Tuesday December 30, 2003

Why free market needs Marx?

Solomon Kebede

Capitalism is a marvelous thing; a wondrous machine that has carried human societies to previously unimagined wealth. No other economic system, no matter how lofty its ambitions, has come close. Capitalism has done what clerics and moral philosophers once thought impossible: turned our self-interest, even our greed, into the motor of social progress.
Free markets, in turn, have made it possible to conduct globe spanning commercial transactions in ways that maximize economic efficiency and minimize the need for central direction. The market system has allowed society to conduct its business and organize its affairs, including the production and distribution of vital goods and services, without resorting to the commands of central planners. Instead, complex enterprises are coordinated through a decentralized process of mutual accommodation and communication, assuring that scarce resources go to their best uses.
In combination, free market and capitalism have also helped usher in and sustain fundamental political changes, widening the scope both of personal freedom and political democracy. Because of this system, more people get to choose where to work, what to consume, and what to make than ever before, while ancient inequalities of rank and status are overturned.
The spread of market capitalism has also laid the foundation for the expansion of democratic decision-making. With the establishment of private property and free exchange, political movements demanding other freedoms, including wider access to government, have proliferated. To be sure, capitalism cannot guarantee personal liberty or political democracy. It has produced its share of dictatorships too. But, to date, no society has been able to establish and maintain political democracy without first establishing and securing a market capitalist system.
The large corporations that stand at the heart of contemporary capitalism have proven indispensable in this transformation. They are the essential intermediaries in the modern economy, linking financial capital, expertise, technology, managerial skill, labor and leadership. They are spreading everywhere in the world not only because they are powerful, but also because they work. But market capitalism is not a machine that can run on its own. It needs rules, limits, and above all else stewardship. Partly because the system feeds off people's darker instincts, partly because it is a machine, and therefore indifferent to human values, and partly because there is no central planner to assure that everything works out in the end, there must be some conscious effort to bring order to this chaos, however creative it might be.
Left to its own devices, unfettered capitalism produces great inequities, great suffering, and great instability. In fact, these in-built tendencies are enough to destroy the system itself. Karl Marx figured this out in the mid-19th century and built his revolutionary system on the expectation that these dark forces would prevail. But Marx underestimated our ability to use politics to impose limits on the economic system itself.
At one time, and still in other places, even conservatives knew this to be true, and offered themselves up as responsible social stewards. Whether out of a sense of noblesse oblige or enlightened self-interest, they volunteered to lead a collective effort to reform the system so that capitalism could survive and continue to serve human interests. From the 1930s through the 1970s, American corporate leaders and a fair number of Republicans seemed to understand this too. They made their piece with "big" government, seeing in the New Deal and even the Great Society a way to forge both social peace and political stability through the creation of a "mixed" economy.
Sadly, this sort of conservatism has all but completely disappeared from the American scene. The contemporary right has abandoned whatever commitment it once had to making capitalism work for everyone, at least if that involves any sort of political intervention. Conservatives find it very hard to even think these thoughts. Instead, they mechanically repeat Lockian and Smithian nostrums about limited government that even these avatars of private property and free markets would have disavowed - if only because the slavish adherence to them makes it impossible to sustain political order and social cohesion, let alone a competitive economy.
According to the American right, capitalism's problems have nothing to do with capitalism itself but are rooted in the government's misguided effort to reform it. Corporate excesses have nothing to do with corporate power, but only to the predatory behavior of a few CEO's gone bad. Blinded by these fixed ideas, conservatives now threaten many of the things that most Americans hold dear. Laissez-faire, the conservative's default position on almost every vital policy issue today, puts individuals and communities at serious risk. This bears repeating. In many of the most important matters, from the quality of the air we breathe, to the safety of our pension funds, we "leave it to the market" at our peril.
Progressives also need to make something else clear: society benefits when the left governs. This will seem counter-intuitive, even bizarre, to a generation brought up on the idea that liberals are always soft-headed, bleeding hearts, radicals are wannabe Stalinists, and conservatives are, in former Republican Majority Leader Dick Armey's words, the real "deep thinkers." But the record is clear here too. To the extent that capitalism has served the interests of the vast majority of Americans, and not just a few rich investors and corporate executives, the left deserves the credit. History shows that capitalism has been made to meet human needs because progressives have challenged many of the basic principles upon which the system is premised, including the idea that private property rights are sacred, free markets are always efficient and fair, and corporations inevitably serve the public interest.
This point also bears repeating. In the 20th century, it's been the left that has fought for racial justice, worker rights, equal opportunity, women's liberation, environmental justice, consumer protection, civil liberties, and anti-discrimination laws - the whole panoply of social and political changes that have made America a better society. Truth be told, if laissez-faire conservatives had had their way, we would still be living in the Gilded Age.
This doesn't mean that more government is always the better choice. But on the large social and economic issues that be devil society, within certain limits the more powerful the left, the better off people are. This is why the recent and precipitous decline of progressive politics is such a disaster for so many Americans. And why it's so important that progressives figure out how to make this clear.
capitalism needs government because free markets don't do everything well. It's really that simple. The political economists who helped invent the system knew this. Adam Smith fully expected, even hoped, that government would act when necessary not only to provide for national defense, but for the establishment of justice and the provision of public works. Without these public activities, the system simply wouldn't function. John Stuart Mill, who thought laissez-faire a useful "general rule," also wrote "there is scarcely anything really important to the general interest, which it may not be desirable, or even necessary, that the government should take upon itself.
Unfortunately, conservatives who celebrate these theorists cannot or will not listen to what they actually had to say about the limits of the market system or consider several hundred years of evidence on that point. In the face of overwhelming proof that markets don't provide everything we need, conservative economists, including Nobel Prize winners like Milton Friedman, would have us believe that if government only got out of the way, competition would be perfect and market outcomes fair, and that capitalism would grow smoothly and robustly. If their denial of reality were only of interest to academics, we could dismiss it and move on. But because the Republican Party is intent on putting these benighted ideas, however poorly thought out, into practice, they can't be ignored.
We could proceed by pointing out that when their own economic interests are at stake, few conservatives are actually willing to live by the principles they espouse. The very same corporate executives who decry government regulations, federal welfare programs, and excessive public spending line up for more than $150 billion a year in corporate subsidy programs and targeted tax loopholes that enhance their bottom line. Whether what's on offer are loan guarantees from the Export-Import bank, or grants from the Departments of Agriculture, Interior, and Commerce, Fortune 500 companies like Halliburton, Mobil Oil, General Electric, AT&T, FedEx, and General Motors show up hat in hand.
In some cases, the amount of money involved is truly staggering. In the 1990s, agribusiness giant Archer Daniels Midland, a friend to both political parties, received more than $3 billion in subsidies to produce ethanol, despite any real indication that this gasoline substitute helps the environment, improves energy efficiency, or benefits anyone other than corn farmers and ADM itself. All the while, Dwayne Andreas, ADM's chairman, brazenly denounced government spending, decried the disappearance of free markets in America, and called for tax increases on working Americans to close the federal deficit.
Andreas is not alone. Corporations that can't cut it in the market routinely line up at the public trough for handouts. Chrysler did it in the early 1980s, taking a $1.5 billion loan guarantee from the federal government; the savings and loans did it in 1989, taking a $157 billion bailout from Congress; and the airlines did it in 2003, taking a $15 billion free lunch. But even successful firms feel no shame in accepting government handouts. As the high-tech economy boomed in the 1990s, bestowing billions on top managers and shareholders, high-tech executives waxed eloquent at corporate galas about the benefits of laissez-faire.
To be continued…
By solomonkebede@yahoo.com