As you do, I’ve been thinking about free market economics. So my thoughts turned to the Conservative party, the party of Thatcherism, natural home of free market economics. You’d think. But wait, what’s this? David Cameron wants to stop the free movement of people in the European Union. Well, he can’t have it both ways.
In a free market, prices reach equilibrium between supply and demand – how much they cost to produce and how much people are prepared to pay. This is tied up with the labour market. Wages are determined by supply of and demand for labour, and the cost of wages impacts on the cost of goods. In order for the buying and selling processes of the market to reach a fair price, there should be no barriers to such buying and selling. Otherwise this distorts the true market value. And for prices to reach equilibrium, labour must follow the work, or workers become scarce, wages rise and prices rise. For the market to work, people need to move to where the jobs are in order for supply and demand to keep up with each other. So, we are apparently governed by a party which believes in free market economics but no longer wants the free market to operate in Europe.
I am by no means a defender of free market economics, but if you want a free market, then you need a free market. Restricted movement of people around Europe is not a free market. If you want to intervene in the market, be my guest, I think it’s important that we do. But then you’ve conceded the principle that the market cannot be left to its own devices for the good of society, and it’s no good pretending you haven’t.
And here’s another reason why we can’t leave it to market forces. Openly stated on BBC news last night, in a report about the spread of the Ebola virus in West Africa, the reporter said that, until now, the virus had not affected enough people to make it worthwhile developing a vaccine. He meant financially worthwhile for the pharmaceutical industry, but that doesn’t really matter. In a free market, there must be thousands of people at risk of dying before it’s worth investing any money in order to save them. Because otherwise the company won’t make enough money. Well, that’s business, you cry. But that is precisely my point. What’s good for business and the free market isn’t the same as what’s good for people and society. Developing a vaccine for Ebola should never have been left until it made market sense. This is where public money should be spent for the good of all.
Not all our financial decisions should be left to the processes of free market economics. Some decisions are far too important for that.