The Free Market Only “Fails” When Liberal/Progressive Politicians Interfere With It

Burger Flipper Replacement


It’s both entertaining and frustrating to hear liberal progressives making the claim that “capitalism and the free market has failed.”  That’s funny since nearly every “failure of the free market” can pretty easily be traced to intervention by government, and the resulting market distortion of that intervention.  Here are a few examples.

  1. Healthcare & Wage/Price Controls – Up until around the time of WWII, most people paid cash or bartered with their doctor for medical services.  During WWII, the government implemented wage and price controls across the economy.  Because wages were fixed, businesses had to come up with other ways to attract the few quality workers who hadn’t gone off to war.  Many started offering medical “insurance” as one of their perks.  Medical care is a limited commodity, and when you subsidize the price of a limited commodity so that the consumer doesn’t feel the regulating pain of price, people consume more of that product than they otherwise would.  When the demand for a commodity goes up and supply can’t be immediately increased, price naturally increases as a means to regulate demand.  When you artificially hold the price down, you create a shortage.  Fast forward to today with Obamacare.  The government subsidizes healthcare for millions who couldn’t afford it before, which seems like the compassionate thing to do.  But at the same time millions MORE will be getting access to a limited number of doctors, the government is limiting what doctors will be reimbursed, thus controlling price, but not addressing real COST.  A demand for medical services is created that outstrips capacity.  Government created shortage.
  2. Housing Market – All you need to look at here is the 2008 economic crash precipitated by the bursting of the housing bubble.  How did that bubble inflate?  One word: government.  There were many contributory causes, but the main causes were manipulation and coercion of the banking industry in an attempt to achieve a specific SOCIAL outcome.  The Community Reinvestment Act is one of those causes.  Banks were pressured to abandon sound historic banking practices to make more loans in high risk areas.  Hiding under the fallacy that this was all to prevent the practice of racial “red lining,” banks were told directly or indirectly to either make the loans, or else.  Normally if a bank makes bad loans, they go out of business.  But government removed the moral restraints, and overrode the sound banking practices that had been in place for centuries, all with the promise that if the loans went bad, government would bail out the banks.  Sound familiar?  Thus through provisions in the law (written by government), banks sold bad loans as securities spreading out the risk to many other sectors of the economy.  The sheer volume of these bad loans, and the mounting risk, was pointed out in the early 2000’s, but the liberals lead by people like Maxine Waters and Barney Frank told us “Remain calm.  All is well.”  Fast forward to 2008 and the economic crash caused by government intervention in the free market, NOT by the free market itself.
  3. The labor market – There are so many ancillary issues to this one.  Illegal immigration/amnesty, tax code, government regulations, etc.  The one I’ll speak to specifically here is the government imposed minimum wage.  As mentioned above with health care, health care is labor, and labor is a commodity.  Businesses pay wages for labor commensurate with the value which that labor adds to the company.  It might be worth $3/hr for a store owner to pay a kid to sweep his floors a few times per week.  But if forced by government to pay $15/hr for that same unskilled labor, the store owner will likely not hire that young kid, and will sweep his floors himself.  This eliminates entry level jobs, prevents young people from gaining work experience, and distorts the labor market and the price of goods.  The artificially inflated labor costs also hasten the move to automation.  Automation and the advancement of technology is inevitable, but when you ARTIFICIALLY raise the minimum wage, you will only hasten the day when companies will choose to replace their unreliable carbon-based employees with robotic employees who don’t take breaks, don’t have healthcare costs (other than maintenance), can’t unionize, and don’t get pensions.  In general, businesses have 4 choices when faced with an artificially increased labor cost.  Absorb the cost by reducing profit, raise prices (which may reduce demand, thus not paying for the increased labor, leading to layoff or closure), eliminate the job/not create the job, or go out of business.  Thus the minimum wage actually harms the very people it was claimed to be helping.

So, if you’re an employee with minimum skill, minimum motivation, and minimum education who contributes minimum value to the company’s bottom line, you deserve minimum pay.  You want $15/hr to flip burgers?  Sorry, your not worth it.

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