{"id":49829,"date":"2021-10-03T13:45:00","date_gmt":"2021-10-03T17:45:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=49829"},"modified":"2021-10-04T10:22:42","modified_gmt":"2021-10-04T14:22:42","slug":"what-is-free-market-capitalism","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/what-is-free-market-capitalism\/","title":{"rendered":"What Is Free-Market Capitalism? Definition & Examples"},"content":{"rendered":"\n

What is free-market capitalism<\/a>? How are resources distributed in a free-market economy<\/a>?<\/p>\n\n\n\n

Free-market capitalism<\/a> is an economic system where factors of production are controlled by private entities (individuals and firms) with little to no government intervention<\/a>. Firms charge the highest price consumers are willing to pay and workers earn the highest wages firms are willing to pay for their labor. In a free-market capitalist economy, firms are motivated to operate as efficiently as possible to keep their market share.<\/p>\n\n\n\n

In this article, we’ll discuss the ideology of free-market capitalism and what happens when it’s realized in practice.<\/p>\n\n\n\n\n\n\n\n

The Advent of Free-Market Capitalism<\/h2>\n\n\n\n

What is free-market capitalism? Free-market capitalism is an economic system where the forces of supply and demand regulate production, prices, and labor with little or no state intervention.<\/p>\n\n\n\n

Free-market capitalism got its start in the University of Chicago\u2019s Economics Department in the 1950s, under Milton Friedman<\/a>. He maintained that in an unregulated economy, the natural economic forces of supply and demand naturally balance one another perfectly, leading to an ideal market wherein products are perfectly priced, everyone who wants to work can find a job, and inflation doesn\u2019t exist. He believed that all economic problems are due to government interference in an otherwise perfect system. <\/p>\n\n\n\n

According to the Chicago School of Economics, any problems that arise must <\/em>be because the market isn\u2019t really free, and the solution must <\/em>be to remove all regulations and interference. <\/p>\n\n\n\n

In short, Friedman\u2019s version of capitalism was more like religious fundamentalism than science. Furthermore, like religious fundamentalists, his greatest enemies weren\u2019t the fundamentalists of other \u201creligions\u201d like Marxism. Rather, he despised those who sought a mix of capitalism and government intervention, such as social democrats or Keynesians<\/em>.<\/p>\n\n\n\n

Extreme Free-Market Capitalism in Action<\/h3>\n\n\n\n

The first testing ground for Friedman’s free-market capitalism orthodoxy was Chile. The Chicago School of Economics\u2014with the backing of the US government\u2014trained Chilean economists in Milton Friedman\u2019s free-market philosophy so they could build a new economic system back in Chile based on Chicago School ideals.<\/p>\n\n\n\n

With the backing of president Pinochet, the Chicago School-trained economists implemented extreme free-market policies. They replaced the public school system with charter schools and vouchers, eliminated public health care, and privatized cemeteries, kindergartens, and even the social security program. Chile became a model for free-market economists the world over, who had previously only seen their ideals printed in textbooks. <\/p>\n\n\n\n

<\/strong>In 1982 Chile faced total economic collapse. Free-market capitalism had put all of Chile\u2019s assets in the hands of speculators and financial institutions, who\u2019d proceeded to run up a massive $14 billion debt. Inflation ran rampant, and unemployment climbed to a crushing 30%. <\/p>\n\n\n\n

In order to save his country, Pinochet had to do what Allende had done years before: Nationalize major industries and put a firm hand on the economy. Furthermore, following the shock therapy debacle, nearly all of the Chicago-trained economists lost their government posts, and several were investigated for fraud. <\/p>\n\n\n\n

Nonetheless, after Pinochet died in 2006, many publications\u2014including the New York Times and the Washington Post\u2014praised his free-market policies and the economic miracle they\u2019d created. None of those publications seemed to realize that the \u201cmiracle\u201d hadn\u2019t happened until he abandoned Friedman\u2019s economic theories. <\/p>\n","protected":false},"excerpt":{"rendered":"

What is free-market capitalism? How are resources distributed in a free-market economy? Free-market capitalism is an economic system where factors of production are controlled by private entities (individuals and firms) with little to no government intervention. Firms charge the highest price consumers are willing to pay and workers earn the highest wages firms are willing to pay for their labor. In a free-market capitalist economy, firms are motivated to operate as efficiently as possible to keep their market share. In this article, we’ll discuss the ideology of free-market capitalism and what happens when it’s realized in practice.<\/p>\n","protected":false},"author":7,"featured_media":45058,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[81,15],"tags":[494],"class_list":["post-49829","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-education","tag-the-shock-doctrine","","tg-column-two"],"yoast_head":"\nWhat Is Free-Market Capitalism? Definition & Examples - Shortform Books<\/title>\n<meta name=\"description\" content=\"What is free-market capitalism? 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