How Far Does Fee Market WorksEssay -what Are The Consequences Essay - 2,233 words

How far does Fee Market Works-what are the Consequences Within the course of this research, we will elaborate on the principles of free market, liberalism. Although there is a growing body of support for a free market theory and liberalism, there is also some opposition to it, and both will be discussed within the conceptual framework of this essay. We will talk about how free market has become possible in America, as well as discuss the views of Milton Friedman on liberalism and free market. From the early day of the colonization, trade and commerce has played an important role in the forming and shaping of civilization in America. America offered the common people of the world the opportunity for financial gain and self-sufficiency. From these humble beginnings, the roots that became the American economic system formed.


The combination of improved roads, steamboats and canals served to connect vast areas of the country with an increasingly dispersing population to major ports and markets. The flow of goods and products two and from markets became much more efficient and cost effective. The increased trade that resulted stimulated economic growth throughout the country and encouraged migration to western lands. New farming methods and machinery that developed in the early 19th century significantly increased efficiency and productivity of the American farmer, enabling more products to be brought to market. Improvements in the reaper greatly reduced the harvest time of grain. Other labor saving inventions include the horse hay rake, which performed the work of seven men, the mowing machine did the work of 10 men equipped with scythes and the thresher which could harvest over 12 times as much in an hour as six men equipped with hand flails.


These mechanical improvements in farming greatly reduced man-hours and made it possible for a family to farm between 30 or sixty acres rather than 10 or 15 (Kirkland 114). In the South, the invention of the cotton gin in by Eli Whitney gave birth to the Cotton Kingdom. Prior to the cotton gin, the difficulty of removing the seed from the fibers prevented the crop from being commercially farmed in large quantities. A pound of cotton took almost a whole day to process. The crop could now be prepared cheaply and easily for the market. In the year prior to the invention of the cotton gin, the country produced around six thousand, five hundred pound bales.


The following year, production had increased by 10,000 bales. By 1859, 4.5 million bales were produced, accounting for half of the entire country's exports (Kirkland 125,126). The rise in cotton production reinvigorated the institute of slavery. Prior to the cotton gin, slavery was becoming less profitable and practical, and may have died on its own. With the demand for cotton high, the slave trade grew. The wealth generated from the cotton industry created a demand for products such as corn, flour, pork and beef.


The need for manufactured goods from the North also increased. The growth of the Cotton Kingdom expanded internal trade and stimulated settlement in the West (Nettels 204). While the American improvements in transportation, farming and trade created the framework and structure that led to the national free market, it was the spirit, vision and will of the American people that created it and made it work. The country provided a non-interfering, non-oppressive government and opportunity for personal advancement to the common man on a scale never before seen in history. It is this freeing of man that accounts for the development of the free market. The economic system that started from such humble beginnings, in a short period of time, grew to become greatest the world has ever seen and has elevated the quality of life mankind to levels that not even the boldest visionaries of the day could have predicted. The role of government in this free market system that emerged in the United States has been questioned a lot.


In his book Capitalism and Freedom, Friedman states that government is a necessary evil in a society of imperfect humans, but is one whose scope should be limited to only absolutely essential tasks. He very specifically defined these tasks; as he states in the introduction of the book, a fully functional government would be one which, maintained law and order, defined property rights, served as a means whereby we could modify property rights and other rules of the economic game, adjudicated disputes about the interpretation of the rules, enforced contracts, promoted competition, provided a monetary framework, engaged in activities to counter technical monopolies such a government would clearly have important functions to perform. (Friedman, p. 22) Basically, he views any government action beyond the scope of this as improper, including agricultural price supports, import tariffs and quotas, rent controls, minimum wage laws, industry regulation, military conscription, toll roads, and many others. Friedmans basis for opposition is that the best method of making any decision is in the market setting because a market allows for numerous different outcomes for different individuals with different preferences. Governmental or political decisions are made on a majority basis; they do not allow for differing levels of choice for individuals because they produce a single outcome; the market allows for each individual to come to an agreement at the level he feels comfortable. Thus, the more that is left within the scope of the market, the more likely it is that agreement can be achieved while still maintaining freedom.


(Friedman, p. 80) Friedman believes that the modern trend has been to curb the scope of the market in favor of government intervention, a trend which has had poor results overall. While he concedes that the market does not function perfectly, he states that the effects of extensive government intervention over the past few decades have proven to have even worse results around the world. One area that Friedman focuses on as being problematic is government fiscal policy, which consists of taxation and spending. According to him, the US government has subscribed to the traditional Keynesian philosophy of fiscal policy, which involves deficit spending and tax cuts during periods of recession in order to lower unemployment, and reduced government spending during periods of expansion to combat inflation. (Friedman 78) Friedmans basic criticism of this policy is that historically, it has done little to combat recession due to time lags in fiscal policy implementation. Instead, it has put inflationary pressure on the expansions that follow a recession and has fostered a continuous and permanent increase in government expenditures which were originally supposed to be temporary.


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Essay Tags: free market, minimum wage, friedman, fiscal policy, cotton gin

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