Probably the most successful free market ever operated was that of the Australian aborigines. Like indigenous groups elsewhere, they traded ceremonial artifacts, grinding stones, sea shells, ochre’s, shields, axe heads, spears and even ‘water rights’ along the permanent waterways that marked trade routes. This enabled a “United Nations” approach to trade as scarce resources in one region were exchanged for another’s in the same manner as modern economists suggest trading between nations having different natural resources yields optimum outcomes. The tribes relied on carved symbolic message on a message stick to communicate accompanied by translators who negotiated trade agreements, sustainable because of their affinity to the land, spanning a period of over 50,000 years.
In stark contrast in the modern world a will to power was to distort markets so that advancements in science and trade were dissipated to the extent of continuing conflicts.But no empire dating back to the fall of the Roman Empire rivalled that which had its roots in the Industrial Revolution in England from 1740- 1780, - a logical melting pot for trade and progression of the recently discovered Newtonian mechanistic world - as suggested by John Gribbin in ‘Science a History 1543- 2001’
Hence although the industrial revolution underpinned improved living standards and supported much bigger populations, it also led to massive exploitation of people and land. The 'mercantilists' ensured laws were passed to preference British enterprises and shipping companies, to the detriment of other nations. But philosopher and moral ethicist Adam Smith criticized the 'mercantilist' system, in his influential classical economic work entitled ‘Wealth of Nations’ in 1776. Smith pointed out that the Merchants had gained monopolistic power as a consequence of bans on foreign competition. Mercantilism was also associated with a monetary system which used exported bullion to pay for imports- mainly from Asia- which reduced money supply to exert downward pressure on prices and economic activity at the expense of impoverished workers.
Mercantilism adversely affected the colonies who were forced to use English ships, pay duties and trade in commodities whose prices were set by the British Empire. This action created an underclass of colonial citizens, a significant factor leading to world war and eventual American independence. The classical economics of Smith overturned the mercantilist system and his free market ideas remained popular up until the great depression of the 1930’s.
It was then John Maynard Keynes presented a new radically different system to offer hope we could avoid recurrences of the painful boom and bust nature of markets, which was largely adopted by Australia.
Our post World War 2 boom was fuelled by immigration and exports to markets for primary produce. But our fortunes were considerable enhanced by the discovery of large scale mineral deposits in the seventies to establish new markets for the nation , to gain further traction more recently from the huge demand emanating from China. Hence the big questions remains will the market for our minerals remain strong or do we need to brace ourselves for a significant slowdown.
We are bound to see a future slower China with exports curtailed by weak global demand and constrained by less capacity for internally based stimulus measures. However in China the response by authorities has been to loosen the banking ratio reserve( funds banks must keep in reserve)and reduce official interest rates which were cut on a number of occasions given a more accommodating monetary policy made possible by subdued inflation. There has also been a modest pickup in the prospects in the US and the beleaguered European Union to signal weak growth for the first time since the onset of the global financial crisis.Overall markets today,although still constrained by trade barriers and currency wars are much more open and transparent than the past. An inbuilt stabilisation is available to the extent most nations have opted for a floating exchange rate over their currency or like China, have their currency pegged to the US dollar.
But they still remain corrupted to the extent self interest is evident with tariff barriers, dumping and import restrictions to curtail free trade between the nations.