I read a story about a man who met a little girl.  The little girl wanted to grow up to be president and put an end to homelessness.  The man said “why don’t you come to my house and you can do some chores for me and I’ll give you $50.  You can take that money to the homeless buy by the store and buy him anything he wants.”  To which the little girl replied “why doesn’t the homeless man do the housework.”  and the man says “Welcome to the Republican party.”

But the man left out an important part of the discussion and the little girl didn’t think to ask.  That question is, “why haven’t you, Mr. Republican Party, hired the homeless man?”  Are you saying that you would rather pursue child labor instead of helping a homeless guy get a job?

Sorry, that last line was kinda snarky, and anyone with a brain doesn’t actually believe that is happening in this story.  Just as I understand what the moral of the story is (Don’t give a handout when you can give a hand up) I also understand that there is an unanswered critique of free market economics that is being avoided: the human cost.

TL;DR – The core flaw of the free market system is that profit is prioritized over people, and people suffer because of it.

Ever since I was introduced to John Nash’s game theory, I had thought that this key flaw in free market capitalism was resolved.  Game Theory, for those who don’t know, basically states that the greatest success in business occurs when all involved agree to play by the same set of rules while asking two questions of every business decision: does this benefit me, and does this benefit the larger group as a whole?  This is called “Equilibrium.”  The great example from “Beautiful mind” in the clip below explains this in the context of five friends trying to pick up girls at a bar.

Obviously there are problems with this which is why anti-trust laws are in effect because “the group” is too often determined to be other businesses that excludes society as whole.

The tension between free market economics and human cost is no better exemplified than by the 1964 presidential campaign of Barry Goldwater.  As near as I can tell, (and admittedly I have not done a massive amount of research on this) Goldwater opposed the Civil Rights Act, not because he was racist, but because he thought it was unethical for the government to legislate something that the free market would come to eventually.  And theoretically, if business wanted to grow, to avoid boycotts, and if this was truly the will of the people, then the drive for profit would demand that business de-segregate.  In theory that makes sense.  But let’s fast forward 52 years to today.

2016 and the free market looks very different.  The market is now global, free trade is considered normal and generally better for everyone.  I can wake up in DC, grab a cup of Colombian coffee, while wearing Italian shoes, and texting from my Chinese phone.  Pretty awesome in some ways, but what all three of those things have in common is a long and wide ranging supply chain footprint that I, as an average consumer, know nothing about.  Which means that the free market gives me the stuff I want, but maybe not at a human price I am willing to endure.  Namely, the Dakota Access Pipeline.  It has, especially in recent weeks, garnered as much opposition as Keystone XL did, and will even be transporting some of the tar sands oil that Keystone would have.  Yet the corporations building and funding the pipeline will continue to build it if they can get the government permits because they will be able to make a lot of money off of it.  Perhaps the oil all goes overseas (which is quite likely).  It will go to Chinese businessmen who don’t care where the oil came from, only that the price is right.  It will go into making plastic components for my phone, machinery to make my shoes, and gasoline to fuel the global trade behemoth.  And who knows how many industries I unwillingly support that will profit from using cheaper oil that this pipeline brings.

But the cost, the human cost is, in my opinion, too high.  (search twitter for #NODAPL if you want to see why exactly).  This then is the clear fault in a globalized free market.  The consumer’s power to influence corporations is drastically minimized resulting that corporations, absent an ethical, social worldview, have little to no incentive to care about the human cost of their actions.

 

 

 

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