Over the past hundred years, the federal government has been more involved with the free market and it’s hard to even know where the line is drawn between the two. The general philosophy behind the free market is the old rule of supply and demand. As long as there is a demand for a product or service, someone will find a way to supply either of the two.
The issue that has been going on is that the federal government has been getting involved to “help” a particular industry and/or company for so long that we no longer know what is an artificial or organic supply and demand product or service.
During W.W.II, the wool industry was busy supplying the material to make our military’s uniforms. To make sure the industry would always be there to keep our troops clothe, the federal government gave subsidies to them to the tune of millions of dollars. Years later as synthetic materials were being used for the military, Washington continued to pay the wool farmers.
The agricultural subsidies assist farmers and agribusinesses to supplement their revenue, manage the supply of the different commodities and to influence the cost and supply of such commodities (ie corn, wheat, rice, milk, sugar). So the government is dictating the price as well as the supply of these commodities. In this situation, the laws were passed during the Great Depression and have remain in place to this day. We have farmers being paid not to grow corn on their land. Many farmers receive some sort of government (tax payer) financial assitance.
A Canadian report claimed that for every dollar U.S. farmers earn, 62 cents comes from some form of government, with total aid in 2009 from all levels of government adding up to $180.8 billion.
These are just two incidents where government has manipulated the free market for decades. The free market hasn’t been free for just as long. As long as the federal government is involved, no industry or company will go bankrupt. The whole idea of competition is that the strongest one wins. Well in this case, whoever pays more money to the politician campaign funds, wins.
Let’s take a look at the recent bailout of General Motors. They received billions of dollars from Washington to keep them from filing bankruptcy. If GM was left to file bankruptcy, the union contracts would have been history at that point. The company would have restructured to survive or close their doors forever. Is that a bad thing. On the surface, yes. When you go ahead and let the free market work it out, it would become a good thing.
How? Simple, it’s obvious that GM wasn’t making the product(s) that the customers wanted. If they continued doing the same thing, they would have had to close their business forever. An entrepreneur, with the financial backing, would step in and buy the assets of GM to build his own vehicle. They would hire the former GM workers and a new car manufacturer would be born to make it or break it. He either builds want the customers want or he goes out of business too.
The unions are a powerful force with plenty of money to persuade politicians to help the their industry/company. The government makes it impossible for new car companies to start in the industry since there are so many regulations that only the “big” dogs can work within them.
The federal government has made it so hard for the free market to run like it should that it’s questionable to say that we can ever separate the two. The first step is having Congress cut programs that support industries that wouldn’t survive without it.