Why market critics still have questions to answer

The protesters outside St Paul’s couldn’t be more clear: it’s the market that has ruined this country. Or, more accurately, the belief that the market dominates our lives. The charge is not new, yet the pitch of those claims has reached dizzying heights after the financial crisis and the economic downturn of 2008. 

There are two things that are conspicuously missing from the criticism of the market. One is a good analysis of what markets are for. The other, the articulation of a viable alternative. Here are some comments on how to fill this blind spot. 

Public debate often conflates free market with un-regulated market. In fact, as Hayek made clear many decades ago, these concepts are not exchangeable. The lack of regulation in the market place means nothing else but the absence of freedom. The freedom to sell and buy is conditional on the application of strict rules that allow people to chose in an un-coerced manner. Where monopolies develop and price cartels emerge, the freedom to chose is significantly curtailed. Hence a functioning market requires good regulation. A free market is only one that is effectively regulated. 

The critics of the market often think that the play of market forces gives rise to social and economic inequalities. That may be so, and it raises some important moral issues about how we mitigate the effects of the market in a modern society. What critics assume in the wake of this argument, however, is that this renders the market an unacceptable and morally repugnant vehicle to exchange goods. 

Yet this means holding the market to standards it is by no means supposed to meet. The moral aspect of markets hinges on the ability of individuals to operate freely and fairly within the regulative framework that exists at any given time and which applies to everyone without exception. It’s the potential of the market to offer a space for individual self-fulfillment and self-determination that speaks to its moral dimension. Whether this leads to unacceptable inequalities in society is a question of political import, not something for which we can find the answer in any philosophy of the market itself. 

Downscaling the expectations of what markets can and cannot do opens up a more plausible perspective on what markets are for, the aspect that the critics at St Paul’s have so far failed to address. 

Markets are not primarily means to make money or enrich some at the expense of the few. Markets are mainly the most suitable mechanism to establish the value of things in society. This is not so because everything is ‘marketable’ but because markets allow us to accumulate a myriad of pieces of information that we otherwise would not be able to obtain. This is where Hayek made his most important contribution to the debate on markets and society, something that is echoed in the thinking of even left-leaning liberals such as Surowiecki (see his book ‘The Wisdom of Crowds’). 

In effect, markets are the centre piece of a ‘discovery process’ about the needs of human beings and their ability to engage with each other in economic exchanges. In other words, markets function as a mechanism to aggregate knowledge about those human needs and wants and transmit this knowledge to the producers of goods. Since knowledge about human wants is highly fragmented in society, no central authority can effectively gather this information on a national scale, although we certainly have tried hard to achieve this in the past through nationalisation of industries and economic planning. 

And it is here that the protesters outside St Paul’s still have to develop a viable alternative to markets. If they want to jettison the market as a mechanism revealing human preferences and the value of goods through a free and fair exchange, they need to explain what is to take its place. What has previously been a main candidate for this, a dirigist planned socialist economy is not an option anymore. Some hard thinking is in order on their part. 

Democracy or protest?

For the last couple of days, there have been several hundred people camping outside St Paul's in London. They have made life very difficult for the Church of England which is not quite sure whether it should support them or seek an eviction order to have them removed from the steps of the Cathedral. 

Yesterday, the Church decided to cave in and join the protesters. It withdrew its support for an eviction notice that was sought by the Corporation of London and subsequently, the Corporation ditched the idea too. This means the camp is to stay for the foreseeable future. 

I fully support the right to protest. After all, I grew up in a country that did not allow these sort of demonstrations. So it is only right and proper that we should carefully balance the rights of protesters with public order issues and, if in doubt come down on the side of demonstrators who exercise their freedom to public assembly and protest. 

Today, however, the Archbishop of Canterbury did something that went beyond tolerating the protesters outside the Cathedral. He said he supported the so-called 'Robin Hood' tax, a tax that was mooted by the German and French government to be levied on every transaction taking place on the stock exchange. 

This strikes me as odd in several ways. Remember the outcry in the media and from left-leaning commentators when the government introduced some bills that were not in the party election manifestos? The fundamentals of democracy were at stake we were told. The government had no mandate to introduce these bills because the electorate had not voted on them in May 2010. 

Now, here is what puzzles me with the Archbishop's suggestion. He says that we should listen to the campaigners outside St Paul's. Yet I do not remember voting for them, nor do I think they have stood for elections and have obtained a mandate from the British electorate. As many commentators on the left of the political spectrum correctly remarked months ago: This is a question that goes to the heart of British democracy. Who has a mandate to make policy? 

The Occupy London camp claims that it speaks for everyone but the 1% super rich in the country. How do they know? So far, they have not produced a list of their demands. I am at a loss of whether or not they even have my support since I do not know what they stand for. Yet, they seem to think that they have 99% support in society, a claim by the way that is eerily reminiscent of the election results of the country in which I grew up where people could NOT camp outside churches. 

So, why should government listen to a few hundred people camped out on the pavement in London? The simple answer is: it should not. The right to protest is a right to make your voice heard. This is not the same as the right to make decisions on behalf of an elected government. 

The Occupy London protest makes an important contribution to the public debate, yet it should stop claiming that it represents 99% of the British people. Chances are it does nothing of this sort, and even if its (yet unknown) demands chime with the sentiments of the majority of people in this country, the protesters have no mandate to govern. Mandates have to be obtained in democratic elections. If we fiddle with this principle, we may as well outsource policy making to Speaker's Corner and every fruitcake can have a go.