Free Pass

"It's the old Potomac Two Step, Jack."
--President Bennett (Clear and Present Danger)

The February 22nd issue of Business Week features a cover story interview with President Barack Obama. A quote from the interview that appears on the cover includes Mr Obama's claim that, "We are fierce advocates for a thriving, dynamic free market."

That few in the media challenge statements like this one indicates either severe bias, lack of critical thinking capacity, or recognition that such a claim is so ludicrous that it isn't worth critiquing.

Let's review the role of government in a free market. Free markets involve voluntary exchange among individuals. Means of production are privately owned. Production and distribution decisions are made by producers. However, it is consumers who ultimately control this process because they signal value thru their purchasing decisions.

In free markets, the role of government is limited to protecting the property rights of people involved in market exchange. Since market exchange is governed by the notion of the contract, government is focused on fraud, theft, and other contract-related violations.

Here are some of the areas that government would not be involved with if it was an advocate of free markets:

-->Bailing out firms such as banks, insurance companies, and automobile firms that get into financial trouble. In free markets, poor decisions are punished by the redistribution of productive resources to those more capable of creating value for buyers.

-->Taking ownership stakes in productive enterprises.

-->Fixing the price of credit via a central bank.

-->Declaring a monopoly on the medium of exchange used by the market.

-->Increased regulation of manufacturing and service sectors. Regulation increases costs which ultimately raise barriers to entry. Entry barriers discourage entry by innovative entrepreneurs. Competition is reduced.

-->Taking investment capital out of private hands and deploying it towards government 'investment' projects such as alternative energy.

-->Seeking more control over production and distribution in the health care sector, and ignoring government's hand in making the current system inefficient and anti-competitive.

There should be little doubt that the interventionist actions of this administration mark a clear path away from capitalism and toward socialism.