THE BATTLE FOR THE FUTURE OF THE WORLD
Will Market Fundamentalism Win?

The last fifty years has seen two massive politico/economic experiments, based on opposing theories. Most of the Twentieth century was marked by what was cast on both sides as a world-wide struggle between Soviet-style bureaucratic centralism and democratic capitalism. The Soviet model, inaccurately cast as "Communism", was based on the fusion of several streams of thought, in particular:

• The notion that elites could best plan and determine the lives of the masses
• "Taylorism"; a set of ideas developed in the United States and based on the idea that the work of the majority could be analysed and planned by a superior educated class and that all would benefit from the gains in efficiency and productivity. Stalin and Henry Ford were passionate admirers of Frederick Taylor's ideas.
• Cybernetics and the thinking of such philosophers as Stafford Beer, which treated human organisations as systems that could be efficiently directed by a central all-knowing brain.

Advocates of these ideas in the Soviet Union and the West thought that they would take over the world, proving their superiority to capitalism. Their narrative asserted that an enlightened elite was best equipped to take decisions in the interests of the people.

The problem with the theories was that they were untried on anything like the scale of a complex entity like the Soviet Union. In fact, Taylorism became discredited on a much smaller scale in the West as people reacted very negatively to being treated as components in a perfect machine and eventually overturned the system. More participative ideas such as the Japanese "Kaisen" have taken over:

"Kaisen is a daily activity which goes beyond productivity improvement, it humanises the workplace, eliminates excessive hard work (that may lead to stress or illness) and teaches workers confidence in experimenting with their work practices in order to improve productivity and eliminate waste".

In any case, the theories of bureaucratic centrism were dramatically disproved by the sudden collapse of the Soviet system in a welter of chaos and inefficiency. Stories of factories set up in different places to manufacture left and right footed boots that never managed to synchronise production resulting in massive gluts of one-footed boots may have been apocryphal, but could easily have happened!

The Soviet system created a deep dependence that meant the majority of people were quite unprepared to participate actively in a competitive economy and democratic society.

Following the "defeat" of Soviet centrism, another World Theory takes over

As the Soviet system was declining, another World Theory was taking shape through the work of a number of academic economists, based in the United States, Austria and Britain. These theorists postulated that the Market should be the controlling mechanism for economies, and if all people were allowed to pursue their own interests in the market, the net result would be for the benefit of all. Markets, so it was argued, were inherently democratic, allowing individuals to freely pursue their interests. "Market Fundamentalism", so-called by George Soros, was based on a combination of mathematical modelling, Gene theory and a visceral hatred of the state as a corrupting influence. The ideas of Milton Friedman and the Chicago School were fervently adopted by Ronald Regan in the US, and Margaret Thatcher in Britain, guided by Sir Keith Joseph and Professor Alan Walters.

The prevailing narrative of market fundamentalism is that the market is "democratic" in that it allows individuals to freely pursue their legitimate interests unfettered by state interference.

Like Soviet centrism, free-market economics was based on axioms and untested theories. Despite this, propelled by free-market propaganda from a myriad of institutes and think tanks, the philosophy infiltrated universities, political elites and in particular international bodies such as the IMF and World Bank.

Has market fundamentalism delivered?

Like Soviet centrism, the world is now in a position to evaluate the efficacy of the theories that are the foundations of market fundamentalism. The results are probably as disastrous as the Soviet experiment:

• The world economy has seen a succession of booms (hailed as new dawns and events that change the fundamental rules of economics). These have been succeeded by busts that have all but wiped out the gains of the boom times. All in all, the growth in the world economy has not exceeded that of the years before market fundamentalism, and there is evidence that countries that espoused these theories most enthusiastically have only experienced average growth rates, whilst experiencing burgeoning social problems driven by rampant inequality.
• The problems caused by economic instability have hurt the poorer nations and their people - as well as causing stress and anxiety amongst the populations of the US and UK, supposedly the bastions of market fundamentalism. In the US, there has been no real growth in average earnings since the 1970's. What has happened there and in Britain is a massive boom for the rich minority and an equally dramatic increase in inequality of wealth and opportunity.
• The Post-Soviet economy was wrecked by the sudden imposition of market fundamentalism. Public services and public health plunged to dreadful levels with consequent increases in alcoholism and a serious decrease in life expectancy. At the same time, a class of oligarchs was created - people who ripped out the best bits of the old Soviet economy and frequently took their wealth offshore to tax havens. The backlash from the populace has supported a new generation of authoritarian leaders and a sad decline in any hopes of Russia becoming a mature democracy.
• The economies of South East Asia were undermined by the imposition of free-market "disciplines", to the point that the IMF and its dictums were resoundingly rejected - leading to recovery and growth under social market regimes.
• The same "disciplines" applied in South America had similar effects, leading to the collapse of indigenous economies and exploitation by global corporations and banks.
• One country that did not apply the Rules of the "Washington Consensus" devised to impose free-market ideas through the IMF was the United States, which used its economic and sometimes its military power to pursue selfish economic policies, impose pressure on recidivist nations and exercise protectionism at home.
• A final straw in a litany of disaster has been the collapse of the world banking system, leading ironically to the despised institutions of government bailing out the free-market system. But the fall-out from this collapse has seen massive harm caused to the lives and prospects of millions of people in developed and developing countries alike.

Despite the disasters of market fundamentalism, the "system" is fighting hard to stop reform

After the collapse of the Soviet system the "victory" of democratic capitalism based on free-market principles was widely celebrated throughout the West - led by the United States. The superiority of "freedom" of individuals to pursue their interests unfettered by the state was widely proclaimed and books such as "The End Of History" by Francis Fukuyama. In effect, this claimed that the democratic free market system was reaching a state of perfection that would leave little room for future improvement.

But now that the tenets of market fundamentalist theory have been demonstrated to bring instability and misery to the lives of millions, it might be expected that a fundamental rethink of this system of economics would be well under way. This is especially important because the failures of this system are as significant as those of Soviet centrism.

However, the signs are mixed. First, there is reported to be a huge battle being fought by the global investment banks, major beneficiaries of laissez faire economics, to keep things as they and to return to "normal". This means that investment banks will continue to use ordinary peoples' money to speculate, to their own benefit only.

Second, it is clear that the right wings in the US and UK are fighting hard to ensure that the private sector prevails in the provision of public goods and services.

Then, the massive networks of "institutes" and think tanks that have ceaselessly pumped out the market fundamentalist have gone into overdrive. The free-market message has seeped into the very core of politics in the "Anglo-Saxon" economies, particularly the UK and US.
In Britain, a coalition government including the supposedly social democratic Liberal Democrats has embarked on a programme of economic and social reform driven it seems by a market fundamentalist agenda. Driven by over-dramatic debt reduction and free-market ideas such as "choice" in public services, the impending privatisation of education, health and much of the public sector smacks of marketisation of society by stealth. At the very least, there is no sign of any depth of thought about how Britain got into the mess and how it might re-think social and economic policy to get out and stay out of it.

So, how stands the battle for the future of the world?

The picture is confused and very mixed. If one believes, as I do, that neither Soviet centrism or market fundamentalism are going to bring a better world for the vast majority of people, then the signs are interesting. Here are some:

• The countries of South East Asia, which rejected the IMF and market fundamentalism in the 1990's, have thriving economies that involve active government participation to various degrees.
• The world's most rapidly growing economy, China, has never espoused free market democracy, instead forging its own mix of entrepreneurism and central direction
• Of particular interest, many South American countries have rejected the IMF and foreign economic imperialism, instead moving towards popular government-led social and economic reform. This theatre of the battle is particularly interesting, because of very active involvement by foreign banks and global companies - backed by media campaigns and funding of free-market opposition politicians to try to stem the tide of reform.
• The picture in the African continent are very confused, with rule by corrupt elites being all too common. Like South America, many African countries would benefit for the foreseeable future from strong government with popular support, acting in the best interests of the whole population. What is quite clear is that doses of "free market" dogma will only benefit powerful external forces acting in conjunction with corrupt local elites.
• Then, there are the social market countries of Northern Europe which, unlike the UK, never espoused market fundamentalism with any great enthusiasm, preferring their own mix of collaboration between government and other stakeholders in society. Despite a veritable storm of negative propaganda from the free-market right, it seems that these countries, including Norway, Sweden, Denmark, Germany and Finland have weathered the economic storm with less social damage than the US and Britain.

What Should Happen?

Fundamentals

1. Free-market economics is founded on ideas of individual freedom and growth. Growth is needed because the market fundamentalist definition of "freedom" favours the powerful and rich, causing a growth in inequality. Thus the economy needs to grow to keep a lid on social problems and widespread unrest. But even moderate growth rates, as experienced in the US and UK, have not stopped the relative position of average and below-average earners from deteriorating markedly.
2. The notion of unending growth is massively flawed in a world already experiencing instability caused by shortages in food, water and energy. The market can only take care of these problems by leaving poorer nations to foreign exploitation and the vagaries of famine, war and pestilence - as is already happening to some degree.

The Need

The overriding imperative is for the economy to become a servant of the needs of people in society. This means experimenting with many ways of representing the needs of multiple stakeholders in the determination of economic policy and priorities - not just handing power to rich elites.
Global banks and corporations are not democratic institutions and should not be allowed a special position in determining social and economic policy.

The role of governments as the legitimate representatives of people in society needs to be re-asserted. International institutions need to be reshaped so that they act as facilitators of rational economic policy, not agents for any one body of dogma.

A major need is for policies that recognise the need to cope with finite resources, whilst curbing the power of the rich and powerful nations to grab an unequal share by financial dominance and military power.

Above all, the need is for powerful representative Institutions at the national and international levels, because leaving the future of the world to the vagaries of the market will end in chaos and misery.

In the end, mature democratic market economies will only achieve a sustainable equilibrium when they develop cultures and institutions that enable all major stakeholders in society to collaborate for the good of all. Pick regions and countries that are on this road and back them for the long term!

In this regard, there are signs of hope, not least in South America. The importance of what is happening in such countries as Brazil and Venezuela was aptly captured by Seamus Milne in the "Guardian" newspaper of 19 August 2010. Under the headline, "The transformation of Latin America is a global advance", he concludes: "If the political and social movements that have driven the continent's transformation can maintain their momentum and support, they won't only be laying the foundation of an independent Latin America, but new forms of socialist politics declared an impossibility in the modern era. Two decades after were told there was no alternative, another world is being created".

Let many flowers bloom, the future of the world depends on it.