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Greens and the Free Market

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A couple of weeks ago, I walked past a couple of activists at a stand. They were getting signatures to legalise gay marriage, and once at the table I saw they were also giving away leaflets on behalf of the Socialist Alliance and Green Left about a handful of social justice and environmental issues.

One of the women asked me if I follow politics and the sorts of issues I care about. “Corporate protectionism,” I said with a smirk, knowing full well this would take her aback – which it did, because she seemed a little nervous, asking if I meant “like the bailouts and stuff?”

“Yeah,” I replied, “throwing money at dismal businesses is nothing short of robbery.”

At this she stepped up to my challenge saying “well we believe in taking from each according to his ability and giving to each according to his need.” She too was a fan of Marx.

“That's a nice ideal,” I said, “but let's face the fact that people are happier and produce more when they can potently improve their lot. And it's productivity that really matters. Besides, many of the big environmental issues come down to distorting the supply and demand.” I left her dumbfounded and with my signature in support of the local queers who might benefit.

It was only on recent reflection that I really recognised what this exchange had meant. The truth was that supporters of green and social justice causes are marginalised by their reluctance to embrace the free market; and if they did, then they might start to make headway. Here is what Dean Baker, co-director for the Center for Economic and Policy Research and columnist for the Guardian online, wrote about the financial crisis in the current Monthly magazine:

    "In the current crisis, government intervention has taken the form of an insurance policy dubbed “too big to fail.”…This government protection allows the financial behemoths to make riskier investments, because their creditors know that the government will protect them against losses if things turn out badly. The demand for “deregulation” in this context does not constitute free-market ideology; rather, it reflects a desire to receive such government insurance without restrictions, and without paying for it… The same one-sided approach that Kevin Rudd accurately describes as “hypocritical” can be found in most areas of public policy when we look beyond the rhetoric."

Undoubtedly, the reason that the idea of free markets tends to trouble the left comes down to the fact that deregulation is frequently one sided. In fact, as far back as the 19th century, unions emerged in opposition to “freedom of contract” on the grounds that employers wanted workers to compete for scarce jobs (thus forcing their wages down) while retaining the right to collude within their industries to protect prices. The same thing still goes on today, with corporations using a scarcity of opportunity to squeeze artists and inventors for all they can get, and then using intellectual property to avoid competing in the arena of bringing new products to market. Let's face it: businesses do not want to compete and innovate, they want to squat on their old business models and perpetuate their influence on government by virtue of their scale and past success.

Yet instead of busting the power of commercial oligarchies, many on the left would prefer to throw money at environmental pet projects and protect jobs. And for all the future-oriented rhetoric, this strategy is incredibly short term and lacks the daring necessary for the systemic reforms we need. For instance, the best way to drive energy efficiency is to let prices rise and squeeze people into changing their lifestyle. And by pricing in the cost that smog imposes on the community (for example), we can motivate companies and drivers to compete on minimising the impact.

Perhaps the toughest nut to crack, however, is job security, which tends to give large industries an out by generating lots of hysteria about people losing their jobs if legislation fails to support them. Indeed, they often make the argument that lower wages would allow them to employ more people, though I am pretty sure that being able to pay less would give employers a reason to hire the same number of people for a higher profit. And what further complicates things is that the availability of time and money is essential to involving the community in political action (not to mention the fear of job loss provides enough reason to avoid a protest).

Modern activism is not just a matter of getting signatures and generating moral outrage, but also about the careful use of markets. Take for instance, the recent Get-Up campaign against the pulp mill being proposed by Gunns Ltd. First their action slowed legislation, though the proposal still managed to get Tasmanian government approval in spite of public outrage. So Get-Up reacted by using its large member base to threaten a boycott on every bank in the country that considered investing in the project. Failing to secure local investment, Gunns went overseas and is now seeking international funding, but Get-Up has followed by using member donations to place ads in the Financial Times. Clearly, the market is instrumental in modern activism, and while this issue may not be resolved in the immediate future, one can only wonder what activists might achieve by partnering with hedge funds to short stock in concert with the bad press and losses they generate. Activism requires its participants to have disposable time and money.

On the other hand, however, part of the excessive resource consumption that we see in modern society is surely linked to the failure of self-discipline on he part of consumers who do not save and optimise the use of what they already have. In my own case, for instance, the fact that I have rarely had consistent income has given me every reason to be protective of my savings, and for ten years I have managed to avoid purchasing computers by inheriting older machines and optimising their potential with open source software. Yet my younger sister has very little saved because she has always found suitable work.

Granted, it would be wonderful if we could solve our scarcity problems by putting an individual in charge of sharing and distribution, but, as Hayek was right to point out, their judgments would be completely arbitrary. The best solution to any commons dilemma, by far, is to auction off and privatise; thereby instilling in each a sense of responsibility for their own patch. The fact that governments possess the rights to all sorts of natural resources provides corporations with the opportunity to underpay for their purchases in exchange for campaign donations.

Yet there are many greens who would still prefer to link themselves to those who support government ownership and central planning because both they and socialists tend to be marginalised and alienated from the dominant political currents. A handful might concede that the practice of zoning creates pollution and unemployment by failing to place jobs close by, but instead of applying the market they assume that the solution is to plan more carefully.

Now, I am not saying that the government should avoid setting aside sections of the ecosystem – like river systems and old growth forests – as national treasures, which is the kind of thing that greens and socialists agree upon. But if we are to change society for the better, we must bring our fellow citizens to take responsibility for our aggregate choices instead of expecting someone else to figure everything out – which is exactly why governments are struggling to act on climate change.

Besides, if environmentalists like being on the fringe, it's a very small step to start hanging out with free marketeers.

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About Jonathan Scanlan

  • Clavos

    Jonathan, to the establishment, you are the scariest kind of revolutionary; one who proposes a viable plan that co-opts part or all of their own scheme.

    Smart, well-written article.

  • Bliffle

    The “free Market” is a fantasy promoted by those who have the means to take over any free market and turn it to their own monopolistic ends.

    As big a fantasy as Dan Millers ‘rule of law’, which is quickly dominated by the powerful who wish to oppress the weak.

    There is no such thing as Clean Coal, yet the administration is gifting coal companies with $2billion dollars for research, while solar power (which actually works, and there are even many working plants) gets only $200million.

    Powerful interests have their thumbs on the scales of ‘free market competition’ just as they have their thumbs on the scales of justice.

    So the ‘greens’ are justified in being suspicious of ‘free market’ talkers, since they see that there is no such thing.

  • Baronius

    Bliffle, that’s a pretty sweeping generalization about the free market. It fits your recent comments about the rule of law. But neither set of comments seems to be grounded in anything.

    Forgive me for repeating myself, but I’m again reminded me of the donkey in Animal Farm. Basically a sympathetic character, but one who doesn’t accomplish anything. He’s paralyzed by his world-weariness.

    What does it benefit anyone to say that a perfectly free market doesn’t exist? Like perfect justice, it doesn’t exist, but it’s a decent goal. Our efforts to approximate it have served a lot of people. If you give up trying to pursue free trade or justice, either one, you get Haiti. Surely you can agree that however badly we stumble, we’ve attained greater justice and freer exchange of goods than those who’ve surrendered to despair.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Tremendous article, Jonathan.

  • Lumpy

    If there is no absolutely free market there are certainly markets which are freer and more open than others. the more you restrict free trade the more you limit expansion in the economy. bad idea.

  • M a rk

    Baronius, if the market is free only in some approximate bastardized form, why should I believe that its pricing mechanism will lead to a ‘better’ allocation of scarce resources than conscious central planning?

  • M a rk

    (Thank you BC tech staff for the return of the Fresh Comments page!!)

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    But why should anyone believe that “conscious central planning” has any better chance of attaining “the ideal.”

    This looks like a category mistake to analogize from economic management of individual households/units to a collective.

    Apart from that, a belief in the efficacy of “conscious central planning” is contingent on as many presumptions as a belief in the efficacy of the markets – more perhaps.

    Thirdly, the operation of the markets can be subject to judicious control/oversight; whereas, who is going to control the controllers?

  • Bliffle

    Hmmmm. I used to think that: imperfect free markets were superior to other choices. But the degree of imperfection, the tilting of the scales, the un-leveling of the playing fields, has become so gross and obvious and relentless that it is overwhelming.

    IMO, the grotesque financial events of the past few months have destroyed the hopes of even the most optimistic strugglers of independent business. We have openly monopolistic markets, controlled by corps that are “too big to fail”, so that our errant government showers money gifts on them to buy even more companies and increase the grip of their monopolies.

    The sad rightists who defend these travesties, merely because of their knee-jerk reaction against any ‘liberal’ attempt to reign in rogue corporations, are the most forlorn figures of all as they embrace reducing their own freedoms and opportunities and turn over more privileges to the powerful who would oppress them.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Bliffle,

    You made great points before about Corporate Statism and the horns of the dilemma in which we seem to find ourselves – which is to say, between socializing the corporation, on the one hand, and privatizing the government on the other. Both options are equally unpalatable, for they spell a totalitarian regime.

    So under the circumstances, it’d seem to me that you ought to be in support of a division of labor as regards economic and political decisions – to the extent possible. And on that scenario, adequately supervised markets (to prevent abuses) would seem to be the lesser of all evils.

    If you don’t agree, then I must have missed your point completely; and if you don’t care, then why bother to post. Bitching and complaining, as Baronius has aptly pointed out, serves no useful purpose unless you can provide a germ of a solution.

  • Baronius

    “Baronius, if the market is free only in some approximate bastardized form, why should I believe that its pricing mechanism will lead to a ‘better’ allocation of scarce resources than conscious central planning?”

    Post-WWII economic history, particularly that of East Asia and Africa (and India, Brazil, France, England…).

    “We have openly monopolistic markets, controlled by corps that are ‘too big to fail'”

    No, we’ve got a few basket case companies that claim to be ‘too big to fail’, and hundreds of competitive industries that are currently starved for credit.

  • Doug Hunter

    “The sad rightists who defend these travesties, merely because of their knee-jerk reaction against any ‘liberal’ attempt to reign in rogue corporations”

    Who are you talking about? I despise the unholy alliance between big business and big government. I’ve said from the outset that any company that’s too big to fail is too big to exist as a single entity. Government’s job should be ending monopolies and reinstituting competition not handing out monopolies, bailouts, and no bid contracts as they do now. Even at the local and state level handing out credits and tax abatements to new businesses at the expense of older ones. (as if the walmarts of the world need any help competing)

    That’s a big portion of limited government right there… limiting their ability to influence and corrupt businesses.

    Let’s take a look at a strictly leftist issue like cap and trade for carbon. Do you have any idea how this is going to be passed? Poltician A who has megacorp B in his district won’t vote for this unless he gets X number of credits to hand over to corp B who will donate lots of money to his reelection and hire his nephew as a consultant. That’s what politicians do when you hand them new money and new regulatory power.

    To me, the lunatic leftists who want to give more power and money to the same old corrupt douchebags we have in office now are the ones who’ve been blinded to reality.

  • Jordan Richardson

    Government’s job should be ending monopolies and reinstituting competition

    Wouldn’t this require *gasp* REGULATIONS? Say it ain’t so…

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Of course – but “socializing the corporation” or “privatizing the government” is going too far.

  • Doug Hunter

    Why do you say ‘REGULATIONS’ as if it were a bad word? They’re no different from laws, just because I think there are alot of silly pointless laws on the books that are selectively used to harass people doesn’t mean I think every law (murder, theft, etc.) is bad. Same goes for regulations.

  • http://blogcritics.org/writers/jordan-richardson/ Jordan Richardson

    I was being sarcastic.

    Back to the outside world I go: where people laugh and dare to dream, where the gentle sunlight fills the air with warmth, where there is wine and music and books. Ah, yes.

    It’s a wonderful thing. Some of you should try it.

  • http://blogcritics.org/writer/dan_miller Dan(Miller)

    The antitrust laws are useful only if enforced. I was an attorney with the Antitrust Division for a few months after graduation from law school in 1966 while waiting to go on active duty in the army. Upon release from active duty in 1970, I went back to the Antitrust Division. In 1966, it was a vital and active place to be; in 1970, it was not — our section had a special group which spent all of its time blocking the construction of nuclear power plants, because in order to obtain the requisite Governmental licenses to construct, it was necessary to demonstrate a negative — that they had not previously been in non-compliance with the antitrust laws. Worked pretty well in blocking construction, but I thought the idea was pretty dumb. I saw very little future in antitrust law, on either side, and got out after about a year. Some friends who persisted in practicing antitrust law on the outside eventually gave up and sought other specializations.

    The Sherman Antitrust Act was passed in 1890, and there was little enforcement against monopolistic businesses until years later. Prosecutions under it have remained rare. The Clayton Act was passed in 1914, and it also has been used far too infrequently. I think that even modest enforcement of both would help the free market to revive and to survive. Those companies, particularly large conglomerates, which are “too big to fail,” are simply too big to remain that way, and companies merging with others where it might tend to create a monopoly or an oligopoly situation should face enforcement.

    The new head of the Antitrust Division has been making a bit of noise of late about enforcing the laws, and I very much hope that happens. We haven’t done that for a long time, and I rather doubt that it will happen now: I suspect that the current powers that be like things just the way they are: it is far easier to manipulate and thereby control a few very large conglomerates than it is to keep many smaller companies in line.

    Dan(Miller)

  • m ark

    Baronius, I see that my response to your #11 this am never did post. Boiled down it was: we might as well argue religion as interpretations of that economic history. Thanks for your reply.

    And Rog, my take on your #8 similarly didn’t post. It was: I see no category error in my question…? As for the rest of #8, would a coin toss be as good a decision procedure as any?

  • Baronius

    Mark – I’ve only lost one comment this week (so far). I figure that things are stabilizing. Still, I’ve been getting the “Doh” page a lot.

  • m aRk

    I think hey’re doing a fine job pulling it together. This shyte takes time. (Besides, the glitches give us something to foo-bletch-barf about.)

  • Baronius

    Mark, we could argue about religion till the cows come home, but economic history is actual confirmable history. Everything from rotten Soviet potatoes to India’s old governmental corruption to Japan’s lost decade to the financial failures of Airbus points to the inability of central governments to plan effectively. It’s similar to the conversation I’m having with Cindy about Marxism; you’ve got to admit when something fails every time it’s tried.

  • M ark

    …economic history is actual confirmable history.

    Interpretation of this ‘confirmable history’ is the problem. It is arguable that each of your examples (including Soviet production) resulted from the interplay of public planning and private interest.

    And you’ll need to explain (rationalize) how the allocation of labor is ‘better’ in our system of boom and bust.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Mark,

    To escape the “category mistake” – Gilbert Ryle, “The Concept of Mind” – you’d have to regard the whole of humanity, or at least a nation, as one big happy family.

    And that calls for “changed human nature.”
    So we’re back to square one.

  • http://www.republicofdave.com Dave Nalle

    And you’ll need to explain (rationalize) how the allocation of labor is ‘better’ in our system of boom and bust.

    Our system was not one of ‘boom and bust’ for many years. So long as the keynesians and the free market advocates respected the basic rules of controlling the money supply it didn’t matter a great deal which economic model we followed, neither would drive us into the kind of boom and bust economy we had in the 19th century. It’s when they started to drift away from that model and allowed banks to follow the same profligate practices as government that things became destabilized.

    Dave

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    “the [resulted] interplay of public planning and private interest,” even if efficient, did not fare well with the citizens. They felt oppressed and under the thumb.

    Should economic stability and efficiency be the top priority if it tends to turn people into automatons?

  • M ark

    (Blast…potentially interesting conversations. Work can be most inconvenient. Later.)

  • http://twitter.com/tolstoyscat Cindy

    #24 Dave what sort of ‘history’ teacher are you? I think in one of your classes, the blindness of history might give that of justice a run for the money.

    “Lincoln’s speech was given just as one of the greatest speculative bubbles in US history was bursting. This was followed by the Panic of 1837, which led to a six-year contraction described by Milton Friedman as ‘the only depression on record comparable in severity and scope to the Great Depression.’ ”

    These capitalists generally act harmoniously, and in concert, to fleece the people, and now, that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel.

    from: Collected Works of Abraham Lincoln, Vol I, p 64.

  • http://twitter.com/tolstoyscat Cindy

    Dave,

    hmmm, you’ll probably use what I posted as a defense. Okay. So, what about Tulip Mania?

    Market Crashes:

    When: 1634-1637
    Where: Holland

    The amount the market declined from peak to bottom: This number is difficult to calculate, but, we can tell you that at the peak of the market, a person could trade a single tulip for an entire estate, and, at the bottom, one tulip was the price of a common onion.

  • Bliffle

    Dan’s point (#17) about the lack of anti-trust prosecution is very pertinent. For example, during the Bush administration there were NO anti-trust prosecutions. In fact, they had a policy against it.

    But the free enterprise system NEEDS strong anti-trust activity to keep markets vital and energetic. Nevertheless, many misguided people, proclaiming themselves pro-business, inveighed against anti-trust activities.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Antitrust should be one of the first items on Obama’s agenda. But as Dan has so aptly pointed out, it’s much easier to control a few multi-nationals than a vast array of mid-size business. So they’re just taking the easy way out, the path of least resistance, rather than considering what’s best for the country.

  • Cannonshop

    Roger, the word you’re looking for is “Expedient”-which was the same word under Bush, Clinton, and Bush 1- it’s “Expedient” to nick a nod and wink to merger-mania and easy credit terms (same as Cash) and hope the down-hill doesn’t hit while you’re still in office to take the blame.

    “Too big to Fail” is very expedient, Bailouts are VERY expedient-it shows you’re “Doing something about the problem” without having to DO something. Enforcement of Antitrust, on the other hand (Serious enforcement, not the happy-slappy BS that was the Microsoft suits) is NOT expedient-you can’t collect huge bribes through PACs when you’re tearing their money-sluices away or letting their investors go broke (or putting those ‘investors’ in the poorhouse or jail for breaking the law).

    Obama promised to do the difficult thing, but he’s doing the Expedient thing instead-just like his predecessors, and for the same reasons.

  • M a rk

    Dave, Our system was not one of ‘boom and bust’ for many years.

    To clarify, what period of time are you focusing on?

    Rog, Should economic stability and efficiency be the top priority if it tends to turn people into automatons?

    Is this relationship necessary, or is it a correlation/causation problem? Maybe there’s some other quality of capitalist production (including State capitalism) that leads to the ‘automaton phenomenon’.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Correct, Cannon.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    At this point, it’d say it’s empirical, and it has to do with freedom. Freedom is of course double-edged; it turns some into automatons and others precisely the opposite. But it is the necessary condition for the latter outcome.