(Un)Free Markets and the Diminishing of Choice

Posted: September 14th, 2010 by makleen

By Michael Kleen

In a truly free market, the number of products (or choices) would only be limited by the amount of resources, the number of potential consumers, and the imaginations of the merchants and manufacturers. If the market was broad enough for a hundred different kinds of shoes, for example, then customers would enjoy a hundred different options when it came time to purchase footwear. Some shoes would be costly and made of the finest quality, others would cost much less and be made of cheaper material, and still others would appeal to both frugality and durability. Whatever a customer desired would be made available, because the retailers could be assured of a steady stream of profit. If the market for shoes constricted, shoe merchants and manufacturers would close down and go into business catering to some other need.

The street outside of the Change of Pace in Macomb, Illinois come closing time is a perfect example of a free market in action. As patrons of the bar stumble outside at 2am on the weekends, they are greeted by restaurateurs with carts (and some in their cars) selling samples of their products. Inebriated adults are hungry, and local restaurant owners have recognized an opportunity to both fill a need and advertise their businesses. Everyone benefits from this economic activity, which is free from outside interference.

As government comes calling, however, freedom of choice is reduced because the number of options available to the public decreases. Several major cities, most notably New York and San Francisco, have begun to meddle in the kind of free market activity mentioned above. In New York, legislators have proposed a law that would impose licensing requirements, prioritized space-allocation, regulations relating to the location, placement and size of vendor’s vehicles, pushcarts and stands, and even a fingerprinting requirement for all vendors. The immediate result of this legislation would be the elimination of many vendors, who would be unwilling or unable to meet the regulations, and possibly the eventual end of street vending altogether.

Sometimes, as is the case in San Francisco, business owners themselves conspire to shut down free markets. According to a March 8, 2010 KTVU News report, “restaurant owners are complaining about new competition from street vendors selling gourmet goodies and demanding that the board of supervisors to take action.” The article went on to reveal that street vendors already pay $1,000 to $10,000 in permit costs, “a fraction of what restaurant owners pay for rent, utilities and health care costs.” Imagine how many restaurants and vendors would spring up if government licensing and permit costs were inexpensive or nonexistent? The answer is as many as the local market would support.

But with that free market would come competition, something that some business owners do not want. (“It’s not fair competition,” complained a local restaurant owner. “They [vendors] move around.”) That is why many business leaders work with government officials to make it as difficult as possible for anyone else to start a business. But while their own business might benefit from such an arrangement, the economy as a whole suffers. When those businesses move or are forced to close, it is very difficult for anything else to take their place.

In Marxist-Leninist and socialist economies, market regulation directly benefits a government monopoly, however, under State Capitalism, markets are manipulated to benefit a few select companies or corporations who have the ear of Federal, state, and local government. Such is the case in the United States, where State Capitalism is often mistaken for a “free market.” This collusion of state and private interests harms competition (and, ultimately, the public) by favoring one business over another, thereby removing choice from the customer and a certain motivation for adaptation on the part of business.

Proponents of this particular form of market interference might argue that the loss of a certain number of goods and services would be more than made up for by the assurance of fairness and equity in the marketplace. The government, in other words, acts as a watchdog ensuring that no business has an unfair advantage over another. While well-intentioned, this line of reasoning proves fallacious when put into practice. It is true that open competition is often unfair, and there is always a risk of failure, but sometimes temporary pain brings long term gain. The constant threat of losing the upper hand keeps prices low and innovation high. When businesses compete, they compete for the approval and loyalty of the buying public. A business secured by government, on the other hand, extinguishes that innovation and growth for the sake of artificially maintaining the status quo.

In a truly free market, businesses rise and fall by their own merits, failing businesses are not propped up with tax money, and start up costs are not driven through the roof by large licensing fees and other restrictions. Everyone benefits from a wide variety of goods and services, whether the goods are offered by a street vendor, on the Internet, or in a brick-and-mortar store, but the more government gets its hands into the market, the higher the operating costs, the greater the price for goods and services, and fewer choices for consumers. In this troubled economy, we could all use a little less government and a little more freedom to buy and sell what and where we choose.

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Michael Kleen is the publisher of Black Oak Presents, a quarterly digital magazine of Middle American art and culture and proprietor of Black Oak Media. He holds a master’s degree in American history, and is the author of One Voice, a collection of columns regarding issues in contemporary America.

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