Morals in Markets?

Can markets really be “moral?”

A Review of:
Wilson, James Q., and Martin Wolf. “The Morality of the Market,” Foreign Policy, September/October 2003, pp. 47-50.

It depends on your perspective on markets. Under the laisse-faire principle, no, markets can not be moral… they need nation-state and perhaps even international oversight. With the “invisible hand” as the only guiding principle of market capitalism, the pursuit of profit ignores human rights and environmentalism.

It seems to me that Martin Wolf’s article is weak; the entire piece is conjecture and opinion with almost no actual facts. Take statements like: “The market economy rests on and encourages valuable moral qualities” (Paragraph5). He makes the statement, but then never proves it…then by the end of the article he contradicts himself. In Paragraph 24 he begins by saying “The liberal market economy is morally imperfect” then concludes the paragraph by saying “It is not the market that is immoral.” I understand that Mr. Wolf is both an economist (a fmr economist for the World Bank) as well as a journalist, but this article would read better in his opinion column of the Financial Times than an academic journal like Foreign Affairs.

Wolf says market economies foster (Paragraph 6):
trustworthiness? What about the wiping out of pensions ?
reliability? Hello, I said what about corporate pensions?
civility? Please…
and self restraint? What about the Robber Barons?

Wolf says that market economies create NGOs and charities? (Paragraph 7) No, as Acemonglu said, there might be a correlation between market economies and the abundance of NGOs and charities but correlation does not equal causation.

In paragraph 10, Wolf says market economies avoid the environmental catastrophes of socialist economies…What about our Superfund Sites, Love Canal, The Bhopal Disaster of 1984 by American Union Carbide, the proposed Yucca Mountain Repository, etc. Its economically ignorant to be blind to capitalism’s disasters and focus on socialist ones.

In just the next paragraph is when Wolf really lost me: He says, “only a liberal democracy makes it possible for concerns about the environment to be routinely aired and addressed.” From this point on in the article, Wolf seems to forget what he’s writing about…is he talking about markets being moral or liberal democracy being moral….he goes back and forth as if they were the same thing. in terms Wolf’s point that only a democracy addresses environmental concerns, I think you could make the opposite point. In a democracy, special interests like logging companies or oil companies can influence legislation and public opinion whereas in a technocracy like Singapore, the technocrats make the decisions. When confronting traffic pollution and traffic jams, Singapore drastically reduced the number of cars on the road, could you see the US doing that? (http://www.unep.org/GEO/geo3/english/416.htm) When Singapore became nervous about the safety of oil/LNG container ships, they implemented a plan to cut need (http://www.eia.doe.gov/emeu/cabs/singapor.html); in the US we have the same concerns, but special interests in the US Congress just stripped MA and RI of the states right to protect its waterways and gave the federal executive branch the power to allow shipping in questionable waters. http://www.boston.com/news/nation/articles/2005/06/23/senate_boosts_prospects_of_lng_sites/
So maybe technocracies are better than democracies in managing environmental problems?

I laughed at the 12th paragraph when I thought of Fox News…

Back to the environment and other long-term issues (paragraph 13), Wolf seems blind to the fact that democracies DO NOT address long term viability, look at the US and its failure to address social security reform, energy reform, and attempts not to renew the Clean Air and Clean Water Acts. The Iroquois made decisions based on the “Seventh Generation,” but the US does not.

Wolf says that “the rule of law came about as a means of facilitating commerce.” He clearly never read a history of law. Any law historian knows that the modern basis of law comes from the Magna Carta which was not to facilitate commerce, but from the barons’ (elites if you will) desire to protect their wealth from King John’s taxation without representation, hence Parliament, hence law rather than whims of absolute monarchy.

Wolf says that markets create growth, but what about the decline in real wages? The American worker has made less and less in real income (adjusted for inflation and cost of living increases) almost every year since 1979. Where is the growth? http://www.laborresearch.org/charts.php?id=8

Next, Wolf continues on about how market economies encourage dissent which is good for democracy. He says that liberal democracies are the only entity that creates its own opposition. I would argue, though, that the US increasingly doesn’t have a sense of opposition. Let’s compare the US Election in 2000 with the Ukraine election in 2004 and maybe the Mexican election in 2006. All three of the losers believe that they really won and that the election results were not representative. Gore eventually acquiesces, goes into retirement from public life, makes money giving speeches and now making a movie. There’s no attempt to oppose. Yushchenko, meanwhile, takes to the streets and Obrador threatens the same in Mexico. I’m not saying all three of the election losers are right, but I’m saying that Yushchenko stuck to his opposition. Gore chose the system, even though he thinks it wronged him. Could you imagine the Orange Revolution in Dade County?

Wolf later takes cheap shots at his main critic, Klein, by saying she’s done well financially in a market economy. Can he prove she is the rule and not the exception? No, and he doesn’t even try.

In trying to raise democracy (even though he’s supposed to be talking about markets), Wolf say we should look at China who is not a democracy and has created a more unjust distribution of wealth. Notice there’s no evidence again, just opinion. In addition, Wolf undermines himself because China is the perfect example of a non-democracy with a rapidly growing economy that has become more and more market driven.

Toward the end of page 3, Wolf argues that “ The gap [inequality among countries] reflects the success of thouse countries that embraced capitalism and the failure of thouse that did not.” What a sweeping generalization. Didn’t Argentina virtually collapse after it implimented open market reforms? How did Mexico make out after it opened it economy via NAFTA? Russia seems to be having second thoughts about free markets after the collapse of its economy and standard of living. On the flip side, look at Belize. Stable liberal democracy with markets for more almost thirty years now….with 33% of the population below poverty (http://en.wikipedia.org/wiki/Economy_of_Belize)…and Wolf wants me to believe that embracing capitalism is the panecea?

Finally he conclude with the utopian idea that “no millionaire or corporation can flout the law.” Let’s see… the tobacco companies are getting the judgements against them overturned, airlines had their liability for security lapses legislatively removed, the asbestos companies are about to achieve the same immunity from liability, gun makers got it from Protection of Lawful Commerce in Arms Act (http://en.wikipedia.org/wiki/Protection_of_Lawful_Commerce_in_Arms_Act), and the late Kenneth Day never spent a night in jail. Of the most concern, however, was the overturning of Anderson Little’s conviction related to Enron. Sure, people could argue that all of these cases are cases of justice being served and it’s the right decision, but taken together, it looks an aweful lot like ‘millionaires and corporations flouting the law.’

I guess what I’m trying to say is that I didn’t like the article…I’ll try not to be so subtle next time 🙂

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