A central feature of free-market, neoliberal ideology is the automaticity of the market, the self-regulating market. As I describe in my keynote essay, “What Is Market Capitalism and Why Do We Need to Understand It?“:
The market mechanism mobilizes capital investment assigning it to best uses, provides automatic self-regulating supply optimal to the needs of customers, and allows labor and customers autonomy to enter or leave.
Addressing this claim later in the essay I noted:
For example, petroleum is the most important single commodity in the world, both in terms of its central uses and its share of world economic output. Yet the entire history of this industry displays huge swings in supply and demand that are so disruptive that, regardless of the idealized models of market capitalism, both producer groups and governments have tried over many decades to bring order to this market through price or production controls. There has been no workable solution to date.
Here is another historical example of the failure of the real world economy to support the principles of free-market capitalist ideology.1
In the 1920s the price of cotton varied between $0.09 and $0.29 per pound. In the 1930s the overall price level fell substantially, from a low of $0.06 in 1931 to a high of $0.12 in 1933 ending $0.09 in 1939. During these two decades actual production of cotton always exceeded demand in the marketplace by between 10% (1924) and 110% (1939). During the 1930s over-production of cotton chronically ran over by 50% and more. Since cotton is a durable product all of these years of over production just swelled the mountains of cotton sitting in warehouse waiting for demand. In 1933 the cotton stored in warehouses equaled the entire world demand. The miracle of the automatic self-regulating market in action.
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Also published on Medium.