Market Abolition Arguments A - F
By Gregory Dean at Jun 24, 2008
Market Abolitions Arguments A – F:
‘Capitalism 2.0’ – Marching Civilization Head Long Back to the Status-quo.
Hayek on efficient planning:
This view disregards the fact that the method by which such [transparent] knowledge can be made as widely available as possible is precisely the problem to which we have to find an answer.
Prices and Production (1935)
In a handful of generations, if civilization survives that long, I believe we will look back at the organization of our socio-economics via a market system as the most disastrous advent and practice of man. It is clear now that the great inefficiencies of the market system and it’s demand for ever widening markets, but, ironically its structuring towards scarcity, have pitted neighbour against neighbour and fouled the very planet we rely on. Designed obsolescence, market share competition resulting in improper investment and resource use for too much manufacturing capacity, are two basic inefficiencies of capitalism. The cheapest possible route is most always the one taken. Corruption, obfuscation, and greed, are all structural components of a market economy. This paper will explain how these inefficiencies are required by the very structure of market capitalism and thereby de-construct the strengths that capitalism tends to claim for itself.
I believe that Hayek would’ve loved participatory planning through the mechanism of distributed networks like the internets – where complete collective knowledge is always available. Unfortunately he lived before the time of collective electronic knowledge and took a clear stance for what he believed the most democratic model available – especially in the face of centralized command economies on his Austrian doorstep. We live in a new time however and do not have to accept the binary red herring of TINA’s (There Is No Alternative) command economy vs. the ‘free’ market. We are an imaginative species and so there are alternatives: my favourite is Participatory Economics or Parecon by Michael Albert and Robyn Hahnel. But first let us leave behind the market myths through logical analysis of their implied statements… Especially because, more and more, I see various versions of Capitalism 2.0 rearing their heads. I see it from the “anarchists’ Vanity Fair” aka Adbusters, YES magazine, the Aurora institute, BALLE, Canadian Institute for Policy Alternatives and a host of other organizations and thinkers. I assume progressives are looking at the same world, and thereby see that we need a full sea change to salvage a bio-sphere that can support civilization. Certainly then we can all agree that tinkering within the thinking that got us into this mess is not going to be able to solve the problems. This is basic logic. We need a sea change
Does capitalist reformers/apologist take their illogical stance because they don’t want to beat upwind, or they don’t think the population will be willing to make the hard tacks into it? Or maybe they don’t think we can attain the media capacity to communicate effectively enough. Well do better! Those with the time, resources and know how simply must do better. We must find the ship that can beat into the wind comfortably so that others will want to ride along. Getting anywhere in a sea change is going to require some upwind maneuvers.
Many of these Capitalism 2.0 versions work to merely improve the market to ‘what it should be’; perfect competitive conditions with monopolies kept under check. It says lets regulate corporations better but still allow them to be the arbiters of the stuff of life. Give corporations the right to that kind of power and they’ll be able to use it to corrupt and change the laws that are meant to govern them. We saw this in
Market Abolition Argument A: When you own and make the playing field you make the rules and say who gets to play: If we allow private control of the productive means, which is implicit in a market, then the means will be leveraged for more power over others as that is the logic of the markets’ competitive language of buyer vs. seller. In this quest for more scale and profitability we will see our political systems come under the manipulation of market actors who can muster greater public relations capability with the scale of their wealth/bargaining power. As market players seek more and more control of productive capacity they will lobby (or corrupt) governments and the populous with a greater ability to influence as enshrined in a market system based on ownership garnering. Shortly after
Many economists will make the claim that lowering wages also helps prices to come down, thereby keeping our purchasing power constant. The other favourite one applied more on the ground is that we must sacrifice just to remain competitive and keep our jobs at all.
This will lead to the impoverishment of people’s free time and thus ability to lobby their own governments ending us right back in corporations having asymmetrical say in our polities and being able to undo all the constitutional gains and market checks and balances that many ‘Capitalism 2.0’ reformers wants re-emplaced at this time. Most of these reformists are still talking about representative democracy as their own intelligencia or coordinator class lives reflect the same gratuitous privilege as executivist ‘representatives’, which is likely unnecessary in this distributed network (internets) age. But even if we were to adopt more direct democratic models for government, market (win-loose) players would be able to widdle away at those constitutional gains as per the argument of workers impoverishment of time to influence decisions in the face of huge corporate wealth.
‘The Medium is the Message’:
If we keep a market system we’re basically choosing the conditions which nurture a violent culture. If we must engage oppositional modes every time we exchange for the stuff of life, then we have an oppositional culture as buyer vs. seller will make up the lion’ share of any peoples’ day-to-day interactions. If culture is basically how we interact then economics imbue most of our cultural make up. Co-operativism or mutualism can’t survive a capitalist environment, as proven on the Canadian prairie which bore the CCF and Canadian universal health coverage, which is now under heavy attack. If this isn’t clear enough let’s look to Yugoslavia and Professor Lebowitz’ studies there… where market socialism ended up as workers’ capitalism with the most profitable industrial co-ops having the means to get their members elected time and time again to public office and the big credit unions. This is the same deal as what we have now, a limited spectrum of society asymmetrically running all of society no matter that limited cadre’ lack of experience in the sectors it tries to coordinate. Asymmetrical say ending up in the hands of those with greater means to change the constitutionality of a polity is a structural determination of privately controlled productive capacity. If groups can leverage more means from their control of base productive capacity then they can attain more time and resources to lobby society.
Let’s remember that
As soon as we have to compete we have to undercut a descent living wage because there will always be a firm that will play that good ‘ol game of chicken and/or war of attrition to gain more market share. In order to keep from loosing market share and thus jobs, the moral work places with child care, good education programs, maternity leave, living wages, etc., etc., will have to screw themselves and bring in a management class to do it, as many workers will likely be un-willing to do it to themselves: I think Albert is quite right here. This sets up a coordinator class that our representative political bodies naturally identify with because our representatives are more aligned to coordinator kinds of work and mindsets than to blue collar work or the mindsets of actually putting the rubber to the road. These coordinator classes form an iron-triangle (unions (or co-ops), commercial production, and government), they negotiate to concentrate constitutional power in their own hands, slowly erode community based power checks & balances and we’re right back to the same dynamics we’re currently reeling under.
Many of these Capitalism 2.0 schemes involve a kind of neo-liberalism on crack but with a nice government where politics are separated from corporations by law, which is what we’ve already tried and fails as per the above nature of private property’s asymmetrical distribution of say and of economic hyper-competition.
They advocate for more representative prices on natural resource extraction and allow profit on that which, at higher and higher prices is usually a pretty good profit per unit if profit margins are kept anywhere near the same. David Korten argues for tight government leasing of the commons and natural resource extraction… I’m from B.C.,
Market Abolition Argument B: Disconnected Hierarchy and Coordinators in Decisions making: Markets in so far as they allow for hierarchy of ownership based on leveraged power-over (Argument A), allow for hierarchy of control as only the rich or well placed in social networks can afford voting shares. So only those who are well emplaced enough to own controlling shares have constitutional say in trade between capitalist firms and thus over the means. Everyone else’ interests necessarily become extraneous. One must turn back to MA argument A before one tries to get away with saying that market actors have to vie for consumer’s approval to secure them as customers. When we have private ownership of the means we’ll inevitably have private control of the media… Which means that the bigger monopolists or oligarchical industries (which markets naturally tend to) will be able to buy up big media entities or lobby for their privatization by government. In an environment that normalizes power-over or asymmetrical control, we are likely to have a paradigm that normalizes representative democracy. Representative democracy has its fatal structural problems which are much akin to co-ordinator class problems (see Discourse ethics chapter??). Meaning that we will have co-ordinators/representatives who can be corrupted or tricked into selling out peoples’ interests. Even if you believe that people are basically good and un-corruptible if given absolute power (and I tip my hat to this faith in humanity) then we must see that to give coordinators or a bunch of managers, politicians, social networkers and lawyers the keys to all manner of issues is to set up bad decisions as these people tend to know very little about how to actually build and do real, pragmatic things in the real world. We inherently give power over the mechanics and construction of the world to a bunch of administrators and philosophers. This is a recipe for disaster. Never mind the fact that such small representative groups can never hope to identify all the problems of their governed realm in a timely enough fashion, let alone address them properly.
This division of labour where very few coordinators who administrate their own or others’ capital will be the ones who get all the chance to practice and develop the most rewarding skills, like public speaking, conceptual analysis and argumentation, social hobnobbing, etc. This keeps the rest of the population in a deficit of skills to be able to organize and represent themselves well.
Market Abolition Argument C - Standards: Let’s also remember that society requires standards. In a market we’re going to maintain private property so those standards can be owned by market actors (whether corporately organized or not). In the case of societally required standards, like telephones or operating systems for our computers (Microsoft), the organization will use its control of the standard or standard adoption capacity to design a standard towards the monopoly’s or oligarchy’s interests, not that of all stakeholders.
The biggest example of controlling production logic is the suppression of new technology or much more efficient technology by the oil/auto industry for fueling cars, or generally an executive system of control that suppresses the distribution of cheap power producing technologies over centralized technology such as Nuclear or Hydro dams. There are a cascade of effects that result from the choice for one kind of technology and infrastructure over another. A populous that is energy self reliant via their own efficient, de-centralized and small scale production of power is much less dependent on a hierarchy of control.
But let’s look at this further, if a self-interested monopoly, concerned with profit off the many is allowed to design the logic of our major infrastructure, all competitors must basically compete within that logic or set up their own infrastructure. This does not make for minimal barriers to entry which would keep monopolists’ prices low as is the caveat that even market economists insist on as necessary. A good example of this is a transportation network based on cars. The average personal car costs at least $400 more per year than operating a transit system per person even before figuring in about $4,500 in public tax spending per car on roads, disaster response, asthma and health responses, traffic lighting, etc., etc. All so we can be occupied driving ourselves instead of relaxing or being productive while being driven on a spacious and comfortable inter-urban rapid rail system. It’s hard for a comfortable and wide-coverage mass transit system to exist when a third of a city’s area is needed for perfuse car traffic as per the logic of the personal car infrastructure and production values of capitalist consumer good-relations (wanting to suck more money out of us in requiring that everyone needs their own big ass machine to get around). An oligarchy of rubber, oil and auto manufacturers recognized this and bought up rapid rail services in
Market Abolition Argument D: Markets are inherently wasteful. Market share competition will see structural inefficiency at all times. Albert’ basic example is great here, we see that when market demand for light bulbs grows %5, that many (let’s say 5) firms new will build new factories to compete for this new market share. When maybe just 2 large, efficient factories would’ve met the new demand nicely we have 5 because many of the firms wanted to risk and compete for market share. If these firms don’t compete for market share then they are liable to fall behind in the race for leverage in the market place, without that power, or scale, they can’t market as widely or get their strategies for production control adopted as might another firm, and become liable to end up bankrupt. So the maintenance of ‘perfectly competitive market conditions’ require inefficiency.
This inefficiency extends directly to the monetary supply or the only (price) signal that market players have to communicate about allocation values with: When one firm eventually wins more market share the other firms’ factories have to close down or shift to seldomly being used. This means that the financing of those factories has no real return (economic good) to represent the new credit (money) that was created to finance the factories construction. So that credit no longer has real goods or wealth that can back it. This means that the new money (and all money as per current Foreign Direct Investment hegemony through the
A counter argument to this is that the firms take some losses and that provides the elasticity. What about bankruptcy? ‘Well the economy grows again and/or new demand for other goods are created in other sectors.’ This is why market capitalism structurally requires perpetual growth of consumption (of the planet). If it doesn’t re-allocate growth to another sector then it risks running into Say’s law tripping off recession which shows us that overproduction in one area is what creates market capitalism recessions… consumer demand never fails, it’s about misallocation which we see all the time in the propping up of the finance/stock markets or in bubbles such as real estate and technology, or just a profitable industry which everyone pours into all over the globe and finds that prices have dropped immediately with over production. These are arguments of the structurally determined inefficiency of the very unit of measure – money – and the purpose of markets - allocation that most in the monetarist seemingly never incorporate into their critique of the ‘Federal’ Reserve and fiat monetary policy.
Even if we recycled most of the components of the various materials that go into our consumer goods, growth in consumerism would require new components to be sourced from the Earth when we need to be repairing the planet not looking for new extraction locations. We are too far gone already; the shift needs to be made structurally. No matter what technology we adopt, markets, in so far as they require constant consumptive growth as per the growth of credit in competition and firms that must fail in that competition, will not allow for reparations of the planet to be the focus.
Let’s say we want to contract the monetary supply to band-aid over the markets’ requirement to adopt overcapacity (bankruptcy of the market share losers). First we move to reclaim the monetary instruments issued for that industries competitive excursion, the firms in that industry can’t give it all back because many of them have no more revenue and spent a lot of it in their market share war. So we contract the monetary supply more generally beyond just that industry’s pockets to make up the difference of what they already paid out to labour and other parties who were innocent of the depth of the gamble and who just did their part as per the capitalists’ command of their wages (or even contracts). But by contracting the supply of money we punish everyone who uses the money and lessens the ability of sectors that society wants more production from to meet demand through new financing. The monetary instrument is too widely used, indeed the only meaningful signal to communicate value across society and thus always too wide brush with which to correct course in one sector of the economy or society.
The argument is that individuals will act rationally and use the reduced money more carefully, that is investors/lenders then loan out only to those industries that have a good price point. This is not necessarily for goods and services that society wants but for industries with wide profit margins. So there is less money to go around generally, often times not going where it’s actually needed for all of social wealth/equilibrium or the palmetto effect, which market economist reduce their ethical analysis. The whole balance of economic sectors’ supply chains goes out of whack with the value of money going up. People put purchases on hold waiting for the purchasing power of their money to hit its peak and the financing of other industries goes wanting for a return as consumption generally stagnates while people sit on their money waiting for it to be able buy more. This side lining of consumers leads to other industries that are financed through the elastic money supply (theoretically elastic to allow for growth and contraction with constant value of the price factor) having to default on their credit. Even the profitable, good price point industries that still get loans may well loose some suppliers in their production chain in this chaos, thereby tightening even their margins.
Prices go up because of scarcity and more consumers are sidelined not by choice but merely by lack of affordability. We see that monetary contraction is dangerous collective punishment for imprudent competition, which the market system requires in global arbitrage over Foreign Direct Investment. Conversely, with perpetual expansion of the money supply we have perpetual deflation of the value of money (this is of the value of a dollar), as now more firms have gone out of business due to the contraction of financing that also puts consumers on the sidelines.
The flip side of this is the liquidity trap. This is where there is no growth but there is no limit to the amount of money in the economy, i.e., the rate of interest for new money is close to or equal to zero – ‘free’ monetary supply is unable to spur growth. People see no reason to invest their money with next to no returns so they sit on it. Same effect but from the opposite problem of a shrinking stock of money so we start to see that the market economists’ argument of savings leading eventually back to investment is contradictory and a revolving door that always hits us on the ass. We begin to say that a money economy, which a market requires because of the necessitated price signal in a market, is doomed to inflation or deflation and can pretty well never know equilibrium where costs are real and not nominal. Economists in the real world have to admit that the classical dichotomy – the idea of a separation between a real value of labour, goods, interests, etc., and monetary representation of cost - can never exist, thus there is never a ‘real balance effect’. In linguistic terms what they need to do to rationalize the market system without internal contradiction is call money an adamic language or system of syntax, ordained as the true representation of Nature (or God) itself. This is to claim that consciousness has an end state or structure, almost as ludicrous as to say that an economy has an end state. Money can’t represent real wealth; money is by definition a speculative, subjective commodity itself! Equilibrium my ass, to have planning of commodities based on price signal or on money, itself being a commodity, is to assign the fox to guard the hen house. If people are to argue this as a reason for the market to determine the value of money refer to Market Abolition argument A to see that hegemonic control by powerful self-interested market actors of money in a market is just as likely, if not more, as if monetary supply and valuation were controlled by a finance ministry controlled central bank. When even the basic logic of the very foundation of market economics are non-existent, market economics must be heeded by genuine thinkers (depressingly there is actually a fairly limited percentage of the population that really informs itself and thinks things through with various methodology) as failing, making almost all market economists’ half-wits tragically turning their whole lives to deceive the world and themselves.
We won’t even go into all the problems around hording and savings, as again, we are verging on being pulled into the mire of market economics’ splitting of hairs on an insane head.
The above shows that price-up/price-down and buyer vs. seller, is far too blunt a signal to contract or grow a whole economy without large, indiscriminate sacrifices. In the current economic system we must inflate everyone’s money (eventually) or deflate everyone’s monetary value. Pinpointing is very difficult in a complex economy where velocity of trade and thus money’s rate of exchange is an interconnected matter of many industries and perspectives.
Essentially we need richer, more intelligent communications and planning of the economy than buyer vs. seller and price-up price-down. Luckily with distributed network logic (the Internets for example) we have the seeds of better planning mechanisms.
Buyer vs. seller market dynamics makes everyone outside of a transaction an externality and doesn’t require investment to consider the economy as a whole when investing wealth, let alone consider non-market factors. We are finding more and more that markets will always find new instruments which rationalize greater leveraging of base rates of financing as set by the central banks. This is something all central banks are starting to admit. That they can’t quite calculate the multiplication of money in the economy anymore… Central banks are merely chasing the lending rate trying to make it what they hope they can. So we can’t even count on the constancy of markets’ communications syntax - the price signal. Hayek himself, the great equilibrium modeler, determined in Prices and Production that the “conditions under which money would remain neutral will never be given in the real world" this of course invites in the disciples of Hayek and market determination for the value of money, when the real debate is much before the market price and monetary equilibrium as determined by the market. It is the dysfunction of socio-economics based on the market system itself, not just the reliability of its signal – monetary value and price. For as we’ve determined in argument A, a cattalactyx where all economic actors are democratic actors, creating simultaneous equilibrium is impossible in the game theory nature of the market modality, perfect competition or no. And to have a government that can enforce perfect competition, i.e., have the scale and power to be able to break monopoly is to invite the very power that neo-liberalism and the Austrian economist pre-port to be escaping with their market absolutism over state centralized command economics. Even though some of the points, taken by them selves can be countered by theories within the market model the overall argument with the double trap door on democratic outcomes as provided in argument A is unavoidable… Walrasian vs. Neo-Walresian, or Keynesian monetary/business cycles vs. the Arrow-Debreu model are irrelevant… don’t bother, at least until you’ve first considered models other than centralization or markets. (Please also bring a clear philosophical underpinning of your version of the formative process – or not - of reality.)
Basically though, if the central banks can’t understand the level of innovation of monetary instruments in the market at any given time they can’t know the amount of credit that a certain interest rate will create at any given time.
Watch for economists to attack this paper, not on its basic critique of markets, but by attacking many of its critiques of the smaller, internal issues of market operation which I probably shouldn’t even engage as they are distracting from the broad overarching problems like the market’s inefficient and undemocratic nature.
Market Abolition Argument E: Production Methods Necessarily Hidden from Public Evaluation
Also remember that in a market, expert and proprietary secrecy are structurally required because we still have instituted competition, thereby preventing companies from having to reveal their true profit margins or at least how they achieve them.
So we as the people will not be able to investigate profit margins even if we had the time to. With structurally impossible regulation due to required obfuscation of business models we can not keep a check on price inflation, the rich end up able to buy food, house and clothe them selves and the rest of us can be divided over mere survival opportunities.
This constant obfuscation of perception of value goes beyond vexing the need to know how to price ‘commons’ licensing of natural resource use as proposed by some market reformists, it is structural in markets: in highly atomized divisions of labour arrangements we will inherently have a very difficult time knowing the realities and valuations of other labourers or specialized producers. If we can’t see what other market actors actions and plans are we can’t anticipate demand supply dynamics even, let alone costs and profit margins… we are thus left in a crap shoot, many industries are likely unable to know what will happen to their prices – the system basically puts them and the world’s capital, whether real or monetary at greater risk then if workers and consumers all just planned with structured transparency as in parecon. This happened with flat-screen TVs. Many jumped in to what was initially a great price point. But because many jumped in all at once, not knowing how many others around the globe were going into competitive production, there was a glut of TVs, destroying the initial margin which financed so many flat-screen factories and thus we ended up with a lot of bankruptcies and overcapacity that our shared monetary and ecosystems had to be degraded to build. In parecon consumers and workers would openly communicate and plan how much production will be needed to meet demand. In markets, firms hide their information and business models from each other.
Firms going bankrupt because of many other people jumping into their market somewhere else happens everyday now in the globalized world. We see it with all kinds of surplus manufacturing capacity through out
M.A. Argument F: Markets preclude an open knowledge commons where collaboration and co-operation drives efficiency in production and simultaneous planning of the micro and macro frames as per agriculture techniques, energy sourcing assumptions, collective population planning, what have you. Planning happens the same old way, based on a monopolies’ or an oligarchies’ position and the technology that can be distributed via controlled systems of hierarchy (‘bottled’) to ensure funneling of profits back to owners in a secure way. Argument C ensures that markets are inefficient.
In the end, I think the questions becomes #1. Does Capitalism 2.0 reformisms put us en-route towards real change that engenders a completely moral world for un-corruptible thriving of all life? Or, #2. Does Capitalism 2.0 dissipate our efforts and the perceptions of requisite change so much that the reforms get in the way of structural changes, which would ensure social and environmental sustainability aren’t just defended but are structural requisites in the system of production, allocation and consumption? That is will Capitalism 2.0 reformism (because clearly it’s not a new model) make people think that we’ve solved the problem and let them get back to their personal lives and communities with false confidence that they won’t be encroached upon by a violent structure?... Whilst power-over interests are allowed windows to maneuver back through into pouncing position again? Will such a capitalism reform movement reach its moderate targets and have its momentum cease?
I think the latter is more likely, especially when we frame a movement through its objectives and not its principles. The achievement of the objectives usually means the puttering of a movement. We saw this with some anti-nuke organizing during the ‘cold war’ (World War 3 more accurately); the objectives of non-nuclear proliferation were met and the wider issues of a totally nuclear and war/arms race free world, where military spending is instead funneled into creating the conditions for peace, lost a lot of momentum.
With such major goals as restructuring political economic constitutionality I believe it hard not to get immersed in the framing of objectives. This balanced framing of objectives and principles then is something we must be careful with in transitioning to a structurally just socio-economics.
Often Capitalism 2.0 sincerely claims to want the same thing as many primitivist and socialist-syndicalist anarchist do; a socio-economic ‘post-structuralism’ free of domination which brings out the best of human nature as a matter of course. But reformers tend to set the way points (that are both existentially and quantifiably fallacious as per my above argument) and focus on them instead of the principles. The objectives must always be mere hypothesizes, which, if turn out to be an ‘own goal’ (scoring against life and ourselves) can be turned away from as mere tests that proved to be immaterial to proving the possibility of moral ‘laws’ such as equity, participatory self-management, diversity, and solidarity. (Moral laws is a bit strong, I believe a discourse ethic is the only real moral law… Not the what as morally correct but the how we determine fluid moral norms. Parecon essentially is just this, a discursive process for political economy, with corruption made impossible by just forms of remuneration and social control (Remuneration based on Effort and Sacrifice with social governance of the productive means backed up by rotation of roles ala Balanced Job Complexes).
Too many movements have been splintered by mere strategic approaches to reaching the same ends. Let’s take the time and give ourselves whatever needed space to really hash out diverse, synergistic strategies together. We owe it to the civilization we’re working ‘for’ (not with if not within a participatory framework) to work together. We must employ the best of human nature to grow institutional codes/processes which require the best of human values.
I’ve explored some of the main, basic arguments which give markets no way out of their structural hopelessness. There are others but I didn’t even have to go past MA Argument A to do-in a market system as incapable of allowing the interests of life via responsive (full perspectives via participatory), non-corrupt allocation and use of resources. Parecon gives us hope, and clearly we need to try something new… there’s very little to loose in giving this system up when all we find ourselves hoping is that it won’t drive us to the suicide of our species.