The Big Myth of the “free market”

“Market fundamentalists aren’t wrong about everything.”

Sometimes the right solution is to do nothing until there’s more information. Some markets do resolve themselves. Prohibition was a worse cure than the very real disease of alcohol abuse.

“But competition doesn’t mean we don’t have rules.”

That’s from The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market, a 2023 book from Erik M. Conway and Naomi Oreskes. They’re the journalist-researchers behind the influential 2010 book Merchants of Doubt, which identified the strategy of disinformation used to defend cigarettes and then climate denial.

When they wrote their 2010 book, they assumed those blocking interventions into tobacco addiction and then climate change were motivated by greed. Later, they realized it was because of a true and ideological market fundamentalism. This new book is answering how that pathological fundamentalism came to be.

A binary choice between the market and the state, between unconstrained capitalism and Soviet central planning is a myth, they argue. The “free market” category, and spirit, was a manufactured marketing and propaganda campaign. Instead, a sensible approach balances market and government interventions.

It’s not the problem that corporations don’t do more for society, they write, it’s that they stop governments from doing so. “If efficiency were our only goal, then market fundamentalism might make sense. But efficiency is a tool not an end.”

Below notes for my future reference.

My notes:

• George Soros: market fundamentalism
• In their first book together, Merchants of Doubt, they assumed the four physicists that sowed doubt into tobacco’s health effects and then environment did so for money — but they did so because they believed so much in a free market that they’d fight anything that looked like government intervention
• This book: how did so many Americans come to have so much faith in markets and so little faith in government?
• In the 1930s, Americans saw government bring electricity to their homes, not the private market
• In the 1930s, the National Association of Manufacturers introduced a tripod of freedom: representative democracy, political freedom and free enterprise
• NAM funded Von Mises and Hayek to come to the US, and to condense Hayek’s iconic Road to Serfdom for Readers Digest version and illustration version in Look magazine — they also funded Milton Friedman’s Capitalism and Freedom
• “Meanwhile progressive foundations mostly focused on specific issues — like saving whales or expanding access to education — not realizing that a larger ideological baffle was under way”
• “Markets reveal a lot about what people want, how far they’re willing to go to get it, and how much they are willing to pay for it. If efficiency were our only goal, then market fundamentalism might make sense. But efficiency is a tool not an end.”
• Market values are different than society’s values
• In 1770 Oliver Goldsmith wrote: “Ill fares the land, to hastening ills a prey / Where wealth accumulates, and men decay” (To mean the country is in a bad state and getting worse, as wealth accumulates)
• Eric wolf: tactical power vs structural power
• A binary choice between the market and the state, between unconstrained capitalism and Soviet central planning is a myth.
• These authors do not believe capitalism is the problem but a very particular kind of Capitalism that has been sold as a myth
• “A young man born America in 1899 would’ve been safer at age 15 going to fight in World War I then going to work on the railroads… In the mid 19th century, 6% of workers in the Pennsylvania anthracite mines were killed every year, with twice again that many injured or disabled “
• Arthur Pigou: social cost of the “accident crisis” (Europeans introduced Workmans insurance)
• Andrew Carnegie endowed accident insurance, as the initial case was workplace injury was inefficient
• Opponents of child labor laws felt it was an issue of families or at most states — but manufacturers said if only some states made it illegal would make them uncompetitive. A constitutional amendment was blocked by industry groups including NAM that misled voters by implying the amendment would keep kids from doing chores at home
• Noel Sargent of NAM: “Enough men have equal opportunities to demonstrate how unequal men are”
• This laissez faire philosophy argument from John Stuart Mill (your right to do without harming others) was insufficient: everything interferes with others so let the strong (big business) survive
• In the 1920s, nearly 70% of Northern European farmers had electricity (treated like a utility like water) but fewer than 10% of American farmers did (treated as commodity sold and established by companies like Edison and Westinghouse)
• In 1922, PA Governor Pinchot had to usher in electricity: super power versus giant power, which sought regulation. He said: electricity is “immeasurably the greatest industrial fact of our time. If uncontrolled, it will be a plague without previous example. If effectively controlled in the public interest, it can be made incomparably the greatest material blessing in human history.”
• Yet they were called communists for wanting some regulation
• Tennessee NELA reminded Tennessee State Public Utilities Commission placed $50k worth of ads while also courting editors to their stance that government ownership of electricity was the start of communism: between 1921-1927 12,784 industry sponsors editorials were published in newspapers. One industry exec said the Associated Press “sends out practically everything we give them” — ghostwritten academic articles, placed townspeople and lobbying against socialism and their talking points. Public utility commissions and residents had no counter. Their goal “was to change the way Americans thought about private property, capitalism and regulation”
• Pinchot’s “Giant Power” inspired the New Deal (because electricity was good and private market did not deliver it to rural counties) but lost the American ethos; Edison Electric Institute came out of discredited NELA (Thomas Fanning is climate denier); the U.S. is primarily a private electricity system and consumers pay 10% more than those with publicly owned utilities  (ENRON)
• “NELA may have lost the battle over rural electrification, but it won the war of what would be taught in American business schools”
• NELA pioneered the argument that market fundamentalism was default truth and the American way regardless of truth
• Corporations are collectivist organizations: shareholders are collective ownership and managers are too. It’s collectivism around a profit motive
• DuPont and Alfred Sloan among those behind the American Liberty League — a kind of anti new deal
• DuPont long demanded “restoration of constitutional government,” or the U.S. government as it was enacted in 1789, without the amendments that had followed. In 1948, Pierre duPont would write to a friend that “it was a mistake to give Negroes a vote, and it is also a mistake to give all white men and women to vote; that is if we are to have good government”
• American Liberty League created 135 pamphlets in its first 2 years which it sent to newspapers and estimated it got it 200k news stories around the country, arguing property rights are akin to liberty
• Edward Bernays: founder of modern PR with 1928 book Propaganda — consultant to NELA
• FDR was vilified by his fellow rich business types and that drove him to swerve more leftward in 1935 and 1936
• The brass hats” were bigger biz leaders that took over the collapsing National Association of Manufacturers in the Depression of 1930s and followed NELA and American Liberty to argue that government failed — they used news bureau and printing and their members would only advertise in anti union publications
• Lawrence Glock: historian showed that NAM shifted “private enterprise” to “free enterprise” intentionally
• Richard Tedlow: NAM ushered in modern corporate public management
• The NAM archives are n the Hagley Library in Wilmington Delaware
• NAM spent to spread message of free enterprise across
• Edward Bernays: propaganda should be continuous and invisible
• NAM followed this; Tedlow estimates in 1937 spent $793k on “public information”  — 55% of their total income
• Ralph Robey retained by NAM in October 1940 to write abstracts for textbooks — he was a Newsweek business editor and source for New York Times among others
• American Family Robinson radio program put on by NAM, and one executive wrote out goals explicitly:  “Can the limitations on the use of radio be overcome so as to make sustaining programs as effective for propaganda as commercial programs have been made for advertising?”—anti new deal propaganda
• In one episode a character reminds: “every big company was a small company once”
• John T Flynn’s 1949 book The Road Ahead, warning of socialism: 10-point protection of American capitalism
• 19th century American system came to mean machine tools with replaceable parts — but also implied tariffs and a central bank earlier
• Gary Gerstle: state governments invented corporations as the products of the state to accomplish state goals. (Like the 1817 Erie Canal Corporation, as I’ve captured elsewhere)
• NAM was created in the first place to lobby for tariffs and American dcbdf of tariffs to build an economy and only later argued developing countries shouldn’t follow the same rules
• American socialists like Debs and Thomas were democratic socialists because they did not believe in central plainng — Trotsky called them “a party of dentists”
• Leaders and eventually NAM funded Mises intellectual work in the Austrian school through the depression and new deal when it was a fringe movement — then von Hayek
• Hayek’s 1944 Road to Serfdom: to preserve political freedom, we must preserve economic freedom. Any step toward socialism takes political freedom away (it’s not that socialists wanted totalitarianism but that it’s the natural outcome). But he was writing in an era when centralized planning was the dominant political fight
• Gary Lipset and others argue Otto von Bismarck and FDR’s New Deal saved capitalism by keeping working class people invested
• Even Hayek in Serfdom still defended some social insurance and necessary inclement in some economic crisis
• National socialists: historian Richard J. Evans puts it in The Coming of the Third Reich, the name was “a deliberate attempt to harness the appeal of socialism while rejecting its essence.”
• A 1945 Readers Digest with Serfdom simplified, and a LOOK magazine cartoon simplified more
• Rose Wilder Lane: “anarchy of individualism” is how America thrives, she helped her mother develop Little House theory
• In Farmer Boy, mother advises Almanzo that not the skilled wagon maker but only the farmer is “able to call his soul his own”
• John Locke 1690 Second Treatise and frequently invoked to defend pushing off native Americans: “ let the sentimentalist say what they will, the man who puts the soil to use must of right dispossessed the man who does not, or the world will come to a standstill”
• Eric Johnston: chamber of commerce to Motion picture association : from grapes of wrath, he led a purge to more capitalistic linked
• Fountainhead and Atlas Shrugged were unloved novels and movies by anyone who likes novels or movies
• William Buckley and others wanted Christian charity to soften capitalism — not government welfare — so thru didn’t support Rand godless capitalism
• Alfred P Sloan among funders

• General Electric theater succeeded where many other corporate programs failed because it was entertaining — less hectoring and didactic
• In 1943, the U.S. Chamber: “only the wealthy blind can fail to see that old style capitalism of a primitive, free shooting period is gone forever.”
• Luhnow and U of Chicago as base of free market think tank
• Road to serfdom was free market capitalism’s Old Testament; Milton Friedman wrote the American style New Testament Capitalism and Freedom
• George Stigler: regulatory capture
• Stigler published an edited Wealth of Nations that fit his worldview (Smith included taxation and minimum wage)
• Robert Bork antitrust
• By 1960s European social democracy showed a middle way of some socialized ((But, of course, my note: under American military umbrella)
• Anatole France: “The law and its majestic equality forbids rich and poor alike from sleeping under bridges”
• Capitalism and Freedom by Friedman reasserts Hayek’s worry of concentration of power — but they don’t consider monopoly or industry as having concentration (because it’s distributed unlike government)
• Rather than moral or social, Friedman argued for primacy of economic freedom first
• (((My note: Friedman seems naive about how industry could influence the law and entrench their interests)
• He claims government makes no great civilized advances but it’s not true — interchangeable parts system by the US army, railroads, rockets, canals, digital computer, nuclear power — he claims Columbus wasn’t directed by parliament but he was by a monarch!!
• Regan 1964 speech big political step, and Hayek inspired

• Carter not Reagan set off deregulation: airlines and trucking and rail
• William Steiger’s 1978 amendment to Carter tax law lowered capital gains to support venture capital
• 1971 Lewis Powell memo for business leaders
• Arther Laffer: supply side economics, which Regan followed and Bush initially called “voodoo economics”

• Reagan’s 1981 tax cuts did not pay for themselves and then walked back with quiet tax increases
• Alfred Rappaport. Shareholder value
• Greed is good era: They say pursue profit within the rules of the game but who makes the rules of the game?
• “If Jimmy Carter began the Reagan revolution, bill Clinton completed it.”
• Clinton: “grow the economy,” influence from post 1978 Democratic Study group — reduced spending but he kept environmental, Medicare and health insurance fights
• Clinton’s RIGO worked in some places and not others (telecom)
• Argues corporate conservatives said they wanted competition but really they wanted control, (pro monopoly) and they’d claim consumer advocates wanted planning but they actually wanted true competition
• End of fairness doctrine, and telecom act of 1996, enabled consolidation and partisanship (Sinclair!) and 230
• Glass-Steagall attacks including the 1999 “Citigroup relief act” — ultimately its removal attributed to Great Recession
• Lorenzo Caliendo of Yale and Fernando Parro of Federal Reserve: NAFTA yielded a 0.008% net increase in economic welfare across counties with most to Mexico — but large and concentrated local negative effects  in Ohio, New York and Texas among others for blue collar workers but college educated did ok
• John Williamson: the Washington consensus
• The economics literature does not demonstrate that free trade would help developing nations — all rich countries grew rich using protectionism first
• Arthur Pigou: negative externalities
• Clinton tried a carbon tax but got pushed back
• We know that we need a standing army to respond to sudden crisis but we haven’t convinced everyone we need a standing scientific community
• Lancet: 40% of American COVID deaths could have been avoided by following other rich countries measures.
• One theory among health researchers is that one contributing factor to the rise in youth suicide is the children of opioid addicts: Europe had no opioid crisis
• Kim Stanley Robinson: “the invisible hand never picks up the check”
• Happiness Report: it’s not the most “free” but most supported that predict happiness levels
• Thom Tillis: don’t make Starbucks force their employees to wash their hands but put up a sign that says they don’t require it — authors ask who will require them to put up that sign?
• Immanuel Wallerstein: conservatism is rational for preaching patience but it will always find partnership wit those comfortable with the status quo
• Robert Reich: Rules of the market don’t intrude on it, they define it — just like rules of football don’t intrude but define it
• Lewis lapam: dark side of the American moon
• Daniel T Rodger, Age of Fracture, on the American system: “maximum wealth, badly distributed”
• “Free market” is a created political term that should be used in quotes
• It’s not the problem that corporations don’t do more for society it’s that they stop governments from doing so
• UN human development index
• Eisenhower: “This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”
• “Our most consequential problems have arisen not because of too much government, but because of too little. Government is not the solution to all our problems, but it is the solution to many of our biggest ones.”