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The Free Market
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April 1998
Volume 16, Number 4

Markets Online
by Llewellyn H. Rockwell, Jr.

The Clinton administration, applying its theory that all good things should be subsidized with tax dollars, proposes new spending to upgrade the Internet. But it's not the government that has turned this medium into the most promising venue for free-market exchange in our time. It's the astounding power of market commerce itself.

Only a few years ago, Internet traffic was controlled by a small clique of academics. Then communication high-techies, the kind that used to operate ham radios, got involved. Suddenly, in the course of only a few years, email has become an essential means of global communication and information retrieval.

The key to the change was the power of free enterprise. In the early days, the "culture of the Internet" warred strongly against any hint of enterprise, the dreaded "commercialization." Advertisements were attacked as contrary to the on-line global commonwealth. But then the advent of the world wide web formed what was a vehicle for mere information display into the most commercial-friendly setting since the advent of trade fairs.

The dawn of Internet commerce has dramatically reduced the costs of starting up a business, after a century of the government's raising them. The entire sector has become fertile ground for job creation and professional advancement, and one that is not cartelized by unions or controlled by licensure.

And what potential there is. Revenues for book sales on the web are approaching a billion per year. Companies involved in music and wine are doubling, tripling, and quadrupling sales every year.

Egghead Software is closing all its physical retail outlets, and moving entirely to the web. As car lots report thinning profit margins and stagnating sales, web-based auto dealers--where there is no haggling and prices are easily compared--are in a boom phase.

Soon, total retail business on the web is expected to exceed $200 billion per year. So much for protecting this medium from the corruptions of capitalism. But why should anyone want to? Commercial relations are the essential source of economic and social vibrancy. These relations mark the difference between living and growing civilizations, and decaying ones.

The rise of the net economy should also give us pause to think about economic principles. The most basic one is that free markets create order from seeming chaos. There is no central authority on the Internet making or enforcing rules. There is no master plan detailing what kinds of businesses should and should not attempt to market their product through this medium.

All these decisions are made by producers and distributors responding to the needs of consumers. They do so using entrepreneurial talent, and no one can foresee the success or failure of their enterprises before they are actually tried out. The result is an orderly and consumer-friendly setting that is accessible to anyone inclined to try it out.

The consumer is the king in all markets free of government control, but web commerce crystalizes this reality like never before. Websites cannot retain the loyalty of a consumer who's had even one bad experience in delivery or price. There is no such thing as "market power." Any fly-by-night operation can immediately supplant the most famous site by offering better delivery and prices.

Not the least of the products made accessible is information about politicians. In decades past, the kept media kept the truth about the parasitic state away from our tender ears and eyes. But at last, the competitive pressure generated on the web has launched a new era of openness that is causing the old myths about government to melt away. Now the state wants to sink its claws into this medium, to tax it, redistribute it, censor it, and regulate it through antitrust laws. But there's a problem. The web has created a generation of users acutely aware of the possibilities for social cooperation absent government coercion. The "anarchists" of the web culture, as they are derisively called, resist government intrusion.

When the history is written of how the leviathan state was brought to its knees, an important chapter will be reserved for the Internet, and the commercial class that has made it an essential tool for the working out of human freedom.

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Llewellyn H. Rockwell, Jr., is president of the Ludwig von Mises Institute.

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