Many of us have grown up with the idea that markets are the best way to organize economies. Indeed, markets are one of our most important and effective institutional mechanisms for facilitating self-organization within and between human communities and therefore are an essential part of a living economy. Yet our experience with the market's often devastating failures properly leads to a healthy skepticism.
Capitalism as a Market Pathology
Contrary to what we have been taught by free market ideologues and corporate media, the market is not a license to forgo personal responsibility in favor of unrestrained pursuit of individual greed in disregard of social and environmental consequences. In truth, the market economy of our experience is the terminal stages of succumbing destruction by a deadly economic cancer called capitalism.
The following essential conditions of healthy market function are well established in real market theory, in contrast to free market ideology.
- Buyers and sellers must be too small to influence the market price.
- Income and ownership must be distributed equitably with no extremes of wealth or poverty.
- Complete information must be available to all participants, and there can be no trade secrets.
- Sellers must bear the full cost of the products they sell and incorporate it into the sale price.
- Investment capital must remain within national borders, and trade between countries must be balanced.
- Savings must be invested in the creation of productive capital rather than in speculative trading.
Unregulated markets do not support these conditions. To the contrary, unrestrained market forces systematically undermine each of them, as the current Wall Street economy demonstrates.
It is instructive that these same conditions are essential foundations of a real democracy. The capitalist drive to acquire private concentrations of corporate monopoly power is the mortal enemy of real markets and real democracy. To maintain efficient market function, markets must have clear and enforceable rules designed to maintain these conditions and thereby create healthy markets free from the economic cancer of capitalism.
Markets Need Rules
In every aspect of civilized society we assume that mature adults will act responsibly in their relationships with others. We have rules and penalties for those who do not. Markets are no different. This fact is well understood by serious market scholars, in contrast to free market ideologues. The larger the corporation and the "freer" the market, the greater the corporation's ability to force others to bear its costs and thereby subsidize its profits. Market fundamentalists call it "economies of scale." More thoughtful observers call it theft.
Appropriate market rules maintain the necessary conditions of socially efficient market allocation to balance individual and collective interests and maximize the well-being of all. This translates into ten rules for socially efficient markets ...more