Why won't markets solve our environmental problems?

Like most unrepentant lefties, I get tired of hearing people talk about markets as though they we some kind of panacea rather than the combination of adolescent abstraction and crooked game they obviously are to anyone who bothers to work out how they really operate.

But just to cut through the usual theological speculation (which would, I am quite sure, have shocked Adam Smith, who seems to have been generous, humane and sophisticated moral philosopher who distrusted business deeply), would someone please point me at, say, three major corporations that organise their own internal operations as a market?

Can't think of even one? Me neither.

So why not markets? Because they don’t work, they don’t make sense and they don’t exist.

Markets don't work

Well, they work in part, but only to the extent that you would expect self-regulating system to work that had no mechanisms to directly tell them whether or not they are doing the right thing. Money and profit are quite good guides to certain kinds of poorly understood or marginal situations, but neither ‘running society as a whole’ nor ‘forestalling the worst ecological crisis since the glaciers retreated from Oxfordshire’ are among them.

A market is like evolution: pretty impressive on its own terms, but if you wanted to create an intelligent organism, would you settle for a system that took half a billion years, repeatedly went off in all sorts of directions no one in their right mind would have chosen, and finally came up with – a giraffe?

Likewise for markets. They have created a fantastic (and I mean that word literally) level of productivity, knowledge and control. But they have absolutely no sense of direction, purpose or self-control.

And as we have been discovering almost daily ever since the world’s government decide that markets were The Answer, if you don’t like markets but work in an area where they predominate, you had better have massive political power at your disposal if you plan to buck them, because not only do markets have no self-control but they are too big for anyone who does have an idea of where they want to go or how they want to get there to deflect, and too deaf to anything but profitability to be persuaded. Like a muscle-bound idiot, markets are wonderfully impressive to people who like gawping at lats and pecs, but you would be very ill advised to engage them in conversation about anything of any actual significance - or to get in their way.

So markets go wherever their own witless impetus takes them. As a result they have created (some of – let’s not exaggerate their significance) the enormously powerful economies and societies of the modern world. But they have also created systems for energy use, food production, resource utilisation, mass communications and any number of other basic social functions that are currently showing every sign of running us straight over a cliff.

Markets don't make sense

Nor do markets really make much sense. If companies don’t operate internally in terms of markets, and neither do governments or any other kind of organisation that knows what it is trying to achieve, it is for the simple reason that, again like evolution, relying markets really is an extraordinarily irrational way of behaving. It is as if you wanted to know what the average of the numbers from 1 to 6 was, and instead of simply dividing the sum of these numbers by how many numbers there are (i.e., the lamentably centralised approach of mathematics), we decided to ask thousands of people to guess, and assumed that the group shouting loudest were right.

True, there are many social functions we do not know how to directly organise efficiently or effectively yet. But if that is the rationale for markets, then they make sense only as a last resort, could only work if we kept a careful eye on how things were going, and they would have always to be surrounded by the power to intervene when things start to go wrong.

For example, the exploding problem of ‘externalities’ – i.e., the fact that the markets are utterly unresponsive to the fact that the environment is collapsing – can only be detected by markets if you cobble together some artificial regulatory and pricing system that can tell this poor deaf, simple-minded creature what the hell the is going on.

Hence the autism of markets that is so truly frightening. If markets were human beings, they would be kept in a home for the terminally bewildered. But our current approach to markets is the very reverse. It is to empower them to make every possible decision about how we will run the world – some of the most crucial parts of which markets cannot even register.

Even those things we are pretty good at doing rationally and we know from massive experience that markets cannot do, such as running health, defence or social security systems, are increasingly being handed over to markets to run, and through a succession of global treaties and agreement, we are progressively (is that the right word?) abdicating our right to regulate and intervene.

Markets don't exist

Which brings me to the third problem – that markets don’t actually exist. When we abdicate our control of major social systems to ‘the market’ we are not in fact doing any such thing. In practically every industry and sector, the entire world market is under the thumb of perhaps seven or eight companies. Oil, food distribution, money, cars, computers, pharmaceuticals, fertilizer – in how many of these sectors do the seven largest players make up more than 70% of the market? In such conditions, the entire theoretical basis of the market, with its freedom of movement and openness of information, disappears.

In a way this could be a good thing. If there are only a few global players, each operating truly planetary systems that manage the flow of the world’s resources, then clearly a massively rational system is in fact in control. In that case, could it not be argued that the illusion of the market in fact conceals a rational system for managing society’s needs? So it would seem, listening to some market advocates.

But unfortunately, because the interests that control what counts as ‘rationality’ are those of shareholders rather than society as a whole, both the power of public reason and the economic power of society as a whole have been co-opted to narrow sectional interests. What is more, those interests are not only not neutral to the interests of society as a whole; the two sides are directly and fatally opposed.

All economic systems assume some form of exploitation. We exploit mines and forests and agricultural land and the powers of physics and chemistry and biology and the talents of human beings. But the most fundamental basis of a capitalist system is the fact that the people who actually make and do everything are rewarded for their efforts with only a fraction of the wealth they create. We work, hand over everything we make, and get paid. And because what we have done is worth more than our collective pay, there is a profit left over.

This exploitation is concealed by the superficial fairness of contract relationships, even to the point where the participants are perfectly convinced of fairness of this exchange and the absence of any alternative. But from the present point of view, what it ultimately means is that society’s economic powers have been co-opted to serve the interests of a class whose entire livelihood relies on the exploitation of society at large.

So markets don’t work, don’t make sense, and don’t exist. Especially if you are faced with a crisis on the present scale. On the other hand, if I were planning to organise the end of the world, I know exactly who I’d turn to - someone blind, deaf, self-centred, simple-minded… Now, who might that be?