Democracy and Free Market, Essay Example

Allies or Rival?

Since the mid-19^th century, social engineering has been experimenting and working hard to free the economy from the control arising from various social and political factors. In doing so, there has been a construction of various new institutions while the socially rooted markets are being broken up one by one. This is done in order to create and establish a free market that is not defined by the government but rather on the competition that is in existence between businesses that are privately owned. It has to be understood that free market should be based only on two factors that is the supply and demand. The government should not interfere with this relationship. It is only given little control, if any. The concept of a free market is based on the ideology that both the buyers and sellers can transact freely. This means that the buyers and sellers can freely trade, buy or sell a product based on their mutually agreed upon terms and conditions or price. However, this means that the government should not be able to impose taxes, regulations and even subsidies as these actions can be considered as interference. Good examples of free market are the financial and the foreign-exchange markets. To elucidate, the financial markets involve securities that are being traded worldwide. Its availability does not affect its prices. Exchange rates are not attached to the government as well. Therefore, the rise and fall of exchange rates and their value are merely dependent on the supply and demand on the subjected currency.

In this regard, it can be assume that the democracy and free markets are rivals rather than allies. This is due to the fact, as explained above, that free markets condemns government intervention. With this in mind, it cannot be denied that the two components of the society are struggling and battling for control and power for the resources that are available to be utilized for the activities of the economy. This is despite the main assumptions that the global and local market economies together with the elected government officials are rational partners when it comes to the creation of wealth in the society. It is thought that these two entities will work together in the removal of poverty and create a stable economy for all the members of the society to take advantage of. However, this is far from the truth. The economic state of a nation needs protection and security from the government. It cannot function on its own without such protection that is able to remove insecurity away from the citizens. If the government is not allowed to discharge such roles for security purposes, the economy will be put in a very detrimental situation where the political and economic aspects of the nation will be instable.

In developed nations that have strong economic impact, locally and globally, the government can imposed various ways to mitigate the effects of free markets to its citizens. Yet, in poorer countries, it can be expected that the free markets will only cause the breakdown of the state and the economy due to the lack of competent and resourceful governance (The World Bank, xiii). Therefore, it can be said that free market does not work together with democracy nor does it promote it.

Political Economy

By definition, political economy is the knowledge of wealth that deals with the determinations of men to gratify desires and supply wants. It gives definition to the systems of distribution, production and exchange. It is manner in which household and the community are being managed through custom, knowledge and practice. As a matter of fact, it is defined to be the body of theory and practice used as guidance in dealing with the complexity of economics at numerous times and places taking into consideration moral judgements applied on several economic issues. It has to be understood, though, that political economy is not severely political. It is not limited to the branches of the government and the citizens nor is it confined to the activities of men that are mostly industrial. Rather, it extends to understanding of how the practice and theories involving economic affairs are managed.

Political economy is going to always be intertwined with the undertakings of daily living or what is called the domains of life. Take for example the uncomfortable truth that researches done by pharmaceutical companies are not geared towards what is known as moral economy for the promotion of quality of life and ethical obligations but rather focusing on the insensitive economics and mathematics of the return of investments. But it is an unfortunate truth that the calculations of supply, demand, investment and profitability are what shape the economy. Political economy, though, helps people to understand how the economy should be socially, ethically and politically organized. This is due to the fact that it concerns itself with how politics, economics and society relates with each other. In the field of political science, for example, political scientists utilize political economy in order to comprehend how institutions shape the choices that people make. Hence, political economy gives a clear insight to the interactions between humanity and institutions. It is the same thing with the utilization of political economy by most sociologists to understand the involvement of people in the society and how it affects every individual’s ability to function in the society accordingly. Similarly, in the fields of Human Geography, Anthropology, Economics and even Cultural Studies, political economy is being employed in different ways to understand individuals’ and societal ideology, perspectives and responses to the factors affecting economic consequences and outcomes.

Power and Economic Analysis of Role of Markets

The analysis of power has been integrated into an economic analysis of the role of the market through the understanding that power can strengthen poverty and marginalization and tweak several themes and affirmative methods of power than can be utilized and materialized to get the desired outcome or end-result. It is a known fact that power is critical in getting the desired result not just in the economic aspect of the society but as well as in the political and social. Whoever has the power has the control of what the outcome is going to be. Furthermore, understanding the level of power gives a clear determination of how society is going to be affected. The distribution of power and the exercise of the same give room for evaluation and learning as they speak of domination, control and authority. It has to be understood that the most remarkable aspect of power is domination. Hence, the power that dominates or the business that dominates has the sole capability of affecting the economic outcome and the market. For example, if there is more supply than the market’s demands, the price go down and vice-versa.

Neoliberal Arguments on Privatization, Deregulations and Trade Liberalization

Neoliberal argues that privatization, deregulations and liberalization produce unrivaled advantages. As a matter of fact, it is being predicted that in the near future, liberalization of trade will help in the aim to eradicate poverty not just in a local setting but also global. It would seem far-fetched but many have predicted its possibility and real potential based on what is happening in the present days. This is due to the fact that if there will be no more trade barriers, there is approximately 500 million individuals will get a job and be lifted out of poverty in the next 20 years. Trade liberalization will increase the chance of international trading system and will pave the way for the achievement of the goals set out. In addition, one of the main arguments that the neoliberal holds is that the privatization, deregulation and trade liberalization promotes the interests of the working class not just in the developed countries but as well as the developing and third world countries (Weisbrot & Baker, 12). The ideology is based on a scientific context and structure that will help illuminate the social and economic benefits that can be derived from privatization, deregulation and trade liberalization. In a sense, it seeks to augment efficiency and make the most of the economic well-being. Then there is the theory on comparative advantage. It is a known fact that every country has the capability to create various comparative advantages. But one has to take into consideration the fact that one of the best economic policies that can be created and followed through is the creation of an unfettered international marketplace. This will allow an economy to make a determination of the comparative advantage that can be exploited as well as the patterns for national and international production (UNCTAD, vi).

Critique of the Market System

Even with all the assumptions that are being made in relation to political economy, power, privatization, deregularization and trade liberalization, it cannot be denied that some of these assumptions are unrealistic and extensive. There are also doubts and oppositions to the assumptions and ideas that free trade and liberalization will allow for the promotion of national and international well-being. Rather, the contention is that these market systems will only promote the interest of the capitalist rather than the working class. Like when the idea of globalization is being tackled. It can be seen that capitalists can easily outsource jobs to other countries such as India and Philippines and pay the workers based on the minimum wage on their country. This saves the capitalists a lot of money and yet it provides good paying jobs in the said countries. However, the dilemma is that the workers in the capitalists’ country suffer from job loss. Is it fair? Therefore, there is a need for the determination and evaluation of all the aspects of the systems rather than focus on one side and think it is good and effective while the other side is suffering.

Conclusion

With all the foregoing, it can be concluded that democracy and free market are not allies but rather rivals due to the necessary intervention needed from the government to make sure that the capitalists will not take advantage and intimidate the public. It helps with the manner of getting rid of insecurity among the consumers and the society. In addition, there is a need for continuous evaluation of the market systems to make sure that the interests of the general public- such as the working class- are protected too and not just for the benefits of the capitalists. Wealth has to be made but it should be balanced.

Work Cited

The World Bank. Global Economic Prospects 2002. Washington, D.C: World Bank, 2002.

UNCTAD. Trade and Development Report 1999. New York: United Nations, 1999.

Weisbrot, Mark & Baker, Dean. The Relative Impact of Trade Liberalization on Developing Countries. Washington, DC: Center for Economic and Policy Research, 2002.