348. Double negation of the market
In the preceding items of this blog I proposed that the market should not be abolished but reformed. That presupposes knowledge of what is good about it and what not, and how to separate the two. I discussed that more pragmatically in a book[i], but here I want to look at it more philosophically. For that, I employ the Hegelian notion of the ‘negation of a negation’.
In sum, what I want to say is this. The ideal of the market presented in traditional economics is that of ‘perfect competition’, and that is still the lore in economics, the pedestal of neo-liberal ideology. In Žižek/Lacan parlance, the ideal market is the master signifier that covers and hides the reality of markets. In fact, the actual working of markets is very different from the ideal, is in fact, in Hegelian parlance, its negation. The problem with the market is not that the idea is wrong but that it is never fully or even adequately realised.
So, here comes the negation of the negation: reject markets where they do not approach the ideal, try to reform them so that they do, and halt them when that cannot be done.
The irony of all this is another negation of a negation, as follows. The crux of markets is competition, as opposed to state planning, but in fact so-called competition takes the form of the avoidance of competition. There are many ways to do this, but here I do not have the space to elaborate. I will do that in future items in this blog. The upshot is that limits are needed to the market as it works in reality, to preserve competition, striving for markets as they should ideally work, in so far as possible, and this is the job of state competition authorities.
Now, the big twist that occurs in present capitalism is that states are sidetracked by multinationals threatening to move their business elsewhere, so that regulation is foiled and even reversed into favours for predation, as I indicated in preceding items in this blog.
But there is an even more fundamental problem of time. In the ideal, markets are driven by demand, by the needs of people. Supposedly, an assessment of future needs, such as preservation of nature, leads to present investment. In fact, consumers and shareholders give precedence to present consumption and wealth.
Consumers are not willing to pay extra for environmentally sound products and services, or to reduce their consumption. An increasing number of idealistic producers try to develop such products that can compete, but there are obstacles to this. Novelty at first is always expensive, due to imperfections that need time and application to iron out, and small scale due to lack of widespread use. And they run up against powerful established interests that protect themselves. That requires state intervention, which is politically not viable under neo-liberalism.
When firms invest for the future, that takes money away from present profit, which shareholders do not accept. Private equity firms, or ‘hedge funds’ incur loans to buy firms and then act as locusts, grazing them bare, financing the loan from reducing investments for the future, in research and development, increasing present profits by cutting labour costs, and then cash in on the resulting rise of share value. This is done for the sake of ‘efficiency’, which here means the grasping of opportunities for present profit to the detriment of the future. Again, states see themselves as unable to change the global financial markets involved and renounce themselves to this reality.
The utilitarian ethic of liberalism was collectivist, aiming for the greatest good for the largest number of people. The pursuit of private interest is taken to promote public interest. Present reality is a travesty of that, with the richest 1 % in the US owning almost half (47%) of national income, and in Europe more than a third (37%). The utilitarian ethic has fallen into a hedonistic, individualistic ideology of instant gratification and wealth. Adam Smith, the godfather of market economics, said that ‘moral sentiments’ should correct private interests when they do not serve the public interest. But that has been ‘lost in translation’, the translation of market ideology.
So, what to do now? First of all, continue the unmasking of the master signifier: show how markets really work, how the ideal market is a fata morgana in he heat of the capitalist desert.
Next, it is up to philosophers rather than economists. The economy is too important to be left to economists. That is why I turned from economics to philosophy. The utilitarian ethic underlying economics and liberalism has to be reformed or, as I argued in my book on markets, and in preceding items in this blog, replaced by a virtue ethic. This may sound utopian or revolutionary, but to put it more modestly: I am merely trying to make good on Adam Smith’s promise of moral virtues in the economy.
[i] Bart Nooteboom, 2014, How markets work and fail, and what to make of them, Cheltenham UK: Edward Elgar.