In American discourse the phrase “free market capitalism” has evolved to mean something very specific: a market for goods and services entirely free of any government involvement or regulation. But this is a perversion of what the term originally meant. The “free market” as originally conceived, meant a market in which all suppliers and consumers of goods and services were able to compete with each other in pursuit of their own self-interest, free of coercion from any single or small group of economic actors (which includes the government, but which also includes any extraordinarily powerful private actors as well).
As originally conceived, in order for a “free market” to exist at least three factors have to be present: (i) there must be a sufficient number of suppliers competing with each other to sell products/services, and no single supplier or small group of suppliers can be large enough to set prices on its own; (ii) there must be a sufficient number of consumers competing with each other to purchase products/services, and no single consumer or small group of consumers can be large enough to set prices on its own; and (iii) there must be transparency of information, such that all consumers and suppliers in any particular market can bargain rationally, and no particular economic actor can use superior information to obtain an advantage over another when bargaining.
Only if all three factors are present are market participants truly free to make rational decisions in pursuit of their own self-interests. But – very often – one or more of these factors is missing. When that happens, and in direct furtherance of free market principles, the government needs to step in and correct the system so that the benefits of free market capitalism can flow once again to society.
In fact, this is the entire point of our antitrust, labor protection, and consumer protection laws. We have laws to prohibit (or, in the case of utility companies, regulate) monopolies because monopolies give too much power to a single economic supplier and that distorts the market until it no longer is “free” – it is enslaved to the monopolist. We have laws establishing minimum wages, overtime pay, standard workweeks, and union protection because otherwise employers have too much economic power to “consume” labor, and can very often essentially force people to work for slave wages. And we have anti-fraud regulations and truth-in-advertising laws so that the sellers of goods and services, who naturally have an information advantage over buyers, can’t take advantage of their superior knowledge in order to cheat their customers.
All of these are examples of government interference in the market, and all of them are examples of the government interfering in order to promote free market capitalism. Contrary to the way “free market capitalism” is casually understood in this country, the fact is that without necessary government interference and regulation there would be no free market.
This seems to be recognized throughout most of the developed world except, curiously, here in America.