Stuff You Should Know - Is a free market "free" if it's regulated?

Episode Date: October 28, 2008

Prices in a free market are determined by the law of supply and demand, yet the US government has recently given billions of dollars to rescue large corporations. Check out this HowStuffWorks podcast to learn whether or not the US is still a free market. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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I'm here to help. And a different hot sexy teen crush boy bander each week to guide you through life. Tell everybody, everybody about my new podcast and make sure to listen so we'll never, ever have to say bye-bye-bye. Listen to Frosted Tips with Lance Bass on the I Hard radio app, Apple podcast, or wherever you listen to podcasts. Brought to you by the reinvented 2012 Camry. It's ready. Are you? Welcome to Stuff You Should Know from HowStuffWorks.com. Hey, and welcome to the podcast. Hi, Chuck. Hi, Josh. How are you doing? I'm great, man. How are you? Okay, I'm all right. I know for a fact that you are fully aware of the $700 billion bailouts. I don't say you're not. The what? The $7 bailout? The $70 bailout. If only. Yeah. Yeah,

of course you are aware. Okay, sure. I'm somewhat politically inclined. That's good. That's good. So, I was watching an unnamed TV cable news network, which is called CNN. Sure. An unnamed one. Right. And basically, I was watching basically just coverage of this bailout, what it means, all this. I'm hooked on the bailout, okay? Right. If you haven't figured it out by now, I just, I eat information up. Right. You should get a t-shirt. I'm hooked on the bailout. I'm hooked on Kashkari. Right. Yeah. So, I was, this one commentator, this one pundit was saying, so long free market. And I was thinking, you're stupid. You're a stupid person because we don't have a free market. Did you know that? Of course I do. We never had a truly free market. Well,

maybe an early on. Yeah. In the early heady, salad days. We're trading corn. America. Yeah. Yeah. I'm whiskey. Right. Or bracelets and trinkets for large tracts of land. Or hemp. That was a big one early on, sure. Yeah. So, yeah. I'm glad to hear you say that. I find it refreshing. Most people, when you say, what kind of economy does the United States have, they say it's a free market economy. Right. And it's just false. And let's talk about why it's false. Let's do it. I think we should. So, basically, the one, well, how about this? Let's describe a free market economy under the capitalist system. And then we can say, this is why the US doesn't have one of those. Okay. All right. So, you know who the father of capitalism was, right?

Yes. Charles Darwin. Darwin. Yes. He, no. No. Sorry. Terrible. Adam Smith. Right. Economist extraordinaire. And this guy was working from nothing. Right. This is all just out of this guy's head. He was good. Right. What year was this? He actually wrote The Wealth of Nations in 1776. Yeah. That's it. So, yeah. Exactly. So, the US is like, what kind of economy should we have? Right. What are they doing over in Scotland? They heard about this. Adam Smith, fellow, they bought them over, bought them dinner, and he told them everything they needed to know. And it's a great theory. Capitalism in theory is great. Right. Okay. So, basically, when you have a bunch of people that have a bunch of products, the supply outpaces demand. Right. Prices come down.

Exactly. It protects just the average consumer like that. When, you know, when demand is high and supply is kind of low, then companies are protected. And it's this constant swing back and forth. Exactly. Between protection for consumers and protection for producers. Right. System checks and balances. It is. And ultimately, whichever one is benefiting at any given point in time, everybody benefits. Right. Because if you have demand high, then you have companies who are just working away at making your stuff. Right. Jobs are up. Production is up. Exactly. And another point I made in this article is that these companies pay taxes. So, indirectly, even people who can't get employment are being helped through government funded,

taxpayer funded, social programs. Right. So, everybody's doing really well in capitalism. Employees are probably paid even more too. Yeah. When demand is high. Yeah. Now, there's some natural checks and balances that are built into the capitalist system. Like, for instance, capitalism kind of demands that companies keep wages low. You're trying to maximize profits because capitalism fosters competition. Right. You've got a lot of people out there competing for that consumer dollar that you want to compete and you want to keep your business efficient and trim. Right. One way to do that is to pay low wages. As low as you can get people to work for. Right. But Smith pointed out that if you pay people slightly higher wages, they're

going to be able to, and this is so 18th century, they're going to be able to feed themselves better and thus they'll be sturdier and be able to work harder and all of a sudden you're more efficient. You can extrapolate that into other terms. A better paid employee should be, theoretically, a happier employee who will work more, be more productive, that kind of thing. Right. I've seen that firsthand, actually, as a quick aside. I worked at Stone Mountain Park here in the great state of Georgia for many years. We had a laser show, still do. And I sold, as I think you know, the glow in the dark necklaces. I had no idea. I did. I did that for five summers, man. And the guy, it actually wasn't a park employee job. It was a private contractor that did this and he paid

us on commission. He paid these 16, 17 year old kids on commission. And man, we made, I made more money then than I do now. You're kidding. Well, if you factor in bills and things, absolutely. You must have been quite a hustler. And yeah, but that's, that's the long story short is we all worked our butts off to sell as many as these things we could for this guy because we made more money. Right. And in the meantime, the park employees were schlepping popcorn and candy and stuff. They're all sneaking behind the bushes and smoking cigarettes and making out and stuff. Yeah, they didn't care. No, they didn't care. It's like a government employee. Exactly. Which kind of brings us to our point down the road, which actually we shouldn't get to quite yet because

we're not done talking about capitalism. Okay. Let's put that segue off and we'll pick it up later. There is no need for the outside world because we are removed from it and apart from it and in our own universe. On the new podcast, The Turning Room of Mirrors, we look beneath the delicate veneer of American ballet and the culture formed by its most influential figure, George Balanchine. There are not very many of us that actually grew up with Balanchine. It was like I grew up with Mozart. He could do no wrong. Like he was a God. But what was the cost for the dancers who brought these ballets to life where the lines between the professional and the personal were hazy and often crossed? He used to say, what are you looking at, dear? You can't see you. Only I can

see you. Most people in the ballet world are more interested in their experience of watching it than in a dancer's experience of executing it. Listen to The Turning Room of Mirrors on the iHeart Radio app, Apple podcasts, or wherever you get your podcasts. The war on drugs impacts everyone, whether or not you take drugs. America's public enemy number one is drug abuse. This podcast is going to show you the truth behind the war on drugs. They told me that I would be charged for conspiracy to distribute 2200 pounds of marijuana. Yeah, and they can do that without any drugs on the table. Without any drugs, of course, yes, they can do that. And I'm a prime example of that. The war on drugs is the excuse our government uses to get away with absolutely insane stuff.

Stuff that'll piss you off. The property is guilty. Exactly. And it starts as guilty. It starts as guilty. The cops, are they just like looting? Are they just like pillaging? They just have way better names for what they call like what we would call a jack move or being robbed. They call civil acid. Be sure to listen to the war on drugs on the iHeart Radio app, Apple podcasts, or wherever you get your podcast. Yeah, sounds good to me. Okay, so this is all bright, shiny capitalism. The problem is, is when you factor in like the competition and the competitiveness, you actually come up with a survival of the fittest scenario. Darwin, I told you he factored in. Exactly. He's not the father of capitalism, but man is he ever important. Yeah. So you get all these companies

competing. And then there's this thing called a correction. Right. We know and love it as the word recession. Right. Okay. And all recession is a decline in productivity. And the reason these declines happen is because you got you have too many poorly managed companies. You have too many bad investments. So I don't know, like a mortgage back security or something like that. Right. You have all these things basically gumming up the works and they actually drag the market down. When the market goes into recession, these poorly managed companies and bad investments can't survive. Right. So they actually slough off. It's kind of like a recession to capitalism is like a forest fire to the woods. Right. You've got this raging fire that burns out all the undergrowth.

It gets rid of pests and diseases and pestilence and all that. And then the only thing left standing are these huge old trees that are allowed to flourish and grow. Exactly. And then eventually the cycle begins again. The undergrowth comes back into the pests and diseases. Sort of like what we've seen with the internet actually, the big internet boom that, you know, everyone, their brother started a website, a startup in the 80s, I'm sorry, in the 90s. And same thing happened there. The giants like the Amazon.coms, they stuck around and all the other ones fell away. So that was kind of a self correcting thing too. Right. That's the same thing. The reason that giants like Amazon.com stuck around is because they proved their worth to the economy. Right.

They provided a valuable service to the consumers judged. Hey, we like this. We want this. We're going to give it our money. So Amazon survived. Exactly. Other ones, they were bad ideas for better or worse. They didn't appeal to people. So they fell away. Right. That's exactly what we're going through right now is a recession. This makes me think a recession is actually kind of cool. It is. It's a very natural component of capitalism. Here's the thing. Capitalism in the United States, it's not, it doesn't have the full faith of the U.S. government. Right. Normally when we hit a recession, the government goes into socialist mode. We start buying stakes and companies and start, you know, flooding the market with all sorts of money and adjusting

interest rates, that kind of thing. Exactly. So here's where we enter how the U.S. is not a capitalist free market economy. Right. I love the examples he used in this article, too, because I don't think many people ever think of these as bucking capitalism in the free market, but it's exactly what it's done. Yeah. Well, the obvious one is the SEC. Yeah. Right. The Securities and Exchange Commission. Yeah. And basically they watch the stock market. And the reason the SEC exists, and I say in the article, the only reason why or the very fact that the SEC exists, it shows that capitalism in America isn't based on a free market economy. Exactly. But the reason the SEC exists is because in the U.S. for 100 or 200 years almost,

this capitalist economy eventually devolved into its worst form of itself. Right. He had like robber barons that were, you know, as Ayn Rand, the novelist, the capitalist novelist, would argue these titans of industry helped build modern America and modern America's economy. But as somebody who was maybe, you know, happy with labor on the side of labor would say, yes, they did, but they built it through the direction of the suffering working class. Right. On the backs of the working class. Exactly. So you've got two sides of the same coin. And ultimately, if you look at the federal government's track record, they usually side on, you know, the suffering, alleviating suffering of the working class. Right. They're like, thank you very much,

Robert Barron, for endowing this entire city. But, you know, we're going to have to step in. And they have. The Securities and Exchange Commission was a big one. What else is there? I know another one was the, well, the government getting involved in big companies like Carnegie Steel and Standard Oil and the Railroads Union, Union Pacific Railroad and big major corporations that all of a sudden the government was getting, putting their finger in their pie and saying, you guys got a little too much power. We need to step in and kind of regulate you a little bit. Yeah. Because that competition from a hundred plus years of unregulated, unregulated capitalism led to some really nefarious business practices. Like, you know, corporations saying that

they had, saying to their investors that they'd made, you know, 17 billion dollars or back then, 17 million dollars in profits, but turned around to the government and called for, you know, rode off 11 million in losses, things like that. So you create the SEC. Or monopolies. Monopolies were the first one. Like you said, the railroads and steel companies and all that, they had too much power and they were all basically running the show in their industry. If you wanted steel, you had to go to this one company. If you wanted oil, you had to go to this one company. Right. So they could set whatever prices they want. And really the first appearance of government regulation into the free market was the Sherman Antitrust Act of 18,

what, 90? 1890. Yeah. 1890. Okay. Good enough. But that was hardly the end. You've got food packages. Right. The FDA in itself is sort of, you know, sort of the same thing. Well, big time. I mean, really under a free market system, somebody should be able to put as many rat excrements as possible. A million excretions. Yeah. You and I know that there is a very finite amount that can be allowed in there. Sure. So the FDA regulates business. It interferes with the free market. Right. The same thing with the Federal Trade Commission. They were actually created to encourage competition among corporations and prevent monopolies. Right. Like that's pretty much their sole reason for existing. Right. Even the very idea of setting

a minimum wage is the government getting involved in the business. Yeah. It really isn't. I mean, it took a lot of labor strikes, a lot of violent clashes with police. The anarchists were coming up for a little while there. And basically, ultimately, government fell on the side of the people. If you really look at, again, the federal government's track record over the last hundred or so years, they've ultimately sided with the people. Right. I encourage you to look at the record, my friends. Yeah. The record's out there. I mean, it's in the faces of the happy employees at the FTC and the FDA and the SEC. You go look those people in the eye and you can think, the government cares about me. Right. Yeah. So what do we have, though, if it's not a

free market? What would you call it? I would call it a managed economy. And I wouldn't be the only one to call it that. Okay. You didn't come up with that term? I didn't. It's a managed economy. It's basically what we have. You have a free market, but then there's some government regulation and oversight. Hopefully in all the right places. Yeah. So the next time somebody asks you, what kind of economy does the United States have? Don't say free market. Don't say credit. You say we have a managed economy. Right. And if they want to know what you're talking about, tell them to go type in is a free market free if it's regulated on howstuffworks.com and then punch them in the head. Exactly. And stick around to find out where Chuck got his current gambling

problem. But first, there is no need for the outside world because we are removed from it and apart from it and in our own universe. On the new podcast, The Turning, Room of Mirrors, we look beneath the delicate veneer of American ballet and the culture formed by its most influential figure, George Balanchine. There are not very many of us that actually grew up with Balanchine. It was like I grew up with Mozart. He could do no wrong. Like he was a God. But what was the cost for the dancers who brought these ballets to life where the lines between the professional and the personal were hazy and often crossed? He used to say, what are you looking at, dear? You can't see you. Only I can see you. Most people in the ballet world are more interested in their experience of

watching it than in a dancer's experience of executing it. Listen to The Turning, Room of Mirrors on the iHeart radio app, Apple podcasts, or wherever you get your podcasts. The war on drugs impacts everyone, whether or not you take America's public enemy. Number one is drug abuse. This podcast is going to show you the truth behind the war on drugs. They told me that I would be charged for conspiracy to distribute 2200 pounds of marijuana. Yeah, and they can do that without any drugs on the table. Without any drugs, of course, yes, they can do that. And I'm the prime example of that. The war on drugs is the excuse our government uses to get away with absolutely insane stuff. Stuff that'll piss you off. The property is guilty. Exactly. And it starts

as guilty. It starts as guilty. Cops, are they just like looting? Are they just like pillaging? They just have way better names for what they call like what we would call a jackmove or being robbed. They call civil acid for it. Be sure to listen to the war on drugs on the iHeart radio app, Apple podcast or wherever you get your podcast. So Chuck, where's your gambling problem come from? I've seen you. I made like 150 bucks off you during this podcast. Right. How where is it from? Well, as you know, Josh, I have the Jimmy legs. I have the jumpy legs. I have, I think the technical term is RLS, restless leg syndrome. That is the technical kicking you as we speak. I know it hurts, but $150 is a, it goes a long way. Right. Well, Josh, I had this, this

malady and I'm on some medication to help control my Jimmy legs. And that medication has a side effect and one of them is a compulsive activity like gambling. Yeah. So I had the Jimmy legs and next thing you know, I'm like heading out to the Cherokee, North Carolina every weekend to gamble. That's great. Well, you know, if I had a kid, I'd say you're putting it through college. What's this medication? Well, I can't divulge the name on the air, but it's cured my Jimmy legs, but now I'm way in the hole. That's great. The casinos. Well, thank you, big pharma. I'm going to go spend this 150 bucks on scratch off tickets. Right. And you can read actually about this in a very cool article called the top 10 weirdest side effects of drugs that you can take to make

you feel better. Also known as top 10 weird prescription drug side effects. You can find that on howstuffworks.com. For more on this and thousands of other topics, visit howstuffworks.com. Let us know what you think. Send an email to podcast at howstuffworks.com. Brought to you by the reinvented 2012 Camry. It's ready. Are you bridge water? The hit fiction podcast is back. A supernatural thriller presented in immersive 3D binaural audio, the Bridgewater Triangle. There is some kind of mystical force in this region that attracts monsters and paranormal activity. There's something beyond our understanding going on here. Starring Supernatural's Misha Collins, The Walking Dead's Melissa Ponzi and Rogue One's

Alan Tudyk, written by Lauren Shippen and created by me, Aaron Mankey. Listen to Bridgewater on the iHeart radio app or wherever you get your podcasts. Attention, bachelor nation. He's back. The host of some of America's most dramatic TV moments returns with the most dramatic podcast ever with Chris Harrison. During two decades in reality TV, Chris saw it all and now he's telling all. It's going to be difficult at times. It'll be funny. We'll push the envelope. We have a lot to talk about. Listen to the most dramatic podcast ever with Chris Harrison on the iHeart radio app, Apple Podcasts or wherever you get your podcasts.