Free Markets vs Freedom

Lately, the cult of the market has been enjoying a revival. There’s been a rush to privatise, liberalise and tear down tariffs and taxes and barriers to our sacred free exchange, all while a growing sect of minarchist classical liberals (“libertarians”) loudly denounces the bank bailouts of the financial crisis for being state intervention in an area that only Go- I mean, market forces, are allowed to govern. This renewed blind faith in the guiding light of the invisible hand originated – like most unhealthy things – in America, and has spread from a few closet objectivists on the fringe of the American right to governing parties’ economic policies where in Britain, it has caused the privatisation of the Royal Mail, the probation service and parts of the healthcare and judicial systems. Even on the left, there is increasing support for a market “socialist” system in which capital is worker-managed. Most of the time free markets are associated with freedom, and increasingly so as the libertarian right gathers more support. But the market is, has always been and will always be oppressing workers and hindering freedom in and of itself. And that Satanic bastion of economic unfreedom, the planned economy, might not only be not as totalitarian, undemocratic and eeevil as you might think, but could be the key to a truly free economy and society.

Let’s start with the obvious criticisms of the market. Markets, as they are known today, are defined by the two processes of commodity exchange through the medium of money (C-M-C) and the buying of commodities in order to sell them again for profit, i.e. the circulation of capital (M-C-M’). But as commodities are exchanged at their value, buying and selling alone cannot realise new value. Capital can only expand by purchasing a commodity that creates value as it is consumed, whose use-value creates new value: labour-power. So the owner of capital relies on the labour of others, not only to produce the good or service that they sell in the first place, but to have any chance of making a profit from it and surviving in a market system. The vast majority of the population, meanwhile, are forced to sell their labour because they’re not fortunate enough to own capital, and although they have the right to be self-employed, they have no means of doing so. Labour is unique in that it is not, unlike other commodities, separate from its possessor – people don’t send their labour to work, they go to work. So having to sell one’s labour to someone else is, in essence, enslavement. What makes wage labour even more like slavery is that the worker isn’t paid the full value of their labour, because the capitalist must make a profit. This exploitation of workers is only going to increase over time, as the total amount of materials and machinery consumed in the production process increases, the capitalist must invest more capital in production and to keep their profits up they need to extract more surplus value from labour. You need only look at the pattern of wages to see this in action. When wages have to be kept low, though, workers cannot buy back what they produced, causing economic stagnation until the excess products are finally sold off. This is the anarchy in production, and it benefits no one. A common objection to socialism is that people would have to be forced to work, but it is the market that forces workers to work more and more for less and less to ensure the continued expansion of production and consumption and the continued survival and competitiveness of the enterprise. The need for ever-increasing production has had a terrible impact on the workers, the environment and, by paving the way for monopolisation and the world domination by a few hundred corporations that we have today, many “small” capitalists too. Given that all this is a consequence of the market system itself, only worsened by private property, it is laughable that some people think socialism – which is by definition free of exploitation – can exist with a market.

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Most market apologists don’t particularly praise their system as one that is beneficial to workers. The freedom of the free market is more often said to lie in its voluntary exchange and decision-making, its ability to satisfy needs and the democracy of the supply-demand equilibrium. None of which exist beyond abstract economic models. As explained in the previous paragraph, wage labour is certainly not a voluntary exchange, and the terms of all other exchanges are not voluntarily agreed on by individuals. The notion that economic decisions are made voluntarily, by autonomous workplaces, in a market system is incompatible with the notion of this omnipresent invisible hand, rather like the incompatibility of free will with an omniscient God. However much anyone wants to employ social criteria in their decision-making, they can’t, because they must submit to the profit criterion. Even a worker-managed co-operative would sometimes be forced to make decisions that went against workers’ interests, such as introducing deskilling technology or longer hours, by the market and the necessity of making a profit. The market is an obstruction to the self-management of workplaces by their owners. Decision-making based solely on profit can also cause things (particularly money) to become much more important to everyone than they should be, which can have a dehumanising effect and turn people into cold-hearted calculators who put profits before people. This can be seen in capitalism, where greed and selfishness appear to be human nature because greed and selfishness are rewarded by the market. If market forces could allocate resources more efficiently than voluntary decisions made by people, thus benefitting consumers more, the reduction in freedom that they cause might be forgiven, but this is not the case. Firstly, the market never internalises external costs. Every economic decision made impacts far more people and things than those directly involved: employees, shareholders, the labour market, the environment and, in today’s globalised world, even the economies of other countries. There are also long-term effects of decisions that are not taken into account by the market – pollution, inequality and so on – and these could negatively affect future generations. But the parties involved in a bilateral agreement in a market system need not consider the impact their agreement has on parties outside of their agreement. Nor does any market decision need to take into account things that don’t have prices. It doesn’t reflect the value of the wilderness, for example, simply because it requires people to turn it into property and sell it as a commodity. If you cannot afford to visit the new commodity, the market turns it into something else, no matter how much you value it. Similarly, clean air is something people enjoy collectively, so it has no value on the market and can be sacrificed for something that will make more money. The market system has none of the democracy its proponents love to boast about, either, because democracy exists only when distribution of power is equitable – and this is why orthodox economists demonstrate the efficiency of the market by using very convenient, abstract models where purchasing power is equally distributed, creating the illusion of democracy. In reality, purchasing power is not equally distributed, and those who can back their demands up with a larger sum of money will always emerge as victors in the continuous bidding for goods and services that goes on on the market. This causes inequalities in resources, which lead to further inequalities in purchasing power and a further bias of the market in favour of “effective demand” – i.e. the demands of the rich. A bias that causes the massive wealth disparities that we see all over the world today, gives Western companies the ability to plunder the resources of developing countries while these countries’ citizens live in dire poverty and plunges millions of people into starvation because they don’t have enough money for their demand to count, while huge amounts of money are spent on the production of luxury goods on the rich. This is not freedom. This is not democracy. And this does not satisfy all of humanity’s needs, but instead creates a ridiculous hierarchy in which the “need” of a Western tycoon for diamonds, flashy cars and a fleet of yachts is prioritised over the needs of the 805 million people in the world who don’t have enough to eat.

This is capitalism's economic calculation problem...

This is capitalism’s economic calculation problem…

So what is an alternative method of economic organisation that is democratic, free and efficient? The planned economy is probably not the first thing that those three words bring to mind. After all, the planning system collapsed into an inefficient, bureaucratic mess in the USSR and other states that attempted socialism, and caused famines that killed millions. The context of this collapse cannot be ignored, though. The Russian revolution was isolated, making it a cog in a capitalist wheel, in a backward, feudal country that couldn’t be expected to successfully implement a mode of production meant for a post-capitalist society. The deformed state that emerged in the USSR as a result of these circumstances then funded coups in the Far East that were never socialist revolutions to begin with,a and could most accurately be described as agrarian-fascist dictatorships due to their combination of nationalism and primitivism. I also personally think that adopting centralised planning was a mistake. None of this proves that planning as such is a bad form of economic organisation, as it failed due to the circumstances it was in and could easily be decentralised. There are also many features of the planned economy that make it succeed where markets fail. Most obviously, workers would no longer be exploited in a planned system, since they – through their control of the state apparatus – would own and manage their own workplaces and be paid “wages” in, labour vouchers, that are equivalent in value to what they produced that could only be obtained through working and could not be profited from. Decentralised planning would, I imagine, be done through a planning soviet (the function of which would probably change as society evolves and labour vouchers are rendered unnecessary) that consisted of confederations from various worker-managed enterprises, or syndicates, within the commune along with consumer groups. At assemblies, “prices,” for goods and services in terms of labour vouchers which are based on their actual production costs, the actual demand of everyone for them and cost-benefit analyses using indices to directly measure various costs and various benefits would be agreed on. There would also be a general economic plan containing production quotas, and this would be devised through participatory democracy. Production for and in a given area would operate according to what the people in said area want. Less frequently, economic plans that cover larger areas would be put together. Confederations responsible for more central economic planning would be subordinate to and essentially directed by the grassroots soviets in each area. Syndicates would follow the plan they were supposed to, that they contributed to devising, and would co-operate and make free agreements with other productive units in their supply chains to satisfy mutual needs. Each syndicate would be able to choose its own suppliers and priorities. This method involves direct democracy, allows production and distribution to be tailored specifically to the needs of consumers and account for costs to human wellbeing, the environment and/or the long-term future, and lets each syndicate have a degree of autonomy while also linking all syndicates together to co-operatively manage the economy in a way that benefits everyone.

The competitive pressures, the profit motive and the huge bias of the market is causing the exploitation of workers everywhere, ever-growing income inequality, decisions that are market-rational but have disastrous impacts, disregard of the needs of people in poverty whose demand doesn’t matter and a selfish mentality that ultimately benefits no one but a very, very small and privileged minority. In a truly free society, everyone would be able to have a say in the economic decision-making that affects them. No one would be forced to accept ostensibly free agreements that weren’t in their interests at all. Freedom would be evenly distributed, maximised for everyone, rather than available in enormous quantities for a tiny amount of people and highly limited for everyone else. This is only possible in an economic system built on co-operation, solidarity, and – yes, even though it is controlled by organs of the workers’ state – democracy. Not only does capitalism severely restrict the freedom of a vast amount of people, the market itself is the very antithesis of freedom.