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the ‘free market’ bait-and-switch…

December 11, 2013

So our provincial Premier went down in political flames in our recent provincial election. Flaming out on corruption ($150 million that still can’t be accounted for), shady deals for close friends, and a general indifference to the fundamental economic problems facing Nova Scotia. And, to top it off, he made sure all his cronies got increased severance packages (double and triple the usual amounts) before they all ran out the back door.

And the new Premier, Stephen McNeil, was barely in office a month before he was doling out the patronage positions and cancelling election promises.

His new Minister of Energy, Charlie Parker, announced that they want to open up provincial energy production to the private sector and the “free” market economy because the “market” knows best how to regulate prices and give the consumer the best price for his or her dollar.

This is another backdoor handout to corporate friends – for as anyone with little more than high school economics knows, there is no such thing as a “free” market, and if left to its own unregulated devices, the market operates like a cancer, and feeds off its host until the host dies and the market moves off to find a new host.

I was quite surprised to see that the Minister would actually use the old “free market” bait-and-switch in the newspapers.  I thought that that kind of bullshit economic rhetoric had died out, or was only tried these days in Third World nations when corporations try to argue that the people should have to buy their water from them instead of having it provided by local municipal governments.

The free market – if it ever actually exists outside of first year economics classes – only exists at the most basic entry-level of economics, when all businesses are small. It works – in theory – to control the number of coffee shops or corner stores in a neighbourhood, but it does not exist beyond this basic level of unregulated economics. Soon enough – even at the coffee shop level – a dominant player emerges and gobbles up, or cancels everyone else out.

The natural drive in free capitalism is to the monopoly. That has always been the inherent tension in capitalism.

Why do you think, for all the billions of barrels of oil in the world, there are only a handful of companies that control 95% of the market share? When was the last time you saw a real price competition for the price of gas? Why do you think that 7 out of every ten cups of coffee sold in Canada in a day are sold at Tim Horton’s? 

400 companies control 85% of the world’s economy.  

Nor does the free market give a rat’s ass about quality control, environmental stewardship, or best practices. The free market didn’t put seat belts in cars, doesn’t inspect the quality of our food, or want to educate our children. All of these undermine the immediate bottom line of companies. The free market is only concerned with maximizing profit and concentrating money into fewer and fewer hands.

So everything capitalism does is to eliminate competition, extend the monopoly, and look for ever-more ways to increase the bottom line. Corporate taxes made up nearly 70% of Canadian government revenues in the 1960’s. Today it is just over 15%. The richest 100 companies in Canada last year paid virtually no income tax.

You do not have to be an ideologue to understand this. Any economist, left or right, liberal or conservative, will tell you how this works. (The only difference is that conservative economists think this is good, and liberal economists believe their needs to be regulations for the greater good.)

The free market doesn’t even have its own best interests at heart. If there is money to be made today by sucking the marrow from the bones of its host, then it will do so, because it is blind to long-term sustainability.

The recent Walmart food bank incident is a prime example. Walmart is owned by the five children of the original creator of Wal-Mart, Sam Walton. Walmart sells to the consumer the cheapest products possible. Walmart makes its money by contracting production out to Third World labour, who are forced to work for about $40-$70 a month in wages. Walmart further keeps prices down by paying its employees here the minimum wage ($7.25 in the States, about $10.50 in Canada). If the workers try to organize themselves to demand more money (which is also supposed to be a feature of the so-called free market), Walmart simply closes the store and moves elsewhere. Or, fires the employees, and hires new ones (so much for a free market).

None of this should be news to anyone. We know how Walmart has made the five Walton kids five of the top ten richest Americans, with a combined wealth of about $100 billion. Each of them receiving in a week what their entire employee base earns in a year.

But here’s the blind spot in the so-called free market. Walmart now holds food drives in its own stores for its own employees. The idea being that people will buy food or clothes from Wal-Mart (good for Wal-Mart) to give to the Walmart employees who do not make enough money – by Wal-Mart’s own admission – to live off and support their families. Last year, the United States government gave out more in food stamps to Walmart employees than it received in taxes from Walmart.

That’s how the market eats itself. Unregulated capitalism is a mouth without a face. It is a cancer that cannot see beyond the next quarterly return. Any ten-year-old can see that this is a Charles Dickens tale of unsustainability.

Kelloggs announced this week that it is closing a factory in Ontario and moving production to Thailand where labour is less than 1/6th what they paid here. Sure, this looks good on paper and should increase their bottom line. But who will buy their products when everyone here is poor or unemployed?

So, our provincial Energy Minister is spinning a tale about how opening up energy production to the “free market” will 1) increase energy production, and 2) produce cheaper energy for everyone. What he actually means is that a major corporate player gets to come in and run the house – and before you know it, all of our energy is controlled by some foreign power (my guess would be Emera) whose sole purpose is to make as large a profit as possible – without the responsibility to keep the lights on in rural areas where it costs more to run lines, or to gear the price to minimum incomes or anything else a state-run energy program must deal with…

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