{"id":11675,"date":"2022-05-12T00:33:17","date_gmt":"2022-05-11T14:33:17","guid":{"rendered":"https:\/\/rationalemagazine.com\/?p=11675"},"modified":"2022-07-15T22:33:39","modified_gmt":"2022-07-15T12:33:39","slug":"what-the-neoliberalism-hating-left-should-love-about-markets","status":"publish","type":"post","link":"https:\/\/rationalemagazine.com\/index.php\/2022\/05\/12\/what-the-neoliberalism-hating-left-should-love-about-markets\/","title":{"rendered":"What the neoliberalism-hating left should love about markets"},"content":{"rendered":"

It is fashionable these days to dunk on markets. Show me something bad in the world and I\u2019ll show you someone blaming it on \u2018neoliberalism\u2019.<\/span><\/p>\n

Our collective failure to tackle climate change \u2013 that\u2019s the fault of \u2018neoliberalism\u2019. Poverty, low wages, income inequality, housing affordability, imperfect health care and education systems \u2013 the <\/span>culprit is<\/span><\/a> \u2018neoliberalism\u2019.<\/span><\/p>\n

Not so long ago \u2013 in the 1980s, 1990s and early 2000s, the eras of Hawke and Keating in Australia, Clinton in the US and Blair in Britain \u2013 markets were seen by those on the centre-left as the best way to create broad prosperity and what is sometimes called \u2018inclusive growth\u2019.<\/span><\/p>\n

Then a funny thing happened on the way to the 2010s. A semi-apocalyptic global financial crisis in 2008 turned \u2018market\u2019 into a dirty word. A bunch of greedy but clever Wall Street types transformed mortgage-backed securities \u2013 a way to bundle up mortgages into bonds leading to lower borrowing costs and greater home ownership \u2013 into what famous investor Warren Buffett <\/span>once called<\/span><\/a> \u201cweapons of financial mass destruction\u201d.<\/span><\/p>\n

In the wash-up of the financial crisis, the good and bad aspects of markets were fused into one derogatory word: neoliberalism.<\/span><\/p>\n

Belief in the power of markets to lift people out of poverty, empower households, and provide the resources to create a meaningful social safety net has become <\/span>conflated<\/span><\/a> with the free-market fanaticism associated with Ronald Reagan and Margaret Thatcher.<\/span><\/p>\n

This is a big mistake. Those on the left of politics should embrace markets, not the fanatical laissez-faire views that oppose government and market regulation, and a view of liberalism \u2013 in the classical sense, emphasising individual liberty \u2013 that harnesses the power of markets for social and economic good.<\/span><\/p>\n

Towards democratic liberalism<\/b><\/h3>\n

Two of my former colleagues at the University of Chicago, Raghuram Rajan and Luigi Zingales, capture a version of this in their brilliant 2003 book <\/span>Saving Capitalism from the Capitalists<\/span><\/i><\/a>. So too does Joe Stiglitz with <\/span>his vision<\/span><\/a> of \u2018progressive capitalism\u2019.<\/span><\/p>\n

My take is articulated in my new book with Rosalind Dixon, <\/span>From Free to Fair Markets: Liberalism after COVID-19<\/span><\/i><\/a>, to be published by Oxford University Press next month, where we argue for \u2018democratic liberalism\u2019.<\/span><\/p>\n

For us, democratic liberalism takes more seriously commitments to individual dignity and equality, as well as freedom, within the liberal tradition, placing the democratic citizen at the centre of a liberal approach.<\/span><\/p>\n

It draws heavily on the \u2018capabilities approach\u2019 to human welfare of Amartya Sen and Martha Nussbaum which acknowledges it\u2019s not enough just to have a \u2018level playing field\u2019. It insists on universal access to dignity, a \u2018generous social minimum\u2019 for all. And it insists unregulated markets do not serve those ends.<\/span><\/p>\n

\u2018Capitalism is irredeemable\u2019<\/b><\/h3>\n

In particular, so-called \u2018neoclassical\u2019 economists have long maintained that monopoly power (in business or politics) and externalities, such as carbon pollution, distort and damage markets.<\/span><\/p>\n

We need to do more to make markets work better \u2013 not abandon markets altogether.<\/span><\/p>\n

As Buffett <\/span>said<\/span><\/a>: \u201cWe ought to do better by the people that get left behind by our capitalist system. I don\u2019t think we should kill the capitalist system in the process.\u201d<\/span><\/p>\n

Contrast this with the US left\u2019s icon <\/span>du jour<\/span><\/i>, New York congresswoman Alexandria Ocasio-Cortez, who in 2019 said <\/span>capitalism was irredeemable<\/span><\/a>. Asked what she meant by this <\/span>last month<\/span><\/a>, she described capitalism as: \u201c…the ability for a very small group of actual capitalists \u2013 and that is people who have so much money that their money makes money and they don\u2019t have to work \u2013 to control industry. They can control our energy sources. They can control our labour. They can control massive markets that they dictate and can capture governments. And they can essentially have power over the many.\u201d<\/span><\/p>\n

To be fair, that doesn\u2019t sound so great to me either. And I get that Ocasio-Cortez is not a fusty scholar but a (very successful) politician and activist. Nuance doesn\u2019t play well in those worlds. But nuance is required when thinking about how society should be arranged.<\/span><\/p>\n

We\u2019ve been here before<\/b><\/h3>\n

This isn\u2019t society\u2019s first rodeo on these matters. One of the more consequential debates about liberalism versus socialism \u2013 which became known as the <\/span>socialist calculation debate<\/span><\/a> \u2013 began in the 1920s between neoclassical economists Ludwig von Mises and Friedrich Hayek and socialist economists Fred Taylor, Oskar Lange and Abraham \u2018Abba\u2019 Lerner.<\/span><\/p>\n

At issue was whether Soviet-style socialism and its central planning could replicate the virtues of free markets without the downsides of inequality.<\/span><\/p>\n

The clinching argument in this debate came from Hayek, who pointed out the market\u2019s price mechanism is invaluable for <\/span>aggregating and communicating information<\/span><\/a>.<\/span><\/p>\n

No central planner can ever replicate the price mechanism\u2019s ability to give producers and consumers information they need to make the best decisions.<\/span><\/p>\n

Lower prices, higher incomes<\/b><\/h3>\n

The character <\/span>Toby Ziegler<\/span><\/a> in <\/span>The West Wing<\/span><\/i> succinctly expressed the virtues of free trade and free markets more generally when he said (courtesy of Aaron Sorkin and his fellow writers) \u201cit lowers prices, it raises incomes\u201d.<\/span><\/p>\n

In 1990, more than a third of the world\u2019s 5.3 billion people lived in abject poverty, on less than US$1.90 a day. Now about <\/span>9%<\/span><\/a> of the globe\u2019s 7.9 billion people live in such poverty. That\u2019s about 1.2 billion fewer people, an extraordinary testament to the power of markets.<\/span><\/p>\n

Since 2008 \u2013 and during the coronavirus pandemic \u2013 the limitations of free markets have come into sharp relief. More \u2013 much more \u2013 needs to be done to make markets fairer. That means a commitment to the dignity and freedom of all.<\/span><\/p>\n

But it also means a commitment to the hard work of building a more prosperous society, not just shrieking from the sidelines, complaining about the things that are wrong, and misidentifying the solution.<\/span><\/p>\n

This article was originally published in <\/i><\/b>The Conversation<\/b><\/a>. It is republished under Creative Commons.<\/i><\/b><\/p>\n

Photo by <\/i><\/b>William Gibson<\/i><\/b><\/a> on Unsplash.<\/i><\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

It is fashionable these days to dunk on markets. Show me something bad in the world and I\u2019ll show you<\/p>\n","protected":false},"author":531,"featured_media":11676,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[67],"tags":[349,336],"coauthors":[303],"class_list":["post-11675","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-economics","tag-capitalism","tag-ideology"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/posts\/11675","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/users\/531"}],"replies":[{"embeddable":true,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/comments?post=11675"}],"version-history":[{"count":2,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/posts\/11675\/revisions"}],"predecessor-version":[{"id":11679,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/posts\/11675\/revisions\/11679"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/media\/11676"}],"wp:attachment":[{"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/media?parent=11675"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/categories?post=11675"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/tags?post=11675"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/rationalemagazine.com\/index.php\/wp-json\/wp\/v2\/coauthors?post=11675"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}