Decentralization of Power
Another important part of the case for a free-market economy is that it
tends to decentralize power and thus requires less coercion of individuals
than any other type of economy. Though the market power of large
corporations is sometimes considerable, it tends to be constrained both
by the competition of other large entities and by the emergence of new
products and firms. This is the process of creative destruction that was
described by Joseph Schumpeter and that we examined in Chapter 10
In any case, say defenders of the free market, even such concentrations of
private power are far less substantial than government power.
Governments must coerce if markets are not allowed to allocate people to
jobs and goods to consumers. Not only will such coercion be regarded as
arbitrary (especially by those who do not like the results), but the power
also creates major opportunities for bribery, corruption, and allocation
according to the preferences of the central administrators. If, at the going
prices and wages, there are not enough apartments or coveted jobs to go
around, the bureaucrats can allocate some to those who pay the largest
bribe, some to those with religious beliefs or political views that they like,
and only the rest to those whose names come up on the waiting list.
Of course, even though markets tend to diffuse power, they do not do so
completely; large firms and large labour unions clearly have and exercise
substantial economic power. In recent years, especially in the United