The Morality of Markets Defended
Anil Padmanabhan advocates a mix of a market economy and one based on command and control in Mint. However, neither Anil nor Michael Sandel, whose Atlantic article Anil refers to, addresses the positive case, the moral foundations of free market capitalism.
The positive moral foundations of free market capitalism is the principle of self-ownership, that no one is entitled to own another’s body and property, and that people should be free to associate and exchange on terms they mutually agree to. (To advocate otherwise is to support some form of compulsory servitude of one below another.)
The fall of the USSR did indeed create a period of apparent “market triumphalism.” But the new consensus was not based on the positive understanding of the capitalist alternative to command and control. Conservative forces have been itching for an opportunity to turn backward from the advance of a moral movement that resulted in capitalism. The taste of liberty people have experienced in recent years means that they cannot re-impose total command and control easily, but they want to persuade us that they should be able to have just “a little” for our own good.
As an expression of this conservatism, Anil and Sandel complain that “market values” have escaped their proper confines and need to be put back in a bottle. Not all goods, they say, should be up for sale for two reasons. First, they think, “market values” disadvantage those who have less than others, and second, buying and selling corrupts what they think is the “proper” valuation of things.
Regarding have-nots, Sandel says that, “In a society where everything is for sale,” where there is more capitalism and markets rather than more traditional ways of allocating resources, “life is harder for those of modest means.” This is just false. Not only do we see this in the incredible difference in the standard of living between pre-capitalist and capitalist times, but the per capita income of the poorest 10% in the most capitalist countries is ten times the income of the poorest 10% in the least capitalist countries today. As a rule, the less capitalist a country is, the harder is life for those of modest means. (See Economic Freedom of the World chart.) Anyone who has travelled to countries in these different quartiles has seen the evidence for him or herself.
Both Sandel and Anil acknowledge that “No other mechanism for organizing the production and distribution of goods had proved as successful at generating affluence and prosperity.” Given what we have seen above, it is clear that the have-nots tend to do better under capitalism than under other systems of social organization. Yet, Anil suggests that Indian have-nots lack effective demand to influence market supply and that, therefore, something other than free markets are in order. This idea neglects the progress of the poor under economic freedom through history.
The English poor in 1750 faced similar problems to India’s current poor. Yet economic freedom between 1750 and 1880 enabled the Industrial Revolution to employ a rapidly increasing surplus population of the time. Owning nothing but their own bodies, this class of paupers, beggars, and vagrants raised themselves to the status of self-supporting wage earners and began to have effective demand to influence the market. Mass production under capitalism gave them purchasing power and inexpensive goods, not to the already rich, who continued to have their goods custom-made by craftsman. The proletariat (the “property-less” class) became the consumers of the goods they were producing.
Similar results have been seen in recent years as countries have adopted more free markets in their economies. Where the property of the poor is defined and protected (even that which they do have), and where they have access to markets, “have-nots” historically move rapidly up the economic ladder.
Besides their concern about ‘have-nots,’ Anil and Sandel are concerned that market values will corrupt the sanctity of things. They do not define what they mean by “market values” in their articles specifically. Though Sandel does say that markets “express and promote certain attitudes toward the goods” that incline us to “ treat them as commodities, as instruments of profit and use.”
Sandel misses the fact that all actions involve the attempt to substitute one state of affairs for another that is preferable from the point of view of the person acting, i.e., all action involves exchange and trade-offs. This is true no matter whether the values acted on are “base” and “material” or “sublime” and “spiritual.” Interpersonal exchange is just one species of action, which allows people to give up something they want less for something they want more. Trade thus establishes prices or “rates of exchange” between people who trade. There are no “market values” separate from the values of the people who choose to trade. Moreover, not everything is up for sale, only those things that people want to give up in exchange for something else they value more.
When Anil and Sandel claim that we need to have a public debate so that “we” as a “nation” can decide what can be bought and sold, they are using metaphorical language to obscure an agenda of imposition. They want to be able to decide what other people should be able to buy and sell instead of letting people choose for themselves.
A market society is one in which people decide for themselves what they will buy and sell among the things they rightly own. The alternative is one in which whoever happens to hold the power of government gets to decide. The issue, when seen clearly, isn’t about “market values” vs. “non-market values,” a meaningless distinction. It’s about Sandel’s and Anil’s values being imposed on other people who don’t share them.
For example, Anil suggests that poor farmers should either be forced to sell or not to sell their land (he’s not clear in his article) for their own good and the good of “the country.” There is a third way. Poor farmers can decide for themselves if they want to sell. This is the means by which they express their own values, not “market values,” nor Anil’s values. If Anil wants a farmer to do something different, the moral thing to do would be to try to persuade him, offer information and alternatives through civil society, not to coerce him. How does Anil know for sure what the farmer should value?
It should be clear that the morality of free markets — self-ownership, the presumption of liberty, and trade and association by mutual consent — condemns cronyism and fascist, government-lead development projects that run roughshod over the property right of others, including the poor. Where the property of the poor is defined and protected, and where they have access to markets, “have-nots” historically move rapidly up the economic ladder. Liberal capitalism demands that property be restored as a fundamental right in the constitution so that poor farmers can defend themselves against those who want to force their own idea of values on them.
Market society is based on the value of mutual respect of person and property. Non-market societies, on the contrary, are based on some people having arbitrary decision making power over others. The morality of capitalism suggests that we should use persuasion to try to influence the values of others, but never the force of government to impose some people’s values on others.
