As I have noted in several pieces, true capitalism (a truly free market) is governed not by omnipotent-but-invisible 'market forces' or the quasi-deistic being known as 'the Market' (or even the quasi-deistic being known as Milton Friedman, still far too popular with too many in Washington) but rather by all participants acting in enlightened self interest. Note that I said 'all participants': business, consumers, employees, government, and the human beings who compose the former and the latter. The word 'enlightened' is important too.
In theory, this is something we learn at a young age: what we want and what we need are not always the same thing and we don't always want what is best for us, so it is important to carefully consider the consequences of our actions, and deliberately hurting others to get what we want is wrong. We all need some form of what society calls 'love', which can take a wide variety of forms. Yet sex or the physical lust for sex are not love. If we act on our sexual desires without considering the consequences of our actions, we can hurt ourselves and others in a great many ways. We all need to eat, yet gluttony is more than simple hunger. We all, because of the facts of our economic system, need money to survive; but greed is not the simple need for the security of money.
'Enlightened' self interest is difficult. It requires that we know what is genuinely best for us, which can be a very difficult proposition. We have trouble, at times, knowing when to stop eating before we get a bellyache or gain too much weight to be healthy. If we eat too much, we get sick. Clearly, eating so much we get sick is not in our best interest no matter how good the food or how much of it we think we want. We find, in the end, we didn't really know what we wanted.
Consumers and employees are people, businesses and government are made up of people. So why do we expect all of these people to act in a way we know we ourselves do not always act, and assume such a process will be entirely self-regulating with no need for interference of any kind? For all the talk of hard-nosed common sense bandied about by today's champions of the 'free market', the very assumption on which they base their economic science is entirely against what they know of human nature. It is dependent on everyone knowing exactly what is best for themselves, always acting in that way, and not allowing any degree of persuasion to convince them that what is bad for them is good for them. If you really think about all of this long enough, it makes a lot less sense than socialized medicine or ending the war on drugs.
There is also a trick in the concept of freedom: if everyone is free, then what is to stop people from using their freedom to deprive others of theirs? This is why the federal system of checks and balances was designed in government: to ensure a government able to administer a nation in order to preserve the freedoms of its citizens while preventing that government from itself depriving its citizens of their freedoms. So why do we not use the same logical reasoning and apply it to economics, instead of applying a monetarist economic standard based entirely on faith that 'it is thus'?
So then, what is a genuine free market?
Let's start with what we mean by freedom.
English has so many words and concepts for freedom that it is sometimes difficult to define all of them. 'License' is used in more than one way, as are 'liberty' and 'freedom', and 'independence' is not something entirely possible in an economic sense. Nothing in an economy is 'independent', every economic facet (business, consumers, employees, government) depends on the others.
So I am going to abandon English entirely in defining the free market, ironic since the first capitalist thinkers wrote in English, and use the language of Communism, Russian, to double the irony.
Russian has two different words that both carry very different concepts of freedom. 'Volia' is total freedom from all outside authority: the license to do what you please, when you please, if you have the capacity to do so. You may do anything that you can do, anytime you wish to do it. It is freedom without any limitation whatsoever. The problem with volia is that its exercise may deprive others of their own freedom, and those with the greatest capacity to do as they wish have all the freedom. Those without the capacity to stop them have none. When a political conservative uses the word 'free market' the concept he means is equivalent to volia.
Svoboda is the concept of civil and social liberties and responsibilities shared among the members of a society. The Western concept of democratic political freedom is analogous to svoboda. It is not without limit, proper exercise of svoboda means that one respects the rights and priveleges of others while excercising their own. Individuals do not have individual svoboda, everyone shares in it. In the ideal Western democratic setting, svoboda is shared equally by all in society. We all have the same basic rights, the opportunity to earn or lose the same priveleges based on our merits, and the same responsibilities to respect the rights and priveleges of others.
I believe in a truly free market system in which business, consumers, employees, government, and the people who make up the former and latter of those institutions share svoboda within the complete economy. Business owners and corporate management understand their responsibilities to their employees and customers and their priveleges and responsibilities under the law and act accordingly. Employees' rights are respected and they understand their responsibilities to their employer and under the law. Consumers are aware of their rights and recourses if wronged, while aware of their own responsibilities within the economy. Government acts as an honest broker between employer and employee and business and consumer, regulating against abuses.
That is capitalism, because it is the only free market in which 'free' is anything other than a word. Modern institutions such as immensely powerful corporations, monolithic commercial advertising at all levels of culture, corporate tax incentives and subsidies, monopolies and cartels that circumvent fair competition, and the increasing shift away from raising capital to produce wealth to making a profit off the raising of capital are not institutions of capitalism. While some of these trends are impossible to reverse, government regulation can reverse others and moderate the rest. Under such circumstances, such regulation is not contrary to the spirit of capitalism but defending it from the unrestained excess enjoyed by those whose volia is currently secured by their money and power.
Many of the world's economies are increasingly seeking to follow the Western example of the free market. Let's get to work to make it something that is, once again, worth following, shall we?