly against monopoly market conditions, which has benefited only a selected few elite and greedy people of the world. It has deprived the largest population of bare minimum necessities of life. Although the Pope and his office have all these years enjoyed the fruits of capitalism, he has now realised that capitalism would destroy the entire mankind and also the planet itself if it is not abandoned now.

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