“It is the political system which favors corporations that invest in government over corporations that invest in capital and technology.”
I believe that has been happening for a long time. In fact, that is part of the problem. The corporation and government interweaving has created the mess we are in today. We are no longer a Republic, and we are becoming economic slaves with our devalued dollars and our life savings being devoured.
The banking business is today about how much can they get the average person into debt so that they can become rich off of selling phony “mark to market” credit swaps sinking the rest of the savers and wise with the same ship. The destruction is coming and the short term business cycle could careless, as long as they get theirs.
It is most likely logically impossible to have a completely "free market". If we absolutely have to allow X to occur for us to claim a free market, then we necessarily are going to have to prevent someone from buying the right to prevent X from occuring.
Once we admit that a completely free market is impossible, then I believe we need to focus on what we are trying to gain from a free market. If the ultimate goal is to try and maximize efficiency then I think we would want to encourage those activities which increase transparency and limit barriers to entry.
However, those who claim to support free markets believe it is more important to allow businesses to purchase the right to decrease transparency and increase barriers, so long as those transactions are technically legal.
So for example, lots of contracts between private parties that will impact millions of others who are not direct parties to the contract can pay to have the terms of the contract kept secret. Microsoft can make it financial infeasible for Dell to supply computers with non-Windows operating systems. Financial companies can buy up business journalists to provide faulty information to investors, etc.
Supposedly in the long run companies that do these sorts of things will lose out to companies investing their monies in R&D and capital expansion, but when will this long run occur? If it takes longer than a generation, or in some cases longer than a year or two, then it can mean the difference between someone eking out a meager existence or ending up on welfare.
If we are going to have to regulate the financial markets to some extent, then why not regulate them with the goal of maintaining a relatively free market in the short run, rather than expecting imperfect humans to ultimately generate a free market in the long run?
And if we only have control over a section of the financial market, then we can use our political clout through organizations such as the WTO, G8, etc. to get other countries to agree to similar regulations for the good of all.
Simply requiring people to have the money on hand necessary to back up a hedge, or some reasonable percentage such as 50%, is not equivalent to asking for the nationalization of the home mortgage industry.
And yet those who favor the free market have been cheerleaders for the current system which is in fact inexhorably leading us toward a socialist outcome, i.e. Fannie Mae and Freddie Mac becoming government agencies.