MYTHS OF THE GLOBAL MARKET | Prof John McMurtry | New Internationalist (2007)

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1 June 2007

Free markets are often presented as the sole solution to poverty and human development. But the global market is inefficient and life-destructive, writes *John McMurtry*.

At the end of 2006, the UK-based journal of world economic affairs, The Economist, produced a banner issue on ‘Happiness and Economics’. Not surprisingly, the magazine concluded that human happiness and market economies are closely linked. But in arguing the case the lead article unwittingly revealed the market’s Achilles heel. Orthodox economics has no means of separating the universal needs of human beings from junk commodities for the masses, or gold toilet-seats for the rich.

Not even consumers in the developed world are made happier by ever more market commodities. Robert Lane’s study The Loss of Happiness in Market Democracies shows that human satisfaction actually declines as income and commodity consumption rise beyond need. But the message does not compute to mainstream economists or policymakers.

Neoclassical economics is based on the premise that market growth produces more happiness as more commodities are bought. If this baseline assumption is false, the paradigm collapses. So the ground shifts to other claims. The Economist, for example, explains that many ‘goods’ can be ‘only enjoyed if others don’t’ [have them]. The falsehood of the first premise is diverted to the nasty fact that some can only enjoy what they have at the expense of others. In the end all that matters is the willingness to pay if you can afford it. This is the only measure of human welfare that exists in market and neoclassical doctrine.

A logical person might think that equating what you pay for something with happiness is inane. But the problem is ignored. Instead, supporters argue that the global market is both ‘productive and efficient’. This assumption does not hold up either. The global market system produces many times more waste than any economic order in history. In his world-renowned text Economics, Paul Samuelson defines economic efficiency as ‘absence of waste’. But, like all economists of the dominant paradigm, Samuelson includes only wastes that cost private enterprises money. So as long as pollution and damages to others can be externalized, it is ‘more efficient’ – even if gluttonously wasteful. These ‘externalities’ are kept off the books. That is why depredation of the most basic means of human life – breathable air, water aquifers, the oceans, soil fertility – are ignored by both governments and corporations, both of which operate within the same life-blind model.

Such an economic calculus is fatal but unquestioned. No principle of business or economics has been developed to distinguish commodities that cause disease from goods that enable people’s lives. After 25 years of corporate-led market deregulation, the fall-out is evident. Diseases like cancer increase as chemical carcinogens poison the environment, but are ignored by government food-and-drug overseers, cancer institutes and economists.

Cigarettes, for example, were recognized as a cause of lung cancer by 1950. Big tobacco steadfastly denied the charge for over 40 years while 160,000 Americans a year died from the disease. Historian Allan Brandt’s definitive study, The Cigarette Century: The Rise, Fall and Deadly Persistence of the Product that Defined America, records the long-term strategy of industry to avoid public intervention at all costs.

The poisoning of fellow citizens by deregulated water-testing agencies in 1999 shocked Canadians. Yet if the market is free of regulation from the start, the problem may not come to public notice. For example, in 2004 the US derailed a UN Food and Agriculture Organization campaign to educate consumers about healthy and unhealthy foods. The media subsequently ignored a warning by the US Surgeon-General in March 2006 that ‘the obesity epidemic is a bigger world problem than terrorism’. Recently corporate food producers in Britain have been campaigning against colour-coded warnings on cereals laden with sugar, salt and fat.

The market also discriminates against healthful products unless they promise more profits. The British Medical Journal reported in July 2003 that a daily low-cost pill made up of six known drugs resulted in an 80-per-cent reduction of heart attacks in everyone over 55 – ‘a greater impact on the prevention of disease in the Western world than any known intervention’. Pharmaceutical corporations had little interest because the drugs involved were inexpensive and out of patent. Governments fail to produce the pills themselves because they would be pilloried by corporate PR campaigns for ‘undermining the free market’ – just as public healthcare is still demonized in the US as ‘socialist’.

A tragic macro-spiral unfolds. The more the global market is unregulated, the more it cumulatively despoils and destroys human life and ecological systems. Even the eminent UN Scientific Panel on Climate Change does not connect climate destabilization to global market growth producing ever more industrial gases. Instead, new markets in ‘carbon trading’ are prescribed – exchangeable rights to pollute for polluting corporations. So the life-blind market mechanisms are extended further. The global spiral downwards continues as long as the public accepts it.

The global market is driven by private capital – money which competitively seeks to maximize returns to its owners. But these money-stocks are not tangible goods like ‘fish stocks’ or ‘forest stocks’. Money grows by consuming human and natural resources as part of its feeding cycle. So the ‘life capital’ of society is eroded as private capital accumulates.

As governments decline into ‘the best democracies that money can buy’ there is no public authority left to protect the common interest. Our political leaders assume market growth is essential to society’s development. So public welfare is sacrificed to ‘more global market competitiveness’ – and more life-system depredation. To name the causal links remains taboo.

For example, even long-standing precautionary standards are abandoned as governments hand over hazardous product testing to corporate ‘clients’. Business-led public-relations campaigns demand that social programmes be privatized and taxes cut so we can ‘compete in the global market’. More pollution, more waste and more unneeded goods? That’s just ‘giving consumers what they want’. Neoclassical economists tell us the ‘invisible hand’ of competition ensures the ‘social optimum’. This has become the grand narrative of our age. It even appears rigorous and scientific – until humanity is confronted by global climate destabilization and fossil-fuel exhaustion.

The fulcrum level of the great myth is that all commodities are ‘goods’, never ‘bads’. The rest is simple. Just add up the sales of the ‘goods’ and you have the sum of society’s happiness and well-being. Production of junk foods, violent video games and fossil-fuel leisure machines all count as much in the National Accounts as organic foods, clean water or solar-powered electricity. The macro-pattern is undeniable but unspeakable in economic, business and media discussions.

If we really want to steer out of the life-system meltdown, market controls are an economic imperative. But how best to do that if the universal necessities that people need are not yet defined? Professional economics sees only ‘market demand’, while liberals and postmodernists equate human needs to individual wants. But if the demand for a private weekend jet counts more than the need of millions of African villagers for clean water, then the market produces the weekend jet. The government might even subsidize the company that makes the jets and keep the price of jet fuel low. Meanwhile, thousands of children die daily from water-related illnesses. The truth is what sells.

The deepest confusion is the equation of private money stocks to ‘capital’. Real capital is wealth that produces more wealth – from ecological services and social infrastructures to scientific knowledge and technologies that produce life goods. All have been subjugated to money-capital which produces nothing. Few recognize that money-capital is not real capital, but demand on real capital, with no bounds. So every form of human, natural and social capital is sacrificed to the growth of money-capital – concentrated in the possession of about 2 per cent of the population who invariably have more than the bottom 90 per cent. This is waggishly called ‘wealth creation’. In fact, it is not even an economic order. It is a system of predatory waste.

Anthropologists talk of ‘cultural insanity’ but avoid the present form of it. Jared Diamond’s recent book Collapse is a case in point. He studiously blinkers out money-capital, which is the main driver of this predicted collapse. Even critics like Diamond fail to see that the most basic formations of life-capital are off the radar of the global market.

Life-capital is the wealth of human and ecological life that reproduces and grows in any sane economic order. A sustainable mantle of topsoil, the phytoplankton base of marine life, the biodiverse habitats of species reproduction, the biosphere itself – are all strata of life-capital. The human needs served are all recognized by one principle: whatever our life capacities are reduced without (whether clean air or healthcare) is a life necessity. Whatever does not enable and support these life capacities is not ‘economic’ in the most fundamental sense.

There is one set of life goods that is required by all peoples without which they suffer or die:

We conserve the conditions that make these possible or we die one step at a time. Past civilizations from the Sumerians, Khmers and Aztecs to Hitler’s ‘1,000-year Reich’ went extinct through life-blind worship of their own systems. We travel the same path. The difference is that we know what they did not. We have economic instruments like public infrastructures, life-protective laws and standards, green and social taxes and binding trade regulators. Above all, we have the world itself to lose.

*John McMurtry* is a Fellow of the Royal Society of Canada and University Professor Emeritus at the University of Guelph, Ontario.

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