If you read TPM, you may have occasionally noticed that their TPM Cafe hosts regular book discussions. Sometimes they interest me, sometimes I gloss right over them. But the latest – concerning James Galbraith’s The Predator State – has had me reading every word. Today I picked up the book itself, and if it turns out to be as promising as it seems, I will certainly have a bit to say about it.
And why would I have anything to say about it? Well, in leading up to the book’s central claim – that “predator” industries have captured and manipulated the government for their own benefit – Galbraith examines the cover by which this goal was achieved. That is, wholesale acceptance of the good of the “free market.”
The “free market” is one of those things that so many of us educated in the US system (I may have grown up around the world, but I got a solidly American education) take as a fundamental given. The phrase might as well be “American as mom, apple pie, and the free market.” Despite the fact that most Americans’ last real conversation about economic theory occured in high school (or maybe a basic macro course in college), our political discourse is saturated with claims and suppositions about the “free market.” I don’t know how many times I’ve been in a discussion with someone who has no challenge in identifying the problem in excruciating detail, but when it comes to solving it, simply says “we’ll just leave it up to the free market!” And this just makes my head pop. Over and over again. Why?
As I have been saying for years, there is no such thing as a free market.
It simply does not exist outside of theory. It is as imaginary as philosophy’s Evil Demon (Ed) or perfect efficiency in physics. And yet it is a fundamental given in our common discussion. The Predator State examines and – as best I can tell – demolishes that myth. But first, it asks what the myth accomplished in the first place:
It serves here, as it did there, mainly as a device for corralling the opposition, restricting the flow of thought, shrinking the sphere of admissible debate. Just as even a lapsed believer kneels in church, respectable opposition demonstrates fealty to the system by asserting allegiance to the governing myth. This in turn limits the range of presentable ideas, conveniently setting an entire panoply of reasoned discourse beyond the pale of what can be said, at least in public, but reputable people. There is a process of internalization, of self-censorship. Once the ruels and boundaries prescribed by the myth are understood, adherence becomes reflexive, and at the end of the day people come to think only what it is permitted to think. The know when they might be “going too far.”
Indeed. If this piques your interest (and I really hope it has), start with Galbraith’s own post over at TPM Cafe, and read forward from there. If you’re feeling a bit cautious about it, that post contains a number of links to reviews of the book, and this article summarizes the aims of the book.
Amit
I think a major misconception when it comes to the “free market” is when folks believe it includes the govt giving favors and subsidies to companies. That is definitely not free market. I am a proponent of the free market system and I know its not perfect and perhaps not the most cost effective. China seems to have an efficient model of govt controlled capitalism that I hope America never adopts. In the end, for the free market to work the consumer has to play their role in making informed buying decisions. Many would argue only the govt can regulate industries but I believe in the absence of the govt that third party watchdog groups would fill the void especially in the internet age where information is even easier to share.
hoobie
Read the quote you offered against the background of religion. It applies perfectly.
MB
Hoobie- I thought that, too. In fact, it could serve as a caution for a number of ideological movements.
Amit – except that free market you’re talking about doesn’t exist, and by all indications (we’ve got a pretty good body of evidence here in the US), it never will. It’s somewhat akin to me saying that communism is the solution, and that the Soviets just didn’t do it right.
And third-party watchdogs? That’s called gov’t. I, the citizen, fund the CPSC to act as a check on the business that finds it cheaper to put melamine in my pet food than food. How in the world would a private third party watchdog group ever address that? Manufacturer isn’t going to let them in to examine. Can’t sue over it (I can’t fund a lawsuit over my petfood out of my own pocket, nevermind the favored tort-reform efforts of the “free marketers”). Is the market solution there that the manufacturer will determine the cost-benefit analysis of deaths of customers wrt margin attributable to the filler melamine? A couple thousand dead pets is okay to ensure quarterly satisfaction by the shareholders?
This is just an example, but applies equally well across any number of industries. That free market magic wand is just a stick.
Amti
when buying a new TV, cell phone, car, etc. I usually check CNET, Consumer Reports, etc and read other reviews that I base my decisions on. thinking a little outside the box, I don’t think its a big stretch for me to go to the grocery store and prefer to purchase foods with the “MB 5 Star Organic” label versus the ones that don’t. The producers are incentivized to allow the 3rd party watchdog/reviewer into their processing plants etc to get the label and a higher rating because it’s good for their business. That doesn’t exist today because the govt already plays that role (poorly) and makes it difficult for 3rd party watchdog groups to make a profit and therefore they don’t exist. I know you’re not suggesting making a profit is evil but dovetailing it with open information in a structured way can promote better and safer products for everyone. This is predicated on consumers wanting quality with their quantity which is not always the case but how much can we protect people from themselves? and should we?
Amit
I misspelled my name above. damn public education
CG
I might be wrong on this, but weren’t privately run accounting firms supposed to be watching Enron?
I would argue a privately run firm set up to do the FDA’s job for instance, is still concerned not with the public safety but its bottom line.
And the assumption that the bottom line always equals the same goal has often not proven to be the case. Such as when companies start taking shortcuts where they can get away with it, and save money. The company that would be doing the FDA’s job could essentially get off track for the same reason any company does when it only looks at profit.
I know there are arguments for government waste and inefficiency on the other side of the coin, but I’m less than convinced free markets are any real cure.
(I hope i’m not too far off track the premise of the post, which I haven’t really explored off site links, as yet)
CG
…of course, executing the head of the FDA (as China did) is going too far, however, here Execs who have big time company failures are getting millions in golden parachutes. Now both ends are extreme, but which is really crazier behavior of the two?
At least here, when we kick a head of government agency to the curb for poor performance, they don’t usually reward them with big bonuses too. (Or at least they have to go to the private sector for that)