Tuesday, 30 January 2018

It puzzles me why the left opposes free markets - they argue for most other forms of liberty

It's odd how many on the left, so keen on all sorts of social liberation, are adamantly opposed to the idea of people being economically liberated. It's hard to understand why, when the liberation of women, gay and lesbian people, and ethnic minorities get such prominence in left wing thinking, they seem unable to recognise that part of that liberation must be economic, must be the power to exchange, interact, co-operate and trade.

It seems, without conducting any sort of extensive survey, that the problem lies in two places - firstly, a sort of elitist belief that most people aren't bright enough to make their own economic decisions and therefore need guidance from experts, and secondly a sort of semi-comprehended Marxist reject of the market in preference for a wholly planned economy. In truth though, a lot of the opposition to free markets is pretty woolly - here's an example in a tweet to cabinet minister Liz Truss from Labour MP, Stella Creasey:
Except in a free market you aren’t free @trussliz because you will always end up picking up the tab for its failures - try reading the other half of adam smith about value of collaboration to securing freedom for us all …all money is after all a matter of belief
Now I'm not going to try and deconstruct Ms Creasey's Tweet (it is after all only a Tweet) except in so far as it contains several of those presumptions about free markets - they're not 'free', they 'fail', and they are exploitative. Ms Creasey also references (I assume) Adam Smith's 'other book', the Theory of Moral Sentiments. Here's a chunk from a commentary by Eamonn Butler:
As individuals, we have a natural tendency to look after ourselves. That is merely prudence. And yet as social creatures, explains Smith, we are also endowed with a natural sympathy – today we would say empathy – towards others. When we see others distressed or happy, we feel for them – albeit less strongly. Likewise, others seek our empathy and feel for us. When their feelings are particularly strong, empathy prompts them to restrain their emotions so as to bring them into line with our, less intense reactions. Gradually, as we grow from childhood to adulthood, we each learn what is and is not acceptable to other people. Morality stems from our social nature.
Smith wasn't limiting free markets but rather making the observation - at considerable length - that human beings are not just motivated by prudence, by an overriding utilitarian urge. Rather our motivations are grounded in a set of ethics of which prudence is just one - justice, temperance, faith and courage are just as important. And since our motives in a marketplace are not just self-interest, the idea that free markets exploit is wrong. As Smith put it himself:
“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”
I'm sure we can have an extensive discussion about whether or not we are ever truly free but, in more pragmatic terms, Ms Creasey's typically Fabian position is essentially that we don't have sufficient knowledge in the marketplace so are liable to manipulation and exploitation. We see such an argument put repeatedly in respect of advertising drawing on a variety of slightly sneering observers - Veblen, Packard, Klein - who argue that advertising is uniquely and corruptly persuasive especially for children and what might be called the lower orders of society. As a result, the first target of the prohibitionist is to limit, then ban, the advertising of the product they wish to ban - smoking, drinking, sugary food, gambling.

The problem with this argument is that it is, as with so many left wing critiques of classical liberalism, essentially a straw man. Nobody claims that free markets require perfect knowledge for all parties merely that there is no coercion and that the buyer and seller both secure benefit from the process of exchange. I do not need to know the price of every second hand Land Rover to be able to judge whether the price I pay to buy one provides me with a value in excess of that sum. If I'm wise, and most buyers, regardless of age or social class, are wise, then I will do more than simply buy the first of a product I encounter but even if I do this it doesn't stop the market being free.

To return to Ms Creasey, she argues that Smith's Theory of Moral Sentiments is about collaboration and I assume that, in making this assertion, Ms Creasey believes that collaboration is not a feature of a free market. Now, leaving aside Smith's position that human nature is not simply about self-interest, maximising utility, it does seem odd to consider that interactions in a free market do not feature collaboration or cooperation. Is the achievement of mutual benefit through exchange not the very essence of collaboration - two humans freely interacting to the advantage of both? Yet the Fabian socialist position seems blind to all this, preferring to fall back on the idea that exchange in a marketplace is exploitative and therefore not free.

It makes absolutely no sense at all for people on the left to be so dismissive of free markets, enterprise and trade - they ought to have the same enthusiasm for such things as they do for women's rights to control their bodies, for society to see gay and lesbian people as normal, and for ethnic minorities to be treated fairly. Instead the left seeks out things - often falsely - to suggest that free markets are wrong. Most often they point to failures in highly regulated markets - financial services, energy production, transport, housing - where powerful businesses work with government to limit innovation, create rents and prevent new entrants to that market. But even when they don't, the criticism of free markets is based on an entirely vague notion of an alternative (and I'm guessing that most on the left don't want a Soviet-style planned economy).

In the end, however, the alternative to a free market is a market that isn't free. And this means either that you do not have access to that market or else that your access to directed by another party. As I wrote a while ago:
Please explain which part of the word 'free' is a bad thing? If you don't like free markets, what you want is markets that aren't free. Markets where only some privileged people can trade. Markets where someone else (usually the government) sets the price. Markets where their effectiveness is determined not by the actions of those in the market but by who is most effective at lobbying - for which read bribing, corrupting - government. If you fetter free markets (which given you always go on about the free market being "unfettered" is what you want) what you create are winners and losers, privileged and unprivileged, rather than having a system where people seek co-operation and mutual benefit. Freedom is a good thing. Free markets are a good thing. So stop lying about this and undermining the liberty of your neighbour.
And it makes no sense, given its enthusiasm for other liberties, for the left to oppose this liberty.



Soarer said...

As Thomas Sowell says, if Socialists understood economics, they wouldn't be Socialists.

I must take issue with Adam Smith in your quote though: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

There are actually lots of left-learning people who feel no such thing, if the others involved are bankers, company directors, footballers or other 'people not like us'. People who are like us - actors, musicians, writers etc get a free pass.

FOr evidence, the jealousy on show of any successful person in the 'out-group' can be seen in any edition of the Guardian.

richard yot said...

I don't think a thinking and informed modern-day leftist would really be against free markets in their proper place - which is to say to facilitate trade between people and business.

What leftists object to is introducing the market where it arguably doesn't belong, where competition is non-existent (so there is no real market at all), for infrastructure etc.

Even the most hardened neoliberals don't leave the national road network up to the market, because it would be a disaster: heavily populated areas would have great roads, and isolated ones would have terrible or non-existent roads. The market cannot provide a universal service under these conditions because of asymmetries in population density. Similarly the Victorians didn't leave it up to the market to build the sewage network, because it simply would never have happened.

So as a leftist I would argue that the pragmatic solution is a mixed economy: the market provides trade, with the backing of the infrastructure and legal system of the state, and the state provides the infrastructure upon which the market depends. There is a place for the free market, and a place for central planning, and infrastructure requires central planning.

Brian Cleary said...

It's sort of unbelievable that you cannot understand the difference between freedom of choice in sexual orientation and freedom of choice in a market. Unbelievable, as in, I don't believe that you don't see how these could be different. You may as well have made the argument, "leftists claim to like cheese, and will go on and on about the wonders of brie, but when was the last time you've seen a leftist eat a nacho cheese dorito?"

But, you made the post, so I'll humor you and explain the difference between brie and doritos.

I care about the well-being of humans, and I care about reducing inequality (and lots of other things). I support, for instance, rights to gay marriage because these rights can massively improve quality of life for lots of individuals, without really harming anybody. I also oppose unrestricted free markets when they lead to relatively poor quality of life for lots of individuals.

The difference is that I do no believe that the outcome of a free market is just, per se. In other words, my morals and opinions about how society should operate are derived without consideration of markets. Markets are merely a tool to realize my goals.

The "free markets are good because of freedom" argument is equivalent to saying "all cheese -- brie and nacho cheese doritos alike -- is good, on principle." I, on the other hand, think that doritos are disgusting, while brie is delicious.