Posted 10 years ago on Jan. 5, 2012, 1:44 a.m. EST by ARod1993
This content is user submitted and not an official statement
The current conception of an ideal market is based around the model of supply and demand; this means that the prices and quantities of the goods we buy depend on how much it is possible to produce, how much people are willing to buy, and at what price people are going to buy it. Such a market is perfectly efficient, and one could argue that it is also perfectly fair. Attempting to interfere with this market will in fact decrease its efficiency and ruin it for both the corporations and the consumers.
What people don't realize is that this model depends on several underpinning assumptions, and when these assumptions are not met then you no longer have an ideal free market. There are three major assumptions that must hold true for an ideal market to exist:
1) No single company or business is big enough to affect the equilibrium price and quantity (that means that businesses have to follow the market because they can't really affect how it operates)
2) Anyone who wants to enter the market (start a business) can do so fairly easily, and can leave the market (shut down) just as easily.
3) All costs of production (including things like pollution caused by the manufacturing process) are accounted for in the purchase price.
If you look at most major industries today you'd be very hard-pressed to find a market in which even one of these assumptions holds true, let alone all three. First of all, when corporations reach a certain size you either get what's called an oligopoly, which means that a handful of firms control almost all of the share in a given market, or you get a monopoly in which one firm controls the entire market. This effectively negates Assumption #1, because the firms are big enough to manipulate the market size and shape as they choose, and thus the market is no longer free from outside influence.
Also, once firms get to a certain size it becomes almost impossible to enter the market in any real way. Economies of scale make it much easier for an existing large firm to mass-produce goods at fairly low costs. Someone new who seeks to enter the market will never be able to create a company from scratch that's big enough to match the old firm's economy of scale, and if they start small they'll start off with higher per-unit costs and (by necessity) higher prices than established firms. This makes them fairly easy to run out of business while they're still small, thus invalidating Assumption #2.
The third assumption is almost never valid in our current situation when you think about it, because there are certain side effects to many large manufacturing operations that the corporations themselves never have to address. If you manufacture a good, but the process produces toxic chemicals, then that's a side effect. In many cases, the chemicals are simply released into the environment, causing damage to the local ecosystem and occasionally direct harm to other people. This damage is called an externality, which means that it's a portion of the cost of production that is quietly foisted on everyone whether they like it or not, and more often than not it's simply treated as part of the cost of being alive.
Here's the thing; left to their own devices corporations will inevitably externalize as much of their costs as they possibly can (to increase market share and profits), and eventually most markets will devolve into some form of monopoly or oligopoly, which causes the problems I described above and leads to the kinds of abuses that caused the 2008 economic crisis. Someone or something has to actively work to preserve the free market by breaking up monopolies and forcing companies to stop externalizing their costs, or free markets are no longer free or efficient.
As paradoxical as this may sound, you can't have a truly free market without an outside entity (usually the government) actively fighting to keep it in that state. When we say that we want more regulation, we're not trying to strangle the little guy; we're actually clearing off the playing field so that he can rise or fall solely on the success of his product rather than on who he knows or how much disposable income he has or what he can get away with dumping into the air and water. If you want to make free markets free you have to guard their freedom, and the only safe way to do that is through the government.