Theresa ‘The Appeaser’ May began her speech at the Conservative Party conference this week by re-iterating her party’s commitment to free markets. Unfortunately, she went on to announce several policies, such as the price cap on utilities and extra funding for the Help To Buy scheme, which completely undermined that commitment. As Inigo Montoya said, ‘You keep using that word. I do not think it means what you think it means.’
Mrs May is not the only one who doesn’t understand what the free market is. BBC journalists – even the heavy hitters such as John Humphrys and Nick Robinson – regularly use ‘free market’ and ‘capitalism’ interchangeably, as if they were synonyms.
Many people also talk about ‘the market’ as if it were a thing. It isn’t. There’s no such thing as ‘the market’. Or rather, there’s no such thing as ‘the market’. It’s an idea, a concept. It’s a useful bit of short-hand for describing lots of occurrences of something that is very real, namely, trade.
The market also isn’t out there somewhere, something that concerns only politicians and economists and academics and businessmen. To paraphrase Pogo, ‘We have met the market and it is us.’
When you fill up the car or make the weekly grocery shop or pay your mortgage and the utility bills, when you stop for a coffee on the way to work or a pint of milk on the way home because the kids used the last of it for breakfast, you’re part of the market. And you’re not alone. Millions of people in your country, billions of people around the world, are doing exactly what you’re doing: engaging in trade. Think of all those individual transactions and add them up. That’s what ‘the market’ is. ‘The market’ is all of those uncountable number of trades we make every day.
When you buy a ready meal you make a trade. The supermarket that sells you the meal and the company that made the meal and the transport drivers who delivered the meal to the store and the store employees who put the meal on the shelves, they all gain a slice of the money you pay for the meal. And in return you gain not only the meal but also the time it would have taken you to make the meal yourself. Your time has value.
As long as both sides of the trade are making the trade voluntarily, both sides gain something. And the result of it all is that both sides are now wealthier because both side have traded something they value less for something they value more. Both sides have been enriched. Again, add up all those millions of daily transactions where both sides have got wealthier. That is exactly how countries and societies and, yes, individuals lift themselves out of poverty.
When a group of politicians or bureaucrats regulate markets what they’re really doing is putting restrictions on those uncountable daily individual transactions. And since you are part of the market, it means they are telling you who you may and may not make a trade with. They are telling you what you may and may not make a trade for. When they fiddle about with tax levels and price caps they are fiddling about with your decision about whether a particular trade is worth the cost and effort to you and with the other guy’s decision about whether a particular trade is worth the cost and effort of him of dealing with you.
It’s not just politicians and bureaucrats who want to influence those decisions or even make those decisions for you. There are also all those campaigners for this or that social cause who want to do the same. They don’t have the power to force you to change your decisions, but they do have another pretty powerful weapon: shame. They try to shame you into changing your trading decisions by telling you that if you don’t change them you’re unethical and evil, or by telling you you’re lazy or fat or drink too much. They campaign to shame companies into changing their policies and their procedures and their processes, which changes the companies’ costs, which influences both the companies’ and your decisions about whether a trade is worth the cost and effort.
The market does not exist to provide you with what you need. Even less does it exist to provide you what others decide for you that you need. It exists to provide you with what you want, and as much as you want of it, when you want it.
People who believe in free markets are not pointy-headed policy wonks, nor are they heartless bitter clingers to an outdated theory that only helps big business and hurts the little guy. We genuinely don’t want people to be poor. Many of us have been poor ourselves. We know from experience that being poor is not fun and we really don’t others to have to go through what we have gone through. That is the whole flipping point of it all. We want the market to be as free as possible because we want as many people as possible to get as wealthy as possible as quickly as possible by trading as much as possible.