To have any meaningful understanding of a socio-economic system, one needs to first gain an insight into two things – one, what purpose it is meant to serve, and two, for whom it is supposed to serve that purpose. Civilized human society is made up of individuals – individuals who are unique. And each unique individual has unique needs, goals, and aspirations. History is witness to the fact that every time a certain society has achieved great prosperity and relative equity of wealth, it has not come from social engineering or government intervention, but from individual enterprise and unrestricted trade and commerce among the citizenry. “The world runs on individuals pursuing their separate interests,” Milton Friedman had once remarked. Free markets let people do exactly that. Whenever allowed or adopted, these have been the only ones that have pulled the most number of people out from abject poverty and destitution. No other socio-economic experiment or enforcement “can hold a candle to the productive activities that are unleashed by the free enterprise system.”
The Free Market System is based on Natural Justice
Free markets let people exercise their natural inclination to exchange goods or services for a perceived sense of greater benefit. Nobody has to teach them to do that. The ‘benefit’ is subjective, as it is unique to each individual. So, the idea that a greater wisdom needs to regulate or measure the degree of benefit for each individual, is absurd. The value of the things to be exchanged or the course of action to be undertaken to complete that process, can be fairly determined only by the people mutually agreeing to engage in that exchange, no one else. So, when the detractors shout from the roof tops about the failure of free markets, they are really implicating government intervention in the form of subsidies, licensing, indirect taxes, property laws, the “public” sector, red tape et al.
Real free markets are organic in nature. They follow the natural course of survival and justice. Since they are not planned or regulated, they cannot ration or re-distribute goods, services, or wealth. The only thing that matters here is the value and utility that people derive from the exchanges they make. Therefore, free markets can never fail. Nor can they be mathematically measured for efficiency.
Free Markets vs. Collectivist Economic Systems
Biased ideological dogmas perpetrated by collectivist socio-economic systems have greater appeal to the lay person, because they induce false hopes of free sustenance. There is a basic logical flaw in the principle they are based on. The idea that one can determine that which creates the best trade value for another, is ludicrous. Under the cloak of empathy and equality, these theories practice sugar-coated totalitarianism.
So if the central idea is ‘welfare’, which is what most of the so-called ‘socialist’ theories advocate, they would not interfere with what individuals decide to trade for their own good. The same applies to the argument of ‘utility’, which champions of government intervention in trade brandish every now and then. If anybody can claim to understand the magnitude of its utility, it is the parties involved in the actual exchange of the goods and services.
The Free Market System is a Great Economic Leveler
Friedman said, “The great virtue of a free market system is that it does not care what color people are, it does not care what their religion is, it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.”
When there is regulation in every sphere of an economic system, inequalities and financial hardships of the “proletariat” are bound to expand. When subsidies are given to specific individuals or sectors over others for instance, it comes at the price of higher taxes for the masses. But in a system free from government intervention, industries and businesses reduce costs for themselves by competing with each other. When greater revenue generation is the goal, expenses incurred cease to matter, as they remain the same for everybody. There is more for everyone, even the tax-hungry government. The free market might not be the perfect socio-economic system, but it is the best one we have got.