This cartoon sums a lot up for me. I remember back in the 1980s when I was living in New Jersey and looking for a decent, affordable apartment for me and two little kids. Nobody was building affordable apartments. There was much building of McMansions, yes, but there there was a shortage of decent lower-rent apartments. And every day I passed a huge, newly built industrial/office complex that was completely empty. Months went past; it remained empty. There just wasn’t that much demand for office space, I guess, or else the builders miscalculated what people would be willing to pay in rent. And I understand there’s a glut of McMansions in the New Jersey real estate market these days.
See also “The Old Suburban Office Park Is the New American Ghost Town.”
Now, proponents of Free Market capitalism will probably argue that the Free Market was not at fault; it was bankers, or the Federal Reserve, or something else that caused investment in the wrong thing. But this assumes that the Free Market is a thing that exists out in the ether somewhere entirely separate from banks and financial policy, separate from land and labor, separate from money and infrastructure.
This was published about a year ago, and I’m sorry I didn’t notice it before.
Polanyi’s core thesis is that there is no such thing as a free market; there never has been, nor can there ever be. Indeed he calls the very idea of an economy independent of government and political institutions a “stark utopiaâ€â€”utopian because it is unrealizable, and the effort to bring it into being is doomed to fail and will inevitably produce dystopian consequences. While markets are necessary for any functioning economy, Polanyi argues that the attempt to create a market society is fundamentally threatening to human society and the common good.  In the first instance the market is simply one of many different social institutions; the second represents the effort to subject not just real commodities (computers and widgets) to market principles but virtually all of what makes social life possible, including clean air and water, education, health care, personal, legal, and social security, and the right to earn a livelihood. When these public goods and social necessities (what Polanyi calls “fictitious commoditiesâ€) are treated as if they are commodities produced for sale on the market, rather than protected rights, our social world is endangered and major crises will ensue.
Free market doctrine aims to liberate the economy from government “interferenceâ€, but Polanyi challenges the very idea that markets and governments are separate and autonomous entities. Government action is not some kind of “interference†in the autonomous sphere of economic activity; there simply is no economy without government rules and institutions. It is not just that society depends on roads, schools, a justice system, and other public goods that only government can provide. It is that all of the key inputs into the economy—land, labor, and money—are only created and sustained through continuous government action. The employment system, the arrangements for buying and selling real estate, and the supplies of money and credit are organized and maintained through the exercise of government’s rules, regulations, and powers.
The article goes on to argue that what we all call “deregulation” is really “re-regulation.” “Government continues to regulate, but instead of acting to protect workers, consumers, and citizens, it devised new policies aimed to help giant corporate and financial institutions maximize their returns through revised anti-trust laws, seemingly bottomless bank bailouts, and increased impediments to unionization.”
Our “socialist” mayor, Bill de Blasio, has made the creation of decent low-income housing in NYC a priority, bless him. The city needs this desperately. The “free market” doesn’t provide low income housing here. NYC is a place in which, if you build it, rich people will come and pay ridiculous amounts of money for it. But that means the “free market” only caters to them. There are new high-rise apartment buildings going up all over the place in Brooklyn; rent for a basic one-bedroom unit averages about $2,800 a month, I understand.
The people who have made free market capitalism their religion are certain that as long as government doesn’t interfere, the Holy Free Market (blessed be It) will naturally provide whatever anyone needs. But in truth the Free Market doesn’t give a hoo-haw about what people need. The Free Market will dedicate infinite resources to filling even the frivolous desires of the wealthy; everyone else is just out of luck, sometimes even for life’s necessities.
The Free Market also is wasteful and destructive, depleting resources for short-term profit without thought to the future; using up materials and resources for buildings that sit empty and consumer products that end up in landfills after only two or three years of use. The Free Market refuses to maintain infrastructure, will not safely dispose of hazardous waste unless forced to, and will not clean up the ecosystems it destroys. The Free Market would rather kill coal miners than invest in safety precautions.
Because, you see, there is no “Free Market”; there is no benevolent “invisible hand” that turns individual self-interest into common good. There are just people scrambling to make as much money as they can, and as long as a portion of those people don’t care who they hurt in the process, the results often will not be benevolent at all.
Henry Ferrell — the same guy who wrote the article quoted above — today has a post at Washington Monthly about Very Serious People. He’s talking here about foreign policy, but it applies to economic policy as well.
- Everyone has a mix of beliefs, some of which are right, and some wrong.
- Everyone co-exists in a social system that tends to value, heavily reinforce and widely disseminate some people’s beliefs while disparaging, heavily discounting, and tending to limit the circulation of certain other people’s beliefs. This bias is not random, but instead reflects and reinforces existing power structures and asymmetries.
- People whose beliefs are reinforced and widely circulated so that they are socially and politically influential, even when they are manifestly wrong, are Very Serious People. The system provides them with no incentives to admit error or perhaps to understand that they have erred, even when their mistakes have devastating consequences.
We’ve been fed this fantasy about “free markets” lo these many years, and the fantasy won’t die because the VSPs believe it. But from where I sit that fantasy is not just destroying lives; it’s destroying the planet.
Ouch, that cartoon.
Apologies for the interruption, but breaking news on Our Doug:
http://www.msn.com/en-us/news/crime/man-who-landed-gyrocopter-at-capitol-rejects-10-month-deal/ar-AAdjN6V?ocid=iehp
Just curious, when you observed all those empty office buildings in the 80s, was this about the time of the great Savings and Loan Crisis? Around that time in Dallas (I lived in Fort Worth,) they basically rebuilt their skyline with empty office buildings on speculation. Crash came, then bailouts, and the big Free market worshipping Texas Fat Cats got their urban business infrastructure in DFW, Houston built and ready to go, pretty much free of charge. This put them in a sweet position vis a’ vis competition among fiscally prudent communities in other states for new business. Texas was way overbuilt and just giving leases away. Behold the Invisible Hand of the market…in your pants.
zoomar — maybe. All I remember was that Ronald Reagan was President.
Economics books describe conditions that must be met for markets to be efficient. These include:
Full information to all participants
Numerous buyers and sellers, so that no single participant can affect the market price
A homogeneous product, so that the product of one firm is completely substitutable with the product of another participant
Free entry and exit from the market for all participants
No externalities
Well defined property rights
No public goods
These conditions can be met with textbook commodities like wheat, but are often tough to meet with other kinds of commodity. The first condition, full information to all participants, is what makes health care not something that a free market can allocate efficiently, for example. It also doomed the financial instruments which no one could understand in the run-up to 2008. Real world markets very rarely meet all these conditions.
Rather than say that the free market cannot ever be realized, we could perhaps say that it is a special case, like a frictionless surface in high school physics, which can be used to illustrate certain principles of the discipline but which is not met outside the laboratory. Externalities accrue to people who were not parties to the market transactions of interest, and are also extremely common in the real world.
But when all the aforesaid conditions are met, markets work quite well.
Ed, I don’t doubt a sort of modified and regulated capitalism is workable, because it’s worked in the past. However, “free markets” as the True Believers define them are a fantasy that cannot exist in the real world.
The system is as it is BECAUSE the market says so – the power the force, the brains, the talent, those who can MAKE WANTS and those who need to be directed – govt reflects the state of nature before any state is created.
Our country was established by a type. they held and exerted hegemony and the system they set up keeps the same kinds of people in charge generation after generation.
And YOUR chances? You? a NOBODY? simply being angry? dude, simmer down.
You want to change the thing? you have to HAVE TALENT, massive undeniable ability to create and serve wants better faster than ll the others.
The point is, the system is the way it is, bc guys like you can’t do shit about it.
Your own mediocrity, your own failings, mean that you can’t change the system.
It’s not our problem. It’s your problem.
-selah
Morgan. Ah, yes; there are none so foolish as young testosterone-infused white guys who still believe they are Special.
You’d be surprised what a mediocre talent can achieve, Warstler. Give it a try.
You know, I’m starting to realize something:
The solution to every problem, is a bullet.
There’s a “good old boy” system behind the scenes. The “free marker” is an illusion.
Sorry to be the “Debbie Downer” Wa, Wa !
Some people don’t know the difference between an an argument and a series of unsupported assertions. Morgan Warstler, for example.
I think it was Adam Smith, who the free marketeers hold up as their saint (just before Reagan) who insisted that people have to be morally upright for free markets to work.(I could be putting words into Adam Smith). In other words, the whole free market thing hinges on the morality of the participants. Greedy ruthless people will give you the free market depicted in the cartoon. Turning “free market” into a religion unto itself reveals the moral bankruptcy of those who proclaim it.
I’m going to dissent very slightly from the headline, but not your essential point. There are market forces that might be called an “invisible hand,” but the mythology (BS, actually) is that they are always wise and beneficial. The fact is that the regulations that libertarians deride are simply a means of channeling those forces in a direction that society deems beneficial.
Thanks for the shout, Joan –
DC is a friendly town. They keep inviting me back. Today’s hearing was the next step to the trial. I think it’s inevitable. However, my response to the media – if the prosecutor doesn’t want to deal , then the ensuing circus or trial is what he conjured up. Ergo the money quote of the afternoon –
“If they want to have a circus, I am going to bring the elephants,†Hughes said.
I’m not going to limit this to a three-ring affair. The big tent s going to go up in a hundred sites to protest the trial. If I can bring it off. I’m going to contact the experimental aircraft association and try to bring in aircraft – fixed wing and gyros if we can site-select near water. But the payoff, if we can do it, will be discussing with the local media in 100 sites the LOCAL former congress-critters who have relocated to K Street.
I want to add that the regulation of markets is not shaped as society deems beneficial. Those regulations are shaped to conform to the desires of the owners of the officials involved in promulgating them.
And furthermore, this site is sadly lacking in having no Like, Hell Yes, and Emblazon On Rushmore buttons to click.
This week is one of those rare times when I have social obligations and appointments with bipedal beings. But, this article seems spot on, I will definitely devote some time to the links, when I can.
As a superficial observation, the period prior to “regulated” markets and things like collective bargaining is basically a time out of mind for most people. The abuses of the labor force were so horrific that they would be scarcely believable, unless you have read some labor history, or are among those who are still horribly exploited. The owners seem to have found the knife edge of abuse and exploitation, a smidge more, and the pitchforks would come out. They keep us off balance with the fear of losing a job, and with it, everything else, shortly thereafter.
When we first started with our dairy goats, I read some history of dairy farming. Back in the halcyon, glorious days of the unregulated market, “milk” was adulterated with all sorts of additives. Many had never seen the inside of a mammal. Some were very harmful, but the market didn’t seem to care.
I better shut up until I have more time for the links.
Doug, I heard about you on NPR.
There is no visible hand.
There is no invisible hand.
What’s visible to 98% of us, is the middle-finger!
@Doug:
I read the WaPo article this morning on your having turned down their plea deal. Way to go! It’s so satisfying to tell The Man to stuff it. You’re one very gutsy guy.
Please keep us posted on time/date/location of the trial…er, circus. Some of us in the DC area might want to attend. In fact, we should start a movement to pack the courtroom with people carrying stuffed elephants. Not sure the elephants would get past security, but it might be worth a try.
I also love the idea of harnessing the visual power of lots & lots of small aircraft.
I rented an apartment under a Socialist System called the “Rota SOFA”, the Rota, Spain Status Of Forces Agreement. There was not sufficient housing on the base, which was Spanish with an American presence, for all of the American enlisted to live there. So, many Americans leased apartments off base that came with two lease agreements one in English and one in Spanish. The lease had to be reviewed by base authorities and ones chain of command to make sure that it was affordable for you.
Two of us had in 1979 four bedrooms, two balconies, a bath and a half for $120 a month. The second balcony was for laundry. There was an elevator but only for the handicapped.
It may have been socialist but it worked for me.
Doug…as a fellow pilot and flying enthusiast, I will talk to some of my friends with flying machines…I like your idea…well, any excuse to fly is a good idea for me…Stay strong, friend, you have friends everywhere…and thanks maha…
“The Theory of Moral Sentiments” by Adam Smith is on my list of books to read before the taking of the toast and tea. The most likely event is that as a very old man in a quiet village in a distant land, I might recall this desire, most likely over some sweet and inexpensive French brandy, as the light fades.
Should I bump if forward on the reading list?
goatherd…Maybe you should read the Holy Bible so you don’t become eternal toast. You don’t want to end up like Thomas Paine or Charles Darwin, begging Jesus for forgiveness from your death bed. 🙂
http://www.ibiblio.org/ml/libri/s/SmithA_MoralSentiments_p.pdf
I have that book in my PDF library, but I’ve only managed to read about the first chapter..It’s a rough read for me because he seems to drone on.. I expected something more profound and found myself saying..come on spit it out.
Swami, maybe I’ll trust your judgment and just get the Cliff notes, or give the first chapter a shot, just to say that I did it. Thanks for the link.
Actually, I went to a school that had begun as a mission school. Theology was a required subject. We outlined the entire Bible with at least one entry for every verse as the homework. I have never regretted the experience. When I was reading the “Masks of God” series, I sidetracked into the Old Testament. One strange phenomenon was that the various sources, the Yahwist, Elohist and the filling provided by the Priestly writers all seemed so much more apparent. That was quite a few years ago, before the “change of life.”
Before 1980 the phrase was ‘free enterprise system’ then it turned into The Free Market and the economy stopped being a part of society and became the whole society.
@Moonbat: Here’s a little list of government regulations Adam Smith backed in The Wealth of Nations:
The Magic Hand theory conservatives made up has as much relation to Smith as Mike Huckabee has to Jesus. Their idea isn’t an economic theory but what Barbara calls it, a religion, and in fact it’s a Cargo Cult.
My conservative friends who are defending the Confederate battle flag are quick to note that history is written by the victors. Given the “Lost Cause” startegy, this does not seem particularly convincing in regard to our civil war. The same folks have no problem at all with the victors writing economic history.
By the way, catchy tune, Doug. If the Kingston Trio were just coming up on the music scene, you’d be in the history books for sure.
I had a song written about me in junior high school, it wasn’t so flattering.
In the meantime there’s people worried for their pets instead of human beings. This world is going crazy
http://www.michiganestatejournal.com/index.php/2015/05/29/who-will-care-for-my-pet-when-i-am-gone/