Markets and the Non-Aggression Principle

Thursday 2 January 2014 at 22:43

Markets rule the world. But whether they are the most equitable,efficient and sustainable way to manage economic activity is questioned by a growing number of people.

A market is a space or system for facilitating the exchange of goods and services (trade), and in various forms they (or collectively 'the market') control and influence most economic activity around the world.

One of the moral and utilitarian defences of market based economies offered by those who favour them is known as the Non-Aggression Principle, which it is suggested is compatible with and helpful for markets. NAP in essence is the idea that the initiation of force against any individual (or by extension their legitimate property) except in self-defence, is an affront to freedom and reason. To initiate aggression or violence, in trade or any other conduct, would undermine morality and the prospect of society and progress. NAP is grounded variously in:
  • Nature and instinct: there is generally a natural inclination to peaceful relations where possible, since it opens opportunities for synergy, and there is often a high cost or risk to violence. That is, NAP is generally in the self-interest of individuals.
  • Utilitarianism: The best results or highest utility is almost always reached by avoiding the initiation of force or aggression, or following NAP.
  • Objectivism: A school of thought developed by a figurehead for free-market supporters and neoliberalism, Ayn Rand, places the ability to reason as our means of survival and progress and recognizes violence as antithetical to reason. NAP derives from the primacy of reason.
Historically NAP can be found or trivially derived from the thinking of many ancient cultures. It is, for instance, a direct consequence of the Golden Rule (in its negative form): 'Do not do to others what you would not have them do to you'.

While there are some tricky scenarios for NAP, it is a fairly well supported concept across the political spectrum. Free-market advocates like it most where it explicitly incorporates a concept of private property, and because it speaks to the universal values of freedom, security and peace. It appears to create a moral foundation for the accumulation of private wealth, and the right of that not being interfered with by anyone else. You, and everyone else, can be free, pursue your self-interest in the form of amassing private property, and be morally sound at the same time. What's not to like?

The problem

Problems form around the concept of private property and how as it grows and concentrates it impinges on the freedom of others. If economic activity is largely marketized and commodified, so that most resources are privately owned, then those with less property have less freedom, and in proportion to their lack of wealth specifically tend to be at the mercy of those with more property.

Friedrick Heyak one of the most influential thinkers relating to neoliberalism wrote in "The Road to Serfdom":

"Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."


Milton Freidman, former economic adviser to the US government and a pioneer of neoliberalism and free-market ideology said:

"The problem in this world is to avoid concentration of power - we must have a dispersal of power."


A fundamental value of neoliberals (the modern mainstream face of Capitalism) or supporters of free markets is that of not being controlled by anyone else, and, through NAP, to extend that state of being to everyone else. But, at the same time, the nature of markets,through the mechanisms of private property and competition, is to concentrate wealth and power, by cumulative competitive advantage.The rich get richer and the poor get poorer.

Any country that has any anti-monopoly regulations, or a welfare system, or any kind of tax and publicly funded spending recognizes that power concentrating nature of markets and private property. Anyone who has played the game of Monopoly knows it.

The concentration of power and the resulting loss of freedom can be understood as structural violence, committed through the economic system by those with more wealth, against those with less. This structural or systemic violence need not be conscious or premeditated, and may be rationalized in many ways, with various well felt intentions and be largely culturally inculcated. However, in terms of often great physical and mental harm, and stunting of opportunity and freedom, this violence is being done through the hierarchy of the economic social order, in which the most rich benefit the most in terms of financial gain from it. It is a collective participation in violence, which is one reason why it can be hard to identify our personal involvement with it.

To be clear, the suggestion is not 'rich people are bad'. It is that almost anyone, well intentioned as they may be, were they to become rich relative to those around them would through their choices, rationalizations of privilege and participatory actions, end up contributing to the structural violence of a market controlled economy – such as is championed by neoliberalism and Capitalism in general. Still without neglecting the cultural influence it is also true that having and being in a position of superior socioeconomic class, leads to an increase in unethical and antisocial behaviour, as the research of Paul Piff et al shows. A key reason for this is that the cues and opportunities that stimulate and maintain the development of empathy between people, break down and thin out as social class arises – which is clearly bad news for NAP.

Thus there is a fundamental contradiction in the basis of neoliberalism or market led economics that notionally support NAP:

The means of resource allocation and cooperation that is supposed to honour and imbibe freedom, is the means by which freedom (and peace and security) is taken away.

This internal contradiction between the nature of markets and the universal value of individual freedom is disputed by neoliberals free-market supporters in various ways, for instance:
  • If a trade is agreed freely without force and according to the law then there is no violence, there are simply two or more parties exercising their free (as in uncoerced) will. This is the meaning of free-trade.
  • If all regulation is removed with the state serving only to protect property rights the market will regulate itself. The market is efficient.
  • Wages will settle to a point that sustains the market and thus the people participating in it, and people are free to compete.
The 'if trade is willing, there is no violence' argument works fine, so long as there is a freedom from asymmetric dependence between those trading. However, there very often is such a dependence. Wherever you need something more from who you're trading with, than they need something from you, and circumstances present little alternative, you are less free than they are, regardless whether you agree to the trade. The more desperate a situation someone is in, the more potential there is to exploit them in trade.There are an estimated 30 million slaves in the world today. Perhaps most of them at some point signed an agreement for a loan or contract of work. Does that make their exploitation non-violent? The violence if not always direct, is systemic and stems from large imbalances of economic power and opportunity. The fact that something is done willingly does not address any inherent injustice or violence in the situation.

The idea of efficient markets usually refers to the price of a stock very quickly taking into account all information. If one company announces an offer for another company, the stock price reacts accordingly. If there is a drought, the price of grain goes up, and so on. The result is the price of any product or service quickly tends to the value of what those in a position to trade attribute to it, given all new information. This is taken as a reflection of fairness, because the price is settled independently by demand and supply. However, this line of reasoning does not account for the nature of markets to concentrate economic power, resulting in large numbers of people often not being in a position to trade and increasingly being excluded from economic activity. Also the more that economic power concentrates the less independent prices become,as that power develops the ability to control supply and thus scarcity and price. In terms of development and use of human potential, markets are very far from efficient, because of how they concentrate economic opportunity and narrow the focus on making money, where the allocation of wealth depends to a large extent on luck.

Wages will indeed be controlled by supply and demand, and it would not make sense for a market to drive down wages to a point where sufficient consumption to maintain the economy and distribution of wealth could not continue. Obviously what makes sense and what actually happens aren't always the same thing, and the mechanism of debt allows a way for wages to fall further while, at least for a time, consumption is maintained. In any case, however equal the opportunity to compete is made (and in practice the deck is inevitably very stacked against the majority), the power concentrating nature of markets remains, and thus too the structural violence of market based economics.

Of course many other defences of market led economics are offered, but these move away from claiming compatibility or alignment with NAP. They are often of the form 'these results are just nature at work, and markets are simply an expression of that', or take a more compromising position of 'it is dreadful, but look at the benefits' while seeking to claim human progress as a result of the development of market economics, with greed being revered as the prime motivator of innovation and cooperation. While such positions are similarly conflicted, or only half the tale, we'll stick with discussing NAP issues here.


Making freedom and security the essential values

If ultimately freedom and security are the most important values for supporters of market based economics, especially for neoliberals and anarcho-capitalists, and NAP is seen as a result of self-interest and reason and the basis of morality for which there is a natural inclination, then surely NAP would be realized even more with the free organization of people without the necessity or imposition of trade, or the enforcement of extended property rights arising from a market model? If NAP is so firmly grounded in self-interest, reason, morality and natural inclination then surely the degree of intervention, control and protection of concentrated wealth by a state (itself a concentration of power) is a measure of how much the market has gone against NAP and failed society?

Anarcho-capitalists (the extreme position of 'markets know best')believe that the protection of private property can be provided as a service by the market itself, and that all economic activity is best and most fairly managed by the market, without any presence of a state. But the power concentrating, and thus freedom taking nature of markets is not recognized. In a sense this shouldn't be a problem for anarcho-capitalists, because without any controlling authority people could manage resources as they like, with trade or using a sharing or gift based paradigm. Even the concept of trade and property would be free to morph into something more inclusive and collectively orientated. That is, anarchism is fundamentally not constrained to any particular predefined economic model.

Neoliberals on the other hand, believe that markets present the best and most efficient way of managing an economy and spurring progress, but that the conditions to maintain markets must been forced. They believe that a strong state, independent from the market is necessary to protect property, enforce law and act in those few cases where markets may fail, with the absolute minimum of regulation, for instance to break up monopoly or to lessen information asymmetry (some economic actors being considerably better informed than others) that leads to further concentration of power.

Neoliberalism is interesting in that it recognizes more of the nature of markets to concentrate power, and how that is counter to NAP, but maintains that there is no better alternative. While aligning itself in principle with NAP it is generally averse to the state enacting socially orientated policy that would impinge market activity, seeing that restriction of freedom as the greater transgression of NAP than the structural violence of a market based economy. Of course, as a direct result of having a market controlled economy, neoliberalism (or any other political system that tries) is unable to keep the state and government independent from the market and those with the most power in it, or to effectively break up monopolies (or monopolistic groups and cartels) or address information asymmetry or other market failures.The systemic result is imperialism and mass exploitation as opportunities for it arise.

As a direct consequence of having markets dominate economic activity, everything else which depends on the economy, that is everything, including the government, the state and its policies,ends up being largely controlled by markets. This leads to the conclusion that the state itself, including its various redistributive policies in the form of taxes, regulations and welfare, is a convenient institution for the concentrated powers of markets. Thus where the state moves to interact with 'the market' and the wider sphere of public life, it does so with the overriding rule of protecting the overall concentration of economic power it shares a mutual dependence with. In other words, the state, as it exists in a neoliberal political system (such as in the UK and US), does exactly the opposite of what Milton Friedman, the pioneer of neoliberalism, says must be done to address the 'the problem of the world' - the concentration of power.

To avoid facing and truly tackling these conflicts of reason at the heart of pursing both individual and collective freedom together with a market controlled economy, it is necessary to restrict how we think and our access to information. Avoidance of joined-up thinking is the main one, achieved through culture, eduction and media and the natural aversion to cognitive dissonance. But there are various common responses to help avoid stepping outside the neoliberal paradigm, such as the catch-all pragmatism of 'yes there are problems, and it is terrible, but there is just no better alternative', with grim totalitarian rule wearing a 'socialism' t-shirt, or a return to direct feudalism being the alternatives in mind. The tragedy is that from within the threat-focused mindset that leads to and comes from adopting market and private property based economics, those really are the alternatives and neoliberalism about the best that can be hoped for. The overlap of all these approaches can be appreciated to some extent from the filmed meeting of Nixon with Khrushchev in Moscow, 1959. What is called for is a paradigm shift.

In summary, due to the very nature of markets to concentrate power and economic opportunity, and thus impinge on the basic liberty and well-being of an increasing number of people, markets, as a primary way of managing an economy, are not compatible with NAP. Similarly,where markets have a controlling stake in an economy, the state cannot realistically be independent, and thus under such circumstances nor is it compatible with NAP. Even where the institution of the state is dominant, and it makes some attempt at more equitable distribution of economic opportunity, to whatever extent power remains systemically concentrated we can expect NAP to be violated, through the effects of social hierarchy or class.

All of this is not to say markets and the state must be abandoned tomorrow. They've been with us for at least ten millenia and are rather ingrained into our culture. There are, however, some policy tools that integrate with the current political and economic institutions which would facilitate a broader distribution of economic opportunity and thus progressive social change, even utilizing some aspects of markets. These include a shift away from taxing profits more towards taxing property, and implementing an unconditional basic income, funded from the tax base [a]. These specific methods stand out because they provide a clear and gradual path, through what level they are implemented at, towards eventual freedom from markets and concentrated power.

The logical conclusions of a market dominated economy [b,c], and how a paradigm shift might begin [d], are discussed in the links below.


References

Non-Aggression Principle http://en.wikipedia.org/wiki/Non-aggression_principle
Milton Freidman:  http://www.youtube.com/watch?v=R_T0WF-uCWg  from 1:18
The Golden Rule  http://en.wikipedia.org/wiki/Golden_Rule
30 million slaves today  http://www.globalslaveryindex.org/
Nixon, Khrushchev meeting https://archive.org/details/Nixon-KhrushchevMoscowDebatejuly251959
Piff, Paul K. et al. 2012 "Higher social class predictsincreased unethical behavior" PNAS 2012 109 (11) 4086-4091

Further discussion

[a]http://joe-hudson.blogspot.co.uk/2013/12/two-powerful-mechanisms-for-stimulating.html
[b]http://joe-hudson.blogspot.com/2013/11/the-22-tenets-of-religion-of-more.html
[c] http://joe-hudson.blogspot.com/2013/12/dangerous-thinking.html
[d]http://joe-hudson.blogspot.com/2013/12/what-counts-as-progressive-change.html


* Illustration by Escher, 'Relativity' 1953

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