the market system amplifies injustice
Oct. 4th, 2005 11:00 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
sophiaserpentiaWhen you study Economics 101, you're taught about the functioning of the free market. In theory, the price of any item is determined by demand and supply. Price therefore reflects human behavior in the face of resource scarcity. The higher the demand for an item, the more people are willing to pay for it; the higher the supply, the less people are willing to pay for it, and so on.
According to theory the prices in the free market seek a state of equilibrium -- which is said to be a state of maximum resource allocation.
Similarly, it is said that labor is also sold on a free market. Laborers seek employment and are paid a wage which is supposed to balance out to the marginal product (profit) of the items they produce.
Okay, here we're veering into Economics 201 territory. But bear with me. What this means is that the amount of profit a producer can expect to make, is the fair labor-market wage owed to the people who make the product. Any difference is called exploitation, which is endemic in capitalism, because the suppliers of capital want to keep as much of the profit as possible. This is justified with an appeal to "entrepreneurial risk" (never mind the risks that laborers take; their risks don't count).
On paper, one can be convinced that these are reasonable arguments. But you have to overlook that these arguments depend on outrageous assumptions. One such assumption is that humans will always act in their own best economic interest, and will therefore tend to maximize the effectiveness of their work and lifestyle decisions. The second assumption is that the market is "free," that is, that each person has total freedom to participate or not in the market.
Anyone with eyes and/or ears can see the flaws in these assumptions.
In recent days there has been a lot of concern in the news about rising energy prices. Hurricanes Katrina and Rita, increasing worldwide demand for oil, and (some contend) the peaking of oil production worldwide, are resulting in higher prices for gasoline and natural gas. This in turn means that shipping costs more; since virtually everything we buy nowadays is shipped in from somewhere else, this means that we can expect prices all across the board to go up. On top of this, home heating costs are expected to rise 30% over last year's 30% home heating bill hike. Even the price of firewood is going up, as people try to explore alternative heating options in the face of what is expected to be a bitter winter.
In America, there is little that can be done to reduce one's demand for fuel or natural gas. If you depend on a car, especially to get to work, there are not many opportunities to consolidate or eliminate trips. If you have a home or apartment, you can only cut back so much on home heating, warm showers, and stove-cooked meals. Even a small reduction from your current usage can represent a dramatic dip in your quality of life. So your "freedom" to participate in the energy market is curtailed.
Now, we all know that not everyone is going to be affected to exactly the same degree by energy price inflation. One does not need a degree in economics to know that those with no or lower income are going to be impacted much more severely than those who have highed income.
Similarly, one does not need a degree in sociology to understand why there are groups in America which live at different levels of income.
Those who are already disadvantaged are going to be even more greatly disadvantaged by inflation of energy prices. Market instabilities tend to amplify disadvantage, and therefore economic injustice, because the brunt of the market fluctuation is felt by those at the lowest income levels. And while economic theorists claim they are free to choose other options (and therefore the suffering of the poor is their own fault, why didn't they just stay in school when their uninsured mother got sick and their brothers and sisters needed to eat and the rent had to be paid?) there are no other options to choose.
It is not just the energy market where we find this problem. Participation in many other markets is similarly not free: education, food, housing, labor, transportation. In fact, only the markets for "widgets" like iPods or remote control toys are truly free. In most of the important sectors of our resource consumption, we are driven by necessity. Unless one can do without and is willing to live and scavenge on the streets (an option which is being increasingly criminalized), one has no choice but to participate.
Those who promote the idea of a "free market" have no true answer to this conundrum, just as they have no true answer to the "paradox of libertarianism" which i articulated a few weeks ago. Ironically, both they and i are motivated by the same goal: removing restraints on genuine freedom. But this ideal, i am convinced, is not attainable until we achieve post-scarcity. And so, post-scarcity should be our primary goal.
According to theory the prices in the free market seek a state of equilibrium -- which is said to be a state of maximum resource allocation.
Similarly, it is said that labor is also sold on a free market. Laborers seek employment and are paid a wage which is supposed to balance out to the marginal product (profit) of the items they produce.
Okay, here we're veering into Economics 201 territory. But bear with me. What this means is that the amount of profit a producer can expect to make, is the fair labor-market wage owed to the people who make the product. Any difference is called exploitation, which is endemic in capitalism, because the suppliers of capital want to keep as much of the profit as possible. This is justified with an appeal to "entrepreneurial risk" (never mind the risks that laborers take; their risks don't count).
On paper, one can be convinced that these are reasonable arguments. But you have to overlook that these arguments depend on outrageous assumptions. One such assumption is that humans will always act in their own best economic interest, and will therefore tend to maximize the effectiveness of their work and lifestyle decisions. The second assumption is that the market is "free," that is, that each person has total freedom to participate or not in the market.
Anyone with eyes and/or ears can see the flaws in these assumptions.
In recent days there has been a lot of concern in the news about rising energy prices. Hurricanes Katrina and Rita, increasing worldwide demand for oil, and (some contend) the peaking of oil production worldwide, are resulting in higher prices for gasoline and natural gas. This in turn means that shipping costs more; since virtually everything we buy nowadays is shipped in from somewhere else, this means that we can expect prices all across the board to go up. On top of this, home heating costs are expected to rise 30% over last year's 30% home heating bill hike. Even the price of firewood is going up, as people try to explore alternative heating options in the face of what is expected to be a bitter winter.
In America, there is little that can be done to reduce one's demand for fuel or natural gas. If you depend on a car, especially to get to work, there are not many opportunities to consolidate or eliminate trips. If you have a home or apartment, you can only cut back so much on home heating, warm showers, and stove-cooked meals. Even a small reduction from your current usage can represent a dramatic dip in your quality of life. So your "freedom" to participate in the energy market is curtailed.
Now, we all know that not everyone is going to be affected to exactly the same degree by energy price inflation. One does not need a degree in economics to know that those with no or lower income are going to be impacted much more severely than those who have highed income.
Similarly, one does not need a degree in sociology to understand why there are groups in America which live at different levels of income.
Those who are already disadvantaged are going to be even more greatly disadvantaged by inflation of energy prices. Market instabilities tend to amplify disadvantage, and therefore economic injustice, because the brunt of the market fluctuation is felt by those at the lowest income levels. And while economic theorists claim they are free to choose other options (and therefore the suffering of the poor is their own fault, why didn't they just stay in school when their uninsured mother got sick and their brothers and sisters needed to eat and the rent had to be paid?) there are no other options to choose.
It is not just the energy market where we find this problem. Participation in many other markets is similarly not free: education, food, housing, labor, transportation. In fact, only the markets for "widgets" like iPods or remote control toys are truly free. In most of the important sectors of our resource consumption, we are driven by necessity. Unless one can do without and is willing to live and scavenge on the streets (an option which is being increasingly criminalized), one has no choice but to participate.
Those who promote the idea of a "free market" have no true answer to this conundrum, just as they have no true answer to the "paradox of libertarianism" which i articulated a few weeks ago. Ironically, both they and i are motivated by the same goal: removing restraints on genuine freedom. But this ideal, i am convinced, is not attainable until we achieve post-scarcity. And so, post-scarcity should be our primary goal.
