– Ricaurte Batista III
In a free market economic goods and services are freely exchanged between individuals on a voluntary basis under the rule of law and a private property rights system. Although it is not a perfect system, it is the best system we have had to improve the standards of living and reduce poverty. Before the 1800s an average person made the modern equivalent of $3 a day (£2 a day) in income, throughout that century the process of improvement in people’s income and quality of life started to boom, merchants were now socially honoured in the cities and ideas of economic liberty started to rule over the great nations of the time, these two aspects made an ideal environment for innovation.
When people are free to use their energy, time, and talents, they’re able to produce great things, everything from tiny cameras to skyscrapers and complex vaccines to cure diseases. Under a free market system incentives are created to reward those who are productive, those who work a lot of hours and have good skills and brilliant ideas. This system of free exchange and incentives created a group of people known as entrepreneurs who devote themselves to think on how to make people’s lives better by focusing on satisfying their needs and desires. These entrepreneurs act by pursuing their own interest, they seek a better life and to make more money, but at the same time they benefit society as a whole with new products, great gadgets and smart solutions for the problems of daily life. It is important to bear in mind that entrepreneurs depend on people’s needs to reach a prosperous level of business, so a strictly selfish entrepreneur who puts his or her own interests before that of the consumer will certainly fail and lose a lot of money, however an entrepreneur who better serves the needs of their customers will have a much more successful outcome.
In order to attract more customers, businesses would want to have the best quality products possible at a very competitive prices; the best way for that to happen is within a vigorous environment of competition between businesses. However for some businesses competition is quite hard, because it requires a lot of work, time and money, so in order to safeguard the future and success of the company; they start to lobby in order to get laws, restrictions and regulations enacted against anyone who tries to compete with them. These actions clearly benefit businesses and not consumers. This action damages competition and summons a great deal of difficulties and terrible situations for the society. For that reason we can say that the freer competition is the more benefits consumers will enjoy.
It is a very basic principle of law that every human being should be equally protected before the law and no exception should be made for any business or any person, for that reason corporate cronyism or any kind of cronyism within the government is a terribly deadly cell that disloyally kills competition inciting a process of destroying the incentives to wealth creation; this process ends innovation, harms customer satisfaction and reduces prosperity for everyone. For this reason Adam Smith believed that government must be limited. The core functions of governments should be maintaining defence, keeping order through a justice system under the rule of law, promoting quality education and coordinating the building of public infrastructure. The best way a government can help to reduce poverty is by avoiding any intervention that may distort the operation of a free and open market. John F. Kennedy said: “Every dollar released from taxation that is spared or invested will help create a new job and a new salary.”
Free trade not only provides people with cheaper products, and the chance for countries all over the globe to export and import with one another goods that can only be produced in their part of the world; Free trade also contributes to the preservation of peace in the world, the best possible example would be Europe. After centuries of battles, dominations and wars between the nations of Europe, a new model emerged from the ashes of the Second World War, a model based on the principles of freedom. The very essence of the European Union was tear down the barriers between nations in order to establish the free movement of goods, capital, services, and people. This idea has successfully guaranteed peace in Europe. But like any other matter whenever centralized power and bureaucracy grow, freedom and prosperity most likely decrease, without a doubt the centralized monopolies of big power and the terrifying regime disguised of a “republic”, might be some of the fundamental reasons why many African and Latin American countries have had difficulties to grow and be prosperous nations.
Every free society should have an independent and efficient judicial system, stable property right and small government in the service of the people who pay for them to exist. Education is also a key feature in the development of a free market economy and furthermore in achievement of prosperity for nations. Milton Friedman once said that – the equality of opportunities to develop capacities and skills, independently of race, religion, and social class; is not contrary to the concept of freedom, it reinforces it. – Let us remember that poverty is not caused by things people do, but by things they fail to do.
Ricaurte is a law student at the Universidad Catolica Santa Maria La Antigua in Panama City. He is a classical liberal and active member of the Panamenista Party.