Markets are places where sellers and buyers converge to perform some trading transaction or exchange. With technological improvement of communications and the development of sophisticated trading instruments, markets are no longer confined to a single physical location. In addition, collective dispersed transactions performed are grouped also in an abstract ‘market’. It is commonly touted that the “free market” is a perfect or ideal market that is self correcting that guarantees the generation of natural or real prices. NOTHING IS FURTHER THAN THE TRUTH. This sinister hoax is perpetuated by those whose agenda is the propagation and perpetuation of laissez-faire capitalism.The FACT is that an ideal market only exist where the following condition exists
- The market place consists of an infinite large numbers of freely electing buyers and sellers.
- The market is unfettered by any sort of control, governmental or other.
- By definition buyers and sellers are uninfluenced by each other and have perfect information of mutual competitors and product.
- There must be perfect mobility, i.e. there must be no transaction cost
- Commodities exchanged in transactions must be homogeneous and not vary from supplier to supplier.
- There is non-increasing returns to scale i.e. output varies proportionally to input, totally technologically dependent (NOT the same as economy of scale).
From the FACTs itemized above ideal markets do not exist. Testing each criteria for any commodity easily illustrate this. We have the following instead:
Monopolies – An individual or company having control of a product, service or market sector so that they can determine who has access to that service or product. Popularly and loosely used in reference to a company enjoying a disproportionate market share of a product or service.
Oligopolies – A market place characterized by a few sellers of a product or service. Unlike monopolies, they do not dictate price and supply. Instead they engage in friendly competition in order to avoid regulators, and so maintain a stable market and high profits. Most multinationals fall into this category. Oligopolies choose specific product or service categories to dominate. Few new companies ever penetrate those markets, and the few that do, are quickly gobbled up or run out of business by the oligopolies. Ex. Of oligopolies – Pepsi and Coke.
Monopsonies – A market with only one buyer. The monopsonist can exert his power thereby affecting prices in the market place by the number of units that he purchases.
Oligopsonies – A market sector in which there are few buyers, the number of sellers may be large. Ex. In the cocoa beans market, Cargill, Archer Daniels Midland and Callebaut buy almost all the world’s cocoa bean production in Third World countries. They can play one farmer off against another, dictate prices, specification of varieties etc. and at the same time limit their risk exposure to the vagaries of agricultural production.
If we look further and deeper at modern markets there is an even more sinister anomaly in these ‘magical’ Markets – labor is virtually absent – at least reduced to an impotent passive observer.
WE regard the use of the term “free market” to imply an “ideal market” within the capitalist context as a colossal hoax perpetuated on the people. Over the recent decades labor has been virtually eliminated from active participation in the ‘market’ although the term ‘labor market’ is euphemistically used. Labor Unions have been decimated their structures reduced to mere shells and their functions in effect redesigned by the capitalist class. Their ability to strike has been significantly hobbled and no one even hear of ‘sympathy strikes’ anymore.
The classical equilibrium diagram shows the main components in the market economy as capital; labor and commodities. One never hear any more of the “markets in equilibrium.” There is now apparently only Capital and Commodities.
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