The Illusion of Free Markets, Essay Example

Free trade benefits large multinational organizations because these companies have the ability to collaborate in a manner that exerts control over the supply and demand process. To an extent, supply and demand can be decided by marketing strategies because doing so allows people to be convinced that they need the product and large companies are always able to meet this growing demand.

An example of this is the collaborations that occur between large soda companies like Pepsi release enough products to be able to control the prices of the industry. They do not    release a large supply to ensure that soda products can continue to be sold for a price that allows them to achieve maximum profit. Furthermore, large corporations enter negotiations with their bottling companies and other vendors to ensure that they are able to compete effectively. These trade agreements prevent small businesses from being able to have a chance in terms of distribution of products therefore impacting supply.

Multinational organizations can control price using this strategy by controlling the number of products released after consider the demand (Bernard 1).

Free trade is meant to benefit all companies in practice, however in reality it benefits large corporations due to the ability of these larger organizations to more easily eliminate competition in a manner that is not prohibited by anti-trust laws.

Pepsi and Coca-Cola have entered into territory agreements to ensure that they will not compete with each other. As a consequence, they are a legal type of monopoly. These          territory agreements prevent the ability for smaller companies to step in.

Arguments against the Statement

Those who believe the free market supports the actions of small businesses fail to acknowledge the aspects of business that can interfere with the free market. These individuals assume that in practice, free market principles are untarnished and should favor large corporations and small businesses equally.

The free market by definition, requires that business practices be regulated purely by supply and demand. Based on this understanding, small companies should be able to regulate price in the same manner as larger corporations.

Small businesses have an equal ability to control the amount of products released and the prices of these items. Small businesses have a fair chance compared to corporations on the free market (Stiglitz 1).

Small businesses can more easily avoid price control theories and release as many products as they want, which could potentially cause the prices for soda from the other soda companies to be lowered, demonstrating that small businesses have control in this instance.

Free trade causes many small businesses to shut down because they cannot compete with corporations.

Small companies like Mr. Pibb have closed down because they are unable to sell their product in as many locations as the large companies like Pepsi and Coca-Cola

Works Cited

Harcourt, Bernard. The Illusion of Free Markets: Punishment and the Myth of Natural Order. Harvard University Press, 2012.

Stiglitz, Joseph. Whither Socialism? Cambridge, Massachusetts: MIT Press, 1994.