Sunday , November 28 2021

Markets and freedom

Summary:
One of the great political changes of my adult lifetime has been the right’s abandonment of free market economics, as illustrated by the government imposing trade frictions within the UK and putting up the tax burden to what the OBR says will be “its highest level since Roy Jenkins was Chancellor in the late 1960s.” Two books I’ve read recently pose a question: might this shift be due in part to an awareness that markets are no longer the foundation of freedom we once thought they were? To see my point, let’s start with the classical liberals that so influenced Thatcher. They thought free markets were essential for a free society. As Friedman wrote: Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time

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One of the great political changes of my adult lifetime has been the right’s abandonment of free market economics, as illustrated by the government imposing trade frictions within the UK and putting up the tax burden to what the OBR says will be “its highest level since Roy Jenkins was Chancellor in the late 1960s.” Two books I’ve read recently pose a question: might this shift be due in part to an awareness that markets are no longer the foundation of freedom we once thought they were?

To see my point, let’s start with the classical liberals that so influenced Thatcher. They thought free markets were essential for a free society. As Friedman wrote:

Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of economic activity. (Capitalism and Freedom (pdf), p9)

Or, as Hayek said in The Road to Serfdom, “a directed economy must be run on more or less dictatorial lines.”

And a market economy is itself liberating. As Friedman put it:

So long as effective freedom of exchange is maintained, the central feature of the market organization of economic activity is that it prevents one person from interfering with another in respect of most of his activities. The consumer is protected from coercion by the seller because of the presence of other sellers with whom he can deal. The seller is protected from coercion by the consumer because of other consumers to whom he can sell. The employee is protected from coercion by the employer because of other employers for whom he can work, and so on*. (Capitalism and Freedom, p14)

Two recent books, however, challenge this perspective. Here’s Martin Hagglund:

To lead a free life it is not sufficient that we are exempt from direct coercion and allowed to make choices. To lead a free life we must be able to recognise ourselves in what we do, to see our practical activities as expressions of our own commitments. This requires that we are able to engage not only in choices but also in fundamental decisions…This is why capitalism is an inherently alienating social institution. To lead our lives for the sake of profit is self-contradictory and alienating, since the purpose of profit treats our lives as means rather than as ends in themselves (This Life, p299-300).

There are (at least) two distinct problems here. One is that free markets are a cover, behind which lie exploitation and oppression. The labour market, Marx wrote, is “a very Eden of the innate rights of man” wherein “both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will.”  Once the transaction has occurred, though, things change:

He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own hide to market and has nothing to expect but — a hiding.

Secondly, markets themselves are a form of what William Clare Roberts calls “impersonal domination”:

Because they are dependent for their lives upon the market, as slaves are dependent on their masters, producers of wares for sale must keep a ‘weather eye’ out for changing market conditions, which are, at bottom, nothing but the will and caprices of their customers and competitors. (Marx’s Inferno, p57)

This dependence afflicts capitalists as well as workers. As Marx famously wrote:

Free competition brings out the inherent laws of capitalist production, in the shape of external coercive laws having power over every individual capitalist.

You might think all this is a mere philosophical debate. Far from it. Four big developments since the 80s vindicate Marx, Hagglund and Roberts against Friedman and Hayek.

One was the financial crisis. This showed that mortgage derivatives –products intended to reduce risk – actually increased systemic risk (pdf) and made the financial system as a whole less manageable. Such products were, in the title of Richard Bookstaber’s book, a demon of our own design.

That phrase echoes perfectly Marx’s idea of alienation, of how man-made structures come to exercise impersonal domination over us:

The object which labour produces – labour’s product – confronts it as something alien, as a power independent of the producer…It means that the life which he has conferred on the object confronts him as something hostile and alien.

Secondly, casualization in academia, greater stress among teachers and doctors, the rise of bullshit jobs, falling relative pay in journalism and deadly working hours in investment banking are all facets of a single phenomenon – the degradation of erstwhile good jobs. People in jobs that were once “middle class” experience less freedom at work. Yes, the dark satanic mills have shut and terrible working conditions diminished, but more people now experience labour markets as a front for domination and alienation. And they vote accordingly. Mill

Thirdly, there’s the housing market. In the 80s we young people regarded this as a source of liberation. After just a few years work, we could buy our own place and so free ourselves from the uncertainty caused by dependence upon the rental market. Today’s young people have much less chance. For them, this important market confronts them as an alien force, thwarting their hopes and subjecting them to domination by landlords.

Fourthly, there are globalization and deindustrialization. Many in the US and UK experienced these as causes of and decline, as processes of uncontrolled domination rather than liberation. The vote for Brexit was in large part an expression of frustration by the “left behind.”

That slogan “take back control” tapped in brilliantly to those feelings. To a Hayekian or Friedmanite, the slogan should seem weird: haven’t 40 years of marketization given people more control of their lives? From the perspective that markets aren’t liberating, however, its appeal is clear.

Of course, the slogan took a reasonable feeling and diverted it towards a pointless end. The challenge for our time is to give it more useful expression. How can we increase economic democracy and people’s real control over their economic lives without damaging too much the genuine good that markets do as technologies of allocation? Hardly anybody in politics, however, is interested in this.

* Note that Friedman’s argument only applies to imperfect markets. In the textbook case of perfect competition all sellers and all employers are the same.

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