About that "free-market fundamentalism"

Posted by Joshua Holland at 8:14 AM on February 1, 2007.

I agree with what Ruth Rosen writes on today's front page about challenging the right's worship of "free markets," but I also want to remind readers of a different perspective in terms of how best to "frame" the issue.

Here are some choice bits addressing that questiont from a chat I had last year with economist Dean Baker.

Joshua Holland: You say that conservatives are not, in fact, self-reliant fans of free-markets. Lay out your thesis in a nutshell.

Dean Baker: Well that's the stereotype -- that conservatives are willing to take the hard knocks when they come -- but in my book I argue that what the conservatives have done is they've rigged the deck. They've made sure that certain people come out ahead, that income flows upward, and that other people are put at a disadvantage -- and these things are built into the rules of the system. And then what they want to do -- in talking about "free markets" -- is they want to kick back and say, "No, no, no; those are the rules, and we can't talk about them." They don't want to talk about how the deck is rigged; they want us to fight over the small scraps.

Holland: You think that liberals shouldn't shy away from markets, just that we have to point out how the "conservative nanny state" has rigged the game. Explain.

Baker: The way a lot of liberals approach policy is that they take the current market situation as a given. But if you look at the last quarter century, we've had pretty good growth -- not outstanding, but pretty healthy growth -- and the vast majority of those gains have gone to those at the high end. If you look at incomes in the middle, there have been very modest gains; most of the income has flown upwards. So what a lot of liberals do is they say, "OK, let's see what we can do to redistribute those gains. So let's institute an earned-income tax credit. Let's increase the minimum wage." I support those things too, so I don't mean to trash those policies, but my point is that it's much, much harder to tax money away from people and redistribute it than it is to structure rules so the income doesn't all go upwards. So we made a mistake of focusing on redistribution after the fact instead of getting into the battle and asking if we can have different rules and better rules. We aren't against the market -- I make the analogy about the wheel. We don't want to get rid of the wheel -- but instead of letting the conservatives shape the market so that income flows up, let's restructure it so that we share in the gains, or even so that more benefits flow to the bottom.

Holland: You wrote: "Many progressives even use the phrase 'market fundamentalist' as a term of derision directed against conservatives. Such attacks must delight the intellectual defenders of the conservative nanny state." You want us to refrain from validating their arguments. But you don't really get into how we should be discussing these issues.

Baker: I think the main thing is that we have to get in there and fight over the definitions of the market, because when we say they're "market fundamentalists," we're acting like they're willing to accept market outcomes. And when we do that, we've already given away the store; we've let them set the rules of the market and determine how income's going to flow, and that leaves us fighting over the crumbs. What I want to do is point out all the places where they've intervened in the market, and then open those areas up for discussion -- I think we need to get in and fight over the rules. I talk in the book about how the Fed impacts employment, how we structure rules on corporations, how we come up with tax rules, and trade policy, I talk about intellectual property -- tremendously important in the economy -- the point is to call attention to all the places the government is intervening today, not all of which are bad by any means, but let's talk about it. Let's sit down and acknowledge that they want the government to intervene in the markets and debate how best to structure that intervention so that it works for everyone.

***

Do you challenge them on their "free-market" fundamentalism, or do you call bullshit on the entire premise? It's an interesting question.

PS: You can download Baker's book, The Republican Nanny State, for free, here.

Tagged as: economy, free-market, baker

Joshua Holland is a staff writer at Alternet and a regular contributor to The Gadflyer.