Addendum on Ratepayers

25 June 2010

Friday


A truly free market is an ideal that has probably never been realized in practice. In the earliest economies of prehistory, before there were national boundaries and formal taxes and tariffs to distort the way the market functions, there was nothing like capital per se, and not really a functioning formal economy to speak of. There was economic activity, but of a sort that might well be incommensurable when compared to what we know today as economic activity. In any case, it is worth mentioning prehistory in this context, as whatever economy did exist was probably the closet approximation to a free market that the world as known. The growth of political and social institutions (what Freud thought of and Marcuse called repressive ) were not only psychologically and socially repressive, but also commercially repressive. And things have only gotten worse with time.

By the time we reach the stage in history at which there is a formal economy and such a thing as capital, there are an abundance of restrictions, both formal and informal, to any market functioning freely. And there are many markets to keep in mind: not only different markets in different geographical locations, but markets in goods, markets in services, the labor market, and, of course, the market for money. People like to say that money makes the world go round, and that if you have enough money you can get away with just about anything, but the freedom of money is just as compromised by political and social restrictions, both formal and informal, as any other sector of the economy.

I have several times quoted the famous passage from the Communist Manifesto in which Marx called free trade “that single, unconscionable freedom.” (for example, in Shocking Revelations at the Institute for New Economic Thinking) As I have pointed out elsewhere how silly this assertion is I will not belabor the point here, but I will point out that Marx calls free trade, and thinks of free trade, as a single freedom. It is not. A free market would ideally embody many freedoms, and that is one reason why free trade remains an unrealized ideal: no society has yet been sufficiently free that it embodies all of the freedoms in a sufficiently robust form that we could say that the markets were truly free.

Yesterday in Ratepayers: Everyday Life in Late Industrialized Capitalism I emphasized the choice that consumers have in spending their money, and this choice has evolved into frankly deceptive practices on the part of business in trying to attract and retain ratepayers. This commercial dishonesty represents an informal constraint on freedom that probably could never be eliminated. We can, however, work to reduce formal constraints on freedom of trade, though in doing so, and in not addressing the informal constraints upon trade, we tacitly recognize that the market freedom that we are working toward is still far from ideal, and even far from optimal.

Besides the freedom of the consumer to spend money as he or she likes, there is also the freedom of capital, which can be formulated either in terms of the freedom of investors to spend money as they like, or simply in terms of allowing the market to determine allocation of capital. when we think of it in these latter terms, and also keeping in mind the distinction between formal and informal constraints upon free action, we again see how far markets are from being free. It is almost impossible to imagine a society in which markets purely determine the allocation of capital. In almost all societies, capital is controlled by the most powerful and influential sectors of society, and these sectors of society make determination partly on the basis of expected return on investment, but probably also just as much on the basis of who they know, and what they know (and the latter is the function of the former).

Given that one of the responses to informal constraints upon free markets has been further regulation, and therefore further interference in ideal market freedom, I am not optimistic about the realization of ideal market freedom any time soon, though I remain confident that the fickleness of the consumer will continue to confound the experts as consumers choose to spend their money in ways that were not predicted. As I implied yesterday, no one can predict what product or service will be in such demand that teenagers will work at after school jobs in order to acquire the next “hot” lifestyle accoutrement. In other words, ratepayers are lucrative, but also elusive.

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