“The ‘market’ is a bad master, but can be a good servant.”
– S. Chakravarty (1993: 420)
In the world today, more and more interpersonal interactions are replaced by market transactions. The market system is both an economic and a cultural phenomenon, yet we seem to be hardly aware of the values that are bound up in it. This phenomenon is manifest at many levels: from the family, through the neighbourhood and the enterprise, to the nation and the globe. If there is such a thing as global ethics, I suggest, then they are – like it or not – the ethics of the market. My purpose here is to elaborate this claim, and to assess its implications. I shall distinguish between the market as a theoretical construct in economics, and the market as a social institution.
My main hypothesis can be briefly stated as follows: the most convincing ethical argument currently being made in favour of the market is its neutrality. Whether the market is in fact neutral may be disputed. But if one accepts this claim, it implies that the market is amoral, rather than immoral, and there remain, I suggest, two objections to allowing the market ethic to prevail. The first is that this is an abrogation of moral responsibility. It implies delegating decisions of major social and material significance to powers which are beyond our control, and whose outcome is uncertain. Second, the neutrality of the market comes at a cost in social and human terms; social relations between persons are replaced by contractual relations between economic agents.
All countries of the world are, today, part of the global market system. Even in the poorest countries more and more individuals are being drawn into the national market system, and hence the international also. Peasant subsistence is being replaced by the marketing of crops and the selling of labour. At the other end of the scale, in the richest countries, the same process continues, as I shall demonstrate below. There are undoubtedly many merits in the market system, and many valuable insights to be gained from the academic discipline of economics. I suggest, however, that it is important to retain the human dimension in our lives, and to recognise the alienating, desocialising effect of the market.
The Scope of the Market
The market as we know it today has developed over many centuries. A truly historical study should perhaps begin with Aristotle who, in the Nichomachean Ethics, sought to comprehend the phenomenon of exchange and money, and to examine how relations between persons were affected by (and indeed reflected in) what would today be called market transactions. His text has been the subject of various interpretations, but there can be little doubt that he was describing a society in which, to use the words of Evans-Pritchard in his introduction to Mauss’ The Gift: “exchange of goods was not a mechanical but a moral transaction, bringing about and maintaining human, personal, relationships between individuals and groups” (Mauss, 1970: ix). Over the centuries, there has been a very gradual shift – if one can trace the society which Aristotle described through to our own – from a society in which the emphasis was on persons and relations between persons, to one in which the emphasis is on things and relations between things (McNeill, 1990: 65).
Aristotle did not cast judgement – either positive or negative – on the market; rather he sought to comprehend a novel phenomenon in terms of the norms of his own society. But moving forward about two millennia to the eighteenth century, we find that the market was seen by writers such as Montesquieu and Tom Paine, as a very positive influence, as Hirschman has described in his article “Rival Views of Market Society”. “(Commerce) is a pacific system, operating to cordialise mankind, by rendering Nations as well as individuals, useful to each other … The invention of commerce … is the greatest approach towards universal civilization that has yet been made by any means not immediately flowing from moral principles” (Paine, quoted in Hirschman, 1992: 108). By contrast, Marx, writing in nineteenth century Britain, was very critical of the capitalist system, both in material terms as pauperising, but also in social terms – as alienating. He was also critical of the role of economics in supporting this system. But, as Hirschman notes, the perception that «all social bonds were dissolved through money» did not originate with Marx.[i] This view was «voiced during the 1730s in England by the opponents of Walpole and Whig rule» (Hirschman, 1992: 112). More recently, Karl Polanyi (1957) has been a powerful critic, using a variety of metaphors to describe the effects of the “juggernaut market” on ancient social norms, ranging from “the outright ‘dissolving’ to ‘erosion’, ‘corrosion’, ‘contamination’, ‘penetration’, and ‘intrusion’” (quoted in Hirschman, 1992: 113).
But the argument of some commentators that commerce may be positive – replacing non-existent or antagonistic relations – has been made in relation to international trade rather than inter-personal relations. It is on the latter that this article is concerned, and here the effect has generally been regarded as negative; yet the scope of the market has continually expanded.
In modern society, an increasing number of tasks which used to be undertaken by family members have now entered the market: care of the elderly, for example, or of children. And the duties of parents are even being seen as responsibilities enforceable by law, with children suing their parents for failing to carry them out properly. What is lost in this process are personal relations which may also be valued. Social and inter-personal relations are replaced by economic and legal relations.
Within a neighbourhood, social ties are generally weaker than in the family, but similar issues arise. In Norway, collaborative voluntary work (“dugnad”) is carried out to, for example, organise a concert or raise money for new musical instruments for the school band. Why not – one might ask – buy a cake for the lottery instead of baking it oneself? Why not simply give money to the band instead of organising jumble sales? The answer is that something is thereby lost – a sense of community. The recent massive, and sometimes ill-directed, interest in the concept of “social capital” is, I suggest, explicable not solely by reference to new ideas and empirical evidence, but also a widespread sentiment that in modern society something important is being lost (McNeill, 1996).
Before considering what if anything might be done about this situation, I will discuss some of the theoretical literature concerning economics and the role of the market.
Economic Theory and the Market
In economic theory, the market is seen as fulfilling a central function – the allocation of resources; and the concept of a ‘perfect market’ is important – that is, a market which satisfies certain prerequisites such as perfect information, many buyers and sellers, zero transaction costs. According to economic theory, if these prerequisites are fulfilled then the market ‘clears’, with all buyers and sellers ‘satisfied’ – in the sense that they do not wish to buy or sell more at the market price. Economists do not, of course, believe that these prerequisites are actually satisfied in practice, and they therefore recognise that no perfect market actually exists. It is an ideal concept which is useful for theoretical purposes. Nor does the word ‘perfect’ imply a moral judgment of the outcome. To the extent that the merits of the market are assessed in economic theory this is largely within the field of welfare economics, where the concept of a ‘Pareto optimum’ plays an important role. But this is widely misunderstood by non-economists who make exaggerated claims about how economics can demonstrate the superiority of the market system. To quote Solow: “The general educated and interested public thinks that economics has ‘proved’ that the free market is efficient ‘perhaps even the best of all possible worlds’. Not one reader in a thousand of the Wall Street Journal has any grasp of the qualifications without which the theorem, as a theorem, is simply false.” (1989: 77) My concern with economic theory concerning the market is not that it claims that the market system is morally superior. Rather, my concern is that ‘mainstream’ economic theory is based on a representation of the economic agent (‘homo economicus’) as a person who is immoral – or at best amoral – according to widely held views of morality: self-interested and maximizing; and also autonomous, i.e. asocial, independent of personal relations with others. The economic system which is modelled on the basis of this representative economic agent is subject to the same criticism. And the theoretical assumption – of self-interest and autonomy – can, perversely, become self-fulfilling.
The relationship between the subject under study and the manner in which it is studied is a complex one (Schumpeter, 1954). An economic system is affected, indeed upheld, by the beliefs and values of those who adhere to it; and economists themselves play an important role here. They are not simply independent objective commentators; they are formed by the system, and they themselves influence the system. Thus there may well be a self-fulfilling, or at the least self-reinforcing, tendency in the manner in which economists portray markets. Economists generally seek to exclude discussion of values as far as possible from the discipline; it is common in economic textbooks to seek total separation between fact and value. But any discipline concerned with social phenomena will, either explicitly or implicitly, be concerned with normative issues. Ideology enters “at the ground floor”. To portray the market as ‘a kind of natural or moral order’ (Hodgson, 1988: 177) and to treat “the market as free and institutions as constraints; the supreme medium for the expression of individual Choice” (Hodgson, 1988: 178) is in itself to adopt an (implicit) normative perspective.
Considering its importance as an institution forming our lives, it is remarkable how little the market has been studied in empirical terms. It apparently falls between the disciplinary stools of economics and sociology. Economists do not study institutions (that is what sociologists do); and sociologists do not study markets (that falls within the scope of economics). It is precisely the ‘conventions, routines and rules’ of the market, and the mechanisms by which they bring about specific types of behaviour that are of interest in an understanding of the market as an institution.
Philosophers have not made much of a contribution to the study of the market. A rare but important exception is Elizabeth Anderson, author of Value in Ethics and Economics, who notes, with reference to the market: “Liberal theory has not yet come to grips with the full implications for human freedom and flourishing of this most expansionary institution of the modern world” (1993: 141) (my italics). According to Anderson the norms of the market display five features, which embody the economic ideal of freedom: “they are impersonal, egoistic, exclusive, want-regarding and oriented to ‘exit’ rather than ‘voice’” (Anderson, 1993: 145). These five features listed by Anderson, of course, map closely onto the prerequisites of homo economicus in standard economic theory. Freedom is the freedom to disconnect; to treat others as objects. The cost of exercising such freedom is disconnectedness, and to be treated as an object.
Another of the few philosophers writing on the market is John O’Neill who has made a strongly argued case against the position of a number of economists, but most especially Friedrich Hayek. O’Neill distinguishes between two broad ways of arguing that markets promote the human good: the welfarist, and the perfectionist liberal (O’Neill, 1998: 33). The former argument, which was described in the previous paragraph, has a weaker, more pragmatic, defence: merely that the market provides a better alternative than any other that has been attempted (typically meaning the State). The second argument is of greater relevance to my concerns in this article. Here, the market is portrayed as not simply compatible with, but required by, modern pluralism. As Hayek put it: ‘The Great Society arose through the discovery that men can live together in peace and mutually benefiting each other without agreeing on the particular aims that they severally pursue’ (Hayek, quoted in O’Neill, 1998: 19). This certainly seems a virtue of the system, but such radical autonomy may have its drawbacks. And one may certainly question in what sense it constitutes a moral system. As O’Neill puts it, the market “allows individuals with quite different ends and beliefs about the good to cooperate with each other. … Such cooperation occurs without rational dialogue or conversation about these ends. … An actor informs others not by voice but by exit’ (O’Neill, 1998: 19). Neutrality, well-being, liberty, autonomy. These are the virtues which O’Neill identifies. They accurately portray the characteristics of modern life; but they are not, I suggest, unambiguously virtuous. A strong a priori argument in favour of the market seems to be its claimed neutrality – distinguishing between individuals only insofar as they differ in respect of their purchasing power. This could at best be regarded as an amoral system. But it depends on, and indeed encourages, disconnection between persons as social beings.
The market is a social institution – indeed the dominant institution of modern-day life. As such it involves norms of behaviour. These may also be regarded as embodying a type of ethic, or morality: one which emphasises autonomy and choice, but also disconnectedness – in social and moral terms. . The market is not in all circumstances either good or bad. But the process of commodification, the spread of the market ethic, is an enormously powerful and important tendency of which we must always be aware, and where necessary take steps to control or resist.
Is There no Alternative?
In critically assessing the market we should ask: what does it replace or destroy? At the national level, does it replace strife between warring parties; or promote anarchy, leading to insecurity or environmental damage? And at the local level, does it strengthen or undermine family relationships, social bonds, trust, and a sense of community? It is both its strength and its danger that the market is a totalizing system. The international, national and local markets cannot easily be kept watertight, so that despite the merits of local solutions, these may be swept aside by global market pressures. In summary, my argument is that the spread of the market tends to be homogenising, negative and extremely powerful. This is an extreme position which I to some extent qualify. First, because ‘really existing markets’ actually differ significantly from each other and from the ideal. Second, I recognise that the market has undoubted positive features and merits that must be taken into account in a balanced assessment. But in relation to my third claim I see little cause for qualification. I believe that the expansion of the market has a considerable and negative effect on human, personal, relationships between individuals and groups; and there is scant evidence of any countervailing force.
At a global, macro level the continued expansion of the market is surely irresistible. But is there perhaps some hope that local initiatives can create alternative spaces – countering the apparently irresistible force of the market?
Some recent attempts that have shown great promise – such as couch-surfing and car-sharing – have been increasingly replaced by more market-based versions: Airbnb and Uber. But there are also other interesting examples of local initiatives to create what might be called alternative economic spaces. In Oslo, two very recent examples are the Oslo Food Cooperative and the Restart project. The former was founded in 2013 and acts as an intermediary, connecting local farmers’ produce to people in the city who want organic, local food. The core values are expressed in ten principles that incorporate dimensions of care for people and the environment into the processes of the organization and the goods the Cooperative provides. Important among these principles – and one of its attractions for members – is the emphasis on social relations, both between the consumer members of the cooperative who manage the operation, and between them and the local farmers who supply the produce. The cooperative was immediately extremely popular, with waiting lists of several hundred people. (Dumbauld, forthcoming). The latter example, Restarters Oslo, has sprung out of The Restart Project, an initiative which began in London with the organisation of so-called ‘Restart Parties’, or community repair of electronic devices. These are three-hour pop-up events where participants arrive with broken electronics devices to get help repairing them together with skilled volunteers, called “Restarters”. This form of community repair is positive in environmental terms – contributing to the transition to a circular economy. But it is also apparent (Ahnfelt, 2016) that a motivation for participating in the project is learning new skills and the social dimension – the inter-personal contact between individuals and groups.
Though these are, of course, modest – in comparison to the “juggernaut” of the market – they can perhaps achieve two things. At a minimum they can give satisfaction to those who participate in them; who can enjoy the inter-personal ties that are normally replaced by the market. More ambitiously, they can draw attention to the negative aspects of the market that have been pointed out here. The market is and will remain embedded in political, cultural and moral contexts; but we should be wary that it does not destroy these from within.
- Ahnfelt, K (2016) Community repair within a Circular Economy – an outdated practice or prefiguration for the future? MSc thesis, SUM, University of Oslo.
- Anderson, E., 1993, Value in Ethics and Economics, Cambridge, MA: Harvard University Press.
- Chakravarty, S. 1993. “Policy-making in a mixed economy: the Indian case”. In Selected Economic Writings. Oxford, UK: Oxford University Press.
- Dumbauld, E (forthcoming) Oslo Kooperativet: an alternative food network, its members’ perceptions and ‘orders of worth’ MSc thesis, SUM, University of Oslo.
- Hirschman, A., 1992, Rival Views of Market Society and Other Recent Essays, Cambridge, MA: Viking Penguin.
- Hodgson, G., 1988, Economics and Institutions: A Manifesto for Modern Institutional Economics, Cambridge: Polity Press.
- Mauss, M., 1970, The Gift: Forms and Functions of Exchange in Archaic Societies, London: Routledge & Kegan Paul.
- McNeill, D., 1988, Fetishism and the Value-form: towards a general theory of value, unpublished PhD Thesis, University of London.
- McNeill, D., 1990, ‘Alternative Interpretations of Aristotle on Exchange and Reciprocity’, Public Affairs Quarterly, Vol. 4, No. 1.
- McNeill, D., 1996, ‘Making Social Capital Work’, Forum for Development Studies, No. 2.
- O’Neill, J., 1998, The Market: Ethics, Knowledge and Politics, London: Routledge.
- Polanyi, K., 1957, The Great Transformation, Boston: Beacon Press.
- Schumpeter, J., 1954, History of Economic Analysis. London: Allen and Unwin.
- Solow, R., 1989, in Colander, D. and A. Coats, eds., The Spread of Economic Ideas, Cambridge: Cambridge University Press.
[i] Marx’s analysis was based on the social relations of production. I have argued elsewhere (McNeill, 1988) that in modern, wealthy countries we need to analyse the ‘social relations of consumption’; we need to better understand how people relate as consumers, and how this can be alienating in ways that are analogous to the alienation of workers under capitalism.
Desmond McNeill is head of research at Centre for Development and Environment.
This article was first published in Tvergastein – Interdisciplinary Journal of the Environment.