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Anthony Willy

Democracy and the Free Market Economy

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We in the anglosphere have become so used to conducting our business affairs in a “marketplace” that we take it for granted and if we give it any thought at all we ignore how fundamental it is to our way of life, preservation of our liberties, and to the health of our democracy. It is no accident that those who seek to destroy those liberties and democracy must first destroy the market economy by either state ownership on the Lenin model or an ersatz market place on the Russian and Chinese models. But what do we know about the history of this phenomena.

It is no exaggeration to say that trading is as old as human habitation on the planet and is the natural state of affairs in human interactions. It is not a theory or a philosophy. It is nobody’s invention rather it is a deeply rooted and practical necessity of individuals working together in order to survive as a people; it just happens. In its earliest manifestation it arises from one person owning something that another would like or needs to acquire. To take a simple example. I plant a few pumpkins (not a vegetable I enjoy) for personal consumption and find for whatever reason I have a surplus beyond my own needs. My neighbour has been eying my crop and for a consideration, money or labour for example asks to acquire some. I agree and a commercial transaction comes into being which we have come to call a “contract.” There needs to be the payment otherwise parting with the pumpkin becomes an act of charity which has nothing to do with commerce. Encouraged by my good fortune I decide to expand my plantings next year to ensure a greater surplus but when harvest time comes, I am faced with a problem. I need buyers and I don’t have many neighbours who want pumpkins so either I find buyers, or the pumpkins will be left to rot. That involves locating interested parties beyond my immediate locality and persuading them to the benefits of buying my pumpkins. If I am successful, I end up with a surplus not of pumpkins but whatever is the currency of the day. Furnished with this I buy more land grow more pumpkins and expand my horizons. But that gives rise to  another problem. I will have to travel further and further to make the sales and I will need a means of getting the pumpkins to the buyers. I solve the matter by asking a handy neighbour to make me a cart on which I can transport the pumpkins to my ever-widening customer base and the cart maker will want payment either in kind or money.  It is tiring pushing the cart round the countryside and I am not getting any younger. My wife makes the obvious suggestion, as women often do, of buying a horse and getting a bigger cart. Problem solved but there is the nagging doubt that there must be a better way of doing this business. In discussion with my neighbours, who produce goods that others want I find they have similar problems. The horse breeder needs a place to sell his progeny, another neighbour who raises cattle wants to sell the skins and the surplus meat and so on. We discuss what is a novel conundrum and unsurprisingly it is the horse breeder’s wife who comes up with a suggestion. Why not get together and buy that bit of vacant land near at hand and set up some tables with shelter from the elements and offer our wares to any passing customer. This is immediately popular not only does it solve the problem of finding customers and taking the goods to various buyers but they will come to us. Then we find there are a number of others wanting to dispose of their surplus produce and the more the variety of produce the greater the numbers of buyers that seek a place at our “market” and so it grows. It also creates the wholly unexpected windfall that as we own the land, we can charge other users rent for their stalls. In modern parlance we have put our capital to work and derive a return without actually any extra personal input. Thus, is born the marketplace, the buying and selling of goods and also the notion of the value of a capital investment.  All of this is achieved by individual effort without any outside interference. It leads to the establishment  of villages, and as commerce grows , towns and cities. For a range of reasons more and more people find it convenient to leave their rural seclusion and go to live near the marketplace in the villages and many such villages and the towns and cities which grew out of them still exist to this day. 

So fundamental is the human desire to trade freely that by the thirteen hundreds in England it had outgrown the village, the town, the cities and even the country. Traders got together in what they called “companies” which then meant no more than a group with a common aim, and in ever increasing numbers they looked beyond their shore. One such was the Eastland Company comprising a group of merchant adventurers which came into being in the fourteenth century to trade furs with Russia and the Baltic states. Quite a step up from our pumpkin seller with need for boats and crews to man them.  The pattern of international trade continued and by the sixteen hundreds traders turned their eyes beyond Europe to the Orient, and the East India company was founded. Because of the risks of trading over such vast areas the company sought and was granted royal protection from competition. In this way this group of merchants controlled from offices in the City of London oversaw, with the consent of the rulers the establishment of two trading settlements in small coastal enclaves on the Indian sub-continent. Further similar ventures in the East Indies (now Indonesia, Malaya, and Singapore). All achieved against the fierce opposition of the French and the Dutch both of whom had similar ambitions, and so began the extraordinary and historically unique story of an Empire founded on trade. The traders who settled in Madras to buy silks and spices did not come with an army intent on conquest. They merely wanted to be left alone to trade and make money for their shareholders. Of course, life is not so simple, and others wished to share in the new found wealth. To this end it became necessary for the Company to employ what we would today call security guards to protect their facilities and client base. Over time the company, to protect its investments became involved in the unending warfare between the competing Indian rulers principally but not exclusively between Muslims and Hindus which has continued to this day. In these wars the Rulers sought to avail themselves  of the superior British military technology of the troops protecting the English traders. In this way more and more troops were needed to assist in these local wars. The snag was that if the company did not assist the local Amir, then the trading concessions would be revoked to the detriment of the shareholders. The inevitable happened and all of this outgrew the means and rational of the Company necessitating the Crown undertaking what became the colonisation of India in part by conquest and in part peacefully. From those beginnings the trading spread around the known world to the Caribbean, North America, parts of Africa and later Australia and New Zealand. These territories together with lesser but vital acquisitions such as Singapore became the British empire on which geographically the sun never set. Viewed in this way  there is much force in the observation of Sir John Seeley a nineteenth  century historian that; “the Empire was acquired in a fit of absent mindedness.” It certainly inspired Lord Normanby’s instructions to Captain Hobson that he come not as a conqueror but with an offer to do business with and grant to the Tribes of New Zealand the then priceless boon of citizenship of the British Empire. In return for which the natives acknowledged the Crown as their sovereign.

When the Empire  fell as they all do, these early traders left behind a legacy far more important than colonial glory. They bequeathed the fundamental human yearning for individual liberty which later flowered into democracy something absent from most of the rest of the world at that time; and that is not all. It left in place a law common to all market trading. For as our village traders quickly learned rules were needed to ensure that the marketplace worked efficiently and fairly. If I bought a pound of pumpkins, I needed to know that is what I got and not something less or unsound, I needed to have recourse if I was cheated on the change etc. But all marketplaces did not necessarily adopt the same rules which were at best only local customs and difficult to enforce. Of necessity over time these rules became what we now know as the law  of contract and outside of the criminal law resorted to more than any other part of the common law in litigation in the courts, arbitration and mediation. The man credited with the codification of disparate market practices is Lord Chief Justice Mansfield. He surveyed the various trading customs and simplified them into what became the law of contract. That common legal system then migrated wherever the English traders took root: North America, Asia, Australasia, Africa, the West Indies and remains the basis of the law regulating contracts to this day in Britain and those other parts of the world. In addition, in one sentence, Lord Mansfield changed society and politics for ever by his ruling in the case of “Somerset” the runaway slave brought to England by his master. The owner sought to recover the slave as an item of property by court action. Lord Mansfield rejected the claim and with the ringing declaration “let the black go free the air of England is too pure for a slave to breathe” found for the slave. That one sentence marked the beginning of the end of slavery in the English-speaking world. The case also has a crucial significance to the continued  operation of free market trading by establishing that it is just that, free and cannot accommodate a claim to own the body of another. Thus, was born the notion that labouring for another is a valuable commodity and that  the labourer must be free to put a price on it. We now call this free market bargaining in labour the trade union movement.

This means of organising society by allowing the untrammelled myriad daily personal decisions of the market place fulfils our most basic needs of food and shelter leading to the intellectual drive involved in the rise of science and the arts in what we call our civilised society. Above all it contributed to what may be mankind’s greatest achievement; the flowering of democracy which for many years we have taken for granted. However all is not well in the free market garden. Until recently the law was clear that any trader incorporated as a company with shareholders and a board of directors, (and that is most of the larger traders) the directors owed duties solely to their shareholders, and their only function was to maximise the profits of the company for the benefit of the shareholders with whose money they had  been entrusted. Increasingly this is no longer the case and there is a growing tendency for governments and pressure groups to require the directors to be influenced in their decision making  by extraneous matters such as global warming and gender politics. The Human Resources departments of many of New Zealand companies have responded enthusiastically to these demands with the result that the company is no longer able to trade freely and maximise the returns to the shareholders. In some cases this has resulted in the company ceasing hitherto profitable ventures with the loss of autonomy that entails.  Over the longer term nothing could be more destructive to the survival of free markets particularly as these are not constraints suffered by competitors in the totalitarian economies with whom we do business. In addition to these self imposed fetters there are of course ever present and more malign alternatives.  


The principal alternative to the market economy is communism/Marxism. It flowered in Russia and its satellites between 1917 and 1986 when the Berlin Wall came down. It involves the collectivisation of all mercantile activity in the hands of the state and its distribution (in theory) to each according to his needs. In this system there is one employer, the state  and the efforts of those who create the wealth accrue solely to the state. Absent entirely from this system is the notion of individual liberty to conduct one’s business affairs as one sees fit, and of course any notion of profit as a return for effort. The Commissars would visit pumpkin man at harvest time confiscate his crop and if he is lucky leave him with bare subsistence. The inevitable consequence is the loss of all of the business activity generated by Pumpkin man together with the other freedoms associated with the individual; freedom of speech, thought, religion, the right to travel and settle where one wished, ownership of any sort of property “real” or “personal” and a voice in the governance of the society. It was not until the nineteenth century that earlier collectivists stirrings bore fruit in the writings of the likes of Karl Marx. He was able to fix on the unacceptable shortcomings of the free market economy  principally the exploitation of labour by the employer. Human nature being what it is and imbued with the seven deadly sins, one of which is greed, there was much force in Marx’s defence of what he called the proletariat against the rapacity of some employers. This was however not a desire to improve the market economy but merely a cloak for his real agenda which was its destruction along with democracy. It is his solution which was a classic case of babies and bath water which was untenable in a free and democratic society and has remained so ever since. As a matter of government policy and public acceptance the excesses of the employer and the vulnerability of the employee have in any real sense ceased to exist and the free market continues to flourish.

That Marx’s prescription for substituting a system of state control for the free market is contrary to human nature has been amply borne out by the experience of those despots who have tried to impose it. The reason is simple, nowhere in the world has it flourished by the voluntary acceptance of the people. All such despots have failed sooner or later and will continue to do so, including those, such as the Peoples Republic of China and Russia who have attempted a bit of both by allowing a “market economy” to operate but only with the consent of the state and without democracy. The toll in human suffering when the state snuffs out private enterprise has been incalculable. History is littered with examples but one which is fresh in our minds  was Joseph Stalin’s prescription for Ukraine, then a part of the USSR. Under the direction of his Commissar Nakita Khrushchev the whole of the prosperous Kulak farming community in that afflicted country was “collectivised,” a euphemism for theft, and the fruits of their labours shipped to other parts of Russia. The result was the death by starvation of millions of Ukrainians in what became known as the “Holodomor” every bit as horrifying as the extermination of the Jews at the  hands of the Germans. Unsurprisingly the present generation of Ukrainians  are contemptuous of Stalin’s reincarnation, Putin and his intentions for their country based as it is on the same time worn lies and demonstrable deceit. The free market will not survive in Russia under Putin malign diktats. For the  “free market” there is a facade only and the Marxist are already resorting to type with state confiscation of  large swathes of what were privately owned business as western sanctions begin to bite. Given the extent of the sanctions it is doubtful those businesses will ever return to private ownership unless Russia allows democratically elected governments- inconceivable while Putin and his KGB clique of thugs remain in control but not without some hopeful  precedent. Kerensky tried it briefly in 1917after the fall of the Tsars and it worked until snuffed out by Lenin, also Yeltsin in the nineteen eighties until he was despatched by Putin and the KGB.

Tribalism and Co-governance

The other alternative to democracy and the free-market system and one gaining a lot of airtime among the “intelligentsia” in New Zealand is that of tribal control of the means of production and exchange whereby each tribe owns and controls its own assets and, human nature being what it is defends them from the covetous eyes of its neighbours. This alternative to free markets and communism was that practised by Maori tribes in New Zealand before the arrival of the Europeans, and it no doubt worked throughout their uninterrupted occupation of the country. It has shortcomings however as a means of maximising the wealth of society not least of which are: nobody owns anything and therefore cannot prosper from their labours (no pumpkin man), it invites tribal warfare if one tribe is being seen to do better than the neighbour, it creates no enduring “wealth” and causes envy and disaffection when eyes are cast  over the fence at those tribes enjoying the fruits of their labours. A recent example is Southern Rhodesia which, before, the shameful desertion of the Smith government by the Labour Party under Harold Wilson was the breadbasket of Africa, a prosperous and vibrant society capable of balanced budgets and work for those blacks or whites  who wanted it. The fruits of the marketplace funded enviable schools and universities, a first world health system and powerful armed forces capable of defending these tenets of civilisation. This all disappeared literally in a puff of smoke with advent of Robert Mugabe and his tribe. Property was stolen from the largely white owners, but also black if you were a member of the wrong tribe. Inter-tribal violence became the norm, and the whites were pushed out many settling throughout the anglosphere. The result was the neglect of this once prosperous land and the destruction of its economy with inflation rates reaching into the hundreds of percent. All of the social attributes of a prosperous free market  economy – education, welfare, a peaceful settled society, and the rule of law – disappeared and it has taken many years for the partially restoration of a settled society.

There is nothing exceptional about this course of events, it is to be found in the remaining tribal societies mostly in Africa. It is always accompanied  by horrendous violence such as the genocide that occurred in Rwanda and to a lesser extent Kenya. Unsurprisingly after the bloodletting this is now in the past as most African countries have rejected communism and tribalism and have embraced free markets and democracy (albeit a bit dodgy at times). But astonishingly in New Zealand with a record of a settled and prosperous society second to none separate Maori tribal representatives, egged on by other worldly academics are promoting a tribal take over of our hitherto democratically elected institutions based solely on race. Its proponents were exposed at the entirely farcical select Committee hearing into the creation of race based seats on the Canterbury Regional Council where egged on by members of the committee counsel for the sought full co governance of Maori and non Maori. All of which is captured on film by Joseph Mooney the National party MP on the Committee.

This is a notion appears to be greatly favoured by the present government. It is difficult to write about it because as far as I know it is not practiced anywhere else in the world. But in so far as it means anything it appears to involve shared sovereignty between a part or all of those claiming some Maori antecedence and the remaining population of New Zealand (the shares are unspecified). The idea appears to stem from wording used by some of the judges in the 1980s State Owned Enterprises case to the effect that the Treaty of Waitangi established a relationship between those who signed the document which is akin to a partnership. The word akin means similar to but different from and clearly the Judges were merely attempting to give meaning to the words “principles of the Treaty” which appeared in the Act as being similar to the duties of good faith and fair dealing which the law implies into commercial partnerships. The decision is not authority for the proposition that a partnership exists between The Crown and some or all of the  Maori tribes living in New Zealand in 1840. Indeed, it cannot be for such is a Constitutional impossibility. The glib phrase also begs the obvious questions; who are the partners? Is it all Maori people whether or not they wish to participate? What is the partnership property and what are the shares of the respective partners in that property? They can only be those shares on which the parties agree because agreement is fundamental to the very existence of a partnership. Then there is the obvious difficulty that no partnership ever exists in perpetuity. There must be a mechanism for ending it if one or more of the partners wishes. What might that be? What is the nature of the business carried on by the partnership? Those who support the partnership myth never attempt to answer these fundamental questions for the obvious reason no doubt that there are no answers and all that is left is an amorphous wish list which would do credit to Lewis Carroll in his “Through the Looking Glass” and the White Queens’ confident assertion that “words mean what I say they mean.” To then extrapolate this nonsense to a claim that the business of the partnership is the shared governance of the country involving as it does the destruction of democracy and rendering the market economy unworkable without the existing beneficiaries being consulted could only occur by a putsch, or revolution not by reading words into a document which are plainly not there, and which are contrary to the intent and plain meaning of that document. Where it not for the oxygen given by this government to such a bizarre notion it would be left to fester in the minds of a tiny minority of the disaffected egged on by academics seeking a place in the sun to which their contribution to society does not entitle them.

Pity help any political party wishing to be a government in waiting which does not disavow this dangerous and socially destructive nonsense. Thus far we have only New Zealand first leaders and the spokes persons for ACT who have unequivocally stated they will halt the separatist Maori bandwagon and unwind any of the mischief done thus far. The National Party are late in declaring their intentions and it does them no credit.


How to choose between the competing systems, democracy and its hand maiden the market economy? As is so often the case Winston Churchill summed it up in a few words: (with apologies to the ladies):

At the bottom of all tributes paid to democracy is the little man walking into the little booth with a little pencil putting a little cross on a little bit of paper – no amount of rhetoric or voluminous discussion can possibly diminish the overwhelming importance of the point

I like to think that my pumpkin grower’s descendants being in the engine room of democracy are among the pencil wielders.