The Misunderstood Free Markets – Part III
By Wes Keene | March 28, 2010 | In Category: Elections
This is part three in a series of articles exploring popular misconceptions about the free markets. In this edition, we explore some widely held myths that are often uttered by liberals when expressing frustration with the economy.
Myth: Corporations are greedy. They tend to hurt customers because they’re always worried about making higher and higher profits.
Truth: Self-preservation is at the core of free markets, so if a desire to exist tomorrow is how you define “greed”, then perhaps corporations do have lots of “greed” in them. However, they can’t sell a product no one wants to buy, at a price no one wants to pay. In general, every company works in an industry teeming with competitors waiting to eat that company’s lunch. Rest assured that if a products price isn’t at the lowest currently sustainable level right now, it soon will be.
Myth: My job treats me and other co-workers poorly. There’s nothing we can do about it, since the company refuses to open its wallet and do right by us. They’ve even taken away certain benefits that cost the company very little.
Truth: You always have a choice. Most obviously, you could look for another job. If you don’t want any of the other jobs near you, then you’re making a choice to stick with your employer because it’s the best deal available in the market today. Keep in mind, as an employee, you’re the seller, and your boss is the buyer. So in this case, your boss (and every other boss you’ll ever have) is continuously trying to get the lowest market rate for your labor. This is akin to how you look for the cheapest gasoline when filling up your car, without resorting to gas that will make your engine stall.
Having said that, it’s expensive for companies to train employees, so in general, they actually do want employees to stick around. When it comes to workplace safety, many point to how well OSHA has worked out. That may not be a great example, though. OSHA was implemented when workplace injuries were already falling rapidly. As John Stossel once said: “Sometimes government likes to jump in front of a parade and say it’s leading it”.
Myth: Without government controls, we’d have a lot of safety hazards in the market place. We need government to at least protect us from greedy corporations who would otherwise make shoddy products that endanger us to make a higher profit.
Truth: This myth makes two fatal assumptions. One is that we still don’t have dangerous products on the market because government saves us from them. The second is that government is generally more effective at stopping dangerous products than companies would be themselves. Both are false. Recently, Toyota proved that you can have a lot of government oversight and rules about how your products are made, and still create a dangerous product. Although, Toyota is an anomaly, because in general companies try to produce safe products. However, sometimes companies try to reduce costs by reducing the quality of their wares. If successful, you get a product that does the same thing but costs less. If unsuccessful, you could get hurt. In that case we have tort law that lets you take that company to court. Since companies want to avoid that, they try to keep the products safe while lowering costs.
Myth: Because companies have so much money, they don’t have to care about individual customers and they cheat them because the customer can’t afford to fight back.
Truth: Well firstly, not all companies have that much money. Companies start off life with less money than you probably have, and most of them fail. Just because you declare you’re in business doesn’t mean you’ll ever make a single thin dime. With that out of the way; Cheating customers certainly happens. The free market is filled with free people, not robots, so sometimes even best company will make a regrettable decision. However, companies that continuously behave this way eventually suffer consequences. Customers talk, and they especially talk about a company that “screwed them”. However, if you just mumble and take it but you don’t tell friends, you’re part of the problem.
When reasoning about our markets, it’s useful to remember a few basic facts:
- Greed exists in every nation, in every industry, and in any economic system
- People who endanger others have legal liability, government almost always “fixes” problems after they make it to market, not before (FDA recalls are a good example).
- Companies are like individuals in that they have a need to sustain themselves, but that doesn’t make either you or them evil.
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