This may be true in theory, but we are seeing rather different development in the West. 1) power seems to have a tendency to concentrate, which ultimately leads to corporate oligarchy. 2) most markets have high barrier to entry which breaks the alignment of market and interests 3) the concept of rational markets is not as clear cut as it is often perceived, and most studies have failed to incorporate findings from related to bounded rationality

However, the government's incentive is to stay in power and not let that happen. The tool that government has is regulation.