Free Markets - then and now

In a memo made public on Thursday, Attorney General Jeff Sessions said the Obama policy impaired the government's ability to meet the future needs of the federal prison system.

The Obama administration said in August 2016 it planned a gradual phase-out of private prisons by letting contracts expire or by scaling them back to a level consistent with recent declines in the U.S. prison population.

From Reuters, Feb 27

What Sessions says here is that some element outside the private sector, namely the federal government, needs the private sector in order to function. The federal government needs control of markets. There was a phase-out, of private prisons, under Obama. The claim by Sessions is that the phase-out “impaired the government’s ability” to perform some function or to function correctly or efficiently. If we were to ask whether this is an example of the government staying out of the private sector, it seem that is not the case. Then private sector in prison work exists here only because of government. It is the government, at some level, federal or state, that wants to pay for this. Obviously, it is the government, that pays for the so-called "private" prisons. How is that the private sector? It is the government that is creating private sector activity. What does that tell us? Here, the private sector activity is prison work, by somebody who is working with prison-as-business. According to the reasoning that persons are using here, it is the government that causes the private sector to deploy. This would happen whenever the government buys anything. There are many businesses, the majority of whose business goes to the government. If consumer decisions drive the economy, this is not the case of the private sector making those decisions. Rather, the government (state or federal) making the decisions that create profit for the private companies. Then how are they private companies? The origination of this business for private prisons is not in society at large; if their originates from spending it is government spending. Why then would anyone call the prison firm a "private" firm? For prison work? Why would the prisoners need to be taken care of "privately"? The whole thing breaks down. It also seems nefarious. It shows that the distinctions we make between "private" and "public" when we have an economics discussion are completely confused.

     For many years, all of us were subjected to the standard kind of free market arguments—what were and are called the “free market” arguments. The arguments or ideas said that the market was a characteristic feature of free, private citizens. This means this area called the "market" must not come into the domain of what the government does. Therefore, they argued, the country gets the better result when the market was allowed to stay free from what was always called "intervention," where the meaning is government intervention. But when we look carefully, what do we find? It is that the same people making the "free market" arguments eventually take up a position in favor of government intervention. What is happening here is government funding of prison businesses. It looks to me like government intervention in the market. But markets are always public. This is the real nature of capitalism. It is not private at all. Capitalism is a characteristic of a society, of a whole society, which is very much public. This is so; in this case the private industry originates in a decision by government, when government "green lights" a private business activity. The work is contracted by government, it originates in government, and would not exist without government, which includes the courts and the legal and law enforcement systems wherein the offenders are tried and sentenced. But then it suddenly becomes "private." State governments of course also use the supposedly “private prison" system. Thus, we are saying that "private prisons" are businesses only made possible by means of decisions and planned by governments.

     What is under discussion in the Sessions decision is the federal prison system, which is where Sessions works. He is in the federal government now, which is where the argument for private prisons originates from. Then the decision to allow private prisons does not originate in society, in the lives of  private citizens, or anywhere or in any market at all, outside of government. The prisoners may wind up at the mercy of private captors, but they are put there by the government. What do "markets" have to do with any of this? The government has to hire the private prisons. What Sessions wants, this is according to the statement, is for the federal prison system to work well. His concern is not that the private prison system to work well. He is talking about the federal prison system. The argument he makes is that, in order for the public system to work, you gotta have the private system. So, the idea being argued is that government needs private prisons. And that is not a market decision, or not in the sense of traditional free market arguments. This kind of thing is not being decided by the free markets or the society. But this was the original idea of free market thought--to take government out of it. Rather than being decided by some social or market process, it is entirely subjective—Jeff Sessions saying whatever he wants. All Sessions seems to need to do is tell everyone what the government requires. He is the government so he should know. He can say whatever he likes, since he is the government. Thus: “for the government to work, we need private prisons.” But how do we know? What decision-making process is involved? He might be making that up. The important factor is that he is the government and has government power. Maybe he really believes it. Or, it could just be his opinion. How do we know? That is not letting the markets decide at all. It seems like a very arbitrary statement, or like something Sessions felt like saying and knew he could plausibly say.

     Maybe Sessions wants the government to have the freedom to make its own market decisions. In that case, he wants government to have more freedom. Well, that is one sort of "freedom," but those persons who for so long spoke of “free markets” wanted the people to have more freedoms (since some of them were businessmen). In designating how economic decisions should be make, they specifically  wanted for that power to not be given to government. 
     So, in summary, Sessions (presumably), and others, now implicitly use what we can call heritage  free market arguments for a purpose quite opposed to what the free market arguments were originally intended for. 
     If Sessions does not want the federal government's ability "impaired," it means the federal government should have more power to do what it wants. That does not sound like the original intention of the classic free market argument.

Would Free Markets Have Leaders (at all?)

In a true, standard or cliché “free market society” political leaders are a casualty. Such things simply wouldn’t exist! The market is a social phenomenon and each individual person in the market is out to satisfy a particular set group. This group, often called “customers,” can vary in size, and thus, the persons the firm wants to satisfy could be small or it could be a large set of persons. It might be big (e.g. all cell phone users or computer users) or small (all persons who wear Alpaca sweaters). Also, in other ways, as well, it is specialized. What we have covered, above, is that the market actor is not after everybody, and thus does not need everyone for a customer. And in addition, an actor or seller, which is to say within this idealized free market, which is really a society, does not share all concerns, or even "big" concerns. Her concern as to the customer is limited to polite or pleasing behavior, as well as (of course) concern for the specific item being handled or traded/sold. In fact, we may go further and suggest that the market actors seem to specifically try to shirk responsibility. The do not want responsibility for what happens in society. And, in this regard limit their conversations, with the clientele. Conversations are circumscribed.

     Contrast that with a political leader. What is different? The leader (compared with the "trader") has a different job. He is a figure who represents everybody. The leader, therefore, is a persons who has the responsibility for the population. There is a difference in terms of context. We need first to fix (ascertain) the context in which we are discussing human agency. Is it the context of the "market"? If by "market" we mean capitalism, then what we are talking about is an ideal capitalist world, a capitalistic society, and in that cliché capitalist world there is no demand there, for the political leader. This is what I am suggesting, and, maybe this helps explain the current "Trump" phenomenon a bit. Political situation enters crisis. That is because business has gained too much dominance. With the political system weakened, a business leader becomes formally identical to a political leader. Political leaders are no longer wanted.

More on ethnicity and inclusion

Let's talk about when persons help others. We can argue that the ones that actually get helped tend to be members of an ethnicity (or other group) shared in common. In other words, persons helping other persons often belong to a social group in common with the ones being helped. In capitalism, while the aspect of ethnicity is there, it has not been much addressed. It also may not be as obvious. Moreover, it is not exactly ethnicity—but that is the closest word I know, so I just use the term "ethnic." Maybe it means "inclusive group." It is there, and also moving or changing. Now, the idea of ethnicity – or something like that in capitalism – ought not be raised in such a way that would overlook the fact that capitalism contains liberals, those who do promote fair, equal, unbiased treatment for all. Far from being unknown, this is a major claim. Liberals do promote such ideas. These are also the ideas of universal human rights or equality. (For example, we mention the “Founding Fathers,” and they endorsed the idea that “all men were equal.” Except negroes, and, Um—Indians.)

     To clarify, ethnicity is present although as a sort of a moving target since the situation is constantly changing. Different groups gain more access. This happens, as time goes by. It changes as time goes by, so there is this constant alteration. Black gets rights, then gays get rights. An obvious suggestion is that “globalization” would looks to be a sort of terminal point of all of this. If it is an end point it is in the sense that at some point no more of the earth’s surface left to revolutionise/transform.

     In my system, capitalism is always a form of society (and not primarily individualistic, which I find to be a ruse, and which is a subject of its own). Ethnicity is important in societies, of course! It is just as important a factor in capitalism as it was in previous earlier social formations. There seems to be an inexorable trend towards the mixing of ethnicity, in the history of capitalism. This happens gradually, as I think I mentioned. And this in turn elicits absolute indignation and outrage, at regular historical intervals. Outrage is understood as an indication of the importance of ethnicity, which is something that survives into capitalism, yet changes as time goes on.

     The trend is clear. It is towards some kind of human equality or inclusion, but capitalism has a very particular way of getting there. This is a big discussion. In order to get progress we must accept the real facts. This we seem to have trouble doing. As capitalism progresses (if it does, and this seems rather more unlikely these days), one would naturally expect the barriers between people to be gradually taken down. I must point out that the only way to do it is with a lot of intelligence, and planning, and thought, and, therefore, not stupidly (as we are seeing with the ethnically-oriented Trump administration).

     The other thing we really must point out here is that it is not going to happen automatically. That idea (the idea of a “magic” of the market) is not correct.  

There has to be a system of working out our problems.          We have many problems, and, in this period of history, I would like to suggest the “economics” sorts of solutions, since solutions linked to economics are the more germane ones, in my opinion.

And in this effort to address social problems in an economics context I would like to offer some new views of capitalism itself. Capitalism proceeds from ethnicity. Ethnicity presents obstacles, and capitalism progresses only slowly, as the various “groups” (the term “ethnicity” may be substituted sometimes) groups attain greater rights of participation. The unusual thing that happened in Germany under National Socialism was the act of working backwards, and taking away participation rights that had been in use, by the Jewish persons. This seems not to have harmed the German economy at all, but at any rate usually the process goes the other direction: ethnicities at first fail to participate and slowly gain more economic rights. This is still a very big issue, in countries like Turkey.

Capitalism is progressive, and changes over generations, from earliest capitalisms to more recent versions of capitalism. For a while, ethnic groups – or gender groups – have trouble getting into the market. Over the decades, however, more and more persons in the central countries, like Germany, the U. S., or France are able to hold decent jobs.

So, a great part of economics is the decisions about how to include more persons, and only rarely does the trend go in the opposite direction. This of course, is why the current problem of distributive justice (“inequality") is so important and significant. It means there is a problem, it is social, and needs to be addressed.

Exact change, from the barista

 

First, you tender the barista a 20- bill, in payment for a drink that cost you $2.51. So, maybe you pay for your drink with a twenty. If I get a $2.51 coffee drink at Starbucks and pay with a twenty the barista generally gives the exact right change, but that is actually contrary to my understanding of what the principle is that makes capitalism possible. So, the question is that of the principle, what capitalism needs, in order to exist. The tab was exactly $2.51. And she gave me exactly the correct change. Right down to the leetle pennies? There is something very depressing about it, really. That’s not the principle. The principle is that of an active person, living in society, trading. Trucking. Bartering.

There has to be a “margin,” there needs to be a fuzzy space. Human beings do not operate without. If capitalism were that clean, there would be no system. Such exactitude is not the principle of capitalism. It contains no vital principle.

We need to understand in an accurate way. What is to be comprehended is the need of this fuzzy zone. And what does the idea of a “fuzzy zone” have to do with? It has to do with human relations. If we say that two human persons are operating in relation to each other we do not mean a mechanical juxtaposition. Rather this is something that is constantly in adjustment, making adjustments of any and all kinds, up to the limit of human variability. You have the whole spectrum of a busy, modern society with its rich persons, poor persons, consumer, and producers. And the cheaters and hustlers, the legal persons and the “criminals”—this is the way it has always been and that is the truth whether economists and other such stalwarts of the establishment admit it or not.

This constant adjustment allows for fuzzy stuff, inaccuracy, and space. A shifting relation may not seem to be very precise or scientific but the other view misses when it comes to what is the principle. We do not get anything from extreme accuracy, in the precise neo-Classical sense. They are only empty diagrams.

The real principle is not that. But the real story is not so far away, either. The story is right there, but the story is found in the fuzz, not the precision calculation (e.g. of change at Starbucks). Where is the opportunity in that? There is no “margin,” there is no opportunity to get in there and do anything. Yes, your barista is following the dictates of logic. But that is not the principle.