The widely held belief that a “free market” exists as a natural, immutable entity separate from the reach of human law is one of the most pervasive myths in modern economic discourse. In this popular view, government is often characterized as an outside force that merely “intrudes” upon a system of impersonal market forces. However, historical and legal analysis reveals the opposite to be true: the market does not exist in the wild, but is a complex human invention meticulously constructed and maintained by government through the creation and enforcement of rules. As Thomas Hobbes famously observed, without the structure of a commonwealth to enforce the peace, there is no place for industry or commerce; the “free market” is not a state of nature but a product of civilization.
The market is built upon five foundational building blocks, each of which is defined not by nature, but by political and judicial decisions: property, monopoly, contract, bankruptcy, and enforcement. Property rights, for example, are not self-evident; they represent specific societal choices about what can be owned, ranging from physical land to intangible intellectual property like software code, genetic material, or even human beings, as was the case during the era of slavery. Similarly, the rules governing monopoly and market power determine how much a single firm can constrain competition, a balance that has shifted historically from the trust-busting zeal of the Progressive Era to the more permissive standards that allow modern giants to dominate standard platforms and digital networks. Contracts, rather than being simple private agreements, rely on government definitions of what can be traded and what constitutes illegal coercion or fraud. Bankruptcy rules provide a mechanism for dealing with debt, but these too are skewed by political influence, as seen when large corporations use them to shed pension obligations while individual homeowners or student debtors are often denied similar relief. Finally, the enforcement of these rules depends on the priorities of prosecutors and the resources provided to regulatory agencies, which are themselves subject to the pressures of vested interests.
Because these rules are human creations, they are neither neutral nor permanent; they reflect the shifting allocation of power within a society. In a functioning democracy, these rules would ideally be crafted to serve the public interest and broad-based prosperity. However, in the current era of American oligarchy, the “vicious cycle” has taken hold: economic dominance translates into political power, which is then used to rewrite the rules of the market to further enlarge economic power. This is not corruption in the sense of direct bribery, but a more subtle process where large corporations, Wall Street, and the super-wealthy field armies of lobbyists and lawyers to ensure that the ostensibly neutral rules of the game systematically favor their own interests. A landmark 2014 study confirms this disparity, finding that the policy preferences of the average American have a “near-zero, statistically non-significant” impact on legislation, while the demands of economic elites and business groups are consistently met.
This power shift is illustrated by the transition from “stakeholder capitalism”—where managers balanced the interests of workers, communities, and shareholders—to “shareholder capitalism,” which emerged in the 1980s. This was not a natural evolution but a systemic rule change driven by corporate raiders and ideological shifts in the judiciary and regulatory agencies. For instance, in 1982, the Securities and Exchange Commission removed restrictions that had previously treated stock buybacks as a form of illegal market manipulation, allowing CEOs to use corporate earnings to pump up share prices for the benefit of themselves and wealthy investors. This upward redistribution is “baked into” the building blocks of the market themselves, occurring through pre-distributions that favor the owners of capital over the value of labor.
Ultimately, the interminable debate over “big government” versus the “free market” serves as a convenient distraction that prevents an examination of how the rules are rigged. As long as the public views the market as a self-regulating entity beyond their control, the oligarchy can continue to shape the system in the shadows. History demonstrates that the most fundamental economic question is not about the size of the state, but about whom the state’s rules are intended to serve. Reclaiming democracy therefore requires the majority to understand that because the market is their own invention, they possess the inherent power to organize it for the benefit of the many rather than the few.