Market Failure


I never though I would feel nostalgic for the Cold War but in retrospect it’s apparent that the contest between the two superpowers over which system delivered more comfort, freedom, and happiness to its citizens was a golden era.

For starters it was a time of significant social change. Many of our far-sighted leaders argued that racial segregation undermined the United States’ position in the Cold War, making capitalism look bad at home and abroad. Women’s rights also advanced due to the competition. The superior situation of women in the East Bloc was a constant and effective source of communist propaganda, which often drew interest from women in the western world. East German sexologists even found–and their government proudly boasted–that communist women had more orgasms than their luckless West German counterparts.

Our infrastructure and factories were modern and well maintained due to this clash of ideologies and worldwide competition over whose system of economic organization produced a better standard of living.

But the place where the average American benefited the most was in the wallet. The titanic clash of economic systems, with the threat of a communist revolution ever present, gave American workers more power to organize and demand better wages and benefits.

That was then. Now that our feral elite don’t have to worry about a communist revolution, conditions for workers suck. In fact, since the demise of the Soviet Union, wages and living standards throughout the West have stagnated, while what was once a fairly open and diverse economy of small shops and businesses has consolidated back to the way it was during the Robber-Baron era. Now our economy is dominated by monopolies and oligopolies ruled by billionaire plutocrats. Industry after industry–from media to airlines to insurance to hotels to social media to food–have become dominated by cartels of a small handful of companies.

In this sense, not only are billionaires a symptom of an absence of a healthy competitive economy, but they are also a cause of it: their taxes on other firms restrict growth and entrepreneurship, while their control over our government prevents change.

Going further, every billionaire is a market failure–a sign that competition has failed. In a healthy market economy there should be almost no extremely wealthy people simply because profits should be bid away by competition. In the textbook case of perfect competition there are no super-normal profits, and in the more realistic case of Schumpeterian creative destruction, high profits should be competed away quickly.

But, of course, in the US the notion of a free market is largely a propaganda construct. Thanks to Supreme Court decisions like Buckley v. Valeo, that equated money with free speech, billionaires are able to purchase our government. Follow up cases like 2010’s Citizens United decision have largely reduced democracy in the United States to its trappings. The public is engaged in a series of rather empty rituals.

I just finished reading Matt Stoller’s–Goliath–where he traces the history of American monopolies and the efforts to combat them. Stoller says that we’ve reverted to an economic system of monopolies due to the ideology of neoliberalism that’s been embraced by both parties. “It was a broad sweeping restructuring of our culture, the result of forty years of political choices, the same misfiring of institutions that led to the invasion of Iraq, and an endless series of gruesome social consequences. The men in suits told us that Saddam Hussein had weapons of mass destruction, just as they told us taxpayer-funded bank bonuses were essential to the economy…The bailouts from 2008 to 2010 were not intended to stop a depression, they were intended to stop a New Deal. And so they did.”

Like the invasion of Iraq, the Wall Street Crash and government response demonstrated that the neoliberal and neoconservative shibboleths endless promulgated were simply lies, told to justify political and economic decisions that had already been decided.

A great example of this elite cynicism was this interview that George W. Bush did with Fox News’s Bret Baier in the aftermath of the 2008 Wall Street Crash. Struggling to justify the massive economic interventions his administration had just engineered, Bush confessed. “I’m a free market guy, but I’m not gonna let this economy crater in order to preserve the free market system.” Indeed, in the aftermath of the crash, first the Bush, then the Obama administrations took decisive action to resuscitate the ancien regime. They pumped hundreds of billions of public dollars into the major financial companies, created trillions in new money, and, in some cases, took control of private and quasi-private corporations.

Since the demise of the USSR we’ve been told in no uncertain terms that there is no alternative to the wealthy and their technocratic minions controlling our lives. We decided as a society that it would be a great idea to allow financiers and monopolists to organize our economy. As a result, today we have a matrix of monopolies controlling our lives and manipulating our communities and politics.

But the idea that there’s no alternative has always been a lie. There has always been a choice to organize our economy in a different fashion.

It’s up to us.



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