In a free market, the one who provides a good/service for the lowest price gets nearly all the customers. The one offering the highest for the same job gets nearly all the employees. No one wants to let another do this and dominate the industry, so they all compete against each other for customers and employees. Employees can also form unions to demand payment almost equal to the value they bring.
If you're literally penniless and need immediate funds, see the section on welfare. Only join companies that allow employees to unionize. Or find funding and form a cooperative. If enough people join the union that there aren't enough ununionized empoyees left, the employers will have no choice. If that is not the case, either the conditions must not be so bad, or there are more people than needed in the industry, which means some people need to leave and libertarianism is just preventing wasted human effort.
There are several ways to make a profit, life would be pretty boring otherwise. Examples include:
- brand prestige, goodwill, loyalty
- the network effect
- walled gardens
- switching costs
But none of these factors are so powerful that a company in a free market can extract exorbitant profits from a customer unwillingly paying with no better choice. Note that intellectual property would not exist in a libertarian system. Of course, people sometimes buy products/services without doing their due diligence or simply not caring enough about ease of quitting, ease of repair, control, etc., and later face difficulties, but that is simply the consequence of their own decisions.
A customer that can afford it may willingly overpay for a product due to brand affinity/prestige. Even otherwise, there are 8 billion people on the planet. Getting $10 profit from 100 million people means a billion dollars in profit. None of the 100 million people need to have been poor or exploited; small profits per person can result in a billionaire simply due to the large human population. This is not to say that all current billionaires obtained all their wealth through such innocent means – many have used violence or state assistance – just that it is possible.
Libertarianism is not an all-or-nothing philosophy. Different libertarians advocate for different levels of government intervention. An emergency situation, eg., a major war, disaster, irreplaceable resource exhaustion, etc. will almost certainly require a lot of government action. This FAQ aims to show that barring such extremely rare situations that can be handled then using exceptional measures, libertarianism works, and therefore they are no reason to forego libertarianism altogether.
To show this, we go through situations where it seems like the free market would be unfair, and explain why they won't be an issue.
If the resource is replaceable, like fossil fuels, the free market will invest appropriately in alternatives as and when needed. As for irreplaceable resources, it would be a very rare situation for there to only exist a few sources of it globally, controlled by a few entities, and for them to all stop competing and fix prices. This would be a global crisis requiring international action and co-operation for diplomacy, sanctions, and acquiring new sources/technologies. Clearly not a usual scenario that can be used to dismiss libertarianism.
Today, shipping costs are so low (eg., $0.50 per kg for US-China shipments) that for most goods, the market is global.
But what if the main water supply in a region is owned by a single entity, and they charge exorbitant prices? Unlike food, bringing in water from faraway regions would be too expensive. Of course, people moving out would result in the entity going out of business and selling the water supply to someone more rational, but due to various reasons, moving out isn't always easy.
Here's the true solution. Currently, the water supply in most countries is owned by the government. Upon transition to libertarianism, the water supply in each region would simply be an entity with ownership distributed among the residents. If some of them sell their shares of the water supply to a company that then jacks up the prices, they'll have to move out, but that is simply them facing the consequences of risking putting their water supply in another's hands.
What if the water supply was sold by the government to a private entity currently subject to regulations? Would a libertarian transition remove those regulations? Note that this situation is caused by having to transition from big government to libertarianism. If a libertarian society arose naturally, rights to natural resources would be distributed among the community via the principle of homesteading. And as before, anyone selling their rights must be moving or have another source ready, othewise accept the potential consequences.
To fix the issues caused by a non-libertarian government, non-libertarian measured may be needed. The government had no right to the water, nor to sell it to the private entity. It may need to be taken back.
If someone buys up a lot of the food and medicine and tries to resell it at a high price, people will have to buy it, since unlike for non-essentials, they can't just wait for the market to make more, they need it immediately. But this can be solved easily by the community signing an agreement with the supplier before production.
Price fixing would require every single company selling something to cooperate. And if they do, another person sick of them can start a new company and undercut them. Price fixing would also destroy any goodwill towards these companies and many customers wouldn't patronize them even if they lowered their prices again.
When a company begins selling a product, the price starts off higher to recoup the cost of development, advertising, equipment, land, etc. Some costs don't increase proportionately to the number of units sold, so the cost of making each unit goes down as more are made. Thus a new company entering the market will have to charge higher prices. Does this mean that the existing companies will be able to get away with charging high prices forever because the barrier to entry is even higher?
Let's say that a company needs to charge a total of $100M more than their final prices to recoup initial costs. But by using investor funds to pay said costs, the new company can collect this $100M over, say 10 or more years, instead of 2 or 5, making the additional cost of each unit from the final price very small. Thus they can beat the overcharging company. Big investors are surprisingly ready buy billions worth of stock of companies that have been losing billions every year, if they believe it's a necessary sacrifice that will more than make up for it in the future.
Human desires are limitless. We can never have too much of something, so people would move into the remaining jobs and produce more of that. Workers would be paid less, but due to automation, everything would also be cheaper. This would work until the very last jobs are replaced. In a utopia where there is no need for labor, art, or science anymore, a market economy is no longer needed, but I doubt that day will come anytime soon.
If you believe unverified information, you will lose money.
Insider trading can discourage investment, and cause CEOs to hide information from employees. While there have been arguments that insider trading makes share prices more quickly go to their proper value, the true solution is that if investors dislike insider trading, companies can legally declare that they will only work with those that legally agree not to trade its shares or facilitate insider trading. If someone unaffiliated with the company simply overhears or comes across insider information, this won't stop them, but even if it were illegal, it would be nearly impossible to prove such a case.
If the wages for a profession seem too low, it's because there are too many workers in the industry – the free market is just disincentivizing wasted human effort. Leave the job – if you have no other skills, invest in education. If enough people do, wages should rise. Of course, wages won't go beyond the profit each worker can generate, but that shouldn't be the limiting factor for the vast majority of jobs. If it is, and not enough people are willing to work for those wages, the companies will have to come up with some way of improving worker productivity.
