The ‘goddess’ of Market?

Hardcore economists believe the mystique power of the ‘invisible hand’ in the market, first conceived by Adam Smith, essentially creates a self-equilibrating market. But our columnist Taye Negussie (PhD) argues such characterization of the market, particularly when it comes to utilization and preservation of natural resources, misses the subtlety of the actual market exchange processes  

I think one of the greatest human follies is probably our appetite to worship and venerate things of our own making. The objects of worship may range from a hypothetical discourse to the justly long-standing spiritual doctrines and dogmas. The dawn of the enlightenment era in the eighteenth century Europe was mainly meant to address this crippling human predisposition. Therefore, at the heart of the enlightenment was the premise that any worthy action ought to be guided by well-informed and thoroughly examined knowledge of the issue at hand.

Very few would doubt that modern science owes much of its origin and development to the advent of this liberating and inspiring wisdom; though ironically, now science itself has over time become, to a degree, a source of blind faith and commonsense dogma.

Hence, nowadays a mere mention of ‘scientific fact’ could lead many to readily accept a claim in contravention to the elementary scientific principles that call for the adoption of a cautious, skeptical and critical attitude to any intellectual experience.

A case in point is the discourse of the ‘invisible hand’ in the market, first conceived by Adam Smith, and has now turned to be a sort of orthodoxy forming absolute universal ‘economic law’ presumably at par with such natural laws, say the law of gravitation.

In its most general sense, the economist’s theory of the ‘invisible hand’ articulates that through the operation of the hidden forces in a competitive free market, quality will improve and prices will decline, thereby raising the real standard of living for every buyer; to protect themselves in competition, sellers will be forced to innovate by discovering new products and new markets; products and wealth increase without limit, and society prospers.

In a nutshell, the hardcore economists believe the mystique power of the ‘invisible hand’ or ‘the goddess of market’, so to speak, essentially creates a self-equilibrating market.

 The myth of the ‘invisible hand’

Though quite appealing, this simplistic and imaginative market rhetoric is far-removed from the highly complex and intricate social processes evident in the workings of the real markets on the ground.

Overall, the discourse of ‘invisible hand’ portrays the market as a setting where only immediate buyers and sellers interact. Such a characterization of market, however, is so crude to miss the subtlety of the actual market exchange processes. All too often, an ordinary market exchange involves a multitude of immediate or distant market actors exacting varying levels of influences.

Thus, in a given occasion of exchange, for example, property owners, producers, brokers, service providers, scientific and technological institutions, among others, may overtly or subtly shape the terms and conditions of the exchange. So does the government, by virtue of its regulative and executive role, albeit that differs across place and time.

Add to that, in contrary to the free market advocates’ depiction of equal market actors, those actually involved in a market transaction are indeed actors differentially endowed with regard to access to information, human, social and physical capitals that significantly impact their negotiation and transaction power.

It goes without saying that despite the conception of the market as a sacred sanctuary of virtues, varied incidences of market malfeasance – hording, price fixing, adulteration, monopoly control, conspiracies, collision of interests, and corruption, among others – are not as such uncommon.

All these signify the claim of an alleged mystique power of ‘invisible hand’ beyond the awareness and willpower of market actors is just a fantasy; instead, behind the operation of the real market is the rather ordinary workings of a combination of forces – conscious or unconscious emotions, motives, moods, intentions, influences and activities of living human actors and institutions – directly or indirectly involved in market transaction.

 Of marketing mother-nature

The hypothetical and unrealistic assumption of the free market would become more ridiculous as its model is applied per se to deal with the processes of natural cycles as evidenced in the now ill-fated United Nations Conventions on Climate Change and Biological Diversity.

Apparently, with the motive of averting global warming, the loss of biodiversity and the depletion of arable soil and water, the aforesaid conventions formulated a market mechanism and financial incentive strategies that govern the utilization and preservation of natural resources. The strategies of “carbon-trading” (which trades natural conservation endeavors with financial rewards), and “carbon-rationing” (that seeks a cap on permissible CO2 mission), were among the schemes devised along that line of thinking.

Following the utter failure of the aforementioned market model in which the trading partners were at least presumed to be human agents, as of recent, another more weird model that portrays nature itself as a rent-collector, namely ‘ecosystem service provision’– conceived with the presumption that ecosystem service ought not to be provided for ‘free’– has been developed as a substitute of the former.

All the same, both approaches view ecological preservation as commercial matter and thus reduce the natural environment to a set of mere tradable goods and services.

Many studies done to assess the merit of the market approach to nature have now revealed momentous shortfalls inherent in its very conception. For instance, in her investigation in Brazil, environmental scientist Barbara Unmuessig found out that the approach all too often gives a leeway for powerful businesses to manipulate the system. As she observed in Brazil, those influential agro-business industries which destroyed more vegetation than the legal permit managed to cover up their environmental destructive acts by simply purchasing the requisite destruction credits from those with more than the mandated minimum amount of forest cover.

This experience highlights the danger of putting nature on the market – namely, that it offers those with money the option of buying their way out, at the expense of more vulnerable citizens, particularly indigenous peoples and poor small-scale farmers.

So, it becomes clear that the market approach as a sole solution to environmental problems – at the exclusion of all other social and ethical principles – emanates not from a critically-examined scientific wisdom but rather draws on ideology that idolizes market as a miraculous remedy to all types of ills. As the renowned scholar Karl Polanyi in his work, The Great Transformation, admittedly noted, “The capitalist transformation was the development of a market society and a free-market ideology that aspired to commodity and rearrange all human institutions to serve market principles.”

But, when it comes to the environment what is apparently overlooked is the fact that the very problem was, first and foremost, caused mainly by market-driven and excessively materialistic civilization. And sadly enough, leaving nature solely to the vagaries of market amounts to just risking its fate at the mercy of those who can afford the right to use as well as abuse it – not to mention the immorality inevitably involved in extending the devil of market to the realm of the sanctified and priceless gifts of nature for sustenance of life.