I think John’s ruminations on free markets are important but I also think we’re missing some important distinctions when we talk about this subject. I believe there are two issues at hand: first there is the economy and the government’s role in that economy. In liberal nations – such as ours or to one degree or another most of Europe – government plays a relatively limited role in the economy. This is especially true in northern Europe, Ireland, and Switzerland which all take extremely hands-off approaches to economic issues. Ditto Canada and the US. Singapore and Hong Kong are probably the two most liberal economies in the world. These are all countries which practice in some form or another the imperfect project known as free trade.
On the other hand there is the notion of a redistributive state. The two are not mutually exclusive. Countries like Denmark and Switzerland have very redistributive economies in spite of their extraordinarily free economies and hands-off approach to economic matters. In spite of may be the wrong way to phrase this. I believe that for a truly free market society to flourish, a redistributive state must exist alongside it. I wrote this the other day:
This is why I also believe so strongly in safety nets. If we believe in markets because they allow for failure, if we believe that the organic nature of a free society is preferable to one that is planned or managed or riddled with tariffs and barriers to trade – then we must also accept that society is full of cracks. Failure leads to suffering. We need to alleviate that suffering. We need to pick people back up and put them on their feet again, either through health care benefits or unemployment benefits or grants for school and so forth (or really all of the above). So I say – yes on markets, yes on freedom of trade and labor – but yes also on safety nets, on health care, on these many programs that make a market economy and society possible to begin with.
The welfare state and free markets are not merely compatible, they are vital to each other’s success. I believe in markets because I believe they fail. Failure allows people and industries to adapt and evolve (unless we keep up the practice of too-big-to-fail of course). But where there is failure there are people getting screwed, and that’s not how society ought to work. It’s neither morally acceptable or sustainable. And plenty advocates of free trade have glibly set this aside and pointed to these ever-failing markets as the solution not only to an efficient and adaptive economy but also to our safety nets, to society’s many cracks. Which is a fine pipe dream but not particularly well grounded in reality. They conflate government intervention into markets with taxation to provide safety nets. Pretty soon free marketeers sound pretty heartless and callous and begin to earn the reputation they seem to have around these parts.
But that’s not how I see this concept. I see free markets as dependent on the welfare state. The government sets up the parameters of the market to begin with, after all. It’s no great leap from there to creating the necessary conditions for people to succeed even where markets fail. This is all along the lines of what I was getting at in my limited/big government post yesterday. This is, at its core, an advocation of something along the lines of northern Europe’s social democracies though I would prefer a somewhat more liberal version all around – if we can avoid the levels of taxation we see in Sweden and Denmark that would be a good thing, obviously, but of course the only way to do that here would be to cut, cut, cut defense. No easy task.