10 Problems with Markets

Published on ZNet, by Mitchell Szczepanczyk, Nov 25, 2013.

In a time when supposedly nothing is taboo and anything goes and everything is up for re-evaluation, it’s as close to an untouchable taboo catechism as there is in current times: Markets (by which I refer to the formal economic institution of markets) are awesome. Markets are efficient. Markets can do no wrong. Markets are the greatest economic system humans have created, and ever will create. Markets are the best thing since sliced bread and multiple orgasms … //

… 2. Antagonistic roles: Buyers compete against sellers with bargaining power.  Sellers compete against other buyers for market share.  Buyers compete against other buyers for goods that are rivalrous (only one of us can have that sports car).  What’s more, those who act nicely in markets are undone by those who hold no compunctions (”no good deed goes unpunished”), not necessarily because of some pathology of one’s opponent but because markets disincentivize solidarity.  Like the protest sign says: Don’t blame the victim, blame the system.

3. Markets foment hierarchy: What, you expect firms to be noncompetitive internally when they’ve got a perpetual competition to wage externally?  Far from it.  If you leave be that competitive pressure external to firms to compete, that pressure will seep its way internally to firms.  If the stuff of a firm’s insides are tasks and influence, then that pressure to compete will shape the internal operations of a firm.  Tasks are arranged hierarchically according to skill, where those tasks that are empowering and desirable are monopolized by a relatively small number of hands, and those that are less empowering and less desirable are more common.  The result is a strict hierarchy along lines of command and control: Orders come from the top down, obedience comes from the bottom up.

4. Antisocial bias.  Quoting again from Albert and Hahnel: … //

… 8.  Markets ignore externalities: A market only takes into account the immediate effects of the transaction between the buyer and the seller.  Any other effects resulting  from the transaction are considered “external”, and ignored in the costs of a market.  Hence, these effects are called “externalities”.  It’s a big problem, for two reasons:  Reason one: Externalities, as Michael Albert put it in his book “Parecon: Life After Capitalism”, “are the rule rather than the exception”, and he quotes the economist E.K. Hunt who says “most of the millions of acts of production and consumption in which we daily engage involve externalities”.  Reason two: Despite being ignored, externalities skew the cost in a market, thus leading to snowballing effects that might not be so easy to ignore (I’m looking at you, anthropogenic climate change).  Some reformers have raised the call for a true valuation of those externalities, except that those costs are notoriously difficult to gauge in a market.

9.  Markets tend towards monopoly: Let me quote a brief passage from Robert McChesney’s excellent book “Digital Disconnect”, in a section where he discusses monopolies: “The dream scenario [for a capitalist] is to go to market and discover that you are the only one selling a product for which there is demand.  Then you can set the price, not have it determined for you.  This greatly reduces risk and increases profits.  That is why so many of the great fortunes have been built on a foundation of near monopoly.”  At the same time, “pure monopoly…almost never exists.  Instead, capitalism tends to evolve into what is called…oligopoly” and “the price in an oligopolistic industry will tend to gravitate toward what it would be in a pure monopoly[.]“  I recently interviewed Bob McChesney for a radio show I produce, asking if he could provide any examples of markets that don’t tend toward monopoly, the example he mentioned was “hot dog vendor at a football stadium” where the barrier to entry is low and the profit levels are modest.  But for the large scale industries with sweeping levels of profit, this tendency towards monopoly holds.

10. Markets spawn corporations: Let me quote a passage from a presentation I gave: … //

… (full text including many  hyper-links).

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