In response to a blog a wrote a few weeks ago, I was asked, “Does this mean that the competitive free market economy of Adam Smith does not exist in the real world? That it is today a government managed economy through supply side and monetary policies?” It’s an interesting question, and it is very easy to get depressed about the state of the world at the moment – but I still don’t know that I’d go that far.
On the one hand, it is probably true that no country in the world has a pure free market economy. In unstable or extremely undeveloped countries, you don’t get proper free markets (even in the absence of government intervention) because the institutions needed to support them, like secure property rights and the rule of law, are absent. And when countries do become stable and developed, they almost always end up with governments committed to managing the economy and micromanaging citizens.
So yes, pure free markets (in the theoretical sense) probably do not exist in the real world. What we have instead is varying degrees of state capitalism – the most successful versions being those that maximize individual freedom and allow the greatest degree of competition.
But on the other hand, I don’t think we should despair. Maybe there’s no free market utopia, and maybe there never will be. But ultimately individual freedom (and, by extension, the free market) will always be more powerful than statism, because it goes with the grain of human nature – people are inherently entrepreneurial, dynamic and individualistic. So while governments will probably never stop trying to manage everything, they’re never going to succeed in managing everything either. Indeed, the more complex, diverse and advanced economies become, the harder it will get. There will never be a perfect world, sure, but in the long run liberty has the upper hand.