Academic journal article Journal of Economic Issues

The Case against Markets

Academic journal article Journal of Economic Issues

The Case against Markets

Article excerpt

Markets are an efficient way of producing and distributing a very large number of mundane items. Market incentives are a dependable way of getting our bread baked. Markets allow us to make the best use of the information dispersed throughout a society. Markets give their participants a certain kind of freedom--expanding the range of choices and giving each person a variety of partners with whom to deal.

--David Miller and Saul Estrin (1994)--

Rather than efficiency machines, optimal incentive systems, cybernetic miracles, and human liberators, when we examine markets we find institutions that generate increasingly inefficient allocations of resources, unleash socially destructive incentives unnecessarily, bias and obstruct the flow of essential information for economic self-management, substitute trivial for meaningful freedoms, and lead to irremediable inequities in the distribution of goods and power.

--Robin Hahnel and Michael Albert (1990)--

The debate between those who believe that markets are an integral part of a desirable economy and those who believe we must eventually replace the market system with some kind of democratic planning is long standing. By the end of the twentieth century, supporters of markets had the upper hand for obvious reasons. (1) The demise of central planning not only in the Soviet Union and Eastern Europe, but in China, Vietnam, and Cuba (to a lesser degree) casts a pall over any talk of comprehensively planning how best to use productive resources. (2) In Western Europe and the United States, the free market jubilee began in the 1980s when Margaret Thatcher and Helmut Kohl defeated social democracy in Europe and Ronald Reagan put liberals in the United States on the run. (3) When social democrats regained power in Germany and Great Britain, and Democrats won back the White House in the 1990s, instead of reigning in market mania Tony Blair, Gerhard Schroeder, and Bill Clinton routed progressive forces inside their own parties, promoted pro-market, "third way" domestic policies, and directed the IMF (International Monetary Fund), WTO (World Trade Organization), and World Bank to force free market medicine down the throat of one third world country after another. (4) In the aftermath of the East Asian financial crisis even mighty Japan Inc. and other Asian "tigers" like South Korea were forced to bow to the market gods they had long held at bay, and abandon their highly successful "Asian model" of long-run international economic planning.

Consequently, by century's end, to speak ill of markets narrowed one's access to ears, and progressive economists quickly learned how to reformulate criticisms as suggestions about improving market performance. Any hint that one considered markets to be part of the problem rather than the key to the solution to any economic problem was sure to blow one's cover in the economics profession as well as policy circles. Proclaiming oneself a "market abolitionist" at the dawn of the new millennium was tantamount to a plea of insanity.

But, while it is easy to see why the shrinking circle of progressive economists with lingering doubts about markets have been cowed into silence, none of the above "reasons" have any logical bearing on the positive and negative aspects of either markets or democratic planning. Market performance is not enhanced by the collapse of central planning or by an increase in ideological hegemony of those who sing in praise of markets. Nor does the demise of authoritarian planning mean that democratic planning is also a bad idea. As a matter of fact, one reading of the empirical evidence of market performance over the past thirty years is that when constraints on markets are weakened, the damage to human livelihoods and the environment increases dramatically. In any case, having no cover left to blow, I take this opportunity to reiterate the theoretical case against the market system. (1)

The debate between those who favor the market system and those who favor democratic planning has always consisted of two parts: (1) How bad are markets? …

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