Morals and markets
Published: Sunday | February 8, 2009
Martin Henry, Contributor
Markets are in turmoil and culprits and cures are being avidly sought.
Crooks destroy markets and when the freedom of markets is destroyed,
other freedoms inevitably follow. The enemies of market relations are
crowing over the constrictions now being imposed, with a certain
inevitability, on the free operations of the market, little realising
that increasing state management of economic relations among
individuals must mean greater state management of the rest of our lives.
When the complexities and convolutions of macro-economics are stripped
away, the market is nothing more than the mechanism which allows the
free and fair exchange of goods and services among individuals.
Sellers naturally seek to maximise their returns and buyers naturally
seek to minimise their expenditure to obtain the goods and services
which they need. Fair price is the price which allows a product or
service to clear the market, matching seller's supply to buyer's demand.
Distorted market relations
These simple, matter-of-fact market relations among individuals are
distorted by deception on the part of market players and by
interference by third parties. If transactions are not free and fair,
the market and the players in it suffer. Since humans, as sinful
beings, are naturally prone to deception in order to maximise their
advantage, the regulation of the market for freedom and fairness is a
proper function of a central authority. When the central authority
itself becomes a major player in the market, with the natural tendency
of the individual human to use deception and force to maximise its
interest, and not a mere disinterested regulator, then the market
suffers from distortion. Free exchange with the hope of
self-betterment is the wellspring of human innovation.
For maximum efficiency, the market requires a reliable means of
exchange and symbolic store of value. This is money. It is just too
clumsy to lug actual goods around for barter exchange. Barter places
severe limits on the growth and efficiency of the market. Money has
been every conceivable thing - from salt and shark's teeth to bits of
specially printed paper and electronic records lodged in the bowels of
computers. One of the primary functions of the central authority is to
provide a sound currency.
The present economic crisis had its genesis in a prior financial
crisis. It is fashionable to blame the greed of business players in
the market for the failures of the financial system, But President
Barack Obama noted in his inaugural address that "our economy is badly
weakened, a consequence of greed and irresponsibility on the part of
some, but also our collective failure to make hard choices and prepare
the nation for a new age". The last phrase is a study in circumlocution.
The central authority is extremely adept at masking and deflecting its
culpability in market distortions, financial crises and economic
crises through the debasement of the currency, inflation from too much
state-supplied paper money chasing too few goods, and excessive
interference through bad policies and direct engagement in market
activities.
The science of economics
Thieves, the grudgeful and badminded people who want something for
nothing, and those who want to prosper at their neighbours' expense,
left unchecked, cannot run a free market. And now I have to fall back
on a trusty old source, Warren T. Brookes' essay, "Goodness and the
GNP". Brookes was an American syndicated economic columnist. "At its
roots," he noted, "economics is a metaphysical, rather than a
mathematical science, in which intangible spiritual values and
attitudes are at least as important as physical assets and morale more
fundamental than the money supply."
Adam Smith, arguably the greatest writer on political economy, wrote
not only The Wealth of Nations, which advocated free markets and free
trade, but also The Theory of Moral Sentiments, which positioned
ethics as a critical factor of sound political economy. There is now a
growing body of literature on morals and markets, including the 1998
Friedrich Hayek Memorial Lecture, "Markets and Morals", by British
Chief Rabbi Professor Jonathan Sacks.
But we return to Warren Brookes: "A national economy, like an
individual business or a specific product," he writes, "is the sum of
the spiritual and mental qualities of its people, and its output of
value will be only as strong as the values of society ... . Without
the civilising force of universal moral standards, particularly
honesty, trust, self-respect, integrity, and loyalty, the marketplace
quickly degenerates ... . A nation whose values are declining should
not be surprised at a declining economy. As Ralph Waldo Emerson
postulates, 'a dollar is not value, but representative of value, and,
at last, of moral values.'"
Breakdown of the family
Reacting to the progressive breakdown of the family, Brookes sees the
family not only as the basic social unit but as the most fundamental
economic force in society, the key to work, consumption, savings and
investments, but the most vulnerable to deteriorating moral and
spiritual values.
There is a moral explanation to the crisis of the American
supereconomy and with it the global economy. Side by side with his
economic stimulus package, which will inevitably leave the state as an
even bigger player - and distorter - in the market, President Obama is
on the verge of a fundamental restructuring of the American family,
and is under pressure to introduce more protectionist measures. The
Associated Press news agency has posted a story which says, "President
Obama faces a dilemma over protectionist provisions in a massive
economic stimulus bill: backing the measure could set off a trade war;
opposing them could trigger a backlash from his supporters."
Morals
Speaking against the backdrop of the biggest one-day fall in the value
of shares in the United Kingdom Prime Minister Gordon Brown, last
October, urged the market to abide by a system of morals, including
responsible risk-taking and a work ethic resting on "shared values".
How to achieve this in a society progressively sledge-hammering moral
values, the leader was unable to say.
It really is naïvely foolish, as the mass of humankind now does, to
believe that governments of men are wiser and better than individual
men and are better able to look after their interests than people
themselves. Growing control of economic relations by the central
authority must be followed by growing interference with and control of
all other relations among individuals: social, political, religious,
and so on. We have, historically, observed the closest of
relationships between political freedom and democracy and the
operations of a market economy with both resting on moral foundations.
And everywhere, those moral foundations are under severe stress with
more government intervention widely regarded as the antidote.
Martin Henry is a communications consultant who may be reached at
medhen@gmail.
http://www.jamaica-
Tuesday, 10 February 2009
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