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The Emperor Wears no Clothes in Theory: Theories Underlying Major US Policies are Problematic

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One of the major factors undermining the freedom of markets in the United States is defense expenditures which causes a major disruption to decision-making pertaining to buying and selling.   It is a singular violation of the monopolistic criteria since there is only one buyer and in virtually every case, there are very few sellers.   For consumers, there is no utility in the products produced and it is a preposterous stretch to argue that they are protected by the weapons systems purchased by the government.

 

There is a myriad of private corporations who sell weapons and armaments to the government and the dollar value of the sales is leviathan.   For example, in 2010, Lockheed Martin Corp. won almost $17 billion in contracts, Northrop Grumman Corp. won #11 billion, and Boeing Co. won $10.5 billion.    Overall, the government purchased a total of $140 billion from the private sector. On research, development and testing, the government spent another $79 billion.

In addition to purchasing weapon systems and armaments, the government spent over $25 billion on the services of private contract companies, constituting another major intrusion into the operation of the private sector.

 

While defense spending substantially interferes with the criteria limiting the role of government in the market, government subsidies to various sectors in the economy render the pursuit of free markets meaningless.

 

Handouts to industries can assume many forms including grants and other direct payments, government credit subsidies and guarantees and market price supports to name but a few.   The impact of these handouts is to lower costs for the recipient companies and therefore to reduce the price of their products.    Price determination in a free market is supposed to be based exclusively on the actions of buyers and sellers or in economic terms, supply and demand.   As in defense spending, handouts are a major form of government interference strictly prohibited in a true free market economy.

 

For Example, handouts to the energy sector are primarily directed toward the fossil fuel industries rather than renewable energy companies.   In the period 2002 to 2008, subsidies to fossil fuel corporations totalled $72 billion while subsidies to renewables totalled $29 billion, half of which targeted corn-based ethanol, a source of fuel which hardly qualifies as a renewable given the quantity of fossil fuels and water required to grow it.

 

In the agricultural sector, in the period 1995 to 2009, Riceland Foods received $554 million, Farmers Rice Coop $146 million and Harvest States Cooperatives $49 million.   During this period, the total subsidies to the agricultural sector amounted to over $246 billion.

These farm subsidies empowered U.S. food exporters to undercut foreign competition, particularly in developing countries since Europe subsidizes its farmers as well.   Government interference determined who was selling at the best price and therefore which exporters were successful.

 

Agricultural subsidies in conjunction with IMF policies, heavily influenced by the United States and Europe, had a ruinous effect on the agricultural sector in many developing countries.   For example, Jamaica was forced by the IMF to raise interest rates to farmers to 23%, ban tariffs and refrain from any subsidies to farmers.   Up until that point, Jamaican farmers had been supplying both the domestic population and the tourist industry but were practically forced out of business by the heavily subsidized U.S. products and IMF policies.   The fate of the agricultural sector in Jamaica resulted from actions of the American government not from market forces.

 

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David Model Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

I have been a professor of political science at Seneca College in Toronto. I have published five books the last of which "Selling Out: Consuming Ourselves to Death" was released in May/08. As well, I have been featured in CounterPunch, Z (more...)
 
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