So what’s your problem? Nothing too troubling I hope. As for me I’m delighted to report that after many years groping around in the dark I’ve finally had mine explained to me. My problem, (or at least the one I’m prepared to discuss here) is this: I don’t understand The Market.
I realised this by chance one day last week when I happened to be within range of a radio as on three separate occasions my problem, my lack of understanding, was defined by a variety of erudite experts who were obviously “in the know”. Surely this was no coincidence I thought as the mists cleared; there must be some underlying synchronicity at work here. Either that or a well-meaning higher power was prodding me into finally arriving at an understanding of my handicap.
Having thought about it for a few days I now realise that The Market that I don’t understand is actually any number of markets, maybe even all markets. Or maybe all markets are in reality one huge market, much too vast and complex for simple folk to understand. There you go you see, I’m feeling confused and inadequate already just thinking about the great big hugeness of The Market and the depths of my ignorance. However, just for now, and for the sake of simplicity the three markets that I’d like to isolate are these:
1) The Energy Market. I don’t understand how it can be that energy companies, gas suppliers for example, can continue to make such enormous profits for themselves and their shareholders while at the same time obliging the consumer to pay higher and higher prices. Surely if we are “all in this together”, as we’re so often led to believe this spirit would be better served if the energy companies passed a share of their profits on to the consumer in the form of lower prices? As things stand their position could easily be mistaken for simple, uncomplicated greed by an ignorant person like myself. But my confusion, as I’ve now come to see is simply down to my lack of understanding of The Market.
2) The Food Industry. Specifically the market in meat. I don’t understand how it can be economically viable or beneficial to all those in the chain of supply and demand, from farmer to processor to retailer to consumer, for meat to be flown in to Europe from all corners of the globe, and then sold to me in a supermarket at half the price I would pay for locally sourced meat at the local butcher. Not being a butcher or a farmer, a meat trader, or even a supermarket employee I simply fail, from whatever angle I look at it, to see how this is fair, sustainable, or can be described in terms other than globalized profiteering. However, as I now realise, once again this is simply a case of me not understanding The Market.
3) The Banking Industry. Try as I might, and despite the bombardment of excuses and explanations we’re daily subjected to I can’t understand how it can be possible for such failed and failing institutions, bailed out worldwide by taxpayers to still be in a position to reward their decision makers with armfuls of extra cash on top of their already enormous salaries. I realise of course that I lack understanding of The Market, but it just doesn’t feel right, like when you notice that there’s an awful stink coming from somewhere and somehow you just know that there’s a dead rat under the floorboards.
At this point I suppose I should declare a bias. A few years ago, before the current financial crisis became publicly visible I actually met an investment banker at a small social gathering. I’m sorry to say that I didn’t enjoy the experience. The urbane gentleman turned out to be one of the most seriously unpleasant people I’d ever come across, and I can assure you that I’ve led anything but a sheltered life. It’s safe to say that that particular banker left me with a poor opinion of his profession and the culture it spawns. But putting negative personal experiences to one side for now there’s obviously little doubt that it’s The Market that’s got me flummoxed here.
A Dangerous Thing
Clearly there are two sorts of people in the world: those who understand The Market, and those who don’t. So what’s to be done about my unfortunate ignorance? What can I do to get my head around the apparent absurdities and anomalies we constantly see? “Nothing”, is I suppose the answer that some would prefer to hear. Many people believe that there’s little to be gained by poking around under the surface of things, especially when it concerns our economic well-being, or interferes with the status quo, whilst others, the “insiders” seem less than thrilled at the prospect of The Market being obliged to expose itself for all to see. “A little knowledge is a dangerous thing”, as my banking acquaintance might well have said, but you’ve got to start somewhere, and speaking for myself, now that my problem has finally been identified and I can breathe more easily the obvious response is to learn, learn, learn.
23 Things They Don’t Tell You about Capitalism, a book by Cambridge professor of economics Ha-Joon Chang seems like a good place to start. By page one of chapter one: “There is no such thing as a free market”, I already feel that I’ve probably chosen the right guidebook, especially when Professor Chang states that 95 percent of economics is actually common sense deliberately made complicated. Made complicated by whom? By free market ideologists who have convinced us that all we need to do is to put our trust in The Market and get out of the way, according to the author, who goes on to insist that it is not necessary for us to have a grasp of all the technical details in order to understand what is going on in the world.
Active Economic Citizenship
There’s more than one way to run capitalism Chang argues, and what we’ve seen over the last few years are the consequences of allowing free market capitalists, otherwise known as ‘neo-liberal economists’ free rein to develop their concepts about how the World – the World, not just The Market – should work. Understanding the key principles and basic facts puts us in a position to exercise, as he puts it, ‘active economic citizenship’, in order to demand the right courses of action from those we’ve voted in to make decisions on our behalf.
A Failed Ideology
Crucially he also confirms our suspicions that what happened to the world economy over the last few years was no accident but the result of a failed ideology that now wants nothing better than for us go back to sleep and allow it to carry on where it left off – organising and facilitating the upward redistribution of wealth – while we’re left wondering where all the money went.
Of course, this is as about as radical a tome as you’re going to get from someone with the author’s background – there’ll be no overthrow of the established order advocated here. But coming from a self-confessed capitalist this book seems to me like a blast of fresh air finally emerging from the pit. Given that his stated intention is to “equip the reader with an understanding of how capitalism really works and how it can be made to work better”, this is a genuinely courageous and illuminating book from someone who obviously cares about what happens next and wants to let us all in on the act.
To be continued…
Related articles
- Europe is haunted by the myth of the lazy mob | Ha-Joon Chang (guardian.co.uk)
Great article, comments as well. A lot of food for thought here. As I read through all this I was also thinking about all the great co-ops and bartering systems we in the West had begun experimentally in the ’70s and ’80s. They really worked and were a great support to local endeavours.
Hi Sherry, thanks for your comment. The good part is that the systems you talk about are returning in a big way as a viable alternative. I highly recommend the website http://transitionculture.org/ for a look at a well organised and coherent movement that offers a way forward.
Hi there,
Let me help with your confusion:
1. The energy market enjoys monopolies thanks to government takeover of energy provision and distribution. Monopoly always leads to less choice and higher costs. With a free market, that would never happen due to competition.
2. The food industry is a complete sham in the U.S. Monsanto, which unlike proper companies in a free market has worked side-by-side with the federal government for decades, has practically taken over the entire food industry. Its top execs go on to regulate the industry through the FDA and USDA, and sometimes they go on to become judges/Supreme Court justices. No wonder, then, that the nation’s laws are written to favor them and not to respect the individual rights of farmers. There is no free market in the U.S., but especially not in regard to our food. For instance, since the 1970s, corn farmers have been absurdly subsidized by the federal government while sugar imports have been taxed through the roof. Then we wonder why corn syrup is in all our food. Again, all of these problems result from government, not from free markets.
3. The banking industry is manipulated by the Federal Reserve and has been since FDR’s massive interferences in the market. Not only that, in a free market, banks cannot be “too big to fail” since there is no safety net for them other than their own prudence. Can’t run your business? Tough. No bailouts for anyone.
Free markets don’t exist anywhere. They should exist everywhere. All of the problems you have discussed are precisely because there is no free market.
Hi, thanks for taking the trouble to read and comment on my blog post.
Obviously you see things from the perspective of a US citizen and I’m certainly not familiar with many aspects from your point of view. But with regard to the energy market I can tell you that we here (I’m in the Netherlands), have plenty of choice about who we buy our energy from. So do people in most other European countries, as far as I’m aware. In the UK the choice is wide and competition has been the buzzword for many years now. Despite this market freedom the price differences for the enduser remain minimal and the service variable, but consistently company and shareholder profits skyrocket while prices to the consumer steadily increase.
I’ve read and studied a lot about the food industry both in Europe and the US and I take your point about the monopolies controlling food supply in the US. All I can say is that there are many of us fighting tooth and nail to see that the same situation doesn’t come about here. I strongly believe that the only way to subvert the so-called free market in food supply is to downscale and localize – a genuine free market not the sham we’re threatened by now. This isn’t just a shift in focus but a transition in which individuals and communities re-take responsibility for their own food production, supply and consumption from both globalized “free markets”and monopolies. This can only happen from the ground up and in certain places is already well underway. You might be interested in looking at the following website: http://transitionculture.org/
I’m sure there must be similar movements active in the US.
With regard to the banking industry, again we’re obviously seeing things from opposite sides of the Atlantic. For the perfect example of the free market culture in banking see the City of London, one of the great centres of capital in the world totally in thrall to short term profit at the expense of manufacturing and long-term investment, amongst other things. You probably couldn’t find a better example of a free market gone rogue under the noses of regulators and politicians anywhere in the world. The fact is that many banks involved in the free market in Europe and the UK have failed, and failed bigtime. Pretty much without exception they’ve been bailed out, and are being bailed out by the taxpayer.
Also I refer back to my point in the blog article about bankers’ bonuses. While European politicians are finally making an effort to place limits on just how much taxpayers money can find its way into bankers’ private pockets the UK, that great advocate of the competitive free market leads the fight to allow the practice to continue unchecked.
Free markets versus monopolies isn’t the issue, as far as I’m concerned, such polarities are unatural and lead to imbalances and abuse as we can clearly see. I’m convinced that these are not the only choices open to us and it’s these alternatives we need to concentrate on.