Wednesday, August 13, 2008

Market forces

Abell Smith gives us a good laugh about the capitalist commitment to market forces.

This is one of my huge pet peeves. Even liberals, progressives, socialists and communists criticize capitalism for its reliance on market forces. But capitalism is not about free markets. By definition, capitalism is about privileging the owners of capital to restrict markets, to make markets not free.

The fundamental concept of capitalism is not "whatever happens in a free market is good by definition." It can't be, because a free market is a market where large-scale socially constructed coercion doesn't exist. But coercion does exist, and it can't be arbitrarily hand-waved away except as a purely theoretical concept.

The fundamental idea of capitalism is rather clever (and an improvement, I think, on previous political systems, especially feudalism): power, i.e. the privilege of restricting markets, should itself be allocated using market forces. However, it suffers from the flaw that those allotted power have the power to restrict the markets that allocate power. They will inevitably allocate power to those of their own social class, i.e. people like them, in typically superficial ways.

All political systems relevant to present-day reality will be coercive in some sense. Coercion itself is not bad: the only way to believably bind myself to a promise is to make that promise in a social context that will coerce me to keep it. Otherwise, I have the temptation to betray that promise later for my own individual benefit.

It may be possible to create conditions where it would be psychologically impossible to break a promise, even without coercion, but that day is far in the future. The next step is not to abolish coercion, but to ensure that coercion is employed to humanistically to enforce a higher-level rationality in our social constructions, i.e. that coercion is employed for the benefit of human beings, not to reify and privilege some abstract ideal.

[lakercat9 notes correctly in comments that the following is an overstatement in the original. I've amended it to be more precise.]

Capitalism The free-market argument for capitalism — the argument that capitalism is good because it employs free markets — is essentially idealist, in the philosophical sense. Capitalism calls an idea — the idea of the "free" market — the highest good, independently of the benefit of human beings. If someone suffers because of the "free" market, well, their suffering is all part of the greater good, because the "free" market is the greatest good, by definition.

Not only is capitalism the free-market argument idealist instead of humanist, it's also bullshit, because there is no such thing as a free market. Even if it were the case that the free market was the highest good, we cannot relate that ideal directly to human institutions.

Capitalism The free-market argument is not just bullshit, it's doubly bullshit. The best we could do is relate the outcome of human institutions and social constructions to what we would expect if a truly free market were operative. But if you do the math, you quickly see that a truly free market — a market where coercion is completely absent — resembles communism much more closely than it resembles capitalism.

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