Monday 21 November 2011

Controlling the markets

Marcus draws attention to the extent to which ‘the markets’ now control policy, with governments being mere bystanders.  The Observer article to which he links also underlines the way in which governments are being changed undemocratically to satisfy ‘the markets’.
Saturday’s Western Mail had a leader column on the Eurozone crisis, which argued that two things are now necessary.  The first is that Germany must take the lead, and the second is that ‘the markets’ must give the Eurozone time to breathe.  I don’t know whether the first will happen or not; but I’m confident that the second won’t.
There is a tendency for politicians and commentators to imbue ‘the markets’ with rather more rationality than is actually justifiable; the idea that they should also show some responsibility or compassion to the people of countries such as Greece and Italy is about as likely as porcine aviation.
The economic idea of the market acting as Adam Smith’s ‘invisible hand’ to match buyers and sellers has long since been lost in the financial sphere, as individuals and organisations have realised that they can make money for themselves by speculating rather than buying or selling anything, let alone investing.  But as with any other type of gambling, one person’s profit is another person’s loss.  And the losers, in this case, are most of us.
If the speculators believe that they can make a profit by bankrupting a country or two, undermining a currency, or bringing down a few leaders, then no appeal to their better nature will stop them.  And even if it did stop some of them, there would simply be others who would pounce on what they would see as weakness to line their own pockets.
That doesn’t mean that the WM leader writer is wrong to want to see the markets giving the Eurozone a break; it just won’t happen voluntarily.  We sometimes seem to forget that the markets are a human artifice, not something with an objective existence of their own.  They were created to fill a social need, but have been subverted in the interests of the few – it’s another example of the 1% and the 99%. 
If we wanted, collectively and internationally, to re-assert social control over them we could do so.  The fact that so many of our politicians are unwilling even to countenance that merely underlines the extent to which those who benefit from the system also control the political agenda.
In many other contexts, people who enrich themselves at the expense of others, even whole countries, would be regarded as criminals.  Why do we allow ourselves to be so beholden to them?


Plaid Panteg said...

Thanks for the link.

"In many other contexts, people who enrich themselves at the expense of others, even whole countries, would be regarded as criminals. Why do we allow ourselves to be so beholden to them?"

I sense it's because people saw the supposed economic growth/freedom as a worthwhile price. While the sun was shining (at least on the surface) economically, people were happy to let go of the social and democratic levers they now very much wish they had.

What is disturbing is the almost darwin like language used by some, as if the markets are cells acting naturally and that we cannot interfere with natural occurences.

Unknown said...

You only have to ask how, when thinks were looking rosy (pre 2008) - EVERY investment bank saw making a profit through speculating. How is that possible? They were only trading amongst themselves, so where was the extra money coming from? Now we know - IT WAS COMING FROM US!

And at the moment we look on while our leaders scramble about, doing their best to resurrect the corrupt system that allowed this to come about. WHY?

Spirit of BME said...

There is much in your blog to be commended, but I take a broader view than what is being touted by current commentators.
Since the time of Rome through to the Dutch East India company and the big market machines used by HMG`s to exploit Indja and the East, the one thing that gave them the right to live, was that politicians wanted to tax them and spend their money on wars or more recently the relentless expansion of government control/intervention in our society.
Once government has expanded and you have had the acclaim or votes of the people, no regime were foolish enough to ask the simple question – is there a danger that this supply of money will blow up in our face? It did of course and revolutions and wars ensued and most regimes were swept away, which is the last thing our political class want, as they prepared to stand democracy on its head so that they can keep their faces in the trough.

You mean there's more??? said...

Hi Plaid Panteg,

The reasons they talk the Darwin talk is that neoliberalism, the dominant political ideology since 1979 embraces social Darwinism and a form of Durkheim Sociology some of us might not be too comfortable with.

The notion that we "must" do what the markets want is best looked at from the perspective of Gramsci and the concept of Hegemony.

Some of the ideas that Foucault had around discipline and society kick in too.

Anonymous said...

"...politicians wanted to tax them and spend their money on wars or more recently the relentless expansion of government control/intervention in our society."

With the exception of commitments to fighting wars and also Labour's poor record on civil liberties, in general the state, particularly in England, has actually been withdrawing from society, not intervening. In terms of public services (which account for most of the taxes being spent that you refer to) as a result of New Labour and now the Tories the state is doing less in society, not more. We have actually seen an increase in corporate and market power, not state power, over the past three decades. The explosion in high-end wages in the private sector demonstrates this quite clearly, as does the sheer influence and clout wielded by the square mile.

So it's actually opposite to what you describe.

John Dixon said...


"so where was the extra money coming from"

That goes to the heart of the problem. Once the markets cease being simply a place to match buyers and sellers, and are subverted into becoming casinos, then one person's profits inevitable become another person's losses. For everyone who wins a bet, there have to be losers. It should have been obvious much sooner, but you are right - those people were gambling with our money, and we were the losers.

I'm not aware that humanity has invented any better mechanism than the market as a mechanism for exchanging goods and services in a complex world; but the market must serve us, and not be misused as it has been. Rather than a mechanism controlled by us for matching buyers and sellers of real goods and services, it has become a mechanism by which we are controlled by those who have no real goods or services to exchange. And we need to change that.