However as far as I can tell, there is no such thing as a free market, and as a society we should not be in thrall to the markets dictating terms and conditions to us and our governments - effectively the tail trying to wag the dog.
Absolutely. It's a complete myth. Markets are created and defined by the community, which in nations generally means the state.
Even think about something like incorporation. There is no clear reason that it should be possible that owners of a business would be protected, in terms of their personal assets, from the failure of the business. If Jeff Bezos made bad business decisions and owed bags of money to smaller suppliers all over the world, why shouldn't he need to sell of many of his personal assets to repay them? What's the logic there? Doesn't that encourage risky, bad decision making and people not taking responsibility for the impact of their decisions?
The argument on the other side is that it prevents personal bankruptcies and their consequences (which are bad) and encourages investment and innovation. Also probably true. But the decision to allow that legal fiction of incorporation to protect owners of capital is a decision that's been made, it's not natural and god-given, as free-market advocates would like us to believe.
What we see now is that to a large extent, it is not the state making decisions about how to define and shape markets in the best interests of citizens as a whole. That job has largely been turned over to big business who defines regulations and even arbitrates disagreements, all through various kinds of free trade agreements. The state is simply the on the ground regulation and enforcement arm for these private business decisions which exist to further the interests of capital.
One of the principles of distributism is that capital (real income generating capital rather than consumer goods), rather than being concentrated either in the hands of private capitalists or the state, should be widely distributed. That's not only to try and give people maximum power over their own decisions and reduce the necessity to sell one's labour - it's to control the possibility of that sort of regulatory capture by a few powerful (ie rich) individuals.