Thursday, June 09, 2005


According to the promoters of "free markets" any form of subsidy to an industry is something to be avoided. Subsidies, like tariffs and price support for farm produce distort the market. Pseudo-freemarketers (the neocons as a good example) love subsidies like military expenditure, the prison system and all the corporate laws and multitudinous forms of corporate welfare which enable the corporations to distort the market. But for the purpose of this discussion, I am not interested in the Bushite and Blairite frauds, but in the mainstream free market libertarians. There are forms of subsidy that even they are unaware of.

In any society worthy of the term democratic, citizens are free to form trade unions, cooperatives or associations to protect the environment and improve the lives of the poor. (1) These organizations put pressure on governments and corporations to improve the living standard of the population and to create a sustainable environment. Thus the price of labor rose over time (2) and the ability to rape the environment has been somewhat curtailed in democracies.

Where democracy does not exist, or where certain democratic rights are severely restricted - Mexico for example, where trade unions are an arm of the state - the populace does not have the ability to improve its living standards, working conditions and environment. Thus, Chinese workers toil 70 hours a week for pennies. Thus, logging companies in Indonesia clear cut the tropical forests. Thus, Honduran textile workers are murdered attempting to form unions. Does anyone really believe that if Chinese workers were free they would put up with their conditions? The tribal people of the New Guinea forests don't want the trees cut on their lands, yet if they object, they are murdered. If the Hondurans were free of the death squads, they would form the trade unions they wish.

The state in these countries keeps wages low and working conditions poor, and allows the environment to be destroyed. The state thus artificially keeps the price of labor and lumber low (3) and is thereby engaging in a form of subsidy. Democratic countries have a right, indeed a duty, to stop this subsidy, by either embargoing such trade until these nations democratize, or slapping a charge equal to the approximate subsidy on to goods imported. (Thus the "Chinese miracle" and Walmart (which uses massive amounts of cheap Chinese goods) is not an example of free enterprise, but of a brutal form of state capitalism.)

Anyone who does not believe these are state subsidies is not really sincere about their free market ideals and is just one more state capitalist. Or put it another way - subsidies are only bad when they help the little guy, but they are examples of free enterprise when they help the corporations.

(1) Of course, I am using "democracy" in a relative sense. The "democracies" are hardly democratic, yet we have had far more freedom than people living in dictatorships. Of course, the neocons are trying to get rid of what little freedom we have.
(2) Admittedly not the case during the past 20 years thanks to the neocon reaction, but still the price of labor is many times that of the Third World hell-holes.
(3) Also the use of illegal pesticides in growing food and other production methods that are banned in the developed world.


Blogger freeman said...

Great post!

These hidden forms of subsidies need to have the veil removed from them more often to counter the bogus "free market" advocacy that often includes supporting sweatshops and whatnot.

While many of the more powerful and influential of these people are likely aware of this and are simply being dishonest and serving their own wicked interests, I think that many advocates of "free markets" are simply unaware of these things.

It reminds me of the appeal to Bastiat that many libertarians make in regards to what is seen and what is not seen. In this case, there are many forms of subsidy and state privledge that are not seen, leading some "free marketeers" to support situations that really have nothing to do with genuine free markets.

3:04 PM  

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