Skip to content Skip to footer

Free Market Mythologies and the Future of Public Ownership

In the wake of the most crippling economic downturn in 70 years, free market mythology is reaching its limits.

“I’m a free market guy. But I’m not gonna let this economy crater in order to preserve the free market system” – George W. Bush, December 17, 2008

At the heart of the present debate on how to address the continuing political stalemate and economic decay in America are some fundamental misconceptions about the nature and operation of the current system. Many Americans—and not just avowed conservatives—have been led to believe that it is possible to have a “free market” economy, and that the quest to reach it will generate greater prosperity and better social outcomes. Both beliefs are false.

It is highly unlikely that in the entire course of human history there has ever been a real-world economy comprised of completely “free” markets—that is, one in which all economic exchanges take place in the absence of any form of “coercion,” be it coercion between two parties (such as withholding information, fraud, corruption, non-payment, theft, slavery, price-fixing, etc.) or so-called “legal coercion” in the form of government taxation, regulation, subsidies, and so on. Certainly there are no examples in the modern capitalist era.

While pure mathematic models that control for variables and make certain assumptions (such as perfect competition) can suggest that in certain cases free markets may be optimal, in reality the notion of “peaceful competition of producers and suppliers…in which everyone benefits and where everyone’s living standard flourishes,” as the late Austrian School economist Murray Rothbard described it, has no historical basis. It ignores real-world power relationships, and is arguably completely unattainable given human nature. [1]

However, since the mid-1970s this free market myth has risen to dominance in economic and political decision-making in United States and has been exported around the world to developing countries and those transitioning out of communism. In the process, “government” has been labeled as the prime impediment to the achievement of this free market utopia. Thus deregulation, privatization, and market liberalization have been relentlessly pursued while moderate social democratic achievements such as retirement security, workplace safety, union rights, anti-trust enforcement, and public healthcare systems have been vigorously attacked. What has been the result?

The past four decades in the United States have been marked by starkly deteriorating social and economic trends: Income disparity has spiked; most people’s wages have stagnated; wealth has become more concentrated; personal debt has ballooned; poverty and child poverty have increased; incarceration rates have skyrocketed, and the list goes on. [2] Compared to much of the developed world (and even parts of the developing world), the United States now has far worse health, educational, and environmental outcomes. De-regulated financial markets have contributed to an increase in the number and severity of financial crises, culminating in the 2008 crash that cost the United States $2.6 trillion in lost GDP, $19.2 trillion in household net worth, and nearly nine million jobs. [3]

Moreover, as George W. Bush demonstrated during the financial crisis – much like Ronald Reagan before him, during the Savings and Loan crisis of the 1980s – when private corporations get into trouble and put the whole economy at risk, as is inevitable given the amount of profit-driven coercion occurring between private parties in a deregulated “free/r” market, the only entity that can save the system from collapse is the state. In essence, in so-called free market economies, profit becomes privatized while risk is socialized. Moreover, to pay for public bailouts of private corporations and system stabilizing interventions, the proponents of free markets subsequently insist on heavy doses of “austerity” to reduce deficits and debt—proposals that inevitably include further attacks on workers’ rights and the social safety net.

William Simon, President Nixon’s Treasury Secretary, once famously observed of those who preach free markets while rushing to the public treasury: “I watched with incredulity as businessmen ran to the government in every crisis, whining for handouts or protection from the very competition that has made this system so productive…always, such gentlemen proclaimed their devotion to free enterprise and their opposition to the arbitrary intervention into our economic life by the state. Except, of course, for their own case, which was always unique and which was justified by their immense concern for the public interest.” [4]

The Public Ownership Alternative

The free market utopia is in fact a banana republic, an individualistic Randian society in which a small group of extremely wealthy individuals, hidden away in gated communities and protected by their disproportionate influence of key functions of the state (the courts, political parties, and so on), control the vast majority of productive wealth and property while the rest of the population is forced to fight for an ever shrinking share of whatever scraps are left on the table. We are well on our way to this dystopia. The top 400 individuals in the United States now own a greater share of wealth than the bottom 180 million Americans put together. The top 1 percent now receive almost 20 percent of the nation’s income (up from around 10 percent in 1980). [5]

But if privately owned corporate capitalism produces such unpalatable results, what is the alternative?

One option would be a returned focus on establishing, preserving, and strengthening public ownership—broadly defined as forms of collective ownership that democratize wealth and or prioritize providing goods and services that benefit society (rather than ownership focused on exchange values and the profit motive). Traditionally, public ownership has been primarily conceptualized as ownership on different levels within the state. Such forms of public enterprise are in fact alive and well, and should be freed from the undeserved calumny of “free market” propagandists. However, in practice, there can be other forms of collective ownership outside of the state, organized around different “publics” at a variety of scales within the system. Such an expanded definition would encompass cooperatives and employee owned firms.

Despite being the epicenter of the modern free market myth, public ownership has a long history in the United States. Leaving aside the hundreds of millions of Americans who participate in collectively owned enterprises outside of the state, public ownership is widespread throughout the local, state, and federal levels of governance. Along with the Tennessee Valley Authority, 2,000 local public utility companies provide—together with cooperatives—around 25 percent of the nation’s electricity. [6] On the federal level, two of the most cost-effective health care entities in the United States—Medicare and the Veterans’ Administration—are run by the U.S. government. The largest pension manager in the country is also publicly owned: the Social Security Administration.

On the state and regional level, public ownership of highly successful commercial enterprises such as ports and airports are common. Similarly, the profitable and community benefiting Bank of North Dakota has been publicly owned since its formation in 1919 and has contributed more than $300 million in revenues to that state over the past decade. [7] Publicly owned roads, transportation networks, water systems, landfills (and methane capture plants), parks, hotels, loan funds, housing, schools, land management and development, investment funds, and so on exist in virtually every community in every state in the nation. And because they benefit the community in a variety of ways, keeping many of these activities in public ownership remains popular amongst local populations—even in traditionally conservative areas.

However, it is not sufficient to simply defend public ownership from privatization or even expand public ownership to other sectors of the economy and society. The criticisms leveled at large-scale public ownership historically by conservatives and capitalists were not without a grain of truth. Andrew Cumbers, a professor of geographical political economy at the University of Glasgow in the United Kingdom and a leading expert on public ownership, writes that “past and existing forms of public ownership have done little to deliver genuine economic democracy and public participation because they were, on the whole, over-centralized, bureaucratic, and lacking democratic participation.” [8] “Forms of public ownership in the future,” Cumbers concludes, “must be imagined and constructed [with] democracy at their heart.” [9] Without question, public ownership needs to be re-shaped and re-invigorated to reflect the values that serious progressives and socialists are fighting for—including democracy, participation, pluralism, transparency, and sustainability.

Possibilities for Public Ownership in the 21st Century

In recent years many new economic models with a strong worker-ownership/management component have emerged from real-world practice both as an alternative to the current corporate capitalist system and as a viable way to increase economic democracy and participation (see, for instance, Rick Wolff’s Democracy at Work and David Schweickart’s After Capitalism). However, in order to be genuinely pluralistic and systemically transformative, worker-ownership/management centered models must take into account the interests and rights of the wider community as well as issues of scale and planning. Here, incorporating other forms of collective ownership—including state-centered public ownership and community ownership—will be critical.

In this regard, one interesting new systemic model was recently proposed by Seth Ackerman in Jacobin magazine. In Ackerman’s model, publicly-owned investment funds and banks would operate a “tamed” capital market, thus resulting in autonomous companies that “no longer have individual owners who seek to maximize profits. Instead, they are owned by society as a whole, along with any surplus (“profits”) they might generate.” [10] Within this system of public ownership, firms could operate on appropriate scales and be managed in a variety of ways that could increase democratic participation—including management by their workers.

Another option builds upon recent real-world experiences. During the financial crisis and Great Recession, the U.S. government took over the failing private automaker General Motors, and reconstituted it in a way that involved public ownership (via the U.S. government, the Canadian government, and the Ontario government) and pseudo-worker ownership (via the United Auto Workers’ retiree health care VEBA). In the future, when the public is forced to bailout private corporations, the resulting publicly owned (or joint public-worker owned) companies could be restructured in ways that expand economic democracy and public participation and are re-oriented towards important, socially benefiting tasks; perhaps, for example, the domestic manufacturing of vehicles needed for the necessary expansion of high-speed rail and other mass transit networks. Such an orientation would reduce the country’s carbon emissions and fossil fuel usage, while at the same time providing stable, anchored, well-paid jobs in declining former auto producing communities.

In the wake of the most crippling economic downturn in 70 years, free market mythology is reaching its limits. Despite the fact that economic and political elites cling to the theories that have served them so well for so long, the utopian promises of the free market ring increasingly hollow and its contradictions and limitations have been laid bare for all to see. By contrast, a return to public ownership, especially in more pluralist forms, offers a demonstrably realistic alternative as well as a pathway towards the long-term development of a more just, equitable, and sustainable economic system.


1. Murray N. Rothbard, “Free Market,” The Concise Encyclopedia of Economics. accessed March 5, 2013.

2. For a more detailed analysis of some of these deteriorating trends, as well as source material, see the forthcoming book: Gar Alperovitz, What Then Must We Do? Straight Talk About the Next American Revolution (White River Junction, VT: Chelsea Green Publishing, 2013).

3. For the frequency and severity of crises, see: Charles Poor Kindleberger and Robert Z. Aliber, Manias, Panics and Crashes: A History of Financial Crises, 6th ed. (New York, NY: Palgrave MacMillan, 2011), pp. 1 & 7; For the cost of the 2008/09 crisis see: US Department of the Treasury, The Financial Crisis Response: In Charts (Washington, DC: US Department of the Treasury, April 2012); Sarah Childress, “How Much Did the Financial Crisis Cost?Frontline, May 31, 2012, accessed November 30, 2012.

4. William E. Simon, A Time for Truth (New York: McGraw-Hill, 1978), p. 196.

5. The income share (including capital gains) for the top 1 percent was 9.16 percent in 1973. In 1980 it was 10.02 percent. In 2011 it was up to 19.82 percent. See: Facundo Alvaredo et al., “The World Top Incomes Database,” Paris School of Economics, no date, accessed September 17, 2012.

6. American Public Power Association, APPA Annual Directory and Statistical Report 2012-2013: US Electric Utility Industry Statistics, (Washington, D.C.: APPA), accessed 10/25/12.

7. Institute for Local Self-Reliance, “Bank of North Dakota,” ILR, May 5, 2011, accessed 11/7/12. See also: Center for State Innovation, Washington State Bank Analysis (Madison: CSI, 2010), accessed 2/16/12.

8. Andrew Cumbers, Reclaiming Public Ownership: Making a Space for Economic Democracy (London, UK: Zed Books, 2012), p. 5.

9. Andrew Cumbers, Reclaiming Public Ownership: Making a Space for Economic Democracy (London, UK: Zed Books, 2012), p. 8.

10. Seth Ackerman, “The Red and the Black,” Jacobin, Issue 9, accessed January 25, 2012.

Countdown is on: We have 10 days to raise $50,000

Truthout has launched a necessary fundraising campaign to support our work. Can you support us right now?

Each day, our team is reporting deeply on complex political issues: revealing wrongdoing in our so-called justice system, tracking global attacks on human rights, unmasking the money behind right-wing movements, and more. Your tax-deductible donation at this time is critical, allowing us to do this core journalistic work.

As we face increasing political scrutiny and censorship for our reporting, Truthout relies heavily on individual donations at this time. Please give today if you can.