One economic proposition sometimes thought to be attracting increasing support is the “free market.” It comes in a variety of forms or degrees of intensity, from a mild, Liberalistic preference for less bureaucracy than a Labour government tends to impose, to a near-Anarchist demand that government withdraw, more or less completely from intervention in the economic process. At this latter end of the range is found the proposal that even such services as roads, justice and education, usually thought to be necessarily supplied by the community, shall be provided by competitive private enterprise.
In all its forms this belief rests upon the assumption that, left to itself, the market will remain “free” in the sense that it will be, and continue to be, composed of a large number of small units in competition with one another. It disregards the fact that competition tends toward the elimination of most of the competing units. “The trouble with competitions is that somebody wins them.” A market which is “free” in the sense of being uncontrolled, quickly ceases to be competitive. It becomes (near-) monopolistic. In order that the market shall remain competitive it is necessary that it be strictly controlled so that the winners in the competition shall be prevented from taking over the loser.
It is not uncommon for proponents of the “free” market to say, in effect, what is being said here, without realising the full meaning of their own words. The Adam Smith Institute, for example, has just issued a leaflet which quotes with approval a statement made by Ludwig Erhard in 1948:
We must find our way back to a market organisation free from controls.
That is, clearly enough, the demand for a “free market.” But Erhard continues:
In place of intervention, we must insist on personal responsibility and performance… we must eliminate uneconomic enterprises, inflation must be squeezed out through strict monetary discipline.
A market in which personal responsibility is insisted on in which uneconomic enterprises are eliminated and which is subject to strict monetary discipline is not accurately described as “free.” Some institution would be needed to do the insisting and the eliminating, and to impose the discipline, and that institution, in performing these functions, would be controlling the market.
from Ideological Commentary 8, November 1980.