The Market as Prison

Written on July 23, 2007 by Max Oliva in Development

J.Pozuelo-Monfort, MSc candidate in economic development at LSE.
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Charles E. Lindblom (1982)
· Suppose that we faced the fanciful task of designing a political system or a political/economic system that would be highly resistant to change.
· Another possibility might be somehow to place all power in the hands of a despot or oligarch. But doing so would enable the elites to change the system.
· Another possibility is to design institutions so that any attempt to alter them automatically triggers punishment.
· Such a change-repressing system would be all the more effective if the punishments were strong.
· When we come to that cluster of institutions called business, business enterprise, or the market, just such a mechanism is in fact already operating. Many kinds of market reform automatically trigger punishments in the form of unemployment or a sluggish economy.
· You can continue reading more of Lindblom’s thoughs by following this link.
J.Pozuelo-Monfort’s comments:
In a beautiful promenade of explanatory thoughts. Charles E. Lindblom argues against the market, for the market imprisons policy, for the market imprisons thought and stops the intellectual venture. We live in a market-oriented society. We live in a market-oriented democracy that conditions the policy making process. A conditioned policy-making process cannot fully work. A conditioned policy-making process cannot fully operate. We live in a society needy of policy changes, but the more market-oriented society becomes, the more incapable it is to adopt changes leading to a new understanding and vision of how the world should function, of how the world should operate.
Neoliberal policies tend to impose a unique understanding of how the economy should be ruled, empowering the economic return, far from considering the social dimension. The market justifies a unique vision, the market becomes the default reply for those unable to move forward, incapable of thinking ahead.
The human kind is beyond the market. The environment is beyond the market. We need to make sure our policies, be them public or corporate, respect the human being and the environment. We need to make sure our policies guarantee universal access to water, healthcare, education and sanitation. These universal rights are beyond the market theory and theorists.
Our will, that of the citizens of the world, is not imprisoned. Our voice, that of the citizens of the world, is not condemned to silence. Market failures cannot explain the despair of millions. Market failures are the consequence of an economic system that will never work as the theory says or indicates. Because the system is run by individuals, and individuals are human beings that deserve some dignity.

Charles E. Lindblom (1982)
· In the town in which I live, a chemical plant discharges something into the atmosphere that carries both a bad odor and irritants to the eyes. Town and state governments are both reluctant to put an end to the problem for fear that the plant will find it advantageous to move to a new location in another state.
· All this is familiar. One line of reform after another is blocked by prospective punishment. Higher business taxes reduce profitability. Bearing the costs of pollution control reduces profitability.
· In all market oriented societies, the great organizing and coordinating tasks are placed in the hands of two groups of responsible persons, functionaries, or leaders. One group consists of government officials at sufficiently high levels. The other group consists of business people.
· The defining difference between a government official and a business entrepreneur is not that one discharges important functions and the other only secondary functions, for both perform major and essential services for society. The difference is that one is directed and controlled through a system of commands while the other is directed and controlled by a system of inducements.
· Market systems are inducement systems.
· Playing their roles in a command system, government officials can be commanded to perform their functions. Playing their roles in an inducement system, business people cannot be commanded but must be induced.
· Any general business slowdown is measurable and hurtful in jobs, and almost everyone is aware of it.
· When a decline in prosperity and employment is brought about by decisions of corporate and other business executives, it is not they but government officials who consequently are retired from their offices.
· Take note that my argument is that policy is imprisoned in market oriented systems, which is a broader generalization than if I had said that it is imprisoned in private enterprise systems.
· No democratic nation state has ever arisen anywhere in the world except in conjunction with a market system – surely a historical fact of enormous importance. But, according to my argument today, no market society can achieve a fully developed democracy because the market imprisons the policy-making process.
· For minimal democracy, we require a market system. For fuller democracy, we require its elimination.
· Our thought is imprisoned. We cannot venture intellectually – a few exceptions aside – beyond what seems normal and natural. We uncritically accept what the market provides. For American social science it is a scandal that it remains silent on so great an issue.
· Impressed both by the market as an institution and by the tidiness of economists’ interpretation of it, many political scientists have adopted the ethic of preferences taken as given. Is this policy a good one? It depends on the patterns of individual political preferences, whatever they are. Is democracy a good thing? Yes, because it is a system for letting individual preferences, whatever they are, govern policy making.
· From at least Mill on to just before Schumpeter, so massive and persistant a process of preference formation as is constituted by the political system itself was never ignored. In allowing the market to dominate our political thought since then, we have simplified our political theories, with some gains in clarity. But we have impoverished our thought by imprisoning it in an unsatisfactory model of preferences taken as given.
· My main point, however, has been that market systems imprison policy. What I have described constitutes serious disadvantages in making use of a market system. My analysis is a long way from a case either for or against.



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