Free Market and Ron Paul

[KramerDSP]

I am hoping someone can help out with answering a question from a very liberal friend who is slowly becoming more and more intrigued with Dr. Paul. He sent me this question:

" I'm curious. Is Ron Paul in favor of a free market 100%? If so, does that mean a laisez faire approach? What's his take on corporation controls and anti trust issues? I have huge issues with the uneven playing field that screws small businesses.

What's his free market vision? Does ron want a pure capitalistic society?
That's my question, really."

I am not very versed in economic issues, and was hoping somebody on this thread could help by answering my friend's questions so that he could make informed decisions. He is a very vocal person in the DC/MD/VA area, and could do wonders in terms of spreading the word out in the deaf communities there.

By the way, he loved the story about the RP supporters and Rudy on the ferry. That's gonna be a classic campaign story for the annals!

 

[FunkBuddha]

this isn't rp related except that it's a pro-free market article. i thought it was interesting though. it explains how monopolies can't exist without goverment regulation.

http://www.fff.org/freedom/0592c.asp

 

[KramerDSP]

Very interesting read. I will definently pass this on.

 

[jblosser]

I'm curious. Is Ron Paul in favor of a free market 100%? If so, does that mean a laisez faire approach? What's his take on corporation controls and anti trust issues? I have huge issues with the uneven playing field that screws small businesses.

What's his free market vision? Does ron want a pure capitalistic society?
That's my question, really.

Yes, he's in favor of a full free market, and he's one of many who will argue that it is government regulation that allows corporations to screw small businesses. When the government is allowed to legislate in the market it means the laws become for sale, and the corporations always play that game the best. It is impossible to write legislation that doesn't have loopholes these guys can exploit. The only way around it is to not write the legislation and let the market handle it. No system is perfect but historically the market does a better job than anything else. All of the so-called "market failures" can usually be traced back to some form of regulation in the first place.

As an example, take the McCain-Feingold-Thompson election law, which doesn't deal with the market directly but does make this point very well. The supposed goal of this legislation is to limit the ability of big business to influence elections. However, like all legislation it contains loopholes and lobbyist backdoors, with the result that only people with high-dollar lawyers can begin to understand what's going on. The final effect is that small campaigns and real grassroots efforts have their hands completely tied while the big companies are happy to spend extra on legal fees to make sure they can keep donating as much as they want via the loopholes.

It's also worth noting that seeing the market as "capitalism" is essentially playing into a strawman; that is, the idea that the market is all about money. This is not the case, but seeing it this way makes it easy to create supposed failures because if people are only worried about short term monetary gain they supposedly won't care about long term effects or other motivators. The real market is a good bit more complex and intelligent than that and handles things like private charity, the environment, and innovation just fine.

If your friend is willing to do some research, have him read Bastiat's _The Law_. This is one of the first books on Dr. Paul's recommended reading list and it does a great job of explaining why laws meant to protect groups often have the opposite effect. Another one on that list is _Economics in One Lesson_, which is all about the full term/side effects of economic practices.

 

[KramerDSP]

Forgive me for being an idiot with economics, but how far away from a free market are we right now ? I know we are the third most socialized country in the world already in terms of health care, but where do we stand in general ?

 

[bbachtung]

Ron Paul opposes "corporatism" which I believe he views as being a symptom (and cause) of excessive regulation and federal involvement. Although it deals specifically with the health care industry, this article (http://www.ronpaullibrary.org/document.php?id=760) by Ron Paul touches on the issue of corporations and the government getting together to destroy free markets and harm consumers.

One choice morsel:

No one can take a back seat to me regarding the disdain I hold for the HMO's role in managed care. This entire unnecessary level of corporatism that rakes off profits and undermines care is a creature of government interference in health care. These non-market institutions and government could have only gained control over medical care through a collusion of organized medicine, politicians, and the HMO profiteers in an effort to provide universal health care. No one suggests that we should have universal food, housing, TV, computer and automobile programs; and yet, many of the poor to much better getting these services through the marketplace as prices are driven down through competition.

 

[KramerDSP]

Good stuff. What always amazes me is how consistent he has been over the years, and when I am working on some friends, they will always end up noting that he said certain things many years ago that he is saying again today. That always gets their attention and they start to realize that he is not the same old politican that most of them have been accustomed to throughout their lives.

 

[Gee]

KramerDSP, the most important points are:

1) Regulations are like a regressive tax on small businesses. They usually costs small businesses nearly as much to comply with regulations as larger ones, meaning they pay much more relative to their revenue. The result is that big business often likes regulation.

2) Big business isn't necessarily bad. Some industries can serve their customers better with larger firms (e.g. Intel and AMD's oligopoly), while smaller firms work better for others (e.g., barber shops and salons). The important thing is that the number of firms is determined by consumers in the marketplace, and not government bureaucrats. That way if consumers prefer big business, they get big business. In such a scenario, anti-trust laws are rarely necissary.

3) Laissez faire and free markets do not imply caveat emptor (or "buyer beware") polices that would allow dangerous or fraudulent products to be sold. Selling toys marketed towards kids which are made with poisonous materials (lead paint, or whatever) would always be an act punishable by civil tort or criminal negligence. A true free market exists when consumers get what they pay for, and the government punishes fraudulent practices. A good example of this are the lawsuits against Mattel and that company's massive recall which will cost it huge sums of money and even more in reputation.

4) The most heavily regulated and socialized major industries in the USA are probably education and health care and banking. I don't think its any coincidence that those industries are the ones with the largest numbers of problems. The United State's Postal Service's monopoly on local mail is not so bad because the USPS isn't supported by tax money (its more like a business), and it does have some competition.

5) A free market and laissez faire are, contrary to what is often taught in history textbooks, not what America had in the 19th century. In some ways (such as regulation) we were closer to a free market back then, but in other ways we were not (such as the disregard for property rights and industrial pollution, the rights of non-whites, and institutionalized banking systems which caused bank runs and recessions).

To answer your question on how free America's economy is, its very free compared to the rest of the world. Historically America has generally had the most free economy in the world, although in the past few decades countries such as Hong Kong has eclipsed it. For one ranking, go here:
http://www.heritage.org/research/features/index/countries.cfm

 

[KramerDSP]

Thanks for taking the time to explain all of this. It was very easy to understand, and I appreciate the education.

 

[fsk]

The economic system in the USA resembles a communist dictatorship much more than a free market.

The Federal Reserve, income tax, and government regulations are a huge restraint of free trade.

If you're interested, you can read the details on my blog. I'm not reposting everything here.

 

[DocGrimes]

Yep, even Greenspan said the other day in Daily Show interview that the fact that we have the Fed means we are not really in a free market.

I think we still have a lot of choices in our market today but that does not equate to it being free. We have so many regulations, permits, licenses, ect.. that there is very little free or self regulating about it.