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POLITICS
A Fair Market is Not a ftze Market
by Roy Den Hollander

The way the richmake money today in Russia parallels in some respects the way the rich made money in America in the late nineteenth century. Both use enterprises to maximize their profits through unfair commercial practices. Monopoly enterprises, for example, dominatethe major industries in Russia today. In America by 1890 the Ameri-can Sugar Refining Company con-trolled 98% of its market, Standard Oil - 80% of its market, American Tobacco -93%, Aluminum Company of America - 90%. Similar monopolies existed in other major industries. Russian monopoliei, like the for-mer American monopolies, raise their prices to thesky becauseno ot herenter-prises exist to compete with them and because the Russian government, like the former American government, fails to break up the monopolies into com-peting enterprises. American monopo-lies accumulated vast fortunes by selling their products at inflated prices, paying their workers (which included children as young as nine years old) low wages, producing poor quality and often dan-gerous products and even using vio-lence against their workers and poten-tial competitors. Americans call this period in history the "robber baron" or "free market" era. Many of the problems that existed during America's free market era now exist in Russia: high prices, low wages, shoddy goods and a few people growing very rich while most of the population grows poorer. The solution is not a free market but a fair market. And a fair market will not happen by allowing businessmen to do whatever they wish or relying solely on abstract t heoret ica I models of market forces. A fair market requires a set of busi-ness regulations. The regulations can-not be so restrictive that they stifle inno-vation, hard. work and the opportunity m to acquire material wellbeing, but they should not be so lenient as to allow an unbridled pursuit of profits that results in vast concentrations of wealth in the hands of the few, destruction of the environment, mass poverty a nd a life of hopelessness for much of the popula-tion. Business regulation can be de-scribed as a circle that permits business-men to freely pursue their interests in
any way they deem fit within the circle, but . prohibits tlieni from crossing the circle into unfair.commercial activities that harm other businessmen, consum-ers and workers. Under. the. Soviet Union's former command economy,. the circle of busi-ness regulation limited business activity too much. In.America's wild west, free market economy of the nineteenth cen-tury,. the circle of business regulation did not limit businefs activity enough. The insufficiency ofregUlat ion permit-ted a relatively few families in America to aniass great wealth through the enter-prises they controlled. Such wealth enabled a relatively small class to exer-cise great economic, political and social power over America. Since the nine-teenth century, there has been an inter-mittent tug-of-war between the wealthy cla-ks and the masses over the enactment of business regulations. The wealthy class desired little or no regulation in or-der to maximize their enterprises' prof-its; the masses wanted additional regu-lations to distribute the wealth more fairly and protect their material wellbe-ing. The result of the struggle over the past 'one hundred years has been the enactment of some effective reitili-tions, many of which are not adequately enforced. America, today, is no longer a free market, but it is also not a fair market. One percent of American families own approximately 34percent of all the wealth in the United States, the middle class,which comprises about 40 percent of America's families, owns a little over 10 percent of the wealth and the poorest 40 percent owns virtually nothing; in 1989 the average income for the top one percent of households was U.S.$560,000, for the bottom 20%, it was U.S.$8,400; since 1979, the number of people earning wages bellow the poverty level grew from 12 percent to 18 percent of the work force; over 400 people die each day from occupational related causes; and America now ranks 56th among all the world's nations in immunizations and ranks behind Cuba in infant mortality. The historical flaw in America dif-fers only in degree with the flaw in Rus-sia before the August coup and the po-tential danger for Russia since the coup - so many have too little because so few have too much. Today Russia moves through a transition with many of its
former rulers and managers trying to maintain their positions of _influence and privilege by acquiring great wealth. The seek to create through a free mar-ket a small group of wealthy. families thatwill rule Russia as a shadcrwgovern-mentjust as a relatively small number of wealthy families now run America. Russian wealthy businessmen will eventually, if they have not already, ally themselves with American businesses to export vast amounts of Russian raw materials at bargain baiement prices. In return America will export manufac-tured goods and agriculture products that will be purchased with the hard currency gained from the raw materials and loans from the International Mone-tary Fund or World Bank. As a result, Russia may find itself in a position simi-lar to Latin America, which function as a cheap source of raw materials for America, a key export market for American goods and a continent over which western banks and governments wield tremendous economic power through the credits they have extended. Russia's wealthy businessmen will even-tually acquire enough economic power to control the government, and by then it will be too late to establish business regulations that ensure a fair rather than free market. Regulations, such as an upper limit on the net worth of any family and a windfall profits tax, would aid the estab-lishment of a fair market. A net worth limit of one million or two million U.S. dollars per family should provide more than enough incentive for persons, now owning virtually nothing, to take risks, use their ingenuity and work long hours for the material rewards of success. A windfall profits tax on American enter-prises in Russia that applies to profits above perhaps the 12 percent level should give American corporations enough incentive to invest, since the average profit margin in the United States is around 7%. Many other regulations can be enacted that will assure Russia sus-tained economic growth, return reason-able profits to foreign investors and assure that all Russians have a fair chance to share in the wealth of thenew society that is being created. The trick, however, is to enact the regulations now before Russians nouveau businessmen become so rich and powerful they can prevent the government from acting on the people's behalf.