This is a first cut at some of my developing thoughts on free markets versus controlled markets.
Is a free market better than a controlled (fair market)?
Over the long term free markets concentrate wealth due to benefits of scale and favor the urban over the rural due to the network effect. I’ll use Japan as an example because it is the world’s 3rd largest economy as well as has moved from a controlled pricing economy to a free market economy.
Japan had a form of price control up until recently. The cost of a bottle of whiskey was the same whether you bought it in a small store or a large store. In the last decade the economy has been liberalized meaning that big stores (who have economies of scale) can charge less than small stores. Does a free market always lead to better economics guided by Adam Smith’s invisible hand.
Unlike Adam Smith, I think that free markets lead to devastation of small communities to the benefit of larger communities and concentration of wealth in fewer hands,
I’ll take the case of Setagaya a small communiity on Amami Oshima an island in Southern Japan where my wife grew up. 50 years ago Setagaya was mostly a self-sustainging local community My wife’s grandmother grew most her own food, made her own miso paste. kids played on the dirt road streets. The town had a few elctronics shops, stationary stores, clothing stores. The prices of consumer goods were fixed whether you bought at a small shop or a large shop. So people bought locally. Shops competed on quality service rather than price. The fixed price was enough to gaurantee the Mom and Pop shops could at least survive. Money was spent at the local businesses who then spent the money in the village. There was a relationship between the shop owner and their customers. The town even had it’s own sake factory famous for the special snake sake made with local poisonous snakes.
Due to benefits of scale a free market leads to natural monopolies. When Japan allowed the free market to determine prices plus better transportation. People started taking a weekly shopping trip to the big town on the island to shop at the big box stores. The big box stores offered a wider selection of goods and cheaper prices. People started buying their groceries, clothing, books and alcohol in the big town. Money flows from the smaller towns to the bigger town. As the amount of money spent in the villages shrunk the small village shops got smaller to cut costs and remain profitable. This led to even less selection in the small towns which mad the big town stores still more attractive. This was a positive feedback loop. Now Erika’s village has only a small shrinking bookshop, one shrinking clothing store.
The big box stores are owned by companies so the profits flow back to the shareholders outside Amami. Now the Mom and Pop shops have been closed.
Are there parallels between free market ecomics and coloniallization?
