Thursday, February 08, 2007

Market Magic, Market Madness
What a dreary, miserable week this has been for political news. You've got the totally fallacious story the right wing is pushing about Nancy Pelosi's travel "demands"--so outrageous and offensive that the freakin' White House is siding with her; you've got the utterly absurd "controversy" about what John Edwards' bloggers wrote online before they became John Edwards' bloggers, with the ever-charming Bill "I can't stop talking about anal sex" Donohue presuming to make staffing decisions for Democratic presidential campaigns; and this comes after the embarrassing spectacle of Congress proving itself unable even to conduct a real debate about Iraq--even granting that doing this now is four years too late.

While these little sideshows play out, other priorities go unaddressed. As he generally does around this time every year, President Bush submitted a dishonest, bloated yet mean-spirited federal budget, heavy on defense spending (up 11 percent from last year), light on programs to enhance the upward economic mobility of low-income working families; fortunately, the new Democratic majority probably will block at least some, hopefully most of its nastier provisions. But the deficit and the costs of the war (including, prominently, replacing some of the equipment that's been junked in this debacle) will constrain new spending over the near future.

A second constraint in taking on the full range serious and worsening problems, however, is not budgetary but conceptual. This piece at names the problem as "market fundamentalism," describing it as "the exaggerated and quite irrational belief in the ability of markets to solve all problems... that has dominated our national political debate for a generation."

This might be the single most taboo subject in public discourse, but it's vitally important--and best to be debated openly. The one change I've noticed in my personal worldview as I progress (maybe that's not the word) ever deeper into my 30s is that I've become a confirmed believer in capitalism. It is pretty clearly the best wealth-generating model in history, and while it doesn't require personal liberty and free expression--as several Pacific Rim countries among others have sadly proven--free markets mutually reinforce with the rest of the freedoms we cherish. Capitalism isn't perfect; it's just far, far better than anything else that's been tried as an economic system for a large society.

It's been awhile since grad school, but I'm pretty sure that while markets maximize wealth, they don't--they can't, they aren't supposed to--optimize how it's distributed, or necessarily account for the externalities they produce. And that's assuming conditions of perfect competition, which never exist in the real world. The simplest form of this all-pervasive provlem is that the way we pay for our politics, somebody's thumb is always on the scale. It's this phenomenon that the article seeks to address head-on:

What do catastrophic climate change, the widening gulf between the wealthy and the poor, America's obesity epidemic, and our society's lack of care for the young and the elderly have in common? Each has powerful special interests who insist that we need to let the market work its private magic and that government action would create more problems than it would solve.

These interest groups also block any effort to enlist the government by invoking the arguments of market fundamentalism: Privatize everything, rely on yourself and expect nothing from your government.

Market fundamentalism has become like the air we breathe; we hardly notice it. Every time George W. Bush argues for more tax cuts, he relies on the unquestioned assumption that we all embrace market fundamentalism. Like religious fundamentalism, it is based more on faith than on reason. Through constant repetition, however, the American public has been bullied into believing that private spending is rational and efficient, while public spending is always wasteful and unproductive.

Last Sunday, the NYT ran a piece detailing the astonishing extent to which the Bush administration has privatized government services, a development that reflects this same mindset--as well as, of course, the constant Bush/Cheney emphasis on using government to reward and enrich friends and donors. No money was saved; if anything, quite the opposite. Outsourcing public functions becomes an end in itself; if it costs the taxpayer more for a contractor to perform the exact same function previously carried out by a government bureaucrat, the idea seems to be that this extra expense must be worth it, because any private employee inherently does a better job than any civil servant.

This would be funny were it not, in the context of rising deficits and falling service provision relative to need, so painful. Stripped of all the emotional associations, government is just one possible mechanism for accomplishing shared goals; at scale, it's probably the most efficient mechanism by which to do many of these things, particularly when it's beneficial to universalize (think of educational standards). Often, government is the only practical mechanism to carry out certain functions, as in national defense or some kinds of regulation. And--especially if you believe, or even want to believe, that it's still of, by and for all of us who vote and pay taxes--it has both a great deal of power to tangibly improve the conditions of life for millions, and the positive responsibility to moderate market outcomes.

Particularly toward the end of their mid-20th century heyday, American liberals were too quick to screw with markets. Now, though, the pendulum has swung too far the other way: we tolerate absurd inefficiencies in certain areas (health care) and some scary negative externalities (climate change) out of near-superstitious fear that interfering in some company's capacity for profit will cause something terrible to happen. In field after field, though, terrible things are happening now--and our undue deference to a distorted view of markets forces us to sit back and watch. Rather than market fundamentalism, we need market utilitarianism--the mindset that these systems are here to serve the community, not the other way around.

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