Capitalism, more specifically Free Market Capitalism, sometimes called Laissez-faire Capitalism, is the most highly regulated economic system the world has ever known. This is the economic system where property is held privately by individuals. This is the system that guided the United States into world prominence. People buy, sell and trade things as they see fit. Laissez-faire is a French term that loosely translates as, let them do as they will. Government involvement in this system is limited to protecting property rights, supplying things like laws and enforcement to counter fraud, theft, and the like.
It is not our purpose today to speak about the moral dimensions that commend free markets; our purpose here is to point out the powerful regulatory forces that guide economies governed by free markets. If we can learn to recognize this “invisible hand”*, we will be less likely to purposely undermine it, we will hone our vision to the point that we can appreciate the market at work and observe in real time the improvements it brings to our world.
Americans have national elections only every two years, but we go shopping whenever we want and have access to information that informs our market decisions 24/7. When you choose to purchase one product over another, there is a vote taking place, there is an exercise of force on the market, a powerful regulation of the market, if you will. There are many things that might influence your decisions.
One example of market regulation can be seen at your grocery store. Do you remember when the fresh fruit and vegetable section was only one small refrigerated section; today 20% of floor space being devoted to fresh food is not uncommon. Foods categorized as “organic” have a section in most food stores and there are now whole chains devoted specifically to that market. Markets respond and correct quickly when left alone by government, because they are never left alone by the consumer. The trick here is that the consumer be well informed for the regulation to be desirable.
When governments intervene, the effects on the market can often run counter to that which is desired. Beyond that initial wrong effect, a now entrenched bureaucracy has an interest in perpetuating itself and the unintended consequences take on a life of their own. The initial grievance that could have been handled adequately through market forces is now extremely difficult to manage.
Let us take a further look at the food supply example used earlier, as it relates to unintended consequences resulting from government action. Let us look specifically at food diversity. The prominence of corn and soybeans and their byproducts is often bemoaned. Why don’t we have a wider spectrum of cropping? Consider that in order to mechanize and mass produce crops, part of the picture was the development of sprays to control weeds. These sprays were then tested and regulated by authorities to the point that millions of dollars and years of time are required to certify a weed spray for use in a specific crop. A good thing you might say, safety first. Well, it was not intended, but a minor crop will not justify the regulatory expense; thus, it will not have the same opportunities for weed control, and it will not be developed in the market in the same way as a major crop. This results in more corn and less quinoa on the market.
Well, you might argue, the market can’t handle something as important as food safety! Alar is the brand name of a growth regulator once used on apples. Without comment on the safety of the spray, let me just say that market forces were able to shut down apple juice sales before the government regulators could say, “Schedule a hearing”. Alar was voluntarily withdrawn from the market.
We urge you; do not dilute your ability to exert force to change the market with ineffective and unpredictable fiat. Strengthen your efforts with solid information and let your wallet impart wisdom to a needful world.
The Coffee Committee
*The term “invisible hand” was coined by Adam Smith, a Scottish philosopher, in The Wealth of Nations. It was published around the time of the American Revolution.