Market Failure is a White Lie?

November 11, 2020 (to be updated); November 13, 2020; November 21, 2020; November 22, 2020

by Daniel J Arthur

We keep hearing a lot of fear mongering by the Republican Party also known as the GOP and its supporters that the Democratic Party is a bunch of left wing socialists. They tell what they think of as white lies, but in reality are outright misrepresentations of the truth or false allegations. The GOP has been using these lies to scare many ignorant Americans into voting against good common sense policy.

You will hear a lot about free enterprise and competition and the market economy being the savior of mankind. That’s a bunch of manure going to waste. I don’t know many people, Democrats or otherwise, that are against private enterprise or what we often just call business. In fact, I know of no one personally who is against private ownership controlling business. These Democrats and Republicans that I know are capitalists and not socialists.

Now we don’t just have businesses doing their thing totally independent of the government. I don’t know of anyplace that runs just on a pure market economy. Can you guess why? Because in almost every instance there is some kind of market failure. It is natural for markets to fail, and they don’t adjust very well on their own. Why is that? Because when there is market failure the situation tends to get out of control and causes harm to individuals and/or things.

Nations the world over and for thousands of years have been struggling with these issues of market failure and how to deal with them. Governments of many kinds have been invented and have evolved from dictatorships like kings to all kinds of more inclusive democratic organizations of government. Basically, these governments deal with market failures.

What are some kinds of market failures that we typically think of as governmental goods and services? Personal and community safety, defining ownership, personal and community health, defining and protecting property rights, personal and community education, information, power, trade facilitation, environment, religion, culture, diversity, and much more. Can you imagine businesses trying to broker these goods and services? Probably not, and it would not eliminate the market failures.

How do we deal with these market failures? We either have the government provide the primary goods and services like currency, law enforcement and public schooling or we have government regulate the activities like environmental, public health and banking and securities regulations.

What are a few of the many, many market failures in the world of free enterprise? There is not likely to be a market that is without failure. A common example of a market failure is where a polluter, like a coal burning power plant or fracking operation, will just continue polluting the air and/or water without refraining without some kind of intervention from a third party like a government body. Why? Because the resource, air or water in this example, is freely available to deposit harmful and unwanted by-products of the operation. As a consumer or person using air and water, I want it to be very clean so that I may enjoy it and not be harmed by the pollutants. Most often the consumer has little to no power on their own to undo the polluting.

So, instead of foul air and water, which many in the current GOP don’t recognize as a problem, a government regulatory body like the EPA or a state or local environmental agency will set standards, monitor and modify a polluters behavior with fines or imprisonment to maintain what is considered to be a reasonable natural resource quality. Without regulation, we would end up with a ruined environment.

Another common example of market failure is when a company becomes too large a player. Many of you have heard of monopolies and maybe oligopolies that are huge and dominate a market. This creates a situation that is far, far from free enterprise or perfect competition. The monopolist can set their own price to maximize profits, produce much less than the consumers desire, and reduce quality at a whim. In these situations we have learned that we need government regulation to help gain better pricing for individuals and business organizations, ensure output meets demand needs and that quality is maintained.

Yes, government intervention can be excessive at times, but it recent years or decades there has not been enough government regulation to offset the market failure franchises in so many industries like pharmaceuticals, energy and housing. Therefore, often the business or misnamed free enterprise is able to charge consumers too much, not provide enough goods and services and pollute much more than is desired.

Remember these are but a few examples of the welfare for the super wealthy and corporations of the world. Do you see, too little regulating and intervention of market failure leads to the individual being harmed and exploited? The Republicans aka GOP have been leveraging transfers of wealth from individuals of usual means and less to those that can unduly influence our regulatory and intervention agencies.

These examples show how a modern society can actually make adjustments to the business world to ensure a more fair society with more competition and a place for all. However, the people calling themselves conservatives in America, members of the GOP or Republican Party, have been using their power to harm most Americans when there is market failure. In fact, they have been practicing socialism for the wealthy by encouraging huge transfers of wealth from 90% of Americans to the wealthiest. The amounts are in the trillions of dollars, and, in addition, includes terrible environmental and health outcomes as well.

Not mitigating market failures by a government with jurisdiction is in essence socialism. It is socialism for the wealthy as the wealth of the least economically capable will flow to the most economically capable. Is that fair? Desirable?

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