Skip to content

The Free Society

The Free Society

The degree of freedom in an economy is another classic ideological dilemma. Traditionally, the issue is about the degree to which the economy needs to be regulated by the market and governed by the state. However, this approach, again, has an inherent ideological overtone to it. In real life, the degree of freedom in an economy does not depend on what name plates are hanging on the doors of those deciding in favor of “wealth” or “power.” It depends on the extent to which these people are driven by the law adopted by the society and not by their own interests.

The true freedom issue is whether some people are above others or whether everyone is equal before the law. By calling the power of the economic elite a “competitive market” or the power of the political elite a “social state,” we do not get any closer to the real freedom. For freedom, it does not matter what social group has an advantage, the bureaucracy or the rich, since in both cases there is lack of people’s equality before the law.

A truly free economy must be regulated based on the law; the rules of the game must be clear and the same for everyone. A financial system supporting a free society must provide people maximum freedom in controlling their money that represents their personal economic power in the society. This freedom involves tax treatment that is clear, stable, and socially accepted as fair, as well as nondiscrete money emission; nobody has the right to take money away from others or to create new money at one’s own discretion.

Freedom does not care about class position. Wealth, like political power, is a form of social leadership. It is an action and not a status attained once for all. Political leadership as legitimate power can be obtained only as a result of free elections. A free economy implies that wealth as economic leadership is attained in a similar way, through open competition. However, what is still taking place in the real financial system is feudalism, where belonging to the elite is sought by those who have a status as wealthy people, regardless of their ability to back the status with real action.

Owners of large fortunes always have a competitive advantage, having access to better education, health care, and financial and any other resources. This social competitive advantage converted into economic activity creates market advantages that, in turn, make it possible to maintain the large fortunes. While attitudes toward this model may differ, it could be generally agreed that this working system of market economic institutions, even though creating unequal starting positions for different social groups, is better than lawlessness and chaos in the society. To get rich in such a society some people will have to try harder than others, but at least they have the chance.

The problem, however, is that in reality this model does not exist. The modern financial system works to conserve wealth regardless of how hard one tries. There is no need to convert money into business since the money can create wealth on its own. This system has nothing to do with free market economy. By creating the institution of social rent, in the form of money interest, and delegating the discretionary right to issue new money to the private banking system, it virtually spurns the foundation of market economy, which is closely tied to competition and economic rewards.

This system leads to conservation of the social structure. Now, can one call free a society in which a huge number of people have no choice? In practice, freedom is choice. If people are unable to choose what they do and how their skills are realized in the society, if they are severely bound by fear of losing their subsistence and have no resources to implement their initiatives, this is a society of slavery and not freedom.

With regard to the financial system, freedom means creation of an infrastructure that ensures easy access to liquidity for implementing business initiatives. The financial system must encourage all money owners to invest. Undoubtedly, an investor has an absolute right to choose the project and contractors that he or she believes to be a success, as well as the terms that suit both him or her and the management of the project being invested in. Moreover, he or she has the right not to invest and to save his or her money—but in this case, he or she must pay for the insurance provided by the society. This system both benefits entrepreneurship and has an enormous stimulating impact on the economy.

Each entrepreneur generates huge value to the society, both as a production entity and as a financial investor. By investing money, a businessman creates new jobs, pays salaries, and creates demand for his suppliers, helping them to generate revenue. Even if the business has to close up eventually, it leaves behind many benefits received by the economy that would not have been received without its initiative and risk-taking. It is this endless cycle of business activity that the free market consists of, in which some people win, others lose and then start anew, and so on.

The credit banking system creates enormous pressure on the economy by establishing formal requirements to fixed money returns with predetermined profitability that has no economic grounds under it. Such a system creates an illusion that money can grow without any risk or effort, which simply has nothing to do with real life. The rules according to which the banking system operates will inevitably be harmonized with economic laws, where money owners will pay for saving their money, while investors willing to generate profits will bear the business risks.

The financial system of a free market requires the following:

  • the impossibility to issue new money other than by the democratic decision of the entire society
  • the presence of a financial infrastructure providing effective access to liquidity for business development
  • a tax system based on people’s equality before the law and the correlation between any taxpayer’s benefits received from the society and the size of the taxpayer’s tax burden (and not the benefits provided to the society by a taxpayer and his or her tax burden as the case is now), and
  • stable rules of the game, such as long-term regulation that excludes arbitrary rule of the current powers that be.

Back to the previous page                                                                        Continue reading