Wednesday, 11 June 2014

Pirate Party Talking Points: "The Free Market"

There is no such thing as a free market. Anyone who believes that there is such a thing is deluded because they have failed to take protectionism and other distortions into account. Free market enthusiasts have convinced our government that policies based on free market economics are viable. They're not. This is why:


1. "The Market" is not a discrete entity

"The Market" is made up of two sides, sellers (supply-side) and buyers (demand-side), which are supposed to exist in a tension that causes the whole to self-correct when shortages, etc., occur. What actually happens is that the supply-side creates shortages and exerts influence on law-makers to create anti-competitive conditions that give them an advantage over the demand-side, forcing them to either take or leave what they make available at the prices they have set. Therefore "The Market" is not and never can be a unified whole working like a natural organism. It's more appropriate to compare it to a parasitical infestation than anything else.

2. A free market assumes equal access to buyers and sellers

Well that's not true. When the only choice is take it or leave it we buyers have to cope with entitled sellers claiming property rights over the market itself. If either side has an advantage, the market is warped, tilted in favour of one or the other. It's usually the sellers (supply-side) that end up with the advantage.

3. IPR

"Intellectual property rights" is a misnomer. It's a term used to conflate copyright, patents, and trademarks and ascribe property rights to them, which is causing a whole world of trouble for us when attempts are made to enforce this. First of all, copyright, patents, and trademarks are TEMPORARY MONOPOLY PRIVILEGES and have always been treated as such. IPR is anti-competitive and therefore anti-consumer, leaving us with but one choice: take it or leave it. That's not a choice. There is no free market in proprietary items; the clue is in the word "Proprietary."
3.a Mendacity, propaganda, and misplaced property rights
“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.” - Joseph Goebbels: On the "Big Lie"

Please feel free to call Godwin on me but you know I'm right. When is economic protectionism not protectionism? When it's defending property rights! Well, that's okay, then. Wait...

Take a look at this website. And this one. And this one. What do they have in common? They promise you ownership rights over the DVD, Blu-ray, etc. Hah! You fell for it, didn't you? Silly people, you don't own what's on the DVD or Blu-ray, you just own the bit of foil and plastic. The actual recording isn't yours at all. Want to show a video at the local youth club or whatever? Get a licence. Not getting one is a violation of copyright and can get you into a lot of trouble for stealing from the mouths of babes and infants. Don't get me started. This is anti-competitive action disguised as morality, protecting the vulnerable from the predatory public, or something. What it all boils down to, my dear friends, is that you don't actually have full property rights over what you buy if it's a proprietary item. Heck, even reading books aloud at a library requires a licence. The books have already been paid for, so what's happening here? You're being lied to; the LICENCE to read the books in private has been paid for. You're not allowed to make copies of it, either. It's not your book. You own the paper, the cardboard, and the ink, not the actual book.

4. Monopolies, oligopolies, and cartels, oh my!

Exclusive rights to distribute goods or services under licence to companies or groups of companies restricts competition and is therefore anti-competitive. De Beers is a classic example. Permitting companies to merge till there are fewer of them centralises administration and creates artificial scarcities in jobs, goods, and services. This is supposed to be illegal.

Anti-trust laws are supposed to prevent this but in practice they are not used as much as they ought to be. If there's little in the way of competition because competitors are kept out, the market isn't free. Natural monopolies exist where the incumbent is simply the best but that's not anti-competitive if they're not actively keeping competitors out by restricting the right to distribute similar goods and services: Google has the largest market share in search; Bing, a competitor, uses a Google algorithm in its program.

5. Predatory pricing

This is supposed to be illegal. Does anyone remember Kwiksave and their game of economic chicken with beans and tinned tomatoes? Other shops were able to match their prices but big box stores regularly drive small retailers out of business before jacking up the prices when the competition has been nixed. The idea that "The Market" can "self-police" against predatory pricing is laughable; it assumes equal opportunity to set up in competition but anti-competitive laws set up to maintain incumbents' positions contradict that notion. Consider it debunked.

6. Segmentation

Growing up in Ireland I was surrounded by reminders to buy "Guaranteed Irish" products, an initiative by the Government to help Irish businesses. There are similar schemes all over the world and it's a form of protectionism. Import duties and tarriffs are another form of protectionism. Geographical segmentation that sets different prices for different areas is becoming more widespread; it's particularly common in publishing and digital goods, the idea being to sell at a price people can afford in their own countries, limiting distribution to those places at those prices. Enforcing it can be problematic, per the Kirtsaeng case.

7. Hoarding and flooding

One of the most effective ways of driving up prices is to create artificial scarcities via hoarding. Buying up houses and boarding them up is a favourite ploy; it's one of the reasons we're in a housing bubble now. IPR does pretty much the same thing, as does geographical segmentation. Flooding has the opposite effect; driving prices down can force competitors out of business. In both cases, asserting property rights and persuading people that "The Market" can correct itself when the demand-side votes with its feet prevents anything meaningful from being done. This assumes that they have a choice. More often than not, they don't. You can't simply buy a house elsewhere if you don't have the money to buy it with and you're stuck with a zombie mortgage.

8. It's baked into our laws

Article I, Section 8, Clause 8 of the United States Constitution, known as the Copyright Clause, empowers the United States Congress:
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. - Wikipedia, the Copyright Clause

IPR is a monopoly privilege, not a property right. Protectionism is anti-competitive; that is the whole point of it. The UK and all Western countries have similar laws and thanks to a range of Free Trade Agreements, other countries have them too.

Freedom and The Market

The point is, there's no way a genuinely free market could ever exist: creators and inventors would demand the right to protect their ability to profit from their works if we abolished the protectionist laws we have at the moment, correctly pointing out that it's not fair to put in all the legwork and have someone else run away with the money. Property owners would complain if their ability to choose when to buy or sell was constrained by law. And incumbents tend towards protectionism to maintain their position. How do you address that?

The best we can hope for is a fairer, more open market. We can attain that if we work towards it and the quickest way to get there is to admit that there's no such thing as a free market. And there never will be.

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