Bearing the burden of the IMF
in Bangkok earlier this year. |
Countering the previous
viewpoint, the author turns to history to show that belief in the market as the best
of all social orders is an old ideal that does not bear up to scrutiny
 Since
the early 1980s, when the Thatcherite and Reaganite revolutions were in full swing,
the doctrine of neo-liberalism appears to have staked itself out across the countries
of the world without meeting much serious opposition. But negative reactions to the
spread of free market philosophy have ensued as the damage it has caused – in terms
of inequalities, impoverishment, social exclusion and environmental destruction–come
to light.
Supporters of the free market advocate deregulation to the extent that all human
activity would be run by the private sector, while public authorities would be left
to manage the tools of coercion and law within a given territory: namely, the army,
the judicial system, and (if only in part) the police and prisons. On the other side,
supporters of a more humane economy, who have grown hugely in number over recent
years, back a rather different formula for the good society: “yes to the market economy,
not to the market society.” In other words, they insist on the need to resurrect
and re-establish regulation in new and varied forms so that it can cover today’s
global dimensions of economic activity.
The differences between these two broad schools of thought is at least three centuries
old, beginning when the old divine order– in which political authority was enmeshed
–collapsed. At the start of the 17th century, Galileo confounded the Scriptures by
proving that the Earth rotated around the Sun. Shortly after, philosophers such as
Thomas Hobbes and John Locke argued that the social order was not grounded in Providence,
but in the decisions of individuals. The medieval dogma holding that all power came
from God, who assigned each person his or her “natural” place in society, was shattered.
From then on, societies faced a new challenge: defining the “social contract” that
linked people with each other and with the state.
Two radically opposed forms of contract were put forward. The first “political” form
placed its trust in the good will of individuals, who could freely decide the shape
of the new social order. The second “economic” option suspected that this trust in
fallible, fickle human nature was open to abuse. A new social order, these latter
theorists maintained, needed rock-solid foundations–namely economic “laws,” which
are “natural” and thus unchanging.
The first such law is that everyone acts primarily out of his or her own personal
interest, the main thrust of which is a desire for riches. This impulse is shared
universally in all societies, the theory goes, and will eventually be the best method
for organizing all of them. As a result, the market theory took its first step towards
a utopian vision in which everything is subjected to its rules.
It is false to claim, as many neo-liberals do, that today’s enhanced market ideology
is essentially modern, and that the revival of tougher “political” regulatory mechanisms
to check the supremacy of private interests over the public good would be a step
backwards. Scottish economist Adam Smith outlined the fundamentals of the free market
two centuries ago; regulation came much later.
In the 19th century, a number of very tightly controlled national and international
markets gave way to a much more open market. The pendulum swung again, however, and
as a result of the market’s failure to deliver a workable, peaceful society, markets
were refined so that they today include “rules, institutions and networks that control
and monitor the creation of supply and demand and the relationship between them,”
according to French economist Jean Gadrey. But these interventions are now being
challenged by a new wave of deregulation. Defining a market economy, says Gadrey,
has hence become an “extremely contentious and political” issue–as well as a very
urgent one.
A second flawed argument used by neo-liberals is that the market economy is the only
source of wealth, and in particular, wealth for all (the notorious “trickle-down”
theory). The past 20 years, however, have testified to widening inequality, with
the three richest people now wielding a fortune greater than the combined GDP of
the world’s 48 poorest nations.
The third error committed by today’s free-marketeers is their denial of the fact
that the real economy in fact rests on three foundations, as the Hungarian émigré
political scientist Karl Polanyi argued. In a market economy, the terms of trade
are fixed by prices that various participants in the markets decide upon on the basis
of their interests. But hidden in these calculations are all sorts of non-market
variables and contributions, starting with government aid and subsidies to firms.
In the non-market economy, the distribution of goods and services is largely handled
by the public sector, which operates according to the rules set down by democratically
elected authorities. This is the “welfare state.” But beyond this, in the third,
non-monetary economy, the priority rests on reciprocity, with services distributed
by groups or people according to the social links that bind them together, whether
in families, associations or mutual support groups.
Firms benefit from training and teaching conducted in the home, and thus draw on
a fund of “social capital.” Likewise, in the expanding service sector, businesses
take advantage of intangible investments like education, which depends largely on
the public sector, as well as on orders and investments from public authorities.
They also depend heavily on the political decisions made by governments.
These examples go to prove that neither the oft-mentioned distinction between a market
and non-market economy nor the claim that the former is the only source of wealth
survive critical examination. Instead, we should adopt a more realistic and less
ideologically driven model: that of a plural economy. By putting these various beliefs
up for discussion, we can escape the tyranny of a market conceived as an abstract
and impersonal norm imposed on everyone. Tomorrow’s humane economy can only be built
through the interaction of regulated markets, states and democratic civil societies.
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