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Are There No Limits for Markets?

Author: Civitas Vera

The idea of the market seems to dominate our thinking about life and society. In this insightful essay Civitas Vera, a collective of thinkers, explain why their must be limits to the market.

Milton Friedman, amongst others, advocated a free market economic system, in which the forces of supply and demand should be allowed to do their work, without controls being imposed by governments or other authorities. He favoured a very narrow role for government: "as a forum for determining the 'rules of the game' and as an umpire to interpret and enforce the rules decided on." While he supported the state provision of some public goods (where these could not be effectively provided by private businesses) he argued that many public services could be performed better by the private sector. And while he recognised that market forces cannot ensure a distribution of income that enables all citizens to meet basic economic needs, he nonetheless argued against government intervention to correct such imbalances.

Friedman and others’ conceptualization of the free market has become closely associated with the system of capitalism as practiced in western democracies. (Although he also wrote about creating a welfare state, it is these ideas propounded by him and others that have been taken up). The premise is that individuals should be free to transact, compete and cooperate with each other, according to their individual self-interest, thereby encouraging enterprise and self-sufficiency, rewarding those with initiative and energy, supporting an efficient, dynamic and productive economy, and enabling the ‘greatest happiness of the greatest number.’

Similarly, business should be allowed to get on with making a profit, without undue interference. According to Friedman: 

There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

The notion that everyone is equally free to pursue their self-interest and better themselves through unfettered economic activity is not borne out in practice, however. For the large majority of those who are born with little money, the effect of the free market is to ensure that they remain in their current situation. A free market that minimizes the role of government and maximizes individual agency, provides no protection for the poor, the weak, the infirm, and those who are disadvantaged by geography, language, access to education or vagaries of fate. Furthermore, the free market actively dismisses the notion of community, mutual dependencies and shared responsibilities – everyone is free to pursue their own self-interest, without regard for those who have little agency to do so. The free market also limits the middle-classes in what they can choose from and how they live their lives, although, of course, these limits are less obvious.

This influence has pervaded other areas of our lives. The underlying notion of ‘no limits’ and accompanying selfishness are evident in all parts of our lives. We want more and more for ourselves. We become upset when we hear of the plight of others but rarely do something to actually redress the imbalances in our world.
We float free in this free market of ‘no limits’ and rarely think of the importance of using our personal values to steer us through. We reward those who uphold the ‘no limits’ lifestyle. A recent example was the film, ‘Wall Street’, that was based on the selfish acts of one banker/broker. The aim perhaps was to illustrate what one person’s greed had done to destroy the lives of innocents. However there have been very interesting reactions to this film. Some banking and financial institutions are actually encouraging their employees to celebrate the actions in the film by encouraging them to dress like the characters. It is interesting to ask why they have chosen this film to emulate rather than one that emphasises good solid values and integrity. 

Using other people’s work without crediting them or lying to gain advantage becomes acceptable in this limitless society. Perhaps these attitudes contributed to the creation and use of that well-known phrase, ‘it’s business’, which is commonly utilized to justify any verbal statement or behaviour to take advantage.

A ‘no limits’ approach also blurs the line between what is acceptable and what is not. This may be why we have many and recurring instances where business people and companies have edged over the line of morality and, sometimes, legality. Enron and Bernie Madoff are just two examples of individuals and organisations that have stepped knowingly and foolishly into the abyss in pursuit of personal gain. All too often, the perpetrators of these unethical acts get away with it.

Additionally, the free market provides only negative freedom – a freedom from coercion to do something one doesn’t want to do. The extent to which it is able to deliver positive freedom – the absolute freedom to be able to choose to do anything one wants to do – is very limited. People experience huge disparities in their ability to access those choices. As Erik Olin Wright has argued: 

If everyone started out in the same position with the same assets and these differences were just the result of effort and choice, then perhaps it wouldn’t really contradict positive freedom. In fact, most people who accumulate great wealth started with considerable wealth and other advantages. They have greater freedom, not just more stuff, than someone born poor.

So how free are we really, as employees in the free market? Friedman would argue that we have complete control over our economic potential. In practice, however, our work choices are determined not only by our skills, aptitude and enthusiasm, but by external factors such as the state of the macro-economy, global demand for particular skills and services, where we live and even who we know. Our freedom within work is also increasingly limited, the lower down the firm’s hierarchy we are. Unskilled workers in menial jobs tend to have very little autonomy at work, and very little opportunity to seek alternative employment.

There is a question about whether Bill Gates and Microsoft have paid all of their taxes, yet he has used his money for good causes. How does this justify the ‘no limits’ approach to paying taxes?

One of our colleagues, Lon, also pointed out that, in a ‘no limits’ culture, it becomes easy to lose touch with reality. You could pretend that it is perfectly OK to purchase really expensive items and go to meet poor people. We can lose touch with reality in other ways. Think of the way in which we have prioritized the entertainment industry: film stars, who are excellent actors, are suddenly seen as experts who can lead and comment in other fields, e.g. sustainability. Goldie Hawn and Matt Damon were among those who attended Davos this year. It is fantastic that they, through their given positions, can publicise sustainability issues such as water security. But why aren’t we satisfied with listening to the water experts rather than a film star? Why have we accorded the entertainment industry so much power? Why does a film star earns far more than a nurse? 

There are of course exceptions – inspirational stories of individuals born into poverty and disadvantage, who somehow turned the free market’s promise of social mobility based on individual effort into reality. For the most part, however, those born poor into a free market society are likely to live lives that, in Thomas Hobbes’ words, are 'nasty, brutish and short'.

But those born to wealth and privilege have nothing to worry about, right? Wrong. Free market philosophies are eroding the health of the planet and undermining social cohesion – with negative impacts for all of us. The free market’s highly competitive business activity is driven by the pursuit of short-term profit, with little regard to the consequences. Indeed, according to Friedman:

businessmen believe that they are defending free enterprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers [but they are in fact] preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.’ 

Essentially he is stating that caring for the other is not to be recommended as it conflicts with the aims of business in his version of a free society. That’s pretty unequivocal, and alarming. 

Clearly, those operating in free market businesses have no time for thinking about the welfare of communities, much less that of future generations. It’s every woman for herself. And if everyone is looking out for their own self-interest, our ability to trust in anyone else or to collaborate to find shared solutions is greatly diminished.

Fortunately, individuals – and in some cases businesses - do engage in solidarity, generosity, charity and altruism. To some extent, they also consider the long term consequences of their actions on communities and the environment. But they do so largely outside the philosophy of the free market. There is little self-interest to be had in caring for the wellbeing of others, particularly those who are not personally known to us, or those who will be born decades from now. While the free market does not prevent us from doing so, it does not require us to do so. We are free to distance ourselves from those less fortunate than ourselves, and justify our position of privilege on the basis that we worked to achieve our success. When we feel saddened by the plight of others, we can comfort ourselves that it’s just the way of the world and there is nothing we can do about it. We’re free to pick and choose what we care about and when we will act. What’s more, when our own interests are under threat, the extent to which we feel a moral obligation to our broader community is rapidly and dramatically diminished. Individual competition is all good and well when you’re well placed to win. When the odds are stacked against you, it’s a much less attractive prospect.

The economic meltdown of 2008 gave us some insight into what happens when the pursuit of self-interest is allowed to run rampant. The crisis affected nearly every person in the world, both directly and indirectly. The markets of the developing world shrank and retreated, leaving emerging economies with few to consume their exports. Businesses scaled back their operations and their staff. People lost their jobs and their homes. Charity took an enormous knock. Organisations dedicated to easing poverty or protecting the environment saw a massive drop in contributions.

The selfish and greedy mind-set of many corporations and individuals within the financial sector were largely to blame. And yet this sector seems to have emerged from the crisis with its free market principles firmly intact. Banks have rapidly recovered, albeit with some casualties. Despite a tighter global regulatory environment, the values and norms which drive their behaviour appear to have changed very little. The not-for-profit sector, in contrast, is still battling the fall-out. The poor behaviour that, most probably, led to the crisis in 2008 seems to be back and, more importantly, pursued. Some bankers recently obtained a massive increase in bonuses even if their banks failed to make a significant profit. Really!

The corporate and individual greed that has been laid bare in the financial sector is evident in other areas too, and it’s not limited to the private sector. There are many examples of greed and selfishness in the public and non-profit sectors. The medical profession in England, a few years ago, took advantage of a massive injection of funds into the English health service and negotiated massive salary increases to the detriment of healthcare. It’s also evident in our personal lives. We constantly judge our happiness and success against our material assets – and against how these assets compare to what our peers and our larger circle have accumulated.

Those of us in the non-profit sector witness this disconnect all the time, among our colleagues and within ourselves. We’re not immune from wanting the latest technological gadgets or designer clothes, despite spending large proportions of our working lives among poor and deprived communities. The culture of self-interest insists that there is no disjuncture between our own pursuit of material accumulation and the extreme inequality we witness every day.

A discussion with our colleague, Simon Duffy, highlighted an interesting juxtaposition; the ‘no limits’ approach has been implemented and brought alive through, often, very rigid organisational structures and systems where hierarchy is valued and upheld often at the cost of individuality. Conformity to the philosophy via these structures and systems has led to the success of this approach.

So where does this leave us – living as we do in a society which insists it’s up to us to choose how ruthless and selfish we want to be in pursuing our self-interest? How much value should we place on altruism and integrity?

Fortunately, there are always those who fight against the tide. A recent example has been Mozilla whose new chief executive resigned after one week for a failure to demonstrate congruence with the humanitarian value base. In our increasingly interconnected world, those who are willing to make a stand for a different way of life and a different system of social norms are able to reach increasingly broad audiences. We have seen the impact in the emergence of advocacy groups such as the Occupy Movement, who have made many people question whether the free market and the pursuit of self-interest can really be justified, given the huge inequalities that have resulted. It’s also evident in the brave stand taken by individuals battling corporate power, in areas such as carbon emissions and industrial pollution, the abuse of technology to undermine personal privacy, and boycotts of companies and products that have been shown to have exploitative or damaging working practices. These individuals and organisations have chosen community over the individual, and have exercised their freedom of economic choice to advance the greater good. They have used their freedom to advance the cause of others, rather than focusing narrowly on themselves.

Pope Francis’ statements and speeches last year, amongst others’, have been a refreshing breath of air reminding us of the importance of humanity, integrity, true citizenship and society. Their words have challenged our complacency. But how many of us are really willing to put self-interest aside in pursuit of a broader social good?

In this ‘no limits’ world, we have a choice to make. Who are we going to live and work for? How are we going to live? How much do we care about the lives and opportunities of others? Are we willing to put self-interest aside in pursuit of a broader social good? What limits should we set for ourselves as a world community?

The publisher is The Centre for Welfare Reform.

Are There No Limits for Markets? © Civitas Vera 2014.

All Rights Reserved. No part of this paper may be reproduced in any form without permission from the publisher except for the quotation of brief passages in reviews.