The Free Market Is The Toughest & Fairest Regulator In The World

By Chris Rossini

The so-called "Land of The Free" is straddled with the biggest government in the world. Logically, such an unfortunate state can only mean one thing: understanding of the free market is pitifully low. 

Approach the average American, and he is very likely to tell you "But we need government regulation, don't we?" 

You have to cut the person some slack. After all, America has been dominated over the last 100+ years by the ideas of ill-named "progressivism". Most Americans are also forced to spend their first 18 years of life in government's "schools," where they are drilled with these ideas. So you have to cut some slack. It's very hard, under such a setup, to know any better.

However, as the failures of America's centrally planned regulatory state continue to come in, it is very important that enough people understand what the free market actually is. The pieces that government has shattered will have to be picked up someday.

A free market simply means that individuals may freely exchange without outside interference. The force of government is prohibited, and force from the individuals exchanging is prohibited as well. Transactions are carried out voluntarily and peacefully. Both parties, since they are freely choosing to transact, benefit from the exchange. Both had the freedom to reject the exchange if they didn't like the terms.

Does anyone "create" a free market? No. It simply exists. There is no overarching group of elites who sit around a table drawing up blueprints for creating a free market. A free market is not legislated into existence. It can only be legislated out of existence (to a certain extent of course, since so-called "black markets" take over to get around the government's obstacles).

The free market is, without question, the toughest and fairest regulator in the world. It shows no mercy. If a business is not able to profitably sell its product or services, there is no one to run to. No one (other than a private investor) can bail them out. Private investors are not interested in losing their own money, so a failing business has to really show that it can survive if it wants to earn more funding.

A vast majority of non-profitable businesses would have to close their doors under a free market, but this is not as bad as it sounds. We live in a world with scarce resources. We do not have an infinite amount of land, labor, and capital. They are scarce, and since they are scarce, there needs to be a rational way to allocate those resources. Profits and losses provide those signals.

Profits indicate that consumers greatly desire the product or service being produced. Scarce resources need to be further allocated to these areas. Losses indicate that consumers do not have a great desire for the product or service. Scarce resources need to be withdrawn from those areas. Again, in a world with scarce resources, you can't have it all. Some things have to be produced, while others cannot be. Profits and losses tell us what each of those things should be.

The main reason that the Soviet Union collapsed was because they did not have profit and loss signals. As a result, the central planners had absolutely no idea where resources should be allocated. They were totally in the dark. The darkness lasted about 70 years before they had to call it quits.

So profits and losses are extremely valuable signals. They point the way.

In a free market, if you're producing losses, you cannot run to the government for help. You cannot lobby or bribe a politician to help you stay in business. This is a big reason why so many people despise it. Failing business owners would much rather buy a politician. It's so much easier! 

A politician can bail the unprofitable out. A politician can write laws that protects the business from competition. Licensing laws are a huge advantage to established businesses. It's so much better for them to create high barriers of entry for any potential competitors.

Politicians despise the free market too, but for very different reasons. Politicians like to feel important. When they pass a law that prohibits this, or bans that, they get a rush out of it. You know the saying about how power corrupts, right?

Politicians like the feeling of picking winners and losers, instead of letting consumers do so with their free choices. Politicians also like to be bribed and lobbied. Not only does that make them feel important, but it also puts lots of money in their pockets. It also generates votes from the interests that they're serving.

So you have a combination of big businesses and politicians that love adding layers and layers of regulations to their benefit. Not only do they despise the free market, but they fear it as well. A free market would put an end to the buffer zones that they've created by law.

The fact that most Americans think "We need government regulation" only helps to keep the table-tilting ways going. Government and their cronies keep adding and adding. It's reached the point where about 1,000 pages of regulations are created by the U.S. government every day! Everyone jockeys to create a legislative advantage for themselves.

Few understand that playing this game creates impoverishment for all. Businesses that should have went under long ago, are still around. This means that scarce resources are being wasted. New ideas and products are never materialized, which means pressing problems are never solved. Consumers are forced to buy and transact with those that (if left free) they would not deal with. Service declines. After all, if you have government protection, you really don't have to care about your customer. What choice does the customer have?

Government "regulation" is not regulation, it's advantage granting. The free market is the real regulator. It provides a level playing field. You cannot bribe it. You cannot cry to it. It cannot tilt the tables in your favor. 

The free market is the toughest and fairest regulator in the world, which is why politicians and their army of crony businesses hate it so much.

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