Is Robert Reich Correct?

There’s a lot of rhetoric in Robert Reich’s new book, Saving Capitalism: For the Many, Not the Few, but perhaps the most poignant point the former Secretary of Labor made is that there’s no such thing as a “free-market.” That is to say that there’s no place extant in the US where private sector businesses exists unrelated to government.

It’s not a new idea, and on a subconscious level, most of us know that. Government bailouts, federal industry regulations, and the idea of corporate personhood are regularly discussed topics that exist solely because of government actions within the marketplace.

That, of course, leads to the discussion of what defines a free market. If, for example, one views it as the right of the individual to not be subject to undisclosed foods and chemicals that may pose potential harm but cut the cost for private food and drug producers, FDA guidelines and labeling standards may not be seen as an infringement of the free market. If, however, you view it as the right of the corporation to produce the highest quantity at the lowest cost, even if that means using some untested or potentially harmful components, you may see these regulations as free market restriction. HaJoon Chang does an even better job explaining this concept in relation to labor.

Let’s move past all of that for a minute, though. Assuming the nation could agree on a uniform standard for what comprises a free-market, would it actually be free?

Playing Politics

The short answer is no. That’s because those in power, whether by elected office or corporate office, are the ones that make the economic rules. It’s been that way since market systems first came into being. The ability of the market to be truly free means that market participants have the ability to try to create favorable conditions for their success, including doing things like contributing to political campaigns, creating special interest lobbies. A free market, one that truly has no government limits, by nature creates a spot for itself to influence the controlling forces and political agendas.

Reich breaks this down point by point starting with the building blocks of American capitalism, and pointing out key areas that need rewriting in order to create less “free” but more level playing field, including how public office campaigns are financed, how monopolies are regulated and dismantled, and what legal benefits are afforded to corporations. His argument is that reframing some of these business-friendly but not really free practices will make a more navigable space for businesses, consumers, and government to successfully interact.

Government As Business

I’m not going to make any friends here, and I before I take this stand I should really emphasize that while I am an enthusiast of both, I am neither a political nor economic expert. That being said, the government is a business, at least in a way.

A business, in its simplest terms, is an enterprising entity engaged in commercial, industrial, or professional activities. That’s true of both for-profit and not-for-profit companies. Let’s look at this on a local level, very broadly using the idea of security.

Security of home and self is a right, but it’s also an enterprise. Running a police department as a for-profit business creates some notable concerns, but it’s an entity that uses (ideally) trained professionals to provide a specialized service. It shouldn’t be a money-making machine, but that is a business. Employees are going to have interests, the department is going to need resources – there’s a whole market surrounding outfitting and preparing a PD from equipment to training to paperwork. As an entity that provides a service, these departments are going to have an interest in keeping the resources they need accessible to them.

Insofar as those things are true, municipal police departments act as businesses, even though they’re run by local government. In order to keep their resources at accessible levels, they need to be able to interact in the marketplace of which they are a part. Since both microcosms of government and governing bodies themselves have full markets surrounding then and ingrained in them, it’s impossible to separate out the influence of government in the marketplace. In fact, there are a lot of taxes and regulatory fees and fines that go right back into government pocketbooks to afford local governments a chance to provide these services.

So is there truly a free market? No. Can there ever be? That is a question for a skilled economist, but as Reich points out, there’s a lot of change necessary to make that happen, regardless of your definition of “free.”