Adam Smith, famously known as the father of economics and the chief proponent of laissez-faire capitalist economy, enlightened us about an idea of an ‘invisible hand’ guiding the economy and the inefficacy of government intervention in handling economic system. The basic premise here is that markets can function independently of the forces of demand and supply with little or no interference by the state. While the idea gained a widespread appreciation, it also started a debate on the morality of free markets in terms of what impact it might have on the economically disadvantaged groups within the society.
Free market capitalism ought to produce winners and losers, both. The general assumption goes that capitalism applauds winners while chides losers. Popular wisdom goes on to inform us that ‘losers’ here are not always by choice but also by circumstance. The blatant ruthlessness of the system became its Achilles Heel’. While capitalism incorporated within itself the promise of upward social mobility purely on the basis of merit and capability rather than ascriptive identity, it was not a long time before economists, policymakers and the general public realized that this favor was not extended to all. Capitalism systematically excluded sections of society from enjoying the fruits of free market.
The debate about the morality of the free market is essentially a question of how market and society ought to interact with each other. One’s position on this question would most certainly depend on the lens one uses to view this interaction. To further complicate the matter, is the realization that there is no set definition of morality. A layperson definition of morality would be that there are ethical ways of doing things and by contrast- unethical ways. However, as Nietzsche has already explained us, ethics are highly fluid concept and therefore, arriving at any judgment on the morality or immorality or amorality of institutions, markets in this case; is virtually impossible.
We can, nonetheless, consider the arguments posited by the proponents and critics of free market which could also enable us to engage with markets in a much more responsible way. Classical liberals and to a certain extent, neoliberals, believe that passing value judgments on the role of markets is conceptually flawed, in the first place, because market is inherently a value-neutral institution. However, even if one is supposed to take a moral standpoint then free markets promote efficiency and no matter which side of the moral spectrum one is on, efficient systems are always better for the society. Also, since free market is unhindered by government regulations, so the usual prejudices held by the government against some sections or groups would not trickle down to the economic sphere thus providing a free and fair opportunity to everyone to elevate themselves economically. Free market, thus, is portrayed as a panacea for the ills of politics and society.
Critics of free market, with Karl Marx at the helm, argue that free market economy strengthens and cements the inequalities existing in the society. Since economy is the basis of everything else in polity, so inequality in the economy would percolate down to the deepest levels of society. With little or no government intervention in the economy, owners of the means of production would alienate the laborers further from the fruits of production thus magnifying their impoverishment. The process of alienation would move the ‘have-nots’ to the brink of the society, thus, bringing into question their entire existence. Free markets, it is believed, would never be able to ensure fairness precisely because of the value-neutrality which the proponents of the system consider to be an asset.
While there is no denying to the fact that free markets have produced an unprecedented result when it comes to lifting people out of shackles of extreme poverty. It has also brought us to an age of economic abundance and higher standards of living. It has also enabled the highest level of individual expression which allows one to enjoy a fulfilling existence. China’s “opening up” in 1978 resulted in more than 500 million people moving up the economic ladder out, as the poverty rate declined from 88% in 1981 to 6.5% by 2012. Similarly, since 1991, India has also witnessed an age of economic abundance and higher standards of living with the Pricewaterhouse Coopers (PwC) forecasting the average wages to quadruple between 2013-2030. Free market enables the highest level of individual expression, which has been exemplified by the rise in entrepreneurial ventures since the turn of the century.
However, what we are also experiencing alongside is a serious backlash against systemic inequalities and injustices and lack of ‘real democracy’. Occupy Wall Street movement is but one example of many such expressions of discontentment with the system. The basic idea remains that unhindered capitalist market system disables some sections to participate in the economic realm as equal partners. So, while the market system assists individual freedom, it undermines group rights of some sections. Thus, it is amply clear that there is no clear answer to the question pertaining to the morality of free markets. The elemental specificities and economic interests of the group or individual concerns will determine to a great extent the moral position that one takes with regard to the free market system.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Geopolitics.