Ethics & Philosophy Essay

Free markets can be said to be the markets which have no government interference or regulation. The only regulations present are the ones which involve protecting property rights and maintaining the legal system. Free markets are markets in which the product prices are solely set through market forces, as opposed to interference by external forces. There is also free competition in free markets, and the law of supply and demand is used to fix prices of goods and services in such markets. There are various philosophers who support free markets while others are opposed to such markets. The paper will analyze the contributions of Adam smith, Karl Marx and Milton Friedman on the issue and will give a brief conclusion on the issues discussed. Karl Marx. Karl Marx was a German philosophers who is considered to be amongst the most controversial philosophers in history. He was against capitalism and free markets, which he viewed to be a means with which property owners or the rich use to maintain control over the peasants or poor. Karl Marx viewed the capitalist system as a system meant to make the rich richer and the poor poorer. He explained that initially, capitalism was meant to be a means with which people exchanged commodities which they did not have. However, after money was created, it evolved and became a means with which people could make profits as opposed to satisfying the demand for products. Over time, capitalism undermined the human development and well being, and products created could now dictate how interactions between human beings would be. Soon, the relations between society became material as everything was treated in terms of its monetary worth, as opposed to creative and artistic qualities possessed. Capitalism led to the alienation of workers since they were separated from owning the means which was used for production, and they became slaves to the people who owned those means. This led to the emergence of two economic groups; the property owners and the workers, and the latter were oppressed by the former. This is the reason which made him predict the collapse of capitalism and its replacement with socialism. Socialism is a system in which the government or authority controls production so that it may be mutually beneficial to all members of the society or state. Karl Marx was opposed to free markets since they tended to favor the rich and oppress the poor. Free markets are a feature of the capitalist system, which made Karl Marx oppose them. Weaknesses of this argument. Karl Marx is opposed to free markets due to the weaknesses which he views in capitalism. Karl Marx views capitalism to be a system where the rich oppress the poor. He therefore opposes all features of capitalist systems which he views to be a means which promote the exploitation of the poor . However, Karl Marx does not consider the model which combines both capitalism and socialism in order to take advantage of the positive attributes of the two models. Since socialism has its weaknesses, combining both models may be more beneficial to the economy. In this respect, moderate government interference in trade by the government is an option which Karl Marx should have pursued. Adam Smith. He is considered to be the father of the modern economics and he contributed a lot toward the modern capitalist system. Adam Smith was of the opinion that production was the key to economic growth and that this could only be achieved through economic liberalization. Adam Smith therefore supported unregulated markets since he saw them as a means of stimulating economic growth. He explained that free markets would enable individuals to develop a business without having government intervention, and that the people who consume the products developed would do so at prices which have been determined by demand and supply forces . Adam Smith added that free markets enabled the most competitive producers and consumers to survive, which was beneficial to the economy. He viewed free markets are independent problem solvers which did not require government interference, since market forces eventually address any surpluses or shortages which are inherent in the market. Adam Smith uses the ‘invisible hand’ theory to explain the way in which different parts of the economy are integrated. Smith explains that each individual is guided by an invisible hand in making their decisions which benefit the economy, without their knowledge. He explains that individuals carry out actions which are meant to benefit themselves, but they end up benefiting the society at large, which is not the initial aim of the individual. Smith gives an illustration of the creation of a wool coat. He says that the coat is developed after a series of processes which are undertaken by different people. The shepherd who owns the sheep, the spinner who develops the coats, and the shipper who transports them to the market all play a role in the creation of the finished product. He explains that this subconscious process by the different parties involved achieves higher levels of efficiencies than would be achieved had the process been planned by the players involved. It means that markets which are regulated by the government have lower efficiency levels compared to markets which are not regulated . This is the major reason why Adam Smith supports the free markets as opposed to regulated markets. Weaknesses of this argument. Adam smith is of the opinion that free markets enabled the most competitive producers and consumers to survive, which is beneficial to the economy. He gives many attributes of free markets, most of which are true. However, he does not discuss the weaknesses of free markets. Free markets suffer from certain weaknesses such as inhibiting the growth of small firms. Free markets may also experience monopolistic and oligopolistic tendencies which adversely affect the economy. The economy may also suffer certain effects attributed to unfair practices in trade. Other effects like inflation, market downturns and others require regulation by a central authority. Adam Smith does not discuss these situations, which makes his argument inconclusive. Milton Friedman. Friedman made major contributions to the economic crisis during the early 20th century. He viewed the 1920s as a period of sustainable and vital growth. Friedman believed that economic growth and freedom had a direct relationship. He used several principles and arguments to further his support from free markets. The political principle was used by Friedman to define the features of free markets. He explained that in free markets, individuals cannot coerce each other and that there is voluntary cooperation between the parties involved . He further explained that parties which are involved in transactions under such circumstances benefit in one way or another, otherwise they would not participate in these transactions. In free market transactions, there are no social responsibilities and values; there are only shared responsibilities and values. However, Friedman was also of the opinion that the government should intervene in the economy if there is threat to it. One of the instances when Friedman supported government interference was during the Great depression which occurred in 1929. The Great Depression changed the view that the United States economy was robust and that it should be totally free from government control, after the US Stock Exchange collapsed due to various factors. Friedman supports the market regulation and explains that if the Federal Government had intervened and applied the right policies, this depression would have been avoided. He explains that the Federal Government should have suspended payment for the withdrawals being requested by people. The policy which was used at the time, which involved printing more money to supplement the increased demand, is blamed for the Great Depression. This reveals a more soft approach to the initial stand that government intervention should not be allowed, and that the markets should be allowed to operate as free markets. However, it does not completely change the stance which had been taken by Friedman regarding free markets. Government interference is allowed only under special circumstances where lack of intervention would lead to severe effects to the economy. This was the case during the Great depression and is also currently the case in the event of the global financial crisis being experienced. Weaknesses of this argument. Friedman is categorical that there should be free markets if economies are to grow. He argues that the absence of social values and responsibilities and the presence of shared values are factors which facilitate economic growth. However, he appears to take a soft stand when discussing the Great Depression where he advocates for government interference, but using the right policies. This is a deviation from his stand that the government should not interfere with the business environment. It also reveals that free trade has weaknesses which he does not effectively address. Personal view. In my opinion, free markets do not lead to serious political, social, or environmental problems as explained by some philosophers. This is because free markets are the most effective and natural means in which prices should be set to ensure effectiveness. On the contrary, a wrong approach of interference by the government may lead to serious political, social, or environmental problems as was seen in the Great Depression. The current financial crisis which began in the United States can also be said to have been accelerated by the government failure to limit the borrowings by investors and excess lending by financial institutions using predatory lending practices. This is a similar problem which led to the great depressions, and the government interference is seen to have led to adverse effects rather than positive effects on the economy. However, in extreme cases of economic problems, the government should intervene. This should only be done to save the economy in cases where the market forces are clearly unable to rectify the situation. For instance, the current financial crisis facing the world requires the government’s intervention. This does not mean that the government supports the regulation of markets since in the absence of economic crises, the market forces would usually be used to set the product prices. My major reasons for supporting free markets is that regulated markets usually discourage investments, especially if the regulations are too strict. Investors prefer investing in countries where there is free trade since they can predict their future earnings or returns on investment, due to the absence of external factors in the business environment. Regulated markets may also adversely affect the economy especially if the policies which are applied are retrogressive. Summary and conclusion. It is evident that the three philosophers made major contributions to the modern world. Their theories are still in use several years after some of them passed away. However, it is important to note that their arguments relating to free trade are inconclusive since some of the facts which they used to support their arguments have changed. It is also important to note that none of them has a wrong view, it is only that they looked at free trade from different perspectives. The contributions which each of them has made to society should be appreciated since they all talked about various issues affecting the society, and not just free trade. It is important that other scholars improve on the theories which were advanced by Adam smith, Karl Marx and Milton Friedman. This will reflect the market environment as it is today, and the arguments developed can be used to improve the policies in the current business environment. Works cited. Amadae Samuel. Rationalizing capitalist democracy: the Cold War origins of rational choice liberalism.Chicago: University of Chicago Press, 2003, p255-261. Gagnier Regenia. The insatiability of human wants: economics and aesthetics in market society. Chicago: University of Chicago Press, 2000, p25-35. Machaj Mateusz. Friedman for government intervention: the case of the great depression. Mises Daily. Retrieved on March 18, 2009 from . Sunderlin, William D. Ideology, social theory, and the environment. New York: Rowman & Littlefield, 2002, p23-33.