“The capitalistic market economy is a democracy in which every penny constitutes a vote.”
– Ludwig von Mises
An assertion that I’ve heard often from opponents of a voluntary (i.e. free market) economy is that it will cater only to the rich. Their argument is that when every dollar (Mises said “penny,” but we’re accounting for inflation) is a vote on what should be produced, the people with more dollars will have a disproportionate amount of power. “Poor and middle class people will be economically marginalized!” they wail. “We’ll all be slaves to the giant corporations!” they insist, ignoring the government’s legal monopoly on violence, and all it implies.
However, a quick exercise of reason is enough to dispel these emotive arguments. Let’s imagine a typical billionaire—we’ll call him Beff Jezos. Although this isn’t at all how wealth works, let’s assume that Mr. Jezos has $100 billion sitting in his bank account. Mr. Jezos could buy a lot of things with that $100 billion, or a few very big things. But does his ability to buy outweigh the rest of the population? There are approximately 330 million Americans. If only a third of them spent an average of $1K each, that would be $110 billion. They could outbid Mr. Jezos—even if he tried to spend his entire $100 billion. The spending power of the rich cannot compete with the spending power of the poor and middle-class masses. To further demonstrate, let’s try a logical exercise you can sink your teeth into.
Let’s say that billionaires want to eat ultra high-quality steaks. According to the argument from opponents of voluntary markets, the entire agricultural industry, desperate for the money of the billionaires, will reorganize itself to produce stupendous steaks. This will leave everyone who is not a billionaire with little or nothing to eat. Suppose there are 100 billionaires who are willing to purchase steaks at $500 each. If they each eat a steak at every meal(!), they’re spending $150k per day.
While that’s surely a prize worth competing for, there are still >300 million people who need to eat. If they each spend $0.50 per meal, that’s >$450 million per day.
Put another way, 100 billionaires would each have to spend $1.5 million per meal to have the purchasing power of everyone else spending fifty cents each. While the needs of the few rich will quickly be met, all the other producers of steaks (and other things) won’t sit on their hands, waiting for the rich to want something else—meeting the demands of the masses can pay much better. And the masses have a lot of demands.
This already happens to a certain extent. The Waltons did not become rich by making Walmart a store for the wealthy. Amazon does not cater exclusively to billionaires, or even millionaires. The people who benefit most from Walmart’s inexpensive goods and Amazon’s fast deliveries are the poor and middle class. This has always been the case. And if today’s huge businesses can’t keep up with the demands of the masses, they can be dethroned quickly when outperformed by a competitor—remember when Kmart and Ebay were the big players?
Of course, competition can be squashed, but this can only happen to the detriment of customers when it’s done through coercive government action. Dr. Tom Woods has shown that the classic caricature of the monopolist—a fatcat mercilessly raising prices to gain profits—only happens when the government forces competitors out of the market. In a voluntary free-market economy, government economic interference (never voluntary) would not exist. There could be no billionaires who become rich through political graft—trade restrictions, buying off politicians, government bailouts, subsidies, tariffs, corporate lobbying, competition-killing regulations, etc. Then the only way for anyone to become rich would be to persuade people to voluntarily purchase the product or service they provide.
Milton Friedman stated that “the most important single central fact about a free market is that no exchange takes place unless both parties benefit.” If the billionaire does not offer a good product or service to a wide range of customers, few people give them money—and in short order, they’re no longer a billionaire. In a voluntary economy, the rich do not rule, but the average Joe and Jane. It’s as close to the stated ideals of democracy that we can get—and unlike political democracy, nobody gets shot if they don’t comply with the majority.
Well stated, Jeff. I’ll look for more of your work.