There Are No Free Markets

Yves here. We’ve often discussed the fact that “free markets” is a myth, including devoting a chapter of ECONNED to the topic: “How ‘Free Markets’ Was Sold.” Richard Murphy provides a full bore take-down below. He includes the way market operations are failing in late-stage capitalism and some suggestions as to how to replace neoliberal ideology 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 not natural, spontaneous or free. They are legal, institutional and political creations of the state. Without law, money, regulation, wages, accounting standards and trust, markets collapse into monopoly, coercion and extraction.

In this New Year’s Day video, I explain why the neoliberal myth of “free markets” is not just wrong, but actively destructive — and why rebuilding the state, rethinking capital and restoring democratic accountability must define our economic direction for 2026.

Markets are tools. It’s up to society to set their purpose.

This is the audio version:

This is the transcript:

It’s New Year’s Day, so happy New Year, and let’s talk about something that is going to be a recurring   theme on this channel for 2026. That is that  markets are not free.

The claim that   markets are free is part of the neoliberal myth, and it’s as antisocial as everything else that culture puts forward.

There is no truth to this claim, and that’s what this video is going to be about. But what is more, the belief that markets are somehow free and deliver better outcomes for society than government ever can is precisely what is destroying our economy. That’s the issue that we need to discuss, not just today, but for the whole of 2026, because until we get our heads around this idea, we can’t get our heads around what might replace this myth.

The core claim is that markets arise naturally and are the best form of allocation of resources within society. That claim by antisocial neoliberal thinkers is just wrong. There is no evidence at all that  markets in the form that we now have them arise naturally. They   do not, in fact, exist independently of the state. Markets are constructed, maintained, and enforced by a government and without the state, there are no markets of the sort that we now see. There would only be power, coercion, and extraction.

Markets are legal constructs, and that has to be true because every market transaction depends on the existence of law.  Property rights must exist, and the law defines them, and who’s behind the law? Government is.

Contracts must be enforceable, and who defines contract law? Government does.

Disputes must be resolved, and what is the mechanism for doing that? Law courts, and who provides them, the government does.

Fraud must be punished because if we are to have people operate on a level playing field, which is what fair and efficient markets require, then fraudsters must be eliminated from the game, and none of that happens spontaneously because fraud itself must be identified and tackled by the government.

In other words, it’s only the existence of the state that permits markets to exist. The claim otherwise is just utterly untrue.

What is more, the state creates the money that markets are dependent upon because markets exchange goods and services using a unit of account. What is the unit of account?  In the UK, it’s the pound. Who creates the pound? The government does.

In the USA, it’s the dollar. Who creates the US dollar? The government does, and we   could keep on going with that list going right around the world.

The point is that if prices must be denominated and debts must be settled and tax must be paid,  they are all done using the currency that the government created, and this is an operation of the state.   Markets do not create money; markets use money, and it’s money that creates the possibility of markets as we know them, and therefore they are utterly dependent for their existence upon the government.

What is more, markets require participation, and that requires that there be institutions, all of which exist as a consequence of government action. Let’s look at a few examples.

Companies only exist because governments let them be incorporated by law in their state, defining what rights they have and what membership they can be constituted by and so on.

Banks are regulated by states, and that’s essential because otherwise they would not be trusted and payments would not clear.

So trust in banks and regulation and company law and deposit guarantees and all the other things that go around this require the existence of the state. Remove regulation, and people will stop trusting markets.

And markets collapse without competition rules because,  without competition rules, a monopoly becomes the normal form of supply by private companies.  Monopoly represents the control of the supply of a particular type of product by a single company or one or two companies, when it’s called oligopoly,   but the difference is immaterial for our purposes. The point is that in those situations, dominance destroys choice, power replaces price signals, and innovation is suppressed, and it’s only the state that can actually enforce competition through regulation, which is the supposed virtue of free markets.

Markets themselves do the exact opposite of that. Even  Adam Smith knew this in 1776 when he wrote the first ever economics book in the world called The Wealth of Nations, where he   pointed out the threat from monopoly. So, without regulation, markets cease to be markets at all, and yet the free marketeers claim otherwise; they talk nonsense.

There’s another participant in markets who the free marketeers entirely ignore and yet who are absolutely essential, and that is people who can afford to buy the products that are made available for sale. A market does, of course, require buyers as well as sellers. Tell that to a neoliberal, and they’ll scratch their head in puzzlement. ” Who are these people?”, they will say. They are employees, of course, in large numbers of cases, and their ability to participate in markets as buyers, which is critical to the well-being of the market as a whole, is entirely dependent upon there being  fair wages, job security, predictable incomes, enforceable rights, trade union rights, even. These   are not gifts from markets; they come from labour, law, collective bargaining and regulation. And again, without them, markets collapse, and demand fails, and that means there is no profit motive of consequence, and yet the neoliberals ignore this.

They also ignore the fact that regulation is the basis of the trust on which the sale of so many products depends. For example, why would you go out and buy a coffee from anyone but someone you personally knew, unless there were health and safety regulations to ensure that the product you bought was safe?  You only trust markets because products are regulated, standards are enforced, and risks are reduced.   In other words, health and safety regulation – the thing that perhaps is most hated most of all by neoliberals- is in fact the thing that makes most of exchange possible.

There’s something else that markets require. This is a long list, but it’s an important list, and that is that financial markets need accounting regulation because capital allocation within financial markets depends on information. In other words, if somebody’s going to buy a share, they need to know why they want to buy that share, and they need reliable information to do so. That is what accountants and auditors are meant to do, and it is  company law that defines what data the users of capital markets should get to make their decisions.

Accounting regulation   ensures that the results of different companies are comparable so decisions can be made. It defines profits. It defines what an asset is. It defines a liability. It makes sure that risks are disclosed. This requires accounting standards, audit, and enforcement, and without that regulation, financial markets allocate capital badly, or not at all.

We are, in other words, looking at a situation where the great neoliberal lie is completely exposed by reality.

Neoliberalism claims regulation undermines markets, but the truth is the opposite.  Markets cannot exist without regulation; they fail when regulation is removed.

What we   are seeing now is not overregulation; it is a regulatory collapse that is threatening our future well-being, and our governments are delivering that regulatory collapse under pressure from the monopoly-oriented companies like  the big tech firms that are demanding it so they can exploit us.

Everything   has gone wrong. Today’s markets are failing because monopolies dominate; information is hidden; tax is not paid by far too many companies –  40% of small companies in the UK do not pay their corporation tax liabilities –   and regulators are weak and captured. These facts in combination destroy the level playing field on which fair competition takes place. In fact, competition becomes impossible, and our markets are ceasing to work as a result.

This is the consequence of many of the failures of the conditions that I have already noted. For example,  wages have stagnated, job security has declined, and too many people cannot participate in markets   now because they do not get the opportunity to do so, because government is refusing to support their employment.

A market without participants is not free; it is empty.  Late neoliberal capitalism is collapsing because it has excluded the very people on whom it depends,   and nowhere is this more apparent than with regard to labour.

This is self-destruction, not state failure, that we are seeing. Let’s be clear, markets have not been undermined by the state; they have been destroyed by a narrative that denies the state’s essential role in the creation of markets. Neoliberalism has eaten the foundations of the system it claims to defend.

What this means is that we require a broader understanding of capital. Markets claim that they exist to serve the interests of financial capital, and the entire accounting systems that we have in our economies now are designed for that sole purpose.

The truth is, financial capital is a derivative form of capital. In other words, it has no value in itself; it only exists because there are real forms of capital which actually sustain our economy, and they are

productive capital, the things that we use to make stuff;
human capital, the investment in our knowledge and our well-being and our health and our care;
social capital, the institutions of state that ensure that markets can be regulated for all the reasons I’ve noted in this video, plus, of course,
environmental capital.

We need to look after this world that we live upon.

Ignore all of these, and we guarantee long-term failure, and yet our antisocial neoliberal system of financial capitalismignores almost altogether the value of our productive human, social and environmental capital. So, what we need now is not deregulation; what we need is regeneration, strong institutions, effective regulation, and empowered participants in markets, which means you and me.

Markets must be redesigned to serve society and not dominate it.

This is the goal for 2026 and what I will be talking about. This requires a politics of care: care for people, care for institutions, care for the environment, care for the future. Markets are just tools. The state sets their purpose. We need to reset that purpose, and democracy provides legitimacy.

There are no free markets. There never have been. Markets only exist because states make them possible, and they fail when regulation does. So, in that case, if we want markets that work, we must rebuild the state, rethink capital, and restore democratic accountability. That is the direction of travel we need for 2026, and that’s why I’ve talked about it on this New Year’s Day.

Happy New Year. It’s going to be a difficult 2026, but one that is going to be worth talking through because we are going to get a better direction of travel if we understand the concepts I’m talking about here.