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The free market untruth
The free market untruth
The ideology of the free market is a pernicious ideology. In the name of freedom – the freedom to trade and consume – it is subversive of both freedom and morality.
The rule of the market is an arbitrary rule[1] - it is a tyranny without conscience or empathy.
The freedom of the free market is an untruth rather than an outright lie, because a majority of its proponents do believe their own rhetoric.
Markets work well when buyers and sellers are price-takers – when they have to accept the price set by an efficient market.
In an efficient market no single transactor or group of colluding transactors sets the price of an item to their own advantage and to the detriment of others.
That is why governments in the past have taken anti-trust measures to counter the natural tendency to collusion[2] – the natural tendency toward oligopoly and monopoly. Historically, governments have tried to break up commercial power blocs when they have formed, and they have tried to reduce the barriers to entry for new players to encourage competition.
Markets also work well when the transactors have good information. Good information arguably includes a price for the item that factors in the social costs and benefits that come with the production and consumption of the item. Ideally the price of a product would factor in costs like the eventual safe disposal of the item, or an extinction premium for the commercial exploitation of threatened species required to produce the item.
Markets work well when commercial deals are transparent and objectively defensible; where decisions are demonstrably free of corrupt practices.
Markets work well when taking commercial risks can bring significant rewards, but also significant loss or failure for the decision-makers.
In the late 20th and early 21st centuries we have seen a global, ideologically driven removal or dilution of governmental checks and balances on commerce. We are now reaping the consequences of State naivety and negligence.
When banks or other large corporates are deemed by politicians to be “too large to fail” the integrity and viability of the marketplace is fundamentally undermined. The market is then no longer able to punish commercial elites for excessive risk-taking and greed, or for negligence and incompetence. For the commercial risk-takers there is now only an upside, and tax-payers pay for the downside. Greed-driven risk taking can only increase when you are insulated from failure.
In large corporates the supposed accountability of directors and executives to shareholders is flaccid, particularly if the shareholding in a corporate is dispersed and dominated by institutional shareholders who in their turn are also run by the managerial class. In practice the global managerial class is much less constrained and accountable than it purports to be.
Globally there is now an upward spiral in the rewards that the managerial class pays itself. Company directors, senior executives, senior State agency managers, executive search agencies, and the top business schools are all members of this global managerial class. All have a strong vested interest in driving up executive pay and over-stating the indispensability of their members[3]. Shareholder checks on executive largesse have proven to be absent or ineffective.
Governments have been loath to intervene in the upward executive remuneration spiral, because at the micro-level of the individual corporation or state agency the argument that you need to be internationally competitive to attract the best talent is compelling and personally attractive. Senior decision-makers within the State sector, including politicians with an eye on future directorships or executive roles, have a strong personal interest in being part of the managerial class rather than a check on it.
We now regularly witness failed top executives still being paid their bonuses, or their substantial exit packages. Not infrequently, failed executives re-appear at the helm of other corporates. The argument that a failure was due to external factors and would have been worse if not for the efforts of the executive is always a hard one to counter.Meanwhile the managerial class continues to reduce the numbers[4] and remuneration of the layers beneath it. Middle management and the front-line are regularly rationalised and more and more functions are outsourced to lower-wage economies, while the remuneration gap with the managerial class widens.
The ideology of the free market has removed constraints on the international movement of all factors of production, except labour[5]. Under such circumstances, production inevitably moves to the most exploitative and least moral labour market.
As long as there is no free and unrestricted international movement of labour, allowing capital and other resources to move freely does only one thing – it enriches an elite and marginalises and subjugates the rest.
As long as the market price[6] of a product does not reflect the costs of the human and environmental exploitation and degradation that were incurred in its production, again, only an elite benefits from its production.
Corporations move their plants to countries where fellow human beings have to work long hours for subsistence wages, and where environmental protection is not a consideration. You, the consumer get access to cheaper goods and services. But at what price and for how long?
In response to international competitive pressure labour markets everywhere are being deregulated. You find yourself having to work longer for less to be assured of an income. The pressure on governments[7] to reduce their taxation levels to internationally competitive levels inevitably undermines any social safety nets your society may have offered, reducing your option to say ‘no’ and increasing the power of your employer to dictate your conditions of work.
The environmental indifference of low labour cost economies will also, in time, affect you directly, and probably much sooner than we have come to expect. Slave labour fishing boats once they have depleted their own fisheries start poaching other territorial waters and marine reserves. The increased emission of greenhouse gases in any country affects the globe.
Moral citizens of the world must resist the ideology of the free market and its beguiling propaganda.
Act as sovereign and ethical consumers by not consuming products that have been produced by labour practices you yourself would find intolerable. Act by not consuming products that have been produced with wanton disregard to the environment. Act by not voting for candidates who promote the free market ideology and the further liberalisation of world trade. Act by understanding and accepting that true and lasting freedom and morality come at the price of more expensive consumer goods[8], effective anti-trust measures, State-restraint of executive remuneration, and the greater mobility of all people[9].
Footnotes
- an arbitrary rule | Freedom from arbitrary rule
- the natural tendency to collusion | Power concentrates and societies ossify
- over-stating the indispensability of their members | The illusion of competence
- reduce the numbers | The end of work
- except labour | The right to migrate
- the market price | Market failure
- The pressure on governments | The withering state
- more expensive consumer goods | The imperative to be internationally competitive
- the greater mobility of all people | The right to migrate