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Market fundamentalism

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Market fundamentalism (also known as free market fundamentalism) is an expression used by skeptics of laissez-faire capitalism, those interventionist and protectionist ones, to denote an allegedly unjustified and exaggerated belief that free markets provide the greatest possible equity and prosperity, and that any interference with the market process decreases social well being. "Fundamentalists" state that markets tend towards a natural equilibrium, and that the best interests in a given society are achieved by allowing its participants to pursue their own self-interest.[1] The expression is usually rejected as a 'pejorative term' by the persons and organizations to which it applies.[2]

According to John Quiggin, the standard features of "economic fundamentalist rhetoric" are "dogmatic" assertions and the claim that anyone who holds contrary views is not a real economist.[3] John Ralston Saul claims this is simply a form of bullying.[4] This approach flows from evidence that neoclassical economics provides us with a scientific explanation of economic phenomena, an explanation that economists state represents the status of scientific truth (if, and only if, all the assumptions involved in deriving the economic analysis are simultaneously satisfied). However, as Kozul-Wright points out on his book The Resistible Rise of Market Fundamentalism, this "ineluctability of market forces" neo-liberals and conservative politicians tend to stress, and their confidence on a chosen policy, rest on a "mixture of implicit and hidden assumptions, myths about the history of their own countries' economic development, and special interests camouflaged in their rhetoric of general good".[5]

History of the term

The expression "market fundamentalism" was popularized by George Soros in his book The Crisis of Global Capitalism (1998),[6] in which he writes "This idea was called laissez faire in the nineteenth century... I have found a better name for it: market fundamentalism."[7]. Palagummi Sainath believes Jeremy Seabrooke, a journalist and campaigner, first used the term[8].

A full description of the origins of the free market economics dating as far back to the conception of natural laws as mathematical, eternal and absolute — a reflection of some perfect mathematical form — derived from ancient Greek philosophers Pythagoras (569–500 BC) and Plato, and reinvigorated by the Enlightenment is way beyond the scope of this article, but can be read on Chapter 4, A Brief Account of the Historical Origins of Economic Fundamentalism, in Dr. Lee Boldman's book (2007) [9].

The expression is now used by various authors writing on economic topics to signify an allegedly unjustified belief in the ability of markets to solve all problems in a society.[10] The term has been used, pejoratively, to criticize some groups which are mainly viewed as advocating strongly against "any" state regulation and defend a "totally" free market.[10] It is also used to disparage the arguments of the proponents of "the virtues of radical free-market economics" or, in Soros' own words, against the "ideology" which "has put financial capital into the driver's seat."[7]

Joseph E. Stiglitz used the term in his autobiographical essay in acceptance of Nobel Memorial Prize in Economic Sciences to criticize some International Monetary Fund policies: "More broadly, the IMF was advocating a set of policies which is generally referred to alternatively as the Washington consensus, the neo-liberal doctrines, or market fundamentalism, based on an incorrect understanding of economic theory and (what I viewed) as an inadequate interpretation of the historical data." [11]

"The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith’s invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency." [12]

— Joseph E. Stiglitz

History of the concept

While the term market fundamentalism is relatively new (the use of word "fundamentalism" itself is recent. Until 1950 there was no entry for "fundamentalism" in the Oxford English Dictionary[13]; the derivative fundamentalist was added only on its second 1989 edition, with the meaning: "an economic or political doctrinaire" [14]), the concept of economic liberalism is not: the ideas were re-born in the 18th century, with the works of Adam Smith and Jean-Baptiste Say [9]. It was only in the 20th century that the relative sophistication found in Smith’s work would be reformulated by economists such as Freidrich Hayek, Joseph Schumpeter, and Milton Friedman (of the Chicago School of economics of the 1960s and 1970s), resulting in a recipe for a free market economy: deregulate business and trade, restrict state intervention, and let the energies of entrepreneurship and free-flowing capital generate wealth for all of those who participate in the economy.

After the influence of Friedman and the Chicago boys (University of Chicago-educated Chilean economists) on the Miracle of Chile under the Augusto Pinochet regime in the 1970s, similar models were adapted by Prime Minister Margaret Thatcher of the UK (Thatcherism) and President Ronald Reagan in the U.S. (Reaganism) in the early 1980s.[15]

In the late 1980s the Bretton Woods Washington-based financial institutions, (International Monetary Fund and the World Bank) and the U.S. Treasury Department embraced the Washington Consensus, a standard set of policy prescriptions for crisis-wracked nations which include measures such as eliminating state subsidies, redirecting social spending into infrastructural development and reducing taxes.[16], or as Stiglitz summarized, promoted the proselytism of a universal set of economic policy recommendations: "stabilise, liberalise and privatise" (Stiglitz, 1998:21-22).

Fundamentalism and the financial markets

Along the last couple of decades, in the United States, every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and stimulating the economy [1]. This system of 'asymmetric incentives' (also known as "moral hazard"), encouraged ever greater credit expansion [1]. Since 1980, financial regulations have been progressively relaxed until they have practically disappeared [1]. According to George Soros, "The system was so successful that people came to believe in what former US president Ronald Reagan called the magic of the marketplace and I call 'market fundamentalism',"[1] "Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets themselves."[1]

References

  1. ^ a b c d e f Soros, George, "The worst market crisis in 60 years." Financial Times, January 22 2008 19:57]
  2. ^ Eubanks, Phillip (2005). "Globalization, "Corporate Rule," and Blended Worlds: A Conceptual-Rhetorical Analysis of Metaphor, Metonymy, and Conceptual Blending". Metaphor and Symbol. 20 (3): 173–197. doi:10.1207/s15327868ms2003_2. Retrieved 2007-12-17.
  3. ^ Quiggin, John. Rationalism and Rationality in Economics, 1999, On Line Opinion,www.onlineopinion.com.au
  4. ^ SAUL, John Ralston. On Equilibrium, Penguin Books, 2001 Canada
  5. ^ KOZUL-WRIGHT, Richard and RAYMENT, Paul. The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World. London: Zed Books Ltd, 2007 p. 14 and Chapter 6
  6. ^ BRESLOW,Marc. George Soros: Beware Market Fundamentalism. Dollars & Sense, issue #221, January-February 1999
  7. ^ a b SOROS, George. The Crisis of Global Capitalism Public Affairs, 1998.
  8. ^ SAINATH,Palagummi. And then there was the market.
  9. ^ a b Boldeman, Dr. Lee. Template:PDF. 2007, Canberra: The Australian National University ANU E Press. ISBN 9781921313530, p. 13
  10. ^ a b Market fundamentalism The Language of Philosophy - Dictionary and Research Guide, Enlexica, Inc.
  11. ^ Autobiographical essay in acceptance of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel
  12. ^ STIGLITZ, Joseph E. The pact with the devil. Beppe Grillo's Friends interview
  13. ^ GIDDENS, Anthony. Beyond Left and Right. The Future of Radical Politics, Introduction, First English Edition 1994, Brazilian Edition, 1995, p. 14, ISBN 8571391149
  14. ^ Oxford English Dictionary, Oxford University Press, 2nd edition, 1989
  15. ^ AMBROSE, Soren. Resisting Market Fundamentalism! Ending the Reign of Extremist Neo-Liberalism. 50 Years Is Enough Network, April 2004
  16. ^ Williamson, John: What Washington Means by Policy Reform, in: Williamson, John (ed.): Latin American Readjustment: How Much has Happened, Washington: Institute for International Economics 1989

Bibliography

Books

  • Albers, Detlev, Haeler, Stephen, MEYER, Henning; (Editors). Social Europe: A Continent's Answer to Market Fundamentalism. London: European Research Forum at London Metropolitan University (23 June 2006) ISBN 0954744837 ISBN 978-0954744830
  • Boldeman, Dr. Lee. Template:PDF. 2007, Canberra: The Australian National University ANU E Press. ISBN 9781921313530
  • French-Davis, Ricardo. Reforming Latin America's Economies: After Market Fundamentalism. Palgrave Macmillan, 2006. ISBN 140394945X ISBN 978-1403949455
  • Kelsey, Jane. A Review of Economic Fundamentalism: The New Zealand Experiment - A World Model for Structural Adjustment?, Pluto Press, 1995.
  • Kozul-Wright, Richard. The Resistible Rise of Market Fundamentalism: The Struggle for Economic Development in a Global Economy. United Nations Conference on Trade and Development (UNCTAD), London: ZedBooks Ltd, 2007. ISBN 9781842776360 ISBN 9781842776377
  • KOZUL-WRIGHT, Richard & RAYMENT, Paul. The Resistible Rise of Market Fundamentalism: The Struggle for Economic Development in a Global Economy. Palgrave Macmillan, July 2007. ISBN 9781842776377 ISBN 1842776371
  • RITZER, George (editor). The Blackwell Companion to Major Social Theorists, Series: Blackwell Companions to Sociology, Blackwell publishing, 2003. ISBN 9780631207108 ISBN 0631207104
  • Soros, George. The Crisis of Global Capitalism Public Affairs, 1998.

Articles

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