Although I recognize the immense advantage that a credible method of economic calculation gives to the theory of free market capitalism over state-owned factors of production type socialism, I have some uncomfortable reservations. Primarily, these concern the limits of validity we can assume for the theoretical model when applied to the real world. For me, free market capitalism seems compelling as an ideology because it seems to resemble a scientific theory of a natural phenomenon rather than a social construct such as the judicial system for example. There is always the desire to reduce the system to just one or two fundamental principles from which the entire theory can be derived. Then if you can show that it is only necessary that individual liberty be recognised along with the observance of private property rights in order for a theory of free market capitalism to exist it seems to suggest that it rests on something as fundamental as newton’s laws of motion in the absence of dissipative forces. .
By this scientific reduction to a textbook understanding of an economic system, I worry that we are left with a very, unrealistic model that is perhaps only slightly more feasible than the communism espoused by Marx. I do understand the desire to simplify the world in this way, if nothing else because the maths works so much better, the whole thing is more elegant and one never seems to be without a perfect answer to any objection. I also recognize that comparisons may be drawn between theoretical systems comprising utility-maximising economic units and models within physics such as statistical or many body physics where the macroscopic principles manifest in the gas laws emerge from and can be recovered by consideration of individual particles interacting and obeying the classical laws of motion. But this is also the reason why I’m sceptical. This isn’t physics and there are few comprehensively falsifiable claims because there are few perfectly reproducible experiments that can be carried out, not just because of complexity and inability to control for all possible variables but because of the length of time necessary and the many moral and ethical objections to be overcome. Too often it seems to me, the theoretical principles of a stateless free market model are being tested in argument against the “economics” of a socialist ideal in which there is no price mechanism at all and no feasible method of economic calculation in a modern mass urban multi factor economy. At the end of the show trial, the capitalist model is once again vindicated and flaunted as the undisputed champion while the socialist jobber is checked for signs of life and carried off in a stretcher.
I don’t see how this farce can be good for anyone, no matter which cardinal direction of the political compass they occupy. This seems to me especially problematic considered next to the fact that neither one of the two ideologies is recognisable as operating anywhere in the world today. The closest we’ve come to falsification is clearly in the communist disasters of the previous century which, along with the absence of a feasible theoretical economic strategy going for it is enough to satisfy me that it should not be pursued in pure form any further. I also wonder why those so eager to put the socialist ideological poodle through another capitalist pitt bull mauling imagine that if the catastrophic failure of every faithful implementation of the socialist ideology isn’t enough to have settled the matter by now, why is some two-bit dog and pony show going to convince anyone now? So, what should be the subject of a more dynamic and productive debate?
As discussed extensively in a series of posts on his surplus energy economics website and blog Tim Morgan, former head of global strategy at Tullet Prebon the system we currently have in place throughout most of the developed and industrial world, is a corporatist one that seems to favour the interests of large multinationals and powerful interest groups, backed up by governments through subsidy, monetary policy, cronyism, poor regulatory framework subject to abuse, and a lack of accountability at the highest levels. This is a system where companies are fined as a punishment for failure and fraud, ultimately penalising shareholders, while those on the board leave with bonuses instead of facing criminal prosecution. Often they emerge later appointed to powerful positions elsewhere. The loser in all of this is the individual, the self-employed or the small business owner. He/she is miss-sold financial products neither needed nor understood, while at every point of attempted interaction with the corporate entities, be they government services, partly state-owned banks or utility companies, the same one sided contract awaits. Although it is a certainty that that something is being extorted, exercising the apparent choice will only ensure that the extortion is exacted in a slightly different way.
In this country, we have a supposedly reformed banking sector that targets the poorest of its customers to openly subsidise free banking services for the richest. These are essential services that are absolutely necessary for functioning without massive disadvantage in modern society such as an account that supports transfers and payments, standing orders and direct debits and has a debit card for teller services or internet/high-street transactions. This is not a mathematically complex product and doesn’t require payment of interest or to provide credit. Moreover there is little need for innovation. As I tried to illustrate in Cash till welfare, banks are prepared to shamelessly design their revenue generating strategies massively at the disadvantage of those who are most in need. If an unemployed/self-employed customer in receipt of welfare is good for providing a £700+ contribution to the bank’s revenue so that those at the top end who may be using their account just as much pay £0 for the same service, how can anyone claim that this is efficiently run for the good of the consumer? It seems the kind of service that would in fact be rather suited to government oversight. Leaving aside the more exotic financial services, and focusing on those that are an essential utility as described, wouldn’t it make far more sense if this were a government service while the far more complex NHS, with its specialist workforce and logistical requirements, vast range of rapidly developing integrated biotech products was run according to market principles? There is great opportunity for market mechanisms to more efficiently allocate resources, drive improvements, establish optimum ratios for doctors, specialist surgeons, nurses, and management structure and encourage higher service standards. Developments and innovations to healthcare should be driven by competition to promote excellence in an industry at the forefront of the future of humankind. Instead such resources have been channelled into the finance industry where, frustrated by the inappropriate environment have ended up in the creation of unnecessary products being dreamed up by people with biotech Phds on £250,000 salaries to be sold to unsuspecting customers who just want to open a deposit account.
It might just be that there’s no room for a state at all in the most efficiently organised productive society; however, I very much doubt it . Arguably, we should be testing out the free market capitalist ideology against the forms of corporatism in its varying inertial and sclerotic manifestations we see around us. Debate should focus on the degree to which we can break down these oppressive structures according to the ideals of unfettered markets, identifying where we need elements of state regulation to ensure the rights and choices of the individual in his dealings with the providers of services, rather than in subsidising of incumbent failures to keep them from collapse.
Finally, it is worth noting that, even with government attempts to eradicate illegal darknetmarkets, purchasing prohibited goods using cryptocurrencies on onion sites well known to be a more customer oriented, secure, power symmetric and all round pleasant and service focused experience than can be had when trying to initiate, modify or cancel any of the everyday utilities, banking or government services available in the UK.