Sunday, 7 October 2012

Ian Harris on Free Market Myths

       Otago Daily Times        Sept. 28, 2012

Wouldn’t it be nice if the free market really freed – that is, made people free not just to buy and sell in an open market, but in rounded human terms?  An open-slather market certainly does not deliver that – all too often it ends up exploiting the vulnerable and leaving them helpless. What’s freeing about that?

These and other questions bubbled up from an address on The Myth of the Free Market by Professor William Cavanaugh, of DePaul Catholic University, Chicago, in Wellington last month. Cavanaugh was a visiting scholar in religion at Victoria University, sponsored by St John’s Presbyterian Church.  The free market is not usually thought of as a myth, but to Cavanaugh the ideology behind it has a huge hole at its core: it confuses the accumulation of wealth with human flourishing.

In the free-market worldview, freedom means unfettered market transactions, with no standards, guidance or concerns beyond the marketplace, least of all for what will serve the common good. Economist Milton Friedman’s definition of a free-market economy makes that clear: “one that gives people what they want instead of what a particular group thinks they ought to want.”  That defines freedom negatively, as freedom from others. Something may be good or bad, beneficial or harmful, necessary or indulgent, but none of that matters: if you can pay the price, you should be free to have it.

Cavanaugh contrasted that with Christianity’s positive definition of freedom as a capacity to achieve a good end. That end might be God, compassion, showing care for others, or anything else that serves the common good. This takes the question way beyond “Can I have this without interference?” to “Is what I want a good or bad thing?”

“The alcoholic with plenty of money and access to an open liquor store may, in a purely negative sense, be free from anything interfering with getting what he wants,” said Cavanaugh. “But he is in reality profoundly unfree . . . He can only be free by being liberated from his false desires and moved to desire rightly.”
Among forces undermining freedom are the market manipulators who spend heavily to persuade consumers to want their products, whether they need them or not. Advertising provides a vital function when it equips consumers to make an informed choice about products. Much advertising, however, is geared towards associating products with images of glamour, sex, friendship and success (especially sporting success) that tell us nothing about the qualities of the product.  Such advertising limits the consumer’s freedom. “To pretend, as Friedman does, that the consumer simply stands apart from such pervasive control of information is to engage in fantasy,” Cavanaugh said.

Large international corporations exercise another kind of free-market power, especially in poorer countries but not only there. Many keep wages as low as possible to boost profits, dividends and share prices.  Cavanaugh cited a company selling jackets in the United States for $US178, and paying the El Salvador workers who made them 56c an hour, or 77c a jacket. They accepted the job and the hourly rate, which meets the free-market test. But with no concept of a common good to moderate the harshness of the market, exploitation runs amok.

Boards offer executives incentives to favour the interests of shareholders over employees and communities, and those at the top wallow in the wealth produced. In 1980 American CEOs received on average 42 times the wage of an average production worker. In 1999 the difference was 475 times.

If there is no consensus on serving the common good, Cavanaugh said, the one with the most power wins. Working for less than a living wage may be free in Friedman’s terms, but for the workers it is a crushing unfreedom.  Meanwhile the freedom of consumers is curbed when large conglomerates absorb or drive out smaller competitors. Yet state power favours the corporates, and governments have recently poured billions of dollars into bailing out failing financial institutions.

Christianity, by contrast, holds that human freedom involves a lot more than ensuring that markets give people what they want. It offers a comprehensive vision of the true ends of human life – “yet such ends are precisely what free-market advocates would banish from the definition of free market”. The word “love” sums them up.
“Giving free rein to power without ends is more likely to produce unfreedom than freedom,” Cavanaugh said. “The practical task is to judge what kinds of exchange are conducive to the flourishing of life on earth, and what kinds are not.”

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