OUR AMERICAN FREE MARKETS

Presented at the American Jewish Committee (AJC)
Human Rights Dinner,
Chicago, Illinois,
June 17, 1991.
Where Mr. Melamed was awarded the AJC Human Rights Medallion.

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Here was a unique opportunity to speak about a characteristic of free markets, particularly futures markets, which is rarely mentioned in assessments of their intrinsic values: their unyielding force on behalf of human rights.

Indeed, it is an eye-opening experience to visit the floors of the futures exchanges, their administrative departments, and the back offices of their member firms. Only then does one gain an insight to the free market's disregard of age-old prejudices and traditional inequalities that continue to plague other spheres of our society.

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We hear much these days about the sins of the marketplace. We hear much about the sins of market-makers: their greed, their lack of integrity, their misconduct. No doubt some of what we hear is true and that is most unfortunate. We must be vigilant in our efforts to do better. But these regrettable sins of the free marketplace do not represent the whole story, nor do they even represent a significant portion of the story. For lost in all this negative rhetoric is something so fundamentally important about free markets, something so priceless, something so valuable, that lest we occasionally stop to remind ourselves, we might allow irreparable injury to occur. We might someday, in a thoughtless moment of sanctimonious folly, allow someone or something to take from us the most precious gift we possess: the markets of America and the unyielding force on behalf of human rights that these markets represent.

In Free to Choose, Nobel Laureate Milton Friedman asserts that the United States is the result of two separate but interdependent miracles: an economic miracle and a political miracle. He explains that each miracle resulted from the implementation of a separate set of revolutionary ideas and that both sets of ideas—by a curious coincidence—were formulated in documents published in the same year, 1776.

One set of ideas was embodied in Adam Smith's The Wealth of Nations, a masterpiece of economic thought. It established that an economic system could succeed only in an environment that permits individuals to freely pursue their own objectives for purely personal gain. As a consequence of such pursuits, the individual, when taken in mass, will be led by an invisible hand to promote an overall social good.

The second set of ideas, drafted by Thomas Jefferson, was embodied in The Declaration of Independence. It proclaimed a new nation—the first in history to be established based on a set of self-evident truths: that all men are created equal, that they are endowed by their Creator with certain unalienable Rights; that among these are Life, Liberty, and the pursuit of Happiness.

The success of our nation, asserts Friedman, is a consequence of the combination of these two basic ideals: economic freedom coupled with political freedom. The ideals are inexorably intertwined. One without the other cannot work.

History is replete with examples of sovereign powers that ignored these truths. Indeed, we need only be mindful of the desperate events unfolding today in the Soviet Union to bear witness to the unmitigated failure of Communism—a dictatorial political system imbedded in an economic structure based on government central planning. As Friedman suggests, the Soviet experiment not only proves that economic freedom is an essential requisite for political freedom, it is unequivocal proof of the opposite as well: the combination of economic and political power in the same hands is a sure road to tyranny.

When we move from the macro-economic stage to the practical arena of everyday life, we find that there is yet another dimension to Adam Smith's free market postulates that is also entwined with Thomas Jefferson's political freedom ideals. The lofty principles published in 1776, when applied to the practical world of 1991, offer some startling—albeit expected—results: successful markets are the quintessential example of human rights and equality.

Did you ever hear any rational person say: "I won't buy those lower priced wares I need, simply because you—the seller—are a Jew." If you did, it was not for long. Those who conducted their business practices in this fashion were soon left in the historical scrap heap of economic malfunction. Did you ever hear any rational person say: "I will not sell my wares to your higher bid simply because you are Polish or because you are Afro-American, Irish, or Chinese. Not in the markets I know. Ask Lee Iacocca whether Americans refused to buy Japanese cars simply because they were not made by Americans!

The financial markets are color blind. They know no distinction between race, they know nothing about ethnic origin, and they are indifferent to gender. What matters are price and quality. In the financial markets, the trophy goes not to the Catholic or to the Jew, not to the White or Black not to the male or female, but to the one who understands the economic principles of supply and demand. Personal pedigree, family origin, physical infirmities, and gender are meaningless when measured against one's ability to determine the customer's needs and how to market your product. Little else matters. The market rewards you when you are right and punishes you when you are wrong no matter who your father was, no matter what he did for a living, and no matter where he came from.

No other private sector establishment, entity, or apparatus is more free of human prejudice and less concerned with race or religion than the American free market structures. The principles embodied in Adam Smith's Wealth of Nations and the precepts set forth in Thomas Jefferson's Declaration of Independence have produced the miracle we know as the United States of America.

Not only have those principals triumphed over centrally-planned economic systems, when applied to the practical world of our markets they have brought them to the leading edge of human rights and equality. This is especially evident in the financial markets of Chicago. Examine our trading floors, our employees, walk into our trading pits, and review our firms and their personnel. Religious discriminations of past eras are virtually non-existent; race barriers still practiced elsewhere are not recognizable here; and ethnic distinctions of consequence in other endeavors are meaningless in our work place. Did you know that sex discrimination within the infrastructure of American finance was first challenged by our Chicago markets? Did you know that our Chicago markets led the battle against race discrimination in the business world? This was accomplished without fanfare, without marches, and without outside pressures.

While we do not claim utopia, Chicago's financial markets have gone a long way in becoming the ultimate equalizer of race and religion, ethnic origin, and sexual gender. Here, talent is supreme, hard work is rewarded, integrity is prized, and excellence is absolute. Indeed, with respect to human rights, the financial markets of Chicago practice what the United States Constitution preaches.

Is it any wonder Carl Sandburg immortalized our city's distinguished market history: Hog Butcher for the World/Stacker of Wheat. Is it any wonder our guest speaker, our good friend Congressman Dan Rostenkowski, has stood up to those who threaten our markets' existence or impede their growth. He does it in such a delicate manner. He reads to them a poem by Thomas Babington Macaulay which tells of Horatius at the Gate, the lone Roman gatekeeper who valiantly defended the ashes of his fathers and the temples of his gods. Then Congressman Rostenkowski explains the following to our adversaries: at the end of the day, after all the battles they had faced, they will yet have to face the Chairman of the House Ways and Means Committee, who, like Horatius, will stand to protect the temples of Chicago—our markets.

And like Horatius, whenever we hear a blanket condemnation of the free market system, let us too rise up zealously in its defense. At stake is the very essence of the American miracle. At stake is our very freedom. And while there are failings within the markets, and regrettably, while there are sins by some within the system, these negatives are insignificant when measured against the incalculable and priceless achievements of the American free market system. It is on behalf of these markets that I proudly accept the Human Rights Medallion.

Reprinted by permission. Excerpted from Melamed on the Markets, by Leo Melamed. John Wiley & Sons, 1993

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