Beyond market fundamentalism

In the recent past, there has been a tussle over whether society should govern the market mechanism, or markets be allowed to mould society. Those who have questioned the assumptions of a market-driven economy have been sidelined and ridiculed. There is an increasing need for socially desirable goals to take precedence over monetary benefits.

WHAT is the difference between love and prostitution? One view is that prostitution is a valuable service because some people are willing to pay for it. But since love is not for sale it is worthless, in an "economic" sense. This cliche is sometimes used to both describe and ridicule "market fundamentalism".

Unlike religious fundamentalism, this variety of fundamentalism rarely makes front-page news. Yet there is an on-going, intense, sub-surface tussle about whether society should govern the market mechanism or markets should be allowed to mould society. Indeed, is there still scope for society to exercise political and cultural choices in the working of markets?

This is the tough question that underlies the impassioned street- level protests against the World Trade Organisation (WTO), World Bank (WB), International Monetary Fund (IMF) and World Economic Forum (WEF). The most recent altercation, at Melbourne in mid- September, caused members of the WEF to be marooned in the conference centre. Once again newspapers carried pictures of protesters offering flowers to heavily armed and helmeted riot police. What is the link between these protesters and a mindset called market fundamentalism?

The term market fundamentalism refers to several assumptions on which the current global economic structure rests. One, a free market is the most efficient way to organise modes of production and exchange. Two, that the common interest is best served by everybody looking out for his own interests. Three, that virtually all social activities and human interactions can be looked at as transactional, contract-based relationships and valued in terms of a single common denominator, money. Four, that these activities are sufficiently regulated by the invisible hand of profit-maximising competition.

Those who question and challenge these assumptions, like some of the protesters in Melbourne, tend to be dismissed by the powers- that-be as being ignorant, illogical and naive. But at present one of the most controversial challengers of this fundamentalism is George Soros, an ardent capitalist who has made billions of dollars on the world currency markets. Soros has been saying since 1995 that free-societies are now threatened by market fundamentalism rather than communism.

Soros is mostly pointing out the obvious - that market values express merely what people are willing to pay each other in a free exchange. They do not reflect social and moral values which are essential to a civilised society. Like Social Darwinism, market fundamentalism tends to disregard altruism and cooperation. According to Soros, the world capital markets function in an amoral dimension and that's okay. But when the same rules come to govern all the rest of social and economic life, then civilisation itself is endangered.

Most of his peers have scoffed at Soros and ridiculed the contradictions between his money-making ways and his lofty critique. But, other voices expressing the same fears are not that easy to dismiss. One of them is the highly influential Japanese economist, Eisuke Sakakibara.

In Jaunary 1999, while he was still vice finance minister of Japan, Sakakibara stunned a gathering of international journalists by making a speech titled "The End of Market Fundamentalism". In this he strongly agreed with Soros that the current variety of globalisation is unstable and thus unsustainable. The contemporary version of laissez-faire ideology or market fundamentalism, Sakakibara pointed out, has emerged in a context where economics has become devoid of history and society "as a dismal science mimicking natural science in its classical form".

To describe the crux of the problem, Sakakibara quoted from Karl Polyani, an economist of the mid-20th century who is an inspirational figure even for communitarians and anarchists. The central flaw of a laissez-faire regime, Polyani wrote, is that: "Instead of the economy being embedded in social relations, social relations are embedded in the economic system."

For example, today it is taken for granted that labour and land are commodities. But this was not always so. Things were different right upto the 19th century.

Polyani's classic text, The Great Transformation, showed how capitalism succeeded in making the bounty of nature and people's work-energy into commodities. This subordinated the substance of society itself to the laws of the market, such as supply and demand.

Thus the art of healing has become a commercial industry, education a matter of degrees that can be bought and rivers, mountains and now even clean air, carry a price tag.

Polanyi's enduring insight, Sakakibara pointed out, is that markets are sustainable only insofar as they are embedded in social and political institutions which secure the moral and ethical quality of our lives. These institutions also serve three functions without which markets themselves cannot survive - they regulate, stabilise, and legitimate market outcomes.

"The issue of government versus market should not be translated into regulation versus competition" says Sakakibara. "Government is needed to ensure fair competition, and only with appropriate supervision can financial markets function well and deliver socially desirable market outcomes."

In a sense this is what the increasing street-protests are all about - the need for socially desirable goals to take precedence over a purely monetary-profit oriented market logic. This means recognising that the current model of market mechanism, based on individual self-interest, is largely a human construct. It is not a law of nature like gravity or photo synthesis.

The individualistic model of economic theory, which dominates today, has evolved over just the last two hundred years. For the Common Good by Herman Daley and John Cobb, is one of the books which documents this process. When the book was published in 1989, Herman Daley, was a senior economist at the World Bank. Cobb is a Christian theologian.

The individualistic model, they argued, rests on the assumption that benevolence is limited to the family and close personal relationships while self-love dominates all other human interactions. But, there is need to reassert that human beings are fundamentally social and this is the basic civilisational urge. This would mean seeing human beings not as self- aggrandising islands but as "people-in-community".

Daley and Cobb press for a economics for community where the goal would be to provide meaningful and personally satisfying work as much as to provide adequate goods and service. This is an agenda to re-work not only modern economics but capitalism itself.

Even a more mainstream economist like Sakakibara favours different varieties of capitalism, each embedded in the values and culture of a nation. "Globalisation thriving amidst diversity is my vision for the next century, and I strongly believe this coexistence of diverse civilisations with global networking will create a much better world than the unilateral imposition of monolithic ideologies, such as market fundamentalism."

The big question now is if, and how, spaces can be created for different world-views and versions of markets and globalisation to creatively interact in order to forge a more just economic structure. The growing demand that WTO should either "Shrink or Sink" is a reaction to the bulldozing by one particular kind of globalisation agenda - one that has largely been set by world's biggest corporations.

In the midst of the recent disruption of the WEF meeting in Melbourne the founder of that forum, Klaus Schwab, was reported to have said that in future he would try to install ll a "dialogue corner where some business people here and some people on the street could meet in a safe context and just exchange ideas."

This is an urgent need which will not be met by just a dialogue "corner" on the side.

The exchange of ideas, and eventually change of heart, will have to happen at the very centre stage of global economic power.

RAJNI BAKSHI

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