It would be hard to argue that the market is not – in some way at least – broken; vast inequality, debt, and unrestrained free-market capitalism for all but those at the top of the market, who are protected by the state under a reversed form of the socialist state.
It is the contention of some free-market arbiters, that it is the only system that can move those at the bottom of the socio-economic ‘pile’ to a more comfortable standard of living. At a somewhat simplistic view this may be correct, which is perhaps why the idea that the free-markets failings are the restrictions placed on it, rather than the lack of them, but this also ignores the effect of technological advancement which has had on people’s lives.
The free-market has helped to promote the technical innovation which led to the advancement of the socio-economic standards of the average person. The free-market did this through the promise of the returns to the investment which greater than which would have been possible through traditional investments, such as government bonds.
However, this is slightly disingenuous: much of the innovation that we rely on is, in some way, linked to state-backed innovation; touch screens, the internet, mobile phone technology, and the Global Positioning System, are all technologies which began their life in military applications before the civilian equivalent took hold, and then were handed to the private sector for further development. The free-market is inherently conservative and risk adverse, in the main.
For the people who are not shareholders to the companies, they serve only one function, to consume the product. Therefore, in industries which have a monopoly, or an entrenched consumer base, there will be little impetus to innovate, this can be seen in the monopolistic sectors such as the Utilities, Rail, and Health Industries. The free-market paradigm in these sectors has led to private companies effectively being licensed by the state to levy taxes upon the public.
The free-market has not only become a driver for the companies within it, but a means to generate wealth in of itself. Once the market has run out of consumers, then it should mean that the company within the market must stop, or reduce its production to match that reduction in the number of consumers. However, to counter this natural limit to the free-market, debt was rebranded as credit and used to re-energise the market.
However, this too has a limited, capacity and it should not be used as an asset when looking at the balance sheet of those issuing the credit – although it is. This last point being instrumental in the global banking crash that we are only just emerging from currently. This continual need to push the market on comes from a notion that the market is endless, that it can continue to produce returns at a constant rate forever; a point that must surely be dismissed when considering that you can only sell a limited number of consumers a limited number of products – the law of diminishing returns.
The American constitutional lawyer, Philip Bobbitt, described a view of the world which was an evolutionary process, and the world had defining attributes at demarcations within that evolutionary process. The last four iterations of the state within Bobbitt’s model; the territorial state, the state-nation, the nation-state, and the market-state; are all state variants which are defined through their ability to build capacity through operating in the free-market internationally.
The East India Company is an example of this free-market paradigm. Set up under Royal Charter by Elizabeth I in 1600, it could act as the de facto government in much of the Indian subcontinent throughout much of its existence, only becoming defunct after nearly 300 years. It took the resources from its area of power, returned them to Britain for production, and the product was sold back to the empire, and other trading partners. This model worked well – if the purpose was to generate money for the shareholders. Eventually, the free-market model was devolved to entirely private, rather than state-supported private enterprise, and this is where we find ourselves now.
Investment needs to move away from usury, and earning income from no tangible effort for that income; it should be directly linked to a specific and tangible innovation, improvement, or repair, which should cease to offer an income at the end of the specific return. To do otherwise risks the transfer of wealth from the poorer, to the richer and an increase in the relative poverty of those with little or no choice in the goods and services that they use.