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Three Recent Examples of the Failure of the So-called "Free" Market to Meet Modern Society's Needs

Public Health

Flu seasons arrive predictably every year. Demographic data allow the prediction of how many flu vaccines will be needed. However, because freemarket fundamentalism has become fashionable, the US has allowed the supply of these vaccines to be determined by profit motive.

This year's snaffu over the failure to have sufficient supply of flu vaccine is a good example of a market failure. This is something of which honest economists are well aware.

This case is not only a matter of pharmaceutical companies not having sufficient profit motive to ensure sufficient supply. The market failure seems to be a case of outsourcing to the lowest bidder, and cost-cutting resulting in a catasrophic breakdown in manufacturing.

A California pharmaceutical company that supplies the US public with flu vaccines outsourced manufacturing to England (first market failure). The British manufacturing plant has a long history of poor quality control, surely due to cost-cutting measures to be competative in a global market (second market failure). As a result, their manufacturing process resulted in the contamination of the flu vaccine.

The take-away message? When certainty is needed, don't throw your faith behind the market.

The Environment

The privatization of drinking water and airport administration has been praised by many who have total faith in the almighty "invisible hand" of the market.

Historically, drinking water supplies have been held in the public trust, because this is a vital common need. Reliability in water quality is not only a need of the common people, various industries depend on low cost, high quality water supplies for their manufacturing. Fighting privatization of drinking water supplies is a major battle-ground in the global justice movement. CLICK for one of many articles or just search the internet for water privatization.



Similarly, airport administration is so vital that they have also been managed by state departments of transportation. This is evidenced by government interventions, by both Republican and Democratic administrations, when the national interest is at stake (Remember the firing of air traffic controllers by Reagan?). The argument has been that air transportation infrastructure is a vital national interest.

So, knowing the vagaries of the market, how can we allow airport operations to be privatized?

"Inside EPA" reports that "The weak financial conditions of two industries for which EPA may develop a new water discharge regulations -- airports and drinking water facilities -- may inhibit the agency's efforts because it must consider an industry's fiscal health when crafting new rules, sources say."

In other words, they are saying "Sorry, this industry is too weak to protect water quality from de-icing operations, among other things." Freemarket fundamentalists want it both ways; the airports are "public sector" when it comes to supressing labor rights, and are "private industry" when it comes doing the right thing for the environment. Consider this an example of why people use the term "so-called" in front of the term "freemarket." It's free when plutocrats want it to be free; otherwise, they get their friends in Washington to do their bidding in the name of "national interest."



Note: Inside EPA, Vol. 25, No. 36 September 3, 2004.

www.insideepa.com
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