Free Markets? Connectivity, Competition and the Broken History of a Cherished Paradigm. Lessons from Pre-Classical Political Economy

Connectivity, Competition and "free markets" are frequently interpreted as a panacea towards achieving successful economic growth and development; they are often said to have stood at the heart of the "European Miracle", especially the long transition of Europe towards industrialization as well as the global income disparity usually known as Great Divergence. The paper takes issue with this, calling for a re-evaluation of the role of the state as well as "free markets" in the economic process. A first section challenges a commonly held conception of "free markets" and economic deregulation as prerequisites for successful economic development by comparing the discursive evidence of early modern economic texts (usually written by people who have later become labelled either "mercantilists" or "cameralists") with select examples of economic practice and policy in early modern Europe (I). A second section challenges the common notion of "competition", drawing upon the textual heritage of early modern Europe; arguing that competition without rules or intervening states was both unheard of as well as unthinkable (II). The modern notion of "free markets" has led to a distorted view on the role of states and governance in the establishment and stabilization of the "free market process": for markets to be "free" and work effectively there must be a strong tendency for governments and political authorities to intervene (III). This can be shown empirically, mainly using the example of the early modern German Policey discourse and the theories developed by mercantilist and Cameralist authors regarding the governance of markets. The paper concludes that free markets need tight rules. This basic fact has not changed since the middle ages and is still valid today, but it has been portrayed rather differently in the public discourses regarding markets and the emerging modern economic theory since the Enlightenment (IV). © 2016 by Walter de Gruyter Berlin/Boston.