Free market economy
1. Do you think our free market economy, especially against the backdrop of unfettered transnational financial operations and the financial crisis, is the right way to live in a globalized world?
Answer by Jana Hybášková:
Globalization is not result of free market economy, as much as free market economy is not function of globalization.
Free market economy is one of key values, which we have agreed to live according to it, to support it in our external relations. By free market economy we mean economic freedom of every individual, equal economic rights of every individual. We Europeans are of the opinion, that economic freedom is a necessary condition for the creation and sustainability of civil and political freedoms. The other values are democracy, rule of law and protection of human rights. You would be facing difficult time, to argue, that free market economy, as used in Copenhagen criteria, or Treaty on EU, is meant not to represent equal economic rights.
Free market is political idea based on economic freedom of every individual. Freedom does not mean lawlessness. Freedom means the set of rules stipulating for equal chance. In western democratic thinking freedom is not based on limitation of rights of the others. Free market is based on transparency and accountability rules, equal competition, anti monopoly policy, protection of ownership, protection of intellectual property. Free market in European understanding does not exclude social state, free market economy is not synonymous for wild capitalism, right the contrary.
The history of totalitarianism provides evidence, that attempts to limit economic freedoms are necessarily bound to attempts to limit civic freedom and individual human right. To use globalization as apolitical threat leading to necessary limitation of economic freedom would mean return to totalitarian and autocratic forms of social order.
It is not only Friedman and Hayek, but it is very much our post communist experience, that any attempt to limit economic freedom leads to limitation of freedom. So, more important than to limit free market economy, is the way to develop better rules and orders supporting it, strengthening it, making it more sustainable, an open opportunity for everyone, an open economic chance for everyone. Globalization can be a problem for sustainable development in its forms, which are not based on free market economy, be it exploitation of others ownership, lack of competition rules, exploitation of children or forced labor, lack of respect of human rights of workers, occupation of others national wealth.
Three examples of what could be done better follow: World prize of coffee in London Starbucks should be competitive with prize of still water. The prize of coffee bean in Nigeria is not derived from “real” cost – exploitation of soil, price of water, price of working hour, social and health insurance of plantation worker, transportation cost to port, to distant port of Southampton, to package, market, retail sale in London. It is derived from the price of the same quantity of water.
Is there any free oil market? Where is it? You might say: in London, today’s prize of one barrel of Brent, or Dubai, or WTI is… have any of you thought about, which part of the whole day consumption of oil is sold on free market base? The price of oil is not really free and never was. It is negotiated prize, between consumer and producer, between US, China and EU countries and OAPEC and OPEC and Russia. There is no transparent information. Same, even in more precarious way holds for gas, since it is more difficult to store it, or even electric energy, which we can not store at all. The prices of energy follow logic of world economy development, certainly not in clear, predictable and transparent way.
Coming to financial crisis: the issue was “real price” of financial derivates CDO, CDS, SBS. Funds came under ever growing pressure to increase profit. Banks, financial institutions where not able to increase profit by existing means, so the searched for new ones. In the case of CDO CDS SBS experienced bankers themselves did not understand the way, how the price was set up. The price was not transparent even to them. They, representatives of bank, how could they be accountable to their shareholders? How did they obey the law? Which kind of legal instruments: information, accountancy, income sheets, expenditure sheets where at disposal?
The rules, which can help us Europeans, advocating for free market economy benefit more from globalization are competition rules, anti monopoly rules, protection of ownership, better control of financial markets, control of illicit drug and arms traffic, of human traffic, anti money laundering rules, transparency rules, protection of shareholders, open public competition, decrease of unfair protectionism.
Direct threat to free market economy in global world is corruption, protectionism and exploitation.