Hello, this is Yves. We’ve frequently discussed the myth of “free markets,” even dedicating a chapter in ECONNED titled “How ‘Free Markets’ Was Sold.” Below, Richard Murphy offers an incisive critique. He explores the failures of market operations in late-stage capitalism and provides ideas on how to transition away from neoliberal ideologies and systems.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future
Markets are neither natural nor spontaneous; they are legal, institutional, and political constructs established by the state. Absent law, money, regulations, wages, accounting standards, and trust, markets devolve into monopolies, coercion, and exploitation.
In this New Year’s Day video, I elaborate on why the neoliberal notion of “free markets” is misguided and harmful. Furthermore, I argue that renewing the state, reevaluating capital, and restoring democratic accountability must shape our economic approach for 2026.
Markets are essentially tools; it is society that determines their purpose.
This audio version is available here:
The transcript follows:
Happy New Year! Since it’s January 1st, let’s discuss a recurring theme for this channel in 2026: the reality that markets are not free.
The idea that markets operate freely is a fundamental aspect of the neoliberal myth, which is as detrimental as the other narratives this culture promotes.
This notion holds no truth, and today’s discussion focuses on why the belief that markets can inherently deliver better societal outcomes than government intervention is precisely what is undermining our economy. This is an issue we must address today and throughout the year ahead, as understanding this concept is vital for exploring alternatives to this myth.
At its core, the claim asserts that markets naturally emerge and provide the most effective resource allocation in society. This assertion, pushed by misguided neoliberal thinkers, is simply incorrect. There is no evidence supporting the notion that markets, as we know them, are autonomously created. Instead, they necessitate government intervention for both their existence and function. Without the state, there would be nothing but power struggle, coercion, and exploitation.
Markets are defined through legal frameworks, underscoring that every transaction relies on established laws. Property rights need legal backing, and enforcement mechanisms require governmental oversight. Contracts must be upheld through legal systems, which also settle disputes. Fraud must be addressed proactively, and the essential role of government ensures a level playing field necessary for fair and efficient markets.
In essence, the existence of markets is contingent on the state. To claim otherwise is fundamentally untrue.
Moreover, the state is responsible for the creation of money, which markets depend on for transactions. Goods and services are exchanged through established units of account, with currencies like the UK pound or the US dollar created by the government.
For markets to function, debts must be resolved, prices set, and taxes collected—all utilizing the government-created currency. Thus, markets are reliant on government operations—they do not generate their own money.
Additionally, markets need participants, facilitated through institutions resulting from government actions. Let’s consider a few examples:
Companies exist due to government-sanctioned incorporation, which defines their rights and membership. Banks are regulated entities; without oversight, they would lose public trust, hindering financial transactions.
Trust in banks, regulatory frameworks, company laws, and deposit guarantees are contingent upon government involvement. Remove regulation, and market trust dissolves.
Additionally, rules governing competition are essential; without them, monopolies dominate market supply. Monopolistic control hampers consumer choice, distorts price signals, and stifles innovation—only the state can uphold competition through regulation, which is touted as the virtue of free markets.
Interestingly, even Adam Smith recognized this in 1776 when he penned The Wealth of Nations, highlighting the dangers posed by monopolies. Without regulations, markets cease to fulfill their intended function, yet proponents of free markets deny this reality.
Another crucial market participant often overlooked by neoliberal thinkers is the consumer; there must be buyers alongside sellers. Consumers, often employees in vast numbers, rely on fair wages, job security, stable incomes, and enforceable rights to fully engage in markets. These factors—regulations, labor laws, collective bargaining—do not arise from free markets; they originate from government interventions. Without these, market demand falters, nullifying any genuine profit motivation.
Proponents of free markets neglect the foundational trust that regulations provide. For instance, why would someone purchase coffee from an unknown vendor without health and safety regulations ensuring the product’s safety? Trust in markets is primarily maintained through product regulations and enforced standards, significantly reducing risks. In essence, health and safety regulations—often criticized by neoliberal proponents—are vital for facilitating exchanges.
Another pivotal aspect is that financial markets require accounting regulations, as capital allocation relies on transparent information. Investors purchasing shares need reliable data to make informed decisions—this is the role of accountants and auditors, backed by company law that dictates what information is made available to capital market users.
Accounting regulations guarantee comparability among companies, define profits, establish what constitutes an asset or a liability, and ensure risk disclosures. These roles necessitate robust regulatory frameworks; without them, financial markets misallocate capital.
In summary, the grand neoliberal fallacy is laid bare by reality.
Neoliberalism posits that regulation undermines markets, but the actual truth is that markets cannot exist independently of regulation; they collapse when regulatory frameworks are dismantled.
What we witness today is not excessive regulation but rather a failure of regulation that jeopardizes our future welfare, driven by monopolistic companies—such as the major tech firms—pushing for deregulation to exploit consumers.
Today’s markets are faltering due to monopolistic control, information concealment, widespread tax evasion—40% of small businesses in the UK avoid paying their corporation tax obligations—and ineffective, compromised regulators. This combination erodes the level playing field essential for fair competition, rendering it nearly impossible for markets to function.
These failures result from stagnating wages, declining job security, and barriers preventing many individuals from participating in markets due to government inaction regarding employment.
A market without participants is not free; it is empty. Late-stage neoliberal capitalism is disintegrating because it has excluded the very individuals it relies upon—nowhere is this clearer than in Labor markets.
This is self-destruction, not state failure. Let’s clarify: markets have not been undermined by governmental actions but have been dismantled by a narrative that dismisses the state’s critical role in market formation. Neoliberalism has eroded the very foundations it claims to defend.
This necessitates a broader understanding of capital. Current market structures profess to serve the needs of financial capital, relying on accounting systems exclusively designed for that purpose.
However, financial capital is a derivative asset. It holds intrinsic value only because of genuine forms of capital that sustain our economy, which comprise:
- Productive capital—the instruments we utilize to create goods;
- Human capital—investments in our knowledge, well-being, and health;
- Social capital—institutional frameworks that ensure market regulation;
- Environmental capital.
We have a duty to care for our planet.
Ignoring these elements guarantees long-term failure. Yet, our neoliberal system of financial capitalism largely overlooks the significance of productive, human, social, and environmental capital. What we need now is not deregulation but rather regeneration, robust institutions, effective regulation, and empowered market participants—essentially, you and me.
Markets must be re-envisioned to support society instead of dominating it.
This is the goal for 2026—an ongoing conversation for the year ahead. We require a politics of care: care for individuals, institutions, the environment, and our shared future. Markets are merely instruments; it’s the state that assigns them their purpose. It is crucial that we redefine that purpose, and democracy gives legitimacy to these objectives.
No markets are free, and they never have been. Markets exist exclusively because of the enabling role of states, and they falter in the absence of regulations. Thus, if we desire functional markets, we must renew the state, rethink capital systems, and restore democratic accountability. This is the crucial direction for 2026, and it’s why I’ve chosen to share this perspective on this New Year’s Day.
Wishing you all a happy New Year! 2026 may present challenges, but it is a year that merits discussion, and through understanding these concepts, we can foster a more promising direction for our future.
