Barry, My Liege :
A little more history about the early 19th Century shows some additional flaws in free market economics.
'If we turn to the towns, to the manufacturing and mining districts, we shall find a condition of things equally [to the agricultural countryside] revolting to humane sentiment. It was probable more by machinery than by guns that we had won the war, but the price was terrible. The period of transition [to peace] during which, under more favorable circumstances, we might have evolved a new social order, had seen all our energies devoted to beating the enemy and keeping ourselves from actual collapse. Provided this could be done, that the furnaces could be kept roaring and the wheels buzzing, nothing could else counted with those in authority. The new industrial system was allowed to evolve itself, and evolve it did in the most wasteful, slipshod and cruel of all possible ways.
Even for the employers, the struggle for survival was desperate and the spectre of ruin seldom very far off. Markets fluctuated, booms and slumps trod on each others' heels in the most bewildering way. The course of business was left not, as theorists supposed, to the free play of enlightened egotism, but to the reckless optimism and mad panic of business men. This alteration of slump and boom was no new thing, it had gone on continuously at least since Tudor times, but no one had thought out a financial system for regulating it - the very nature of the evil was hardly realized. The Bank of England, protected from any serious competition by Act of Parliament, occupied a position of dominating importance and used its power positively to aggravate the evil it might have mitigated. Before the great panic of 1825 when capital was being demanded recklessly for every sort of wild-cat enterprise, the Bank was adding fuel to the fire of speculation by cheapening credit and lowering its rate in spite of the fact that gold was being drained rapidly out of the country and its own reserve was diminishing to vanishing point. Then, when the first symptom of a slump appeared, the Bank sharply contracted its credit and precipitated a general smash. Henceforth the recurrence of a decennial panic became a regular part of our financial anarchy, with untold consequences of misery and unemployment.
With the coming of peace, the freedom of the seas, and the opening of the world's markets, a period of prosperity had been confidently anticipated. Unfortunately the first result was to plunge the nation more deeply into the trough of misery. It was no good having access to markets when the war had drained our customers of the money to pay, and the other nations, which were now trying belatedly to build up industries of their own, were by no means minded to expose them to the full blast of British competition - in Europe and the United States tariffs were rapidly put up against us. Then the government, which during the war had been a huge employer of labour, civil and military, ceased its abnormal destructive activities, and thereby flooded the labour market with idle hands at a time when works everywhere were closing down. The state of hopeless misery into which the country was plunged in the black year 1816 baffles description....
Grimmest of all was the lot of children who were herded into the factories almost as soon as they could walk, whose hours were from five in the morning till seven or nine at night, in a steaming and overheated atmosphere and amid unfenced machinery into which the poor little victims often dropped through sheer exhaustion, or imprisoned alone and in the dark down in the bowels of the earth. Every species of cruelty had to be practiced to keep them up to the mark ; the employer would often wait with a horsewhip in the small hours of the morning to flog the half drowsed infants into their daily Hell, and as the day went on and agonized appeals for the time were heard, conscientious foremen would apply the scourge with ever more industrious assiduity until the bruised and haggard little boys and girls reeled home for a few hours' insufficient sleep, broken by dreams of the day's torture. The parents, where they were not brutalized by their own misery out of all natural feeling, watched with bleeding hearts the sacrifice of their children, but the industrial Moloch was inexorable, it was a choice between Hell and starvation - conscientious overseers would not grant relief to idle hands, however diminutive.'
From THE HISTORY OF BRITISH CIVILIZATION, Esme Wingfield-Stratford, D Sc., M.A., Ex-Fellow of King's College, Cambridge, Routledge & Kegan Paul Ltd., London First Edition 1928, Second Edition, 1930, Reprinted 1932, 1933, 1938, 1942, 1945 and 1948, pp 887-888