Mythical Beast: The Free-Market Bird of Paradise
The Free-Market Bird of Paradise is the mythical progeny of the God of Greed and the Goddess of Magical Thinking. A distant cousin of the Natural Right Whale (see separate Bestiary entry below), the Free-Market Bird of Paradise is a wild, profligate, unrestrained, and libertine creature that can survive only in a mythical state of nature. It cannot breed in captivity and thus is unsuitable for domestication. The only restraint it can tolerate is the invisible hand (see separate Bestiary entry below).
The last reported sighting of a Free-Market Bird of Paradise was in the Jungle of Darkest Information Asymmetry
where it was being torn to pieces and devoured by Robber-baron Lions and a flock of Bald-headed Corporate-Person Pecker-Woods (see separate Bestiary entry below).
The inability of the Free-Market Bird of Paradise to survive in the real world is due in part to a lack of certain conditions: symmetrical information, information transparency, and fair competition — all parts of the so called “level playing field“. On the level playing field, everyone plays by the same rules and and conducts themselves in a sportsmanlike manner (behaves ethically). When these conditions are met, economic checks and balances operate to maintain a condition of sustainable homeostasis, or steady-state economy.
Free-market fundamentalism, on the other hand, is based on the law of the jungle–survival of the strongest. It is really a form of naturalistic anarchy under which more goes to those who already have; and from those who have the least, even more is taken away. This process leads towards increasing concentrations of wealth and power, to monopoly, and to plutocracy. No wonder this is the system preferred by many in the upper class and by many others who believe that is where they are heading and where they truly belong. In contrast to a fairly and wisely regulated mixed economy, the free market tends to promote continuous, uncontrolled growth at the expense of the planet and, ultimately, everyone and everything that shares it.
Instead of a fairly and wisely regulated economy, the Free-Market Bird of Paradise tries to spin, game, and “put the fix” into the economy to serve its own whim; and if while so doing it sends an opponent over the cliff or under the bus so much the better!
(Wikipedia/Externality) “In economics, an externality (or transaction spillover) is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit. A benefit in this case is called a positive externality or external benefit, while a cost is called a negative externality or external cost.
“In these cases in a competitive market, prices do not reflect the full costs or benefits of producing or consuming a product or service, producers and consumers may either not bear all of the costs or not reap all of the benefits of the economic activity, and too much or too little of the good will be produced or consumed in terms of overall costs and benefits to society. For example, manufacturing that causes air pollution imposes costs on the whole society, while fire-proofing a home improves the fire safety of neighbors. If there exist external costs such as pollution, the good will be overproduced by a competitive market, as the producer does not take into account the external costs when producing the good. If there are external benefits, such as in areas of education or public safety, too little of the good would be produced by private markets as producers and buyers do not take into account the external benefits to others. Here, overall cost and benefit to society is defined as the sum of the economic benefits and costs for all parties involved.”
The deliberate use of externalities to “rig” the free market has reached absurd proportions in the race of corporate capitalism to “Privatize the gains and socialize (externalize) the losses.” The hidden costs of deliberate externalities are disproportionally borne by the poor and powerless segments of society.
A sampling of miscellaneous externalities (as if we hadn’t noticed):
Free-market fundamentalism is just a lot of empty theories, formulas, and euphemisms used to promote an agenda of “plutonomy” (see below)–a government of, for, and by the rich. As far as the plutonomists and their lackeys are concerned, the one-person-one-vote power of flesh and blood citizens is at the very least a nuisance and at most an existential threat.
The reality behind the fundamentalist free-market code language:
Citigroup Oct 16, 2005 Plutonomy Report Part 1 (www.scribd.com)
– The World is dividing into two blocs – the Plutonomy and the rest.The U.S., UK, and Canada are the key Plutonomies – economies powered by the wealthy. Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
– Equity risk premium embedded in “global imbalances” are unwarranted.In plutonomies the rich absorb a disproportionate chunk of the economy and have a massive impact on reported aggregate numbers like savings rates, current account deficits, consumption levels, etc.
This imbalance in inequality expresses itself in the standard scary “global imbalances“. We worry less.
– There is no “average consumer” in a Plutonomy.
Indeed, traditional thinking is likely to have issues with most of it. We will posit that:
- the world is dividing into two blocs – the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest.
Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.S.
What are the common drivers of Plutonomy?
Disruptive technology-driven productivity gains,
creative financial innovation,
capitalist-friendly cooperative governments,
an international dimension of immigrants and
overseas conquests invigorating wealth creation,
the rule of law, and
Often these wealth waves involve great complexity, exploited best by the rich and educated of the time.
- We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization.
- In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”.
There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie. […] i.e., focus on the “average” consumer are flawed from the start.
Citigroup Plutonomy Report Part 2, Mar 5 2006
The second CitiGroup Plutonomy memo was removed, at CitiGroup’s request, from http://www.scrid.com
The following is an excerpt quoted in the Daily Kos article Citigroup’s Shocking ‘Plutonomy’ Reports — h/t Michael Moore:
RISKS — WHAT COULD GO WRONG?
Our whole plutonomy thesis is based on the idea that the rich will keep getting richer. This thesis is not without its risks. For example, a policy error leading to asset deflation, would likely damage plutonomy. Furthermore, the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfrachisement remains as was — one person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. This could be felt through higher taxation on the rich (or indirectly though higher corporate taxes/regulation) or through trying to protect indigenous [home-grown] laborers, in a push-back on globalization — either anti-mmigration, or protectionism. We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.
Non-Mythical Market Alternatives:
We explained above that failures of “free market” systems include a lack of symmetrical information, information transparency, and fair competition. They lead to unsustainable resource demands and create undeclared, unaccounted-for externalities that must be disproportionally suffered and paid for by the poor, and they lead to absurd and immoral concentrations of wealth and power.
Wikipedia/Free Market: “Some…believe that government should intervene to prevent market failure while preserving the general character of a market economy. In the model of a social market economy the state intervenes where the market does not meet political demands. John Rawls was a prominent proponent of this idea.”
Wikipedia/Social_market_economy: “The social market economy is the main economic model used in Germany [perhaps the most prosperous and stable economy in the western world today, despite the recent global economic crisis–PR]… The social market economy seeks a market economic system rejecting both socialism and laissez-faire capitalism, combining private enterprise with measures of government regulation in an attempt to establish fair competition, low inflation, low levels of unemployment, a standard of working conditions, and social welfare. Ludwig Erhard once told Friedrich Hayek that the free market economy did not need to be made social but was social in its origin. The term “social” was chosen rather than “socialist” to distinguish the social market economy from a system in which the state directed economic activity and/or owned the means of production, which are privately-owned in the social market model.”
Another business model compatible with a mixed economy is the worker-owned and consumer owned cooperative. This business model often involves more direct democracy in the workplace than is common in the typical corporation of today. There is no reason that corporations may not, in principle, be organized democratically; but it has become customary for them to adopt hierarchical (top-down, and even militaristic) business management structures. Ironically, this is true of most publicly held corporations –those which are owned collectively by many shareholders. Although the shareholders are the joint co-owners of a publicly traded corporation, the corporate bylaws often provide them little or no effective control of the operation. This creates the perverse state of affairs where a corporation can often act against the wishes and the welfare of the shareholders (owners) as long as it makes a “good faith” effort to “turn a profit“. All else, including the women and children, be damned.
The underlying values that parecon seeks to implement are equity, solidarity, diversity, workers’ self-management and efficiency. (Efficiency here means accomplishing goals without wasting valued assets.) It proposes to attain these ends mainly through the following principles and institutions:
- workers’ and consumers’ councils utilizing self-managerial methods for decision making,
- balanced job complexes,
- remuneration according to effort and sacrifice, and
- Participatory Planning.
Peer-to-Peer (P2P) is another social market variation that can be combined with others in a mixed economy. Wikipedia/Peer-to-peer says:
“Peer-to-peer (P2P) is a term that originated from the popular concept of peer-to-peer computer application design, popularized by the large distributed file sharing systems, such as Napster, the first of its kind in the late 1990s. The concept has inspired new structures and philosophies in other areas of human interaction. In this context it refers to the meme of egalitarian social networking that is currently emerging throughout society, enabled by Internet technologies. This affords a critical look at current authoritarian and centralized social structures.”
- Green Free-enterprise (PRA 2010)
- Green revolution 2.0 (PRA 2010)
- Why can’t the public and private sectors just get along? (PRA 2010)
- Green America: Economic Action for a Just Planet
- Go.Coop | Learn about co-ops.
- The Cooperative Network
- Welcome | US Federation of Worker Cooperatives
- International Co-operative Alliance
- International Confederation of Popular Banks
- Venezuela’s Cooperative Revolution from Dollars & Sense magazine
- Twin Oaks Communities Conference Conference focused on education about Cooperative Living
- Participatory economics website (ZNet Communications)
- P2P Economy (p2peconomy.com)
- P2P Currency Exchange (www.peepex.com)
- The Peer to Peer Manifesto: The Emergence of P2P Civilization and Political Economy by Michel Bauwens- Reality Sandwich
More Sources and Quotes: (Wikipedia/Free Market)
“From Smith to Ricardo and Mill, classical liberalism was a revolutionary doctrine that attacked the privileges of the great landlords and the mercantile interests. Today, we see vulgar libertarians perverting “free market” rhetoric to defend the contemporary institution that most closely resembles, in terms of power and privilege, the landed oligarchies and mercantilists of the Old Regime: the giant corporation.” —contemporary mutualist Kevin Carson
“Critics dispute the claim that in practice free markets create perfect competition, or even increase market competition over the long run. Whether the marketplace should be or is free is disputed; many assert that government intervention is necessary to remedy market failure that is held to be an inevitable result of absolute adherence to free market principles. These failures range from military services to roads, and some would argue, to health care. This is the central argument of those who argue for a mixed market, free at the base, but with government oversight to control social problems.” [A form of mixed market, called Green Free-enterprise, is Poor Richard’s favorite recipe.]
“Another criticism is definitional, in that far-ranging governmental actions such as the creation of corporate personhood or more broadly, the governmental actions behind the very creation of artificial legal entities called corporations, are not considered “intervention” within mainstream economic schools. This inherent definitional bias allows many to advocate strong governmental actions that promote corporate power, while advocating against government actions limiting it, [the emphasis on blatant hypocrisy is mine –PR] while putting these dual positions under the umbrella of “pro free markets” or “anti-intervention.”
“Two prominent Canadian authors (both very hostile to the “Chicago School” philosophy) argue that government at times has to intervene to ensure competition in large and important industries. Naomi Klein illustrates this roughly in her work The Shock Doctrine and John Ralston Saul more humorously illustrates this through various examples in The Collapse of Globalism and the Reinvention of the World. While its supporters argue that only a free market can create healthy competition and therefore more business and reasonable prices, opponents say that a free market in its purest form may result in the opposite. According to Klein and Ralston, the merging of companies into incredibly large corporations or the privatization of government-run industry and national assets often result in monopolies (or ogliopolies) requiring government intervention to force competition and reasonable prices.”
“Critics of laissez-faire since Adam Smith variously see the unregulated market as an impractical ideal or as a rhetorical device that puts the concepts of freedom and anti-protectionism at the service of vested wealthy interests, allowing them to attack labor laws and other protections of the working classes.”
“Martin J. Whitman …argues (explicitly against Hayek) that “a free market situation is probably also doomed to failure if there exist control persons who are not subject to external disciplines imposed by various forces over and above competition.” The lack of these disciplines, says Whitman, lead to…
- Very exorbitant levels of executive compensation…
- Poorly financed businesses with strong prospects for money defaults on credit instruments…
- Speculative bubbles…
- Tendency for industry competition to evolve into monopolies and oligopolies…
For all of these he provides recent examples from the U.S. economy, which he considers to be in some respects under-regulated…[Why would we think THAT? -PR]