Free Markets versus State Intervention

Supporters of free markets maintain that, as far as possible, individuals should be free to own property and to enter into contracts and agreements with others regarding prices, wages and profits. They should be free to compete with each other to gain the greatest possible benefit. This is a simple description of what a free market is. Supporters of free markets believe that if markets are left free of state interference, the sum total of market transactions would ensure an overall just distribution of the benefits and duties in society — those with merit and talent would be rewarded, while the incompetent would get a lesser reward. Whatever the outcome of market distribution turned out to be, they maintain, it would be just.

However, not all free-market supporters today would support absolutely unregulated markets. Many are now willing to accept certain restrictions — for instance, that the state could step in to ensure a basic minimum standard of living to all people, so that they are able to compete on equal terms. But even here, they might argue that the most efficient way of providing people with basic services would still be to allow markets in health care, education and similar services to develop, with state policies aimed at empowering people to be able to buy those services, rather than the state providing such services directly. It might also be considered necessary for the state to give special help to the old and the sick, who cannot compete on equal terms. Apart from this, in this view, the role of the state should be mainly to maintain a framework of laws and regulations that ensures competition between individuals remains free of coercion and other obstacles. Supporters of this view maintain that a free market is the basis of a fair and just society: the market, they say, does not care about the caste or religion of a person, and does not see whether a person is a man or a woman — it is neutral, and is concerned only with the talents and skills that a person has. If a person has merit, nothing else is supposed to matter.

One of the arguments put forward in favour of market distribution is that it gives people more choices. There is no doubt that the market system gives consumers more choice — we can choose the rice we eat, and the school our children go to, provided we have the means to pay for them. But when it comes to basic goods and services, what actually matters is the availability of good-quality goods and services at a cost that people can genuinely afford. If private agencies do not find a particular market profitable, they may simply choose not to enter it at all, or may offer only cheap and substandard services within it. This is one reason there may be very few private schools in remote rural areas, and why the ones that do exist may be of low quality — the same could be true of health care or housing. In such situations, it may fall to the government to step in.

Another argument often heard in defence of free markets and private enterprise is that the quality of the services they provide tends to be superior to that provided by government institutions. But the cost of such privately provided services may put them well out of reach of the poor. Private business, moreover, tends to go where business is likely to be most profitable, and free markets therefore eventually tend to work mainly in the interest of the strong, the wealthy and the powerful. The result, in practice, may be to deny opportunities to those who are relatively weak and disadvantaged, rather than to extend opportunities to them.

Arguments can be, and are, put forward on both sides of this debate — but free markets often exhibit a tendency to work in favour of those who are already privileged. This is why many argue that, in order to ensure social justice, the state should step in to see that basic facilities are made available to all members of society, rather than leaving this task entirely to the market. …