The Tenacity of Free Market Fundamentalism

This is an important and wide ranging conversation about the history of economic ideas and how it played out in political discourse, specifically, how free market fundamentalism, an idea that appeared to be dead in the 1940s, survived and became dominant.

One of the themes in this talk between Fred Block, professor of sociology at UC Davis, and Rob Johnson of INET is the conflict between the idea of “freedom” at the root of free market fundamentalism, which means “freedom to be left alone” versus democracy. As this discussion makes clear, markets cannot self-regulate. They become bare-fisted brawls for assets and power. Perversely from the perspective of the free market fundamentalists, aka libertarian utopians, for markets to deliver the positive benefits ascribed to them, you need government intervention: good access to court systems to enforce contracts and other rights, regulation to contend with externalities and curb predatory practices which are purely extractive, as well as the accumulation of monopoly/oligopoly power.

From the introduction on the INET site:

Despite the manifest shortcomings of market fundamentalism that have been on display over the past few years, Block argues that these principles remain powerfully seductive because they promise to diminish the role of politics in civic and social life, which is a particularly attractive feature for the “haves” who want to maximize their assets at the expense of the “have-nots.” Since politics entails coercion and unsatisfying compromises among groups with deep conflicts, the wish to narrow its scope is understandable. But like Marx’s theory that communism leads to a “withering away of the State,” the flip-side argument that free markets can replace government is just as utopian and dangerous, as Block seeks to demonstrate in this interview.

The end game, as came to pass in Chile under Pinochet, was, as one commentator later wrote, “People died so that markets could be free.”

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  1. Skippy

    Some people died because some peoples property and profit are divine by origin, whether by grace or the singularity of the individuals conquest.

    skip here… Singer poster boy…. Paul E. Singer, a former corporate lawyer, is “the founding partner of Elliott Associates, a $7 billion hedge fund with a conservative, risk-averse bias that has been in business since 1977, making it one of the oldest funds around. A reserved, private man who would answer questions only via e-mail, Mr. Singer is a self-described conservative libertarian who has given millions of dollars to Republican organizations that emphasize a strong military and support Israel.” [1]

    Singer is a member of the Board of Trustees of the neo-conservative think tank the Manhattan Institute for Policy Research;[2] a “member of the boards of the Jewish Institute for National Security Affairs and of Commentary Magazine, and is on the Board of Advisors of the James Madison Program in American Ideals and Institutions at Princeton University”, and a member of the Board of Fellows of Harvard Medical School.[3]

    Funding right-wingers and Swift Boaters

    Recipients of Singer’s contributions “include Progress for America ($1.5 million in contributions), a political advocacy group set up to advance the policies of the Bush administration; Swift Vets and P.O.W.’s for Truth; and the Jewish Institute for National Security Affairs, which includes Vice President Dick Cheney and Richard N. Perle, an adviser to the former Defense Secretary Donald H. Rumsfeld, among its past and current advisory directors.”[1]
    Backing Politicians and Organizations

    In the 2004 election cycle, Singer was a “Pioneer” bundler for George W. Bush, raising at least $100,000 to earn that status.[4]

    In the 2008 election cycle, Singer is a bundler for Rudy Giuliani and has “pledged to raise at least $500,000.00” for 2008 Republican presidential hopeful Rudy Giuliani.[4][5]

    Singer is the Eastern Regional Finance Chairman[3] and “a primary fund-raiser and policy adviser”.[1]

    In the 2005-2006 election cycle, Singer contributed $25,000.00 towards the establishment of the Republican national lobbying front group Vets for Freedom Action Fund.[6]

    Debt Manipulation

    Investigative Journalist Greg Palast uncovered debt manipulation by Singer, who he deems “Vulture Singer.” Palast writes that Singer’s “modus operandi” is to find some forgotten tiny debt owed by a very poor nation (Peru and Congo are given as examples). Singer then waits for the US and European taxpayers to forgive the poor nations’ debts; as well as offers of food aid, medicine and investment loans. At this point Singer grabs at every resource and all the money going to the desperate country. Palast writes that trade stops, funds freeze and an entire economy is effectively held hostage. Singer then demands aid-giving nations pay monstrous ransoms to let trade resume. Singer demanded $400 million dollars from the Congo for a debt he picked up for less than $10 million. Palast writes that if Singer doesn’t get his 4,000% profit, he can effectively starve the nation. In Congo-Brazzaville last year, one-fourth of all deaths of children under five were caused by malnutrition. [7] [8]

    skippy…. libertarian… cough… at liberty to do… methinks…

    1. Jim Haygood

      Oops … the ‘black hat’ character has gone off script:

      A group of hedge funds that sued Argentina in the U.S. has agreed to support a request by Citigroup to allow the bank to make an interest payment due Tuesday to holders of restructured bonds governed by Argentine law, people familiar with the matter said Thursday.

      Allowing Citibank to make the $5 million payment should ease the pressure on the parties and give the court more time to litigate new legal issues recently raised by Citibank, before Argentina has to make a $262 million interest payment on the local-law bonds on Dec. 31, one of people said.

      Thursday’s development could ease tensions, at least momentarily, between Argentina and a small group of hedge funds led by Elliott Management Corp.’s NML Capital Ltd. and Aurelius Capital Management LP, which are suing to collect on debt Argentina repudiated in 2001. The so called holdout creditors have successfully argued in U.S. courts that the Argentina owed them full payment on those defaulted bonds.

      1. Yves Smith Post author

        You don’t have your eye on the right ball. Singer’s real bet was on the CDS. He forced an event of default. He’s almost certainly closed out his position by now. So what happens with the actual bonds is of secondary interest, save in terms of increasing or preserving his degrees of freedom in future raids.

  2. Jim Haygood

    ‘The end game, as came to pass in Chile under Pinochet, was, as one commentator later wrote, “People died so that markets could be free.”

    And the corollary under Mao and Stalin: ‘people died so that markets could be unfree.’

    1. Skippy

      And Jim old boy how do you get from Russia and China to Chile pray tell… maybe some religious like pathological mind set… do tell.

      skippy… if the democracy bit got stuck in your bias buffer or filters please clean it or dial down the preferences settings.

    2. Peter L.

      Something about this statement: “And the corollary under Mao and Stalin: ‘people died so that markets could be unfree.’” struck me as being very diversionary. I would guess that the issue of markets, whatever Stalin and Mao’s ideas about them were, was not at all relevant to the devastating programs they implemented. My impression is that in Chile free-market fundamentalist ideology really was playing a role.

      For instance, in Timothy Synder’s book Bloodlands he discusses the famine in the Ukraine. Stalin exploited Ukraine to get control over a region thought to be too independent and also earn foreign exchange* from international sale of grain in an effort to modernize. There isn’t any mention of Stalin’s murderous policies being driven by a desire to combat free-markets.

      In Schell & Delury’s book Wealth and Power on China, there is no mention of anti-free market policy or even anti-capitalism in the explanation of Mao’s horrendous policies. He was engaged in campaign to consolidate power and modernize. Schell & Delury claim that Mao’s policies fit in with a long line of Chinese struggle to reform their country.

      The best on might do in both these cases is note that for propaganda purposes Stalin and Mao might have claimed to be against capitalism, but in reality it was hardly relevant to their projects.

      The flippant remark regarding Stalin and Mao killing to keep markets unfree is a red herring. I’d guess too, but imagine I could be wrong, that it is totally anachronistic. Did the concept of “free-market” (as opposed to say capitalism) even enter the rhetoric of Mao or Stalin? On the other hand, wasn’t Pinochet championed by Thatcher, and assisted by economists trained at the University of Chicago?

      *By the way, what is the Washington Consensus position on exploiting natural resources at the expense of a population so that a country can earn foreign exchange?

      1. susan the other

        I’ve had the feeling that the “free market” mania was almost a last-ditch effort by liberals to bring about a world of free markets just because they were so sure that was how it should be and they didn’t want anything else to fill the void left by communism when it fell. But, in fact, no such thing as a free market has ever existed. Much like the discussion above. It has all been ideology. The problem with ideologies is that they are so simplistic, yet dedicated, that failure is guaranteed. Leaving a huge mess like the one we are in today. Instead of free markets we should have moderated markets so we at least can maintain a certain level of commerce without destroying the environment or the fabric of society. What else is there?

        1. Peter L.

          But, in fact, no such thing as a free market has ever existed.” To be fair, it depends on how you define the term. I would say I agree, except that the term “free market” is almost like the term “God.” You can’t really take a position on whether something does or doesn’t exist until you are moderately clear on what is at stake. (The ideology definitely exists, of course!)

          I think free-market fundamentalists have the burden to say exactly what they mean by the term. It’s not so easy, and I’m certain that many fundamentalists can’t even come up with a coherent definition to argue over. This is where one would hope the discussion would end.

          Maybe part of the ideology or even religious nature to free-market fundamentalism is very fact that the term “free market” is used ambiguously and in contradiction to advance systems of social control.

          1. Bunk McNulty

            A “free market” is not a natural state of affairs. One could be created, but only with rules, i.e., regulation. When Libertarians talk about a “free market,” what they really mean is an unregulated one.

            1. tongorad

              “When Libertarians talk about a “free market,” what they really mean is an unregulated one.”

              Markets are created by regulations. No regulations = no markets.

              1. markx

                “..Markets are created by regulations. No regulations = no markets…”

                Well said. Those words should be framed and put up in the town hall.

                And tattooed on certain libertarian foreheads.

              2. SnowDog

                “Markets are created by regulations. No regulations = no markets.”

                Then what kind of market do you have when you have no regulations?

  3. timbers

    You wrote:

    “I find it is taking more and more effort to navigate through the hall of mirrors of propagandizing, particularly in the geopolitical realm. Thus it is critical to read news on two levels: its content, and how it is presented, as in how it is framed, what experts are cited, what issues are buried or omitted. Living with all Pravda, all the time, is intellectually taxing, at least if you care to understand what is really going on.”

    Yep. Just doing morning scan of news and this:

    “The world’s three economic superpowers – the U.S., China and Europe – are heading for a major collapse in asset values because their economic models favor consumption instead of productivity, one economist has warned.”

    I already need a drink.

  4. washunate

    The trick with the phrase ‘free market’, though, is that it isn’t about markets or freedom. It’s a specific term that undermines the meanings of the individual words which comprise it. It’s similar to other phrases that are designed to subvert language, like ‘free trade’, which is a concept for restricting the movement of people, goods, and ideas, not enhancing it.

    The free marketeers are rabid authoritarians. They are in love with government. They crave power and control over people and animals and things. Free Market Fundamentalism isn’t the freedom to be left alone. Quite the opposite, it is the freedom for the Serious People to meddle incessantly in the lives of the masses.

    For Their Own Good, of course.

  5. armchair

    It is acceptable to say there are, “no free lunches,” but is it unacceptable to say there are no, “free markets,”? Shouldn’t “free markets” be tossed out as garbage language? It is Reaganesque baloney that stands for someone’s burger stand having a big day at the County Fair or some other wholesome, but incomplete image. Nevermind the bribes that the burger stand operator had to pay to get the concession.

    1. Doug Terpstra

      Excellent point. “Free” preceeding ‘markets’ should always be in quotes, as should “Federal” preceeding ‘Reserve’.

  6. kevinearick


    At the Port of San Diego, we got calls all day, every day, from unhappy people looking for something to complain about, trying to protect their tile in the misdirection, which was protected by government, from encroachment by others. That’s what cops and militaries do, and what most everyone else in government does, whether they care to admit it to themselves or not. If the firefighter brass wants to be all-hazard first responders, send them to the Middle East and be done with it.

    Purchasing power is collapsing because the juveniles of people who worked and built wealth took out mortgages from the bank, to buy toys, instead of raising children and building wealth themselves, as they are apt to do. Now, their rental market is collapsing so they have to raise the rents instead of reducing them, to keep their toys, in a demographic bust, mortgage market house of cards. It’s always the same nonsense.

    If you are homeless or otherwise on the bubble, you are the crack in the sidewalk the juveniles are calling the city manager to fix. At the lower end, inflation is running at 20%, while luxuries are actually deflating, as you should expect, which is why you are seeing the turnover in police forces, growing younger, paid in yet more promises.

    Under the banner of equality, relative incomes have risen and cost have fallen, for those with few children in the city voting the outcome, at the cost of decreasing income and exploding costs for those trying to raise children in the countryside, where natural resources are exported and tourism is imported, until it’s all gone, killing the economy net, from the root out. No matter where you look, it’s a game of last man standing, in which everyone loses.

    Now, you have an older population in fear of its own shadow calling the city manager to protect its toy collection, instead of reducing rent and increasing income for kids. Good luck with that. No kids, no economy. No intelligent kids with freedom to learn, bad economy. It’s not rocket science. The critters have been trying and failing to replace marriage for five thousand years. But keep trying, growing government gravity in the process.

    The critters don’t know whether to put me in jail or give me back my licenses. Meanwhile, I watch them run each other out of town, with increasing rent on decreasing make-work income, to hide bad decisions on the their balance sheet, with vacant units everywhere and growing by the day, hoping not to be run out of town themselves, by the remaining politically manufactured majority.

    How much has California spent fighting fires and raising water rates accordingly, because of the toll booths built by firefighters, pot growers, conservation groups and city counsels, sucking the rivers dry, to water golf courses at millions of gallons per?

    Of course Boehner and Krugman blame the victims and the scapegoats; that’s what the majority pays them to do. $10k/year for preschool is not a problem. Call labor when there is a real problem.

  7. economicminor

    Block and Johnson were a little hard to listen to as Block is so monotone and pauses while he thinks. It is an interesting concept that seems to have validity.. His solution though won’t work.. Orwell was right, a lie or mis-truth can be spread like it was truth with a positive presentation and a confused and yet willing audience. Citizens United guarantees that those with the powerful positions and the lots of money will be able to use their power to continue to convince the not so educated sheeple that Freedom means Monopolies and War.

    Block’s reasoning coupled with history suggests that man thinks he wants freedom yet is so conflicted as to what that means and how to go about getting it that we are willing to follow anyone who promises it. Even to our own destruction and further loss of our actual freedom.

    Things are not likely to change without a further downturn and loss by the many until so many have nothing left to lose except their lives. That is what happened in Chile I think. The Chinese leadership I believe recognized this after Tienanmen Square and changed their paradigm. It looks to me Russia is going down the same road it was on when people had nothing. The Middle East was once a great civilization and even though there is lots of wealth in resources the rest of the world wants, the average person has nothing so has nothing to lose and thus constant war.

    Constant war seems to be the historical outcome of inequality of not only money but of educated thought and quality of life. The US is going down the same path other totalitarian states have gone down.. Endless War to distract the citizens while reducing their numbers so the Oligarch have more assets and less opposition.

  8. Eric L. Prentis

    Congratulations to Professor Fred Block on his co-authored book, entitled, “The Power of Market Fundamentalism: Karl Polanyi’s Critique” Harvard University Press, 2014.

    Gratifying that INET’s Rob Johnson spotlights such an important topic.

    One year ago—I wrote on the same subject. Please read the following publication:
    Prentis, Eric L. “Free Markets are Fraudulent Markets” (September 7, 2013), The Economic Populist.

    The published academic paper on which The Economic Populist article is based is:
    Prentis, Eric L. “Competitive Market Economies: Self-Regulating Markets vs. Economic Stability, and the Paradox of Change,” (2013). Journal of Business, Economics & Finance, Vol. 2, No. 2, 95-109.

    Please read the following excerpt from my paper:
    “Self-regulating or competitive markets need effective and evenhanded laws, imposed by an impartial state, to guard against monopolies, cartels and shady business practices. Fraud makes “free markets” unproductive and a burden on society. “Free market fundamentalism” is promoted either by the uninformed, who do not understand what is necessary to make competitive markets function properly, or by those who have a political agenda and profit from the fraudulent behavior allowed by weak and poorly enforced government laws. “Free market fundamentalism” carries the seed of its own destruction—witness the ongoing 2008 credit crisis.”

  9. Rosario

    We gravitate toward extremes because we love their absolute qualities. There is no free market just as there is no planned market. It would be pretty boring and/or disturbing to most if someone of authority tells everyone on radio or TV, “We don’t really know what the hell is going on in total and the best we can do is make measured, reflexive, reasonable decisions on a case by case basis.” There is a certainty in freedom because it is an empty, meaningless word in the material world that can stand in for anything. In its metaphysical presentation, at best, it can be defined by contrasts and ironically restrictions. The power of freedom comes from its lack of universal presentation or meaning, same goes for religion or any ideology. Check out “The Empire of Necessity” by Greg Grandin, an easy read that really illuminates the great paradox of freedom, though the best description, I feel, comes from Hegel in “The Phenomenology of Spirit”. We will be free when we no longer desire it, in contrast, we are likely farthest from freedom when it is the rationalization for all that we do.

  10. I couldn't hear either of these men

    I have heard Johnson on realnews but can’t hear him on this video, nor can I hear Block. to me they are not only weak speakers, but mumblers. The video is of course as bad on the original site as well as youtube.

    Can anyone here tell me if there is any software that would enhance the audio?

  11. Anders Floderus

    Is there a book explaining why deregulation is good? I have read some, Barofsky, Ferguson, Yves Smith and others but they are on the regulator side; I would like a book explaining things from the deregulation side. Sowell says you can’t explain complicated things to unknowing people but not much more; a pity he doesn’t explain it at least to those in the know (I have not read everything he has written). I have no financial training but to me it seems the deregulators are referring to Adam Smith’s “invisible hand” (according to Wikipedia), extrapolating from his butcher and brewer, disregarding that the butcher and brewer have to perform, disregarding Smith’s warnings for business colluding against consumers, forming monopolies and influencing laws and politics.

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