The "Free" Market: The Ultimate Welfare Queen

[marmar]

This is an excerpt from Raj Patel's new book, "The Value of Nothing.":


Corporations are Homo economicus. Quite rationally and without malice, they try to increase their profits by their profits by any means, legal and occasionally illegal. Corporations that don't follow this cardinal law of the jungle will go out of business, which means that whatever else a corporation makes, it'll invariably produce externalities.

Everyone agrees that if we make a mess, we should clean it up. If prices really reflected environmental and social costs, then prices really could telegraph the relative abundance and scarcity of things. And if some goods produce positive social and environmental benefits - as agroecological farming does - and if that's reflected in prices, the market can successfully use prices to prices to allocate resources to their most efficient use. This shouldn't be an optional "ethical consumer" choice for those who choose to buy products that don't pollute the planet. If products do generate costs and benefits, then those need to be reflected in the price in order for the economic logic of markets to work properly. Otherwise, this is corporate subsidy on a massive scale, and there's nothing free marketers claim to like less than a subsidy. You'd be forgiven for thinking that this ongoing bailout from nature and society to private enterprise is what puts the "free" in free market - despite its protests, corporate capitalism has yet to prove that it can operate without these kinds of subsidies.

When negative externalities are not paid for, the beneficiaries are in effect engaging in theft from those who bear the cost of their behavior. The language of theft implies a victim, and in a broad sense, everyone suffers from these externalities. Add up the health impacts from losing the ozone layer, the loss of fish stocks and ecosystem services provided by trees, the contamination of water by industrial agriculture and the adjustment to a world with more floods and drought because of climate change, and you end up with quite a tab. If humanity had to pay for the consequences of a degraded ecosystem, the bill could, according to one recent study, run to about $47 trillion. But the bill isn't split evenly. Another recent study estimated the environmental footprint - the hidden costs generated through consumption and production choices - of rich countries on poor ones. It included only six areas: ozone depletion, overfishing, deforestation, climate change, mangrove destruction and intensified agriculture. It will come as no surprise to learn that middle- and high-income countries pollute themselves, but they also outsource their pollution, costing poor countries more than $5 trillion in ecological damage. By contrast, the footprint of poor countries on rich ones is $0.64 trillion. The ecological debt of rich countries to poor ones dwarfs the entire third-world debt owed by poor countries to rich ones, which is only $1.8 trillion.

This unevenness, the systematic tilt of costs from rich to poor, from powerful to disempowered, helps explain why these externalities are allowed to continue - because wealthier consumers share the spoils of the theft. If I buy a hamburger that should cost fifty times more than it does, I see a benefit, at least in the short run. Artificially low prices are the consumers' dividend from this system of profit taking, which has given us clothes that are cheaper to buy than clean and phones that are cheaper to replace than repair. It is through these "bargains" that we are conscripted into modern consumer capitalism. Of course, the circumstances under which I buy the hamburger, or anything else, matter a great deal. Consumers might well want to buy better, healthier, tastier food where the price really does reflect the full cost, but with many households earning less than a living wage, bargain hunting has become a form of social policy.

It's important, then, not to lay the blame entirely at consumers' doors and to consider how we become consumers in the first place. We may have been seduced by the flood of cheap goods whose real costs are either deferred or paid by others, but this doesn't explain why we want the goods themselves. There's a subtle process at work here, a social construction in which we learn how to consume, and how to value our time, our happiness and each other. Corporations may be the creatures of modern market society, but in order for profits to flow, they need to conscript consumers to the market. Prices are part of the recruitment material.

[marmar]

1. Kick for a great book.....

:kick: