Exactly What Does The ‘”Free’” In Free Market Mean?

by Henry Harding

The Libor was rigged, the wholesale gas market is a fix, the biggest of multinationals pay next to no tax on their profits but bleat that they pay payroll on their minimum wage workers, insisting that this is both responsible and, probably, humble. Several UK water companies spend a great deal of money to ensure that supplying life’s essential is the only socially responsible thing they do.

Having bought the infrastructure built by our forefathers for pennies in the pound, and then left it leaking like a Government enquiry, they presumably justify their position by pointing out that they have enough crap coming down their pipes to deal with already. So be grateful, pleb.

So why are they called free markets? In what world can monolithic corporate monsters dominate everyday life, to the absolute exclusion of any meaningful competition, and still be called free? In an Orwellian mood it may be suggested that it is simply Newspeak, a distraction of language to trick our minds into believing the opposite of truth. Leveraging maximum possible value is really just a posh way of saying screw the customer for all they got. Price gouging in a disaster zone, as Governor Christie of New Jersey reminds us, is a crime. Outside of a disaster zone it’s a business model. On Wall Street and in The City, it’s a very lucrative way of life. So let’s take a trip to a foreign beach to see the view from there.

Catalan Bay on Gibraltar is a beautiful place. Gibraltar, or The Rock, is nestled at the tip of Spain and sits at the point where the Atlantic meets the Mediterranean and where Europe meets Africa. Ahead, across the Straits, are the Atlas mountains of Morocco. At night you can see the diamond lights of the Spanish enclave Ceuta so clearly you can almost hear the illegal immigrants being beaten as they climb the razor wire fence to the West. Above on the top of The Rock, even higher than the squawking seagulls and occasional ape call is the NATO listening base, so sensitive it can hear the screams of those immigrants. So sensitive, they will shoot you if you try to visit. But that’s not why we are here.

On this side of the Rock, offshore and far from the money laundering in town, glitter the tanker lights. At night they light up, not to look pretty, although they do, but simply to avoid collisions. When you are carrying hundreds of tons of highly flammable petroleum products you really don’t want other boats banging into you. Things tend to go boom in fairly catastrophic ways, and that’s expensive. Miles of complex pipework traverse these ships, so much so that a Microsoft screen saver would be embarrassed. They come from the Middle East mainly, but some from the Far East. Exotic places with faraway names destined for more mundane locations like Grangemouth, Milford Haven and Teeside. With that competition I think we’ll stay on the beach a while. 

The Straits of Gibraltar have always been a place of trade and traffic. The nearby Spanish town of Tarifa became the source of the word tariff after the Berber commander Tarif ibn Malik took the town in 710 AD and imposed a fee on any passing trade. These days the tankers extract a different fee.

In a free market the laws of supply and demand set the price. If there is more demand, or less supply, the price goes up. Less demand, or too much supply, and the opposite happens. One doesn’t need a Harvard MBA to realise that if the supply can be artificially restricted then high prices can be maintained regardless of the real market position. If the commodity is an essential supply, restriction can shift prices to heights normally only seen by Boeing 747s. Those sparkling lights on the tankers in front of us suggest that there is a lot of supply. But gas/petrol prices just keep going higher. In a free market a glut of supply would force a company to take reduced profits, perhaps even to go bust, but the ships with “no smoking” signs so large they can be read from the shore tell the lie.