The “middle of the road” has become a popular position among those who find both free market capitalism and communism both to be extreme opposites. Despite the fall of the USSR, many still believe in various, often moderate, forms of socialism. This leads many to oppose a pure free market economy because they believe it is a radical idea prone to failure.
With the failure of several socialist countries and systems, many are now becoming aware of the problems presented by the adoption of socialism and of excessive government intervention. What they fail to realize is that there is no such thing as “excessive” government regulation because all government regulation is excessive. An economy will not prosper by “correctly regulating” free markets, but rather by simply allowing them to be.
A common phrase I’ve often heard among those who take the middle-of-the-road position is “Communism doesn’t work, but I still think capitalism should be regulated.” In this case, moderation is not a good thing. There is never a shortage of complaints lodged against free market capitalism, because one could always blame outcomes seen as undesirable or unfavorable on the free market. Advocates for market regulation create arbitrary standards for what markets should be, often based on their own wishes, and then advocate in favor of government coercion to force what they believe is right.
First, cases of “market failure” are often markets that are hampered by previous government regulation and are thus unable to properly provide for consumers as they would in a pure free market economy. Second, if the market isn’t hampered but produces “sub-optimal outcomes” according to some, it is important to note that such statements are purely value judgements based on subjective preferences and not objective matters of fact.
For example, if one were to direct blame at the car market for producing small vehicles, it is only the discontent of an observer that consumers prefer smaller vehicles to bigger ones and that firms profit by providing satisfaction to consumers. Calling for regulation in either circumstance brings about negative effects on the economy.
Furthermore, many believe that regulation is needed to prevent the formation of monopolies in a completely free market. Those who make this argument fail to consider that monopolies are a feature of government intervention rather than the free market. Monopolies were initially government licenses to be the sole producers or sellers of a particular commodity. It is virtually impossible for a monopoly to exist in a free market as it would face immense competition and would have to consistently deliver value to their customers to keep their current market share. This is why monopolies usually form in industries which are highly regulated because there is a high barrier to entry for other firms, mandated by the government. Established firms are more capable of withstanding the efficiency losses of government regulations, while startups that rely on being more efficient to capture market share won’t be able to survive.
The economy will not be better off if regulations are added to fix the alleged problems of free markets. Only by allowing producers and consumers to freely and voluntarily trade can prosperity be achieved in the long run. Obstructing voluntary transactions among individuals cannot and does not lead to a better economy.
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