THE CASE AGAINST THE MARKET.

Ted Trainer

16.10.2014

Just about everyone believes that a satisfactory economy must be basically a market system.  Even most of the critics of the present economy are likely to say that the market needs reforming but it should be the central mechanism in a good society.  A market system clearly has some impressive merits, but the following argument is that market forces have such extremely undesirable effects that the long term goal must be to do away with them altogether.

MERITS

In an economic system based on the market mechanism the determinant of issues such as what is produced, where and how, of the prices of inputs and final goods, and of who gets the goods is what will maximize benefit to actors in a situation where they bid competitively for things by offering money for them.  This way of handling economic decisions has a number of merits, such as moving production to the purposes most demanded, eliminating inefficient producers who can't compete, and rapidly shifting production capacity.  Above all these things are done "automatically" by a "hidden hand", avoiding the need for a massive state bureaucracy to make the billions of decisions, and the associated problems of corruption and inefficiency.

Over the last three hundred hears this system has been largely responsible for an astounding explosion of production, efficiency, living standards and "development", technical advance and wealth.  The collapse of the Soviet Union and "communism" in the 1990s is generally taken to mean that a market based economy has been established without doubt as the only sensible way, and most debate is only about how best to manage it.  The general assumption is that it is best to leave as much as possible to the operation of free markets.

From the perspective of The Simpler Way we are entering a dramatically new era, one of intense and irremediable resource scarcity, loss of power by the imperial West, and ecological and social breakdown.  The argument below is that this situation has been brought about mostly by the market system and that when we look at the form a sustainable and just society will have to take we realize that it will have to replace market systems with other mechanisms.  The transition process cannot be sudden but might take several decades, and TSW hope is that it can occur without violence.

FAULTS AND PROBLEDMS.

Most people in countries like Australia do not think there is much if anything wrong with the market system.  It seems to work very well.  This is because it does work very well, for themBut the market mechanism is actually responsible for most of the world's problems, including the poverty of billions, the transfer Third World wealth to rich countries, accelerating inequality, the destruction of the ecosystems of the planet, much of the armed conflict in the world, and the breakdown of social cohesion and the decline in quality of life in even the richest countries.  This will probably seem like an outrageously mistaken list of claims, so let us consider the grounds for them.

This economy is not designed to do what is needed,

just or ecologically sustainable.

Our economy is extremely productive.  It churns out enormous quantities of goods, many of them luxuries.  But at the same time there is huge unsatisfied need.  In Australia thousands of people want basic housing.  We need more and better hospitals.  Millions of Australians live under or just above the poverty line, going without things most people regard as basic.   One billion people in the world are extremely poor.    Huge environmental problems are not being attended to.  Why are these needs not met? 

The answer is, because it is not an economy in which we ask what needs producing and then organise our productive capacity to meet the need.   It is an economy in which,

      most of the productive machinery (capital) is owned by a very few people,

      who decide what to produce by asking what will make most money for themselves,  

      and they can always make most money producing relatively luxurious or more expensive things to sell to people who have higher incomes than they could by producing the cheapest possible necessities for the most needy people, or by producing what is best for society and the environment.

It is easy to show that most of the waste, human suffering and ecological destruction in the world is due to the working of market forces. In a market system what is produced and who gets it at what price is determined by who is prepared to pay most.   The result is that  in a market system scarce things always go to those who can pay more for them.   In other words those who own resources will sell them for the highest price they can get, and richer people can pay higher prices.  Poor people have little or no "effective demand".  Need, morality, welfare, justice, future generations or the environment are all totally irrelevant and will not influence the outcome.  In a market system it does not matter how desperately something is needed, it will go to whoever can pay most for it.

This is why one-third of the world's grain production, more than 600 million tonnes is fed every year to animals in rich countries, while around 850 million people are hungry.  It is why the rich countries take 3/4 of the world's resource output and consume resources at a per capita rate that is 15-20 times that of the poorest half of the world's people.

Thus the massive injustice in the global economy is an inevitable consequence of the fact that it is a market economy.  In a good society we would have an economy that ensured that scarce resources went primarily to those in most need.  If this happened then we in rich countries would have to get by on something like our fair share, that is, far less.

Grossly inappropriate development.

Even worse is the fact that market forces ensure that the wrong things are developed.  For example in the Third World where there is obviously an urgent need for development of farms and factories to produce for the majority of people who are very poor, little development of this kind occurs while almost all the investment goes into developing farms and factories to export to rich countries.  Why?  Simply because these are the purposes that will yield most return on investment.  Investors will never maximise their profits developing industries to produce what is most needed, because the most urgent needs are felt by poor people and it is always much more profitable to produce what relatively rich people want.  Foreign investors never invest in what most needs developing. (For more detailed discussion of the way these two mechanisms cause Third World underdevelopment and poverty see, Third World Development.)

This is the mechanism that has developed the world into the forms and structures that serve the interests of the rich countries and especially their corporate elites.  Most of the productive capacity in the Third World now produces things that benefit only the transnational corporations, the few richer people in the Third World, and people who shop in rich world supermarkets -- because producing to satisfy their demand is the most profitable aim for those with capital to invest.

              "The market makes the most efficient allocations."

Conventional economists claim that the market makes the most "efficient" allocations of resources and investment.  This is absurdly wrong.  It is only true if we define "efficient" in terms of the monetary return on investment.  If on the other hand we are concerned with using resources and capital to meet needs most effectively, or to do what is morally right, or to develop what is sensible or best for the environment, then market forces are not only appallingly inefficient, they will almost always result in precisely the wrong outcome!  Resource producers never sell vital resources to those in most need.  Foreign investors never develop industries to supply what most poor people need.  Market forces never result in just outcomes or those most likely to preserve the environment. 

Again conventional economists, and most people in general, think the market system is satisfactory, but this is because it has had such desirable consequences, for most people in rich countries.  What they overlook is the fact that they are rich.  They are among the few in the world who win and take when markets determine production, distribution and development.  The market system does work well – for them – because they have "effective demand", i.e., the money to buy things.   There are three large groups who have no power to bid in the market and therefore will get nothing from it – the poor majority of people on the planet, all future generations, and all other species.  Before you claim that the market works well you should ask those groups how well it works for them.

"The freedom of enterprise"

Conventional economists claim as a merit of this economy the fact that it gives people a great deal of freedom to buy and sell and invest as they wish.  But the foregoing examples show that in our economy there is far too much freedom of enterprise and freedom for market forces to determine what happens.   Corporations and richer people have far too much freedom to do and to get what they want.  Third World plantation owners are free to plant coffee for export rather than food for local people.  Transnational corporations are free to invest in luxury production and to avoid investing in what most needs producing.  Richer people are free to take most of the scarce resources and goods on sale by being able to pay more for them.

It is of course desirable in principle to ensure that people have considerable freedom to do what they want, but obviously in a good society there must be many restrictions placed on individual freedom. There are many things that it makes sense for us not to allow each other to do if we want an orderly, sensible, just and sustainable society.  For example it is not a good idea to allow people the freedom to drive on whatever side of the road they choose to. This would reduce the freedom from danger that we all want.  When those who own most of the land in the Third World have the freedom to produce what they like this undermines the freedom of most people to have sufficient food. 

These have been arguments against the acceptability of a free enterprise or capitalist economy.  It does not follow that the alternative has to be a "communist" or "socialist" economy in which all productive property is owned by a state totally controlling the economy and all economic action is decided by state planners.  The Simpler Way alternative is quite different.  In a satisfactory economy there might still be considerable scope for markets, private firms and freedom of enterprise, but this must be within guidelines set  by society and there must be basic  social control, planning and regulation.  It will be stressed that this would have to be in mostly small local economies via open and participatory processes in which all people share equally in making the decisions.

Of course in a capitalist society the notion of this amount of social control over both the economy and how rich some individuals could become would be fiercely rejected, both by the few who benefit most by the system and by people in general.  They all insist on a system in which a few are free to get very rich taking more than they need, they all try to be among the few winners, and they all cheer the winner who becomes a tycoon, with no concern for the many who lose their livelihoods and the many who lose in the competitive struggle.

            What regulates?  Either the market, or needs and rights.

When you allow the market to be the determinant of what is produced and who gets it you are rejecting the other way of doing these things. The other way to determine what is done is by making deliberate, rational social or collective decisions concerning the needs and rights of people and what's good for society and the environment. 

As Polanyi and others have emphasized, if most or all things were left to the market to determine, society and its environment would be quickly destroyed.  Markets are only about maximizing self interest, without any restraint, so richer people would become much richer, take more business and property and wealth for themselves, and a tiny super-rich class would emerge and increasing numbers would be dumped into low wages or unemployment and poverty (, which is more or less what is happening in the world today.)

Obviously much regulation of the market by society is essential, and it takes place in even the most enthusiastic neo-liberal states.  Australia is probably better than most countries in restraining the power of market forces to determine the provision for old and disabled people, fire brigades, parks and roads etc.  What would happen to Sydney's central Hyde Park if its fate was left to be determined by market forces?  It would be quickly bought to build high rise luxury units.

The neo-liberal claim is that the less regulation on the freedom of business the better for the economy.  This is perfectly true if all you are interested in is the amount of business turnover, sales and GDP, which is indeed just about all that the conventional economist is interested in.  Of course by definition regulation prevents entrepreneurs doing some profitable business that would have led to more sales and GDP.  But there are far more important social priorities than that.

It is evident how support for free markets is central in capitalist ideology.  People with capital do not want their freedom to buy, sell, invest or trade to be interfered with.  Any regulation by definition reduces their scope for dong profitable business.  They always dress up their claims in terms of how freedom for them will result in more output, wealth, jobs and GDP, which is quite true.

Unemployment

Unemployment is a central element in a market economy, because it is an economy in which labour is treated as just another commodity that can be bought and sold in a market.  Unemployment reveals some of the worst irrationalities and injustices in this economy.

In this economy it would only be possible to solve the unemployment problem if there was increase in the amount consumed and therefore in the amount produced and in the jobs required for that.  But we do not need anywhere near as much produced as there is now; present levels of production and consumption are quite unsustainable in view of the resource and ecological limits of the planet.  If we only produced as much as was sensible, with modern technology the unemployment rate in this economy might be well over 80%!  In a satisfactory economy we would organise to share the rather small amount of necessary work among all who wanted work. 

In this market economy labour is treated as just another "factor of production", like bricks or land, to be used in production according to what will maximise the return on investment.  But labour should not be treated as just another commodityLabour is people.  It is alright to leave a brick idle or to scrap it.  It is not alright to leave a person unemployed and without a reasonable income.  It is not alright to let market forces determine whether a person is dumped into unemployment. A major feature of a good society would be that it ensured that everyone had a livelihood, the opportunity to enjoy working at making a valued contribution.  A good society provides for its members, it does not let anyone fall into poverty or disadvantage.  In a tribal society no one is poor, unemployed, excluded or dumped. (The Bedouins say, "A poor man among us would shame us all.")

The fault here is that conventional economic theory excludes from decisions all factors other than money costs and benefits.  Those costs are relevant but they should always be given far lower priority than considerations of justice, morality and the welfare of people and ecosystems.  The misery of unemployment, the damage it causes to morale and self-concept, are real and serious costs, which economists and people with capital completely ignore.  That just means someone else has to pay them.  Often we should keep people in jobs even though this might be quite inefficient or costly in monetary terms.  It would be very easy for governments to organise cooperatives in which unemployed people could produce some of the things they need, or make socially valuable contributions such as environmental restoration.  During the Great depression millions suffered the misery of unemployment for a decade when governments could have prevented this by setting up cooperatives, but such action is not acceptable in a capitalist economy. 

It is easy to organise an economy without there being any unemployment.  There is none in the economy of the Kibbutz settlements, or in a tribal society or an eco-village or a monastery.  In those economies people simply arrange to share the work that needs doing among the people who want work.  Only backward and uncivilised societies allow unemployment to exist.

It suits the owners of capital if labour is treated as a commodity that can be bought and sold in a labour market, like bricks and just left idle if no one wants to buy any of it.  But many important things should not be treated as a commodity that can be bought and sold, including children, friendship, the judgments of courts, loyalty, good health care, prison sentences, fire protection, clean air, safe water, public parks ,   Again the power of capitalist ideology is apparent.  Almost everyone, including unemployed workers, accept without question that whether or not people can have a livelihood and an income and thereby escape the misery of unemployment and poverty should depend on whether employers can make more money giving people more jobs. 

Inequality

Inevitably when market forces are allowed to be the major determinants of what happens in a society, inequality tends to become much worse over time.  Those richer and more powerful in the first place are able to get most of the resources, sales, profits and benefits available.  Those too poor to compete in the market are at best ignored and get no benefits, and often the resources they had are taken from them (e.g., via debt and repossessions) and they are dumped into "exclusion".  Just glance at the figures (See Inequality documents), e.g., the wealth of the super-rich 0.1% in the  US is going through the roof, but the real income of 80% of US workers has actually not increased in decades!  That's what globalization and freeing the miracle of the market does.

"But economic planners cannot make all the decisions the market makes."

Most people would argue that a major merit of the market system is that it does away with any need for massive state bureaucracies to decide on what to produce, how to distribute, what prices to set etc.  The market seems to make billions of such decisions automatically.  But of course this is totally incorrect.  The massive bureaucracy is there; it's just within private firms.   Vast numbers of people meticulously and rationally decide what to produce, what price to set etc, .working within corporation, shops and factories.

This shifts to question to whether it's best to have the decisions made within private firms and via competition in the market. Probably the most impressive characteristic of the market is that it is a powerful driver of innovation and it will get rid of an "inefficient" firm very quickly, or decide which of two competitors survives, or which new product is to succeed, with no argument.  If such decisions had to be made by committees wouldn't there be interminable debates, corruption, support for mates in firms that should be closed, etc?   These are indeed serious problems that would have to be dealt with in a non-market economy.  However,

      The Simpler Way proposal is that in the early decades of the transition only the core elements of the emerging local economy need to be under social control, and this could involve setting guidelines within which private firms must operate.  Even in the long run most economic activity might remain within small private firms and co-ops, so long as their owners are not out to get rich and take over rivals but are happy to run their firms as valued suppliers of important goods within stable conditions, to earn stable and sufficient incomes.  From time to time the community would have to make decisions about restructuring within this sector, e.g., if we find we have too many bakers we would work out how best to help some move to other contributions they would be happy to make.  Outside this Economy B dealing with community necessities there might remain a sector in which some choose to operate according to market forces to see if they can earn an income.  The scope for this would have to be decided by the community according to the availability of resources etc.  In the longer term as we could see how things were working out we would have to decide what scope to leave for the market driven Economy A sector.  It is likely that we would opt to completely phase it out, mainly for moral reasons (below.)

The problem of setting prices.

Probably the greatest merit of the free market and the greatest difficulty for alternatives is to do with setting prices.  In the former the solution is simple; the buyer and the seller are free to come to an agreement.  In centralised authoritarian forms of socialism the state bureaucracy sets all prices, guaranteeing problems to do with whether they get them right.  If they don't suppliers will not produce a sufficient amount or they will produce too much, meaning resources will be badly allocated, and there will be endless disputes about whether payments received by various sectors are fair.

Again the problem is much more tractable in a Simpler Way economy.  Only the prices of basic items might need to be set by the community.  Many goods and services would simply be free to all people, paid for by taxes and community working bee contributions. Where monetary prices are needed for basic items these would best be set by detailed study of materials and labour inputs and uses, and this might involve considerable time and effort by economic committees. (The Spanish anarchists appear to have run large scale economies well, without market forces or state bureaucrats, by putting much committee time into monitoring, recording and analyzing in order to decide prices and other factors.) Adjustments in those prices that were set would need to be made from time to time. The relevant committee would make recommendations to be voted on by town assemblies.

What about setting the price for labour?  This should not be left to "agreements" between an employer and an employee. One solution is for the community to decide on a monetary income all are to receive for an hour's work, regardless of skill level or "value" produced.  This should be worked out in terms of the time it takes to produce the things a person needs each week for a good life.  If it takes on average one hour to produce x loaves of bread and y kg of beans(established by committee studies), this sets their relative value and monetary prices.

An implication is that no matter how bright or credentialed you are you are expected to work for money as long as everyone else has to each week.  Remember that would probably only be one day. Most of your needs would be met without having to earn money, e.g., via free concerts and food from the commons, and paid for by your working bee contributions plus (small) monetary taxes. Note also that all training should be free. This adds to the reasons why a doctor should be happy to be paid as much for the work time he contributes as the baker.

All that is to do with Economy B in which the community organizes provision of basic necessities for a good life. In a commune that's the only economy there is, but it is possible that your town might decide to retain a considerable remnant Economy A in its version of The Simpler Way. Thus someone might like to produce elaborate hand sewn dresses and negotiate prices with people who want to buy them. Many routine and occasional exchanges might be carried out via such a market process.

There would also have to be a monetary accounting system of some kind to deal with town imports and exports. Items such as radios that would not be produced in  every town would be produced in factories spread carefully throughout the land enabling all towns to do that (small amount of ) export producing that would pay for their (small) need to import from the regional or national economy. Again rational price setting systems would have to be worked out. There could be no place for competition to determine which town won the sales as that would quickly lead to some taking them all and others being deprived of the capacity to import necessities.  If a town was not producing exports well enough we would have to work out how to fix the problem in a way that ended up providing well for all. There would also have to be subsidies and differential taxes and transfers to make sure that all towns could provide good living conditions even though some were in more difficult areas.

The stability of the economy would make this problem of setting prices easier than it would be in an economy that was growing, and in which all were struggling to get richer.

The morality of the market is unacceptable.

Even if we were able to prevent market forces from generating unjust outcomes, the fundamental motivation and values operating within markets is not acceptable. Markets require and reinforce undesirable attitudes, values and practices. They are only about maximizing self interest and disadvantaging the other. In markets prices are always set as high as possible, which means that the driving principle is to get as much as possible, i.e., it is greed. Price is not set by reference to the cost of production, or the capacity of the seller to make a sufficient income, or by what people can pay, etc. Markets are always about suppliers trying to get as rich as possible, and buyers trying to pay as little as possible. The seller does not ask himself what is enough; he asks what is the most he can get. In Medieval and ancient economies there was often the idea of a "just price", but we have no such idea now.

In addition the situation is predatory; you must be careful because the other person is likely to cheat you.  If someone is forced to sell you pounce on a "bargain ". It is alright to take advantage of another person's misfortune. "Fire sales" are acceptable. If someone really wants something you have that didn't cost you much it is alright to charge much more than you need to. Banks look for more fees they can charge on everything even though their profits are already extreme. These are not nice or friendly ways to treat others and they are not the ways we will want people to behave in the satisfactory society we will have some day.

The conventional economist thinks that if supply falls price "naturally" rises.  This is not so.  If you are running out of weet-bix at home the price does not rise.  You decide who should have what's left in terms of what's best for everyone.  Price only rises in situations where sellers find they are able to demand more and therefore choose to raise their prices even when they have no need to.  That's not nice.  Above all, in a market situation behaviour is about limitless gain, which means ultimately it is incompatible with sustainability, but more importantly it is not admirable.

The market situation eliminates consideration of the important issues.  In a market system by definition no attention is or can be given to rights, justice, the public good, future generations or the environment.  If you allow these considerations to influence your behaviour in the market you will be trashed; someone else will sell cheaper, get the contract, or drive you out of business.

But the right way for humans to interact puts a premium on friendliness, helping, giving and generosity, cooperation and care for the welfare of the other.  In general our primary concern should be for the public good, i.e., collectivist, not for our private benefit. (The Simpler Way recognizes that by prioritizing the welfare of the community we also maximize our private welfare.) In a good society we would have institutions and systems which both required and reinforced these caring values and behaviours. But they cannot survive in a marketing society.

Polanyi is one who emphasizes how social/moral values controlled the economy in tribal, peasant and ancient societies, but in the fifteenth century the economic sphere became free from such values and constraints. (See below.)

The loss of social cohesion and quality of life.

In other words, when buying and selling within a market situation is allowed to become the main mechanism determining what happens in a society, then desirable social attitudes, bonds and relations are damaged or entirely driven out.  This is an extremely important point, (especially elaborated in the works of Polanyi and Marx.)  It is not just that in a market relations between people are less than desirable. It is that society itself is increasingly destroyed, because the bonds and arrangements that constitute society are contradicted and driven out.

When you enter a market situation to buy or sell you have to be selfish. You go into the market to get things for yourself, and you must focus on how to maximise your own advantage and to minimise that of the other person.  Because markets allocate things to those who can pay most for them the situation does not encourage thought about what would be good for other people or for society as a whole. But it is impossible to have any society, let alone a good one, unless there is much more than self interest, i.e., unless there is concern with what would be good for others and for the society as a whole. Self-interest is only one of the many motives and values people have, and the quality of their society depends on their social and moral values, not on their self interest, competitiveness and acquisitiveness. The quality of a society depends on the forces, relations and bonds which restrain and outweigh self-interest and encourage behaviour that is good for society.

Thus the things that constitute society are the values its members hold which transcend selfish concerns, that is concerns for social values such as being honest, doing the right thing, seeing justice done, standards, the public good, what is good for others, traditions and customs, cultural values and practices, equity, morality, decency, pride in society, respect for law, appreciation of good institutions, concern for those less fortunate, concern for the environment and desire to see social progress.  If these concerns are not there then you do not have a society.  Yet the relations you have in a market situation contradict and prohibit these concerns. The more emphasis we put on mere market relations, i.e., trading to maximise individual monetary wealth, then the less attention and value will be given to the other-regarding values that make society possible, let alone satisfactory or admirable.

What would happen if mum made the toast and sold it to the highest bidder?

Dad would get the toast, because he can pay more for it. The kids, and grandma, would starve.

The things that make a family satisfactory are precisely the many non-market values and relations, the giving, mutual aid, and concern for the welfare of others, and the satisfaction that comes from doing what will help others thrive.  When you let market relations determine what happens you drive out good human relations and replace them with self-interest, suspicion and predatory behaviour.

The market in history.

Most people wrongly assume that the market system is and has always been the norm in human society.

Polanyi explains that in all known societies before our own, if there was a market it was "embedded in" society and controlled by social rules, custom, religion and morality.  A general moral code governed all behavior.  One would approach decisions to do with production or distribution as one would approach those to do with attending church or painting a picture, that is by considering the general social rules and bonds governing the way you must treat people and the environment in any situation.  For instance in Medieval times everything you did was in accord with God's expectations, including producing and exchanging.  Polanyi stresses that only our society has made "The Great Transformation" to a situation in which the economic sphere has been separated from society and allowed to proceed according to a new set of rules which are not subject to control by the general social or moral code.  The new rules are the rules of the market.  In this arena you can seek to maximize wealth through buying and selling without any concern for loyalty, friendship, the welfare of others, the effects on the environment, the damage to social cohesion, or the suffering and impoverishment that results, or whether outcomes are just or respect human rights.  All that needs to be considered are your own monetary costs and benefits.  Thus the economy is freed from social control. 

For instance, in Medieval Europe it was immoral to take advantage of a person in distress.  But in our present economy it is quite acceptable to buy goods very cheaply if someone is forced by a fire or bankruptcy to sell for whatever he can get.

Polanyi, Marx and many others have stressed that the unregulated market is an extremely socially destructive force.  It will quickly destroy society and ecosystems if not carefully controlled, because it gives the strongest individuals the capacity to take as much as they can and disadvantage and dump weaker people.  Polanyi discusses at length the way the emergence of the market system in England destroyed rural society.  It tore people from their traditional places of living, eliminated community, wiped out their networks and customs and security systems, their sources of self respect, leisure and assistance etc. 

Thus we can see the serious mistake in allowing the market to have much influence in society, let alone in identifying a society with its economy, which economists are strongly inclined to do.  Markets, wealth-seeking, trading, investing and making money are dangerous to society, because they are about individuals pursuing self-interest. It might be acceptable to have a large market sector within a society, so long as it is a minor part of the society and so long as moral, pro-social values and rules are much more important considerations.

Polanyi calls for the market to be "re-embedded" in society.  However, from the perspective of The Simpler Way this is clearly unsatisfactory.  Of course it is preferable that the market should be subject to much social control if that is possible.  The extent to which present society is tolerable is largely a function of the extent to which regulation prevents the market from operating.  However the ultimate goal must be to develop an economy that does not involve market forces and the undesirable values they bring.  Note again that this will be much more easily achieved when economies are small, stable, and under local control, all people will be economically secure, and there will be far more interesting things to live for than getting richer. (The Simpler Way vision is detailed in The New Economy.)

The neo-liberal scourge.

Over the last 500 years there has been a titanic struggle for freedom for the individual, i.e., freedom from rule by tyrants, kings and popes, and freedom to do one's own thing and to believe what one wishes.  This has been of immense importance for human emancipation.  The trouble is that it has also freed acquisitiveness from moral/social control.  For instance in Medieval times lending money to receive any interest was regarded as a mortal sin, banned by the Catholic church.  In that era feudal lords were bound by moral laws to provide for and protect their serfs.  (See the notes on the writings of Polanyi and Tawney on the enormous cultural difference between that era and our own.)  But in the capitalist era there are only weak moral considerations restraining some from taking more and more and from seriously harming the welfare of others.  (For instance it is quite acceptable to drive a competitor into bankruptcy.)  Over a period of a hundred years or so the labour and "socialist" movements managed to establish stricter controls over the freedom of the entrepreneur, by giving the state power to regulate. But by the1970s capital's ceaseless drive to find more investment outlets was increasingly coming up against barriers set by state regulation – so capital determined to get rid of this interference as much as possible. Hence globalization, an era in which impediments to the pursuit by corporations of limitless investment opportunities are increasingly swept aside.  (See Globalisation, in The Economic System.) 

The worst thing about globalization and the neo-liberal era is not society's loss of capacity to regulate the economy in order to meet needs (not that it this was ever done very well), or the resulting economic catastrophe afflicting millions and killing thousands of Third World people every day.  It is the effect on culture and world view, the ideological shift affirming the desirability and legitimacy of individuals having freedom from social regulation to maximise their own self interest.

Throughout the last four hundred years this new orientation has been pushed by the classes whose interests it serves, obviously those who own capital and benefit when there are free markets, which allow them to make money with minimal interference from society.  Polanyi stresses that society resists the resulting destruction, and at times wins back social control, e.g., through the emergence of the trade union movement, and the post World War 11 era of "big-state socialism".  But the current neo-liberal era represents a powerful surge in the onslaught by the forces of selfishness and accumulation.  Now we are all pushed to be individual entrepreneurs who must focus on our own self-interest and survival in a difficult and hostile market place, working against all others, knowing that not all can get jobs or prosper or be secure.  Neo-liberalism makes altruism and cooperation and concern about social issues irrelevant at best, or liabilities holding us back.  It generates a more selfish, mean, unequal, predatory, brutal and callous society, undermining the fundamental social bonds, solidarity and cohesion.  As has been explained, the result has been the accelerating destruction of society itself, of the attitudes, habits, ideas and institutions which assume and reinforce the importance of values other than self interest.

These problems of cohesion cannot be solved in or by consumer-capitalist society.  The problems are caused by the fundamental elements in such a society, by the competitive selfish pursuit of affluence and economic growth and especially by the excessive and increasing freedom given to market forces.   Solving the problems the market creates is not possible unless there is a vast and radical change to another, very different kind of society in which markets are very minor determinants of what happens, if they exist at all.  (Chapter 6 of The Transition to a Sustainable and Just Society discusses how the conditions experienced in The Simpler Way would build cohesion.)

Gain; the fundamental mistake.

Thinking about the market system also helps to clarify the fundamental problem of gain.  Polanyi helps us to appreciate the huge distinction between "subsistence" economics and the market economy.  In all economies previous to our own exchange was "equal".  The "markets" were places where goods were exchanged in transactions that enabled participants to leave with items they didn't bring, but items of equal value to those they brought to exchange.  Those who had yams but no bananas could exchange some yams for some bananas, and go home with things of the same, equal, "value" as those they came with (e.g., things requiring as much work to produce).  There was, in other words no concept of gain and no intention of gaining from "trade".  Markets were therefore not driven by "market forces" and might be better described simply as market-places where equal exchange could take place.

The contrast with our society could not be more stark.  Just about all our economic relations are driven by the intention to gain.  Firms operate in the market place with the intention of coming out with more wealth than they had.  The point of investing and trading is to accumulate, to end up with more than one had in the first place, and over time to get richer with no limit in sight.

This is the root evil which has now generated the global predicament.  An economy driven by this determination to get more and more without limit soon creates insufferable inequality as the fittest grab more and more, it uses up resources and devastates ecosystems, it shreds social cohesion as all are pitted in dog-eat-dog struggle to survive, and it generates increasingly serious financial crises.  Marx showed how the fundamental motive force in capitalism, the drive to accumulate, reinvest, accumulate more and more, leads to its fatal contradictions.  Markets are the things which enable gain. 

Even more important is the limits to growth analysis of our situation, which means that we must move to a zero-growth economy as soon as we can.  This is not possible unless there is enormous cultural change to values involving the rejection of all desire to increase wealth, that is all interest in gain.  Most people today would of course flatly reject this crucial point; i.e., that there can be no place for gain in a satisfactory future society.  Such a society must have and control an economy which provides that low but sufficient and stable quantity of goods and services that enable a high quality of life for all.  Yet the market is above all an arena in which players try to gain.

 

For a collection of documents supporting th above analysis see Docs.ECONOMICS.htm