Every government around the world professes the belief in ‘free markets’ but what does it really mean? Does it mean no subsidizing of the local producers? Or does it mean fair tariffs? And who decides what is fair … is it something to be decided mutually or among a group of countries?
I just haven’t grasped the concept of free market and what it means for the world.
Re: Free Market
hmm, AJ...Free market as the name implies is a market that is free :p Ok, let me elucidate on this according to the whatever little understanding I have of the system.
Well, an economy that operates through voluntary exchange in a free market and which is not planned, where there is absolutely no state intervention or the presence or control of a central authority is a free market economy. Here, the production, distribution and exhange is not governed by the government but controlled for the most part by the non-state actors (individuals and TNCs or MNC's). It is the 'market forces' that decide the prices and allocates goods and services. Basically, free market include the complete absence of artificial price pressures from taxes, subsidies, tariffs, or government regulation.
( I do not think we have a complete 'free market system' in operation as there are still minimal and minor restrictions and hinderances created by the governments...so it is an ideal situation and theoratically possible but it will take time before it is fully operational).
This is one of the main pillars of the neo-liberal paradigm that governs the international economic order in large part today. It is interesting how IMF and World Bank's role has changed over the years and they act as handmaiden's of this system.The IMF and the Bank intervene at will and force countries to participate in the world economy on basically unfavourable terms.
As for whether it is fair...now that is debatable. If you know the pros and cons and the working of the neo-liberal doctrine, you'd be able to decide it for yourself how fair or unfair this whole setup is or whether the free market system is actually natural or imposed. This is what I can think of right now, some salient features...
Free enterprise,
individual initiative
privatisation
tax-cuts
downsizing of the Welfare state
free trade in goods and services
uninterrupted and reckless flow/circulation of capital across borders( do you remember the massive political and economic crises from east Asia to eastern Europe and Latin America).
freedom of investment
In the end under this system, it is the economy that dicatates rules to the society. What repurcussions that would ultimately have on the society is again debatable.
p.s: you can double check my explaination with some eco. or bussiness major or someone who knows the intricacies of the market mechanism.
Re: Free Market
Free market implies no government interference. The theory is that this will lead to economic activity occuring in the places that are relatively best suited to those activities.
The reality is that no country wants a completely free market, as the political consequences are severe. For example, if US and European subsidies to local farmers were to end, countryside unemployment would spike. These countries will also become dependent on other states for the basics such as food.
Similarly, tariffs on imports such as steel interfere with the free market concept, but protect politically valuable voter jobs and maintain strategic industries within countries.
Re: Free Market
TNCs or MNC's
What do the above stand for?
Let me decipher the information and then come back with questions.
hugs to both for replying.
Re: Free Market
transnational and multi-national corporations.
Please maintain a distance of 3 feet ( sponsored by JI :D )
Re: Free Market
^ The last line must be for M_D, he is also sponsored by JI :D
Re: Free Market
hahahah, whatever gave you the idea or you assumed keeping in mind Mad's foot. :--D
Re: Free Market
Ok, I am back. I want to know more about how/why an ideal Free Market will lead to "downsizing of the Welfare state". I don't get the connection.
I recently watched a show on Changez Khan and while he generally gets a bad reputation for his horrific wars, one good thing the historians attribute to him is the expansion of Free Market ideas every where he concurred, or so the documentary claimed.