The Fictions of a Free Market

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The Fictions of a Free Market
By Maggie Mahar - August 11, 2008, 4:06PM


What is delightful about James Galbraith's The Predator State is that he says things that are, at once, outrageous-- and completely true. Because he shows so little concern for what one "can" and one "cannot" say in a polite capitalist society, one might call him an idealist. But Galbraith is not tilting at windmills; he is simply toppling the conventional wisdom of the past 28 years.

Begin with "the market." When you come down to it, Galbraith explains, "the market" is a fiction. In theory, "it is the broker, the means of detached and dispassionate interaction between parties with opposed interests. . . . Buyers want a low price, sellers wants a high price. The market works out the price that exactly balances these desires, a price that is fair because it is the market price." Even liberals believe in this mythy "market"--a higher intelligence that hovers over transactions ensuring that, as long as you let "the market" work its magic, everything will work out for the best


But Galbraith points out that when you try to define the word "market" you find that it is merely a negative. It refers to the "context of any transaction so long as that transaction is not directly dictated by the state. The word has no content of its own because it is defined simply, and by reasons of politics, by what it is not. The market is the nonstate and thus it can do everything the state can do but with none of the procedures or rules or limitations. . . . it is a disembodied decision-maker--a Maxwell's Demon--who somehow, and without effort, balances and reflects the preferences of everyone participating in economic decisions. . . . It can be these things precisely because it is nothing at all."

Yet who dares to say there is no wizard behind the curtain? "Can anyone in modern American politics . . . deny existence, or even its relevance?" Galbraith asks. "To do so would be political suicide--precisely like denying the existence of God." The best that a liberal economist can do is to "hedge and qualify, at the margins." One can say that the market "may be imperfect, that under certain conditions it may fail."

Meanwhile, take a look at the last quarter-century of this country's economic history, and you have to acknowledge that Reality offers what Galbraith calls "an overwhelming critique of the very concept of the market." ......(more)

The complete piece is at: http://tpmcafe.talkingpointsmemo.com/2008/08/11/the_fictions_of_a_free_market/