Pandemic lessons. No. 1: The death of the “self-regulating market” myth

by | Sep 16, 2020 | Experts, Finance | 0 comments

The myth of the self-regulating market is attributed to Adam Smith in 17761. England was the birthplace of a technological revolution that increased its productivity dramatically, reduced transport costs and created enormous financial and goods surpluses.  England, which had previously defended the protection of its national market from the other European powers, embraced the “free market” and “self-regulation”. From its position of being able to buy more than other countries on the international market, of being able to sell what others lacked, and of having the fattest wallet for lending money, it established its myth. It exercised its dominant position putting pressure on the European colonies in the world and its direct competitors to make them open their borders, abandon protectionism and follow its civilising economic policies: the free and self-regulating market.

As a result of the First World War and the Second World War, England fell into decline, and the once extremely protectionist United States of America emerged as a world power. The latter embraced the free market, combated the protectionism of other countries and subordinated it through commercial, credit and military means, and also cultivated in its elite universities the myth of the free and self-regulating market.


And today?


The myth of the Anglo-Saxon bourgeois elites is now transferred as a legacy to other flagship countries, this time in Asia, where the centre of the new technological revolution is located, with the highest production of patents, most of the world’s multimillionaire companies, and the highest and most sustained global economic growth rates. Today, China defends the international free market against Anglo-Saxon protectionism, and uses its financial surpluses to acquire natural resources everywhere, to connect the continents to its new “silk route” and buy large companies and banks all over the world, in particular in the shaky centre of global capitalism: the USA and Europe.

However, the Myth, which re-emerges over and over again, as a torch that is passed to the fastest runner in the race, is no longer the same; it appears more sincere: Liberalism outwards, strong intervention from within. China is the self-confessed caricature of what always maintained the myth of the free market: it was never free, it was always supported by the State, it lived off the imperial power, off advantageous commercial agreements, it was based on the primacy of the national currency in global transactions, it expanded, defended and enforced it with weapons.


Essential State intervention


The pandemic makes us more sincere, exacerbates all the basic characteristics of a “normality” that lays bare its foundations. The State comes openly and massively to the rescue of the market and it may be concluded that the latter is neither self-regulating nor self-controlled, and does not produce what society needs spontaneously.  There is no such thing as a “market order”. It is true that, at least since the 1970s, the State has worked for the financial sector, which acts as an intermediary for all activities in the real economy: in the primary, productive, transport, commercial and administrative sectors.

No sector escapes from “working for banks”2. In addition to privatising almost all profitable companies, the principle of financial intermediation even encompasses social security. The health system and pensions are the cream of financialisation, alongside construction, infrastructures, insurance, food control and the mining and energy markets.  Neither culture, nor social policies, even those designed to relieve poverty, escape from the parasitic, costly and unnecessary intermediation, which it has been agreed to describe as “financialised capitalism3. Nature, work, knowledge, subjectivity, art and even time are colonised by financial intermediation, which obtains income from each creative, productive and consumption process.


The ever-emerging self-defence of society


One of the main dilemmas of the pandemic is whether, on the one hand, the increase in the rentier, parasitic, useless power of financial intermediation will subject the State to an even greater extent, if possible, to the economy sector and families, or whether on the other hand social and political pressure will manage to regain control of the currency, credit and savings in order to support job creation, the fulfilment of the population’s most pressing needs, as well as the defence of riches and public goods.  ‘You can only get away with it for so long’. Millions are suffering and will suffer even more from the consequences of the pandemic, hundreds of thousands, more than before, will get angry when they see that the emperor has no clothes. The State works for financial intermediation because it is the State of rentier and speculative accumulation. Will society be capable of seizing power from the financial sector and investing money in a fairer and more equitable society, which stops the orgy of the destruction of nature and undertakes a rapid transition of the energy pattern?

DARIO I. RESTREPO
Facultad de Ciencias Económicas, Universidad Nacional de Colombia
indamail@gmail.com

MARIO E. HERNANDEZ
Facultad de Medicina, Universidad Nacional de Colombia
mariohernandez62@gmail.com

1 Smith, Adam, (1776), La riqueza de las naciones. Alianza editorial, 1994, Madrid

2 Villabona, Jairo Orlando, Un país trabajando para los bancos, (2015), Facultad de Ciencias Económicas, Universidad Nacional de Colombia, Bogotá

3 Lapavitsas, Costas, (2012), El capitalismo financiarizado, expansión y crisis, Editorial MAIA, Madrid

This article is a translation of the original version in Spanish

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

*

code

Related articles
___

Does the UN Actually Make a Difference?

Does the UN Actually Make a Difference?

Reflections by Cécile Molinier, former senior UN official Anniversaries are cause for celebration, and for reflections on past and current achievements. Yet, reflections on the UN’s 75th anniversary have been far from celebratory, and the gloom is magnified by concern...

read more

Newsletter
___

Receive our latest articles by subscribing to our newsletter!

Previous articles
___

Tags
___

Follow us
___

The views and opinions expressed in the articles are those of the authors and do not necessarily reflect the position of The Graduate Institute, Geneva.

Favorisez l'intégration du genre
dans le développement
Programme Overview Webinar
Inscrivez-vous>

Le genre au temps des
pandémies

Programme Overview Webinar
Inscrivez-vous>

Comment gérer vos projets de développement ?
Programme Overview Webinar
Inscrivez-vous>

Lead Development in Middle East & North Africa
Programme Overview Webinar
Register here>

Make Development work in Times of Crisis
Programme Overview Webinar
Register here>

Programmes
___

Genre et développement
Executive Programmes
Postulez>

Transformative Leadership
Executive Course
Apply now>

Gestion stratégique de projets
de développement
Formation courte
Postulez>

Development Policies & Practices
Executive Programmes
Apply now>

Conflict & Fragility Management
Executive Programmes
Apply now>

Int'l Negotiation & Policy-Making
Executive Master
Apply now>