The Myth of the Market
Market Whys and Human Wherefore - by Bishop David Jenkins
Three headlines in one newspaper on one day. Perhaps it is a good time to review the beliefs we have about the way economic life works, or could work, or should work, for the benefit of people.
I noticed David Jenkins’ book on a visit, some weeks ago, to the Church House Bookshop in Westminster. A quick scan suggested it might provide some sort of ethical illumination on the ideas and practices that drive our economic life - and it would make challenging reading in Lent! However I did not expect quite such a forensic dissection of the theory, history and functioning of Free Market economics.
Economic ideas are having an increasing impact on human affairs: on the limits of national politics; on the character of international relations; on the viability of local communities; and on the daily lives of countless millions. It is both relevant and important to raise fundamental questions as this book does.
I knew from earlier meetings and conferences that David Jenkins was an exciting communicator and prepared to tackle the most difficult of questions - clear minded, relentless in logic and never guilty of over-simplification. Sounds heavy, but I found it very compelling reading.
The concerns of his ‘exploration’ are about the nature of belief, the consistency with which the market delivers what theory promises, and in particular its impact on the lives of ordinary people.
The book covers an enormous scope, with quotations making up about a third of it. Notably, for someone who is a critic, all of these are by supporters and advocates of a Free Market approach, which he uses and comments on to support his themes. Sources range from the works of Adam Smith, the first prophet of capitalism, to economists, financial experts, economic analysts and politicians, through to newspapers and journals like the Economist and Financial Times. I don’t think there was a single quotation from a market ‘disbeliever’. Rich in detail, it was a brave and honourable approach.
His approach to Free Market Theory traces its origins, like Marxism, to a dialectical view of history derived from Hegel. Like the Theory of Communism it is based on ‘immutable laws’, promises material prosperity for all, sees a diminished role for the state, and commands the same uncompromising absolutism in application. Like communism, there are difficulties in taking what works pragmatically on a modest scale and elevating it, on shaky evidential grounds, to a ‘comprehensive worldview claiming dogmatic authority and demanding economic obedience’. Unlike the world of science, theory does not seem to adapt to experience. It is unscientific.
He has many criticisms of the way markets function today, and argues that Adam Smith, whom he quotes at length, would share many of his concerns. He readily accepts the contribution that the market model has made to an increasing general prosperity over much of the last 300 years, but raises questions about current practices and trends. For instance, market theory was developed to support the ‘real economy’- trade in goods and services, but that is not how it works now. Of all the billions traded daily on the London Stock Exchange (enough to buy the entire economies of Britain and Russia - plus others) only about 7% of transactions relate to the ‘real’ world of commerce and industry - making money out of trade. The rest is speculation on future money values - making money out of money - that can distort whole economies without tangible benefit. The proportions are wrong - it is simply not doing what it is there to do.
As free trade in global markets has increased, so performance has got worse. According to an IMF review of the last hundred years, the period of highest economic growth (and political stability) was 1950-73, a time of fixed exchange rates and rigid capital controls - a regime replaced by radical market thinking.
For ordinary people it is true that prosperity has increased, but not to the benefit of everyone. In the last two decades, as market influence has increased so have disparities in wealth - both for nations and individuals, while the wealthy have become richer the poorer have seen conditions worsen. In the USA, 60% of people are relatively worse off while 20% are worse off in absolute terms. US Deputy Treasury Secretary Summers conceded in 1997 that a child born in New York was less likely to live to the age of five than a child born in Shanghai. He also concluded that the ‘superiority of the American model was far from clear’.
In spite of reservations and criticisms, David Jenkins maintains an open and optimistic view of the future, with a firm belief in human capacity and capability. He gives an ‘Outline Agenda’ of ideas for moderating market excesses, mostly well known in economic circles. He is more solidly optimistic considering the human dimension, with a strong belief that the world is ultimately run by people not ‘immutable laws’. Only in the final 2-3 pages does he overtly link this with his Christian faith, ‘refusing to believe’ that human beings are no more than consumers and competitors.
“Human experiences of pilgrimage, intense commitment and great sacrifice are as evident as selfishness, indifference and stupidity”.
Perhaps he attributes too much influence to what he calls the ‘myth of the market’, since most of us get on with life in a fairly pragmatic way without too much concern for theoretical models. Market decision-makers are human too, able to see how things work out and adapt accordingly. In the global economy of today therein lies much of our trust. One of them may write a reply to David Jenkins - reading for next Lent perhaps?
David Jenkins is a former Professor of Theology at Leeds University, and was Bishop of Durham until 1994. ‘ Market Whys and Human Wherefores’ is published by Cassell, 2000 at £16.99.