Market

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Characteristics

Stefan Merten discusses the characteristics of markets, and also directly ties this within the context of free software:

* Distribution of goods

Probably one of the most obvious functions of markets is the distribution of goods. Goods that have been produced in a separate process are brought to a market and there they can be distributed.

This function of markets is certainly something which we generally need in a society which includes separation of labor - i.e. in every society which can be wished for.

In Free Software this distribution can be seen - see (Linux) distributions or countless web sites of Free Software projects or SourceForge or ... However, this is not something I'd call a market but a flow of goods.


* Connection of otherwise separated social entities

If those social entities would not be separated from each other they could cooperate in the first place and would not need to distribute there separately produced good afterwards.

This separation is probably a result of large societies where you can not have this type of connection in each instance because the costs for such a connection are simply too high. This is BTW the end to all these backward oriented types of Utopias where people are connected on a level of knowing each other. No, separation of social entities is not reversable in any society which can be wished for.

In a typical market transaction the connection vanishes as soon as the good is distributed. This maximizes your freedom because you don't need to cope with all these difficulties which human relationships can bring with them.

In Free Software we see this connection when one Free Software project uses other Free Software products. Inside of a project where the developers are connected by being in the same project this type of connection making is not necessary. The developers build up a social entity in itself.

It might be notable that in Free Software sometimes the connection is deeper than only in the moment of distribution. This is when users contribute to the project they are using in one or another way.

To me these would be the key characteristics of markets. Please note that scarcity plays no role until here. However, probably usually this is also understood by markets:

* Exchange based distribution

The goods are not simply distributed to those who need them but exchanged by a general exchange system. I.e.: You can only take if you give at the same time something which is considered equal to the good you are taking. Because goods are not equal - otherwise it would not make sense to exchange them at all - there must be a common third which makes them comparable. In capitalism this is the price of the labor which went into the product plus the surplus.

This is the point where alienation comes in because the exchange system abstracts from the concrete use of goods. Even the production process is changed because suddenly it may make sense to produce for a market.

This is also where the notion of quality of a produced good shifts. When you are producing for yourself or socially related people or because of your Selbstentfaltung then you are heading for absolute quality: Creating the best product you can think of. When you produce for a market it totally suffices to produce a quality which is just high enough to be sellable.


Discussion

How the market economy is always already embedded and connected to non-market forms and sharing

Brett Scott:

"There are, however, three major but inconvenient truths that seem to get glossed over when we talk about the market economy. The first is that market systems feed off an extensive, underlying gift economy in which people transfer ideas, goods, services, and emotional support to each other without requesting money. Unpaid childcare is one example. If your mother watches your two children while you’re at a job, that’s the gift economy in action. In fact, without friends and family it’s unlikely that you could even maintain the desire to go to work. Even in professional settings we share common resources with business colleagues. Companies rely upon this internal collaboration to produce the very products they then competitively exchange in markets.

The second inconvenient truth about the market economy is that its products are not really desirable unless we can use them within non-market systems. What’s the point of all this stuff getting produced if we can’t share it, compare it, gloat about it, or enjoy it with others? Friends, family, and various community systems make having material goods meaningful.

And third, many commercial market exchanges are actually hybridized with non-commercial elements that add richness. Take, for example, flirting with a bartender as they serve you drinks, or having a discussion about politics with the stylist you’re paying to cut your hair. Not only do market systems rely on non-market influences in order to work, but their products feel pointless and empty without them. Recognition of this, however, is uneven. In small community settings it’s often easy to see a balance between market and gift economies. The shop owner gives a spontaneous discount to a retiree, or allows friends to lounge in a coffee shop long after they’ve finished drinking. Commercial exchange is but one element in a broader set of relationships, and this means the exchange takes longer. Economists call this inefficient; we call it enjoying life.

Meanwhile, in megacities such as London or New York there’s a tendency to strip all non-commercial elements from market interactions. This is the hallmark of what we refer to as commercialization. The large-scale mall and corporation are designed to maximize exchange while offering only a shallow appearance of sociability. The McDonald’s employee is forced by contract to smile at you, but prohibited from taking time to have a true conversation. This phenomenon is even more acute in faceless internet commerce, where clinical, transactional precision dominates. While hyper-efficient exchanges play into our short-term impulses — initially feeling exciting, convenient, and modern — they gradually begin to feel empty. Sure, it’s frictionless commerce, but it’s also textureless.

When detached from a community foundation, markets can bring out people’s most anxious, petty, arrogant, and narcissistic sides, encouraging them to fixate on their individual strands of the overall economic picture, as if it were the whole. The defining qualities of a market economy — like uncertainty and unequal monetary reward — get exalted, and in this frame, everyone else is either a stranger to do battle with or a temporary ally to assist in your personal gain. Socializing becomes “networki"ng.” Non-commercial ties such as friendship, sex, love, and family are either rendered invisible, or presented as kitsch advertisements designed to promote more commercial exchange." (https://howwegettonext.com/reversing-the-lies-of-the-sharing-economy-a85501d14be8)


A critique of markets as optimal

From [email protected]:

"Broadly speaking, there are four fundamental flaws in the theory that private greed reliably creates social good. The financial crisis highlights the fourth and least familiar item in the list, involving access to information. But it will be helpful to begin with a brief review of the other flaws.


First, the theoretical defense of market outcomes rests on Pareto optimality, an absurdly narrow definition of social goals. A proposal to raise taxes on the richest five percent and lower taxes on everyone else is not “optimal” by this standard, since it makes only 95 percent of the population, not everyone, better off. Important public policies typically help some people at the expense of others: pollution controls are good for those who value clean air and water, but bad for the profits of major polluters. The invisible hand won’t achieve such non-consensual results; public goods require public choices.

Second, market competition only leads to the right outcomes if everything that matters is a marketable commodity with a meaningful price. Marxists and others have objected to the treatment of labor as a mere commodity; environmentalists have likewise objected to the view of nature as something to buy and sell. This is not a new idea: in the words of the 18th century philosopher Immanuel Kant, some things have a price, or relative worth; other things have a dignity, or intrinsic worth. Respect for the dignity of labor and of nature leads into a realm of rights and absolute standards, not prices and markets. It doesn’t matter how much someone would be willing to pay for the opportunity to engage in slavery, child labor, or the extinction of species; those options are not for sale. Which issues call for absolute standards, and which can safely be left to the market? This foundational question precedes and defines the legitimate scope of market competition; it cannot be answered from within the apparatus of economics as usual.

Third, the theory of competitive markets and the proof of their optimality rest on the assumption that no enterprise is large enough to wield noticeable power in the marketplace. Adam Smith’s butchers and bakers operated in a relentlessly competitive environment, as do the small producers and consumers of modern general equilibrium theory. In reality, businesses big enough to wield significant power over prices, wages, and production processes can be found throughout the economic landscape.

Big businesses thrive, in part, thanks to economies of scale in technology and work organization: bigger boilers and furnaces are physically more efficient than small ones; assembly lines can make labor more productive than individual craft work; computers are often more productive when they run the same software used by everyone else. Economies of scale are also important in establishing and advertising well-known brands: since no one ever has complete information about the market, as discussed below, there is a value to knowing exactly what to expect when you walk into a McDonald’s or a Starbucks.

Bigness can also be based on unethical, even illegal manipulation of markets to create monopoly or near-monopoly positions. Manipulation constantly reappears because the “rules of the game” create such a powerful incentive to break the rules. The story of the invisible hand, and its formalization in the theory of perfectly competitive markets, offers businesses only the life of the Red Queen in Alice in Wonderland, running faster and faster to stay in the same place. Firms must constantly compete with each other to create better and cheaper products; as soon as they succeed and start to make greater profits, their competitors catch up with them, driving profits back down to the low level that is just enough to keep them all in business. An ambitious, profit-maximizing individual could easily conclude that there is more money to be made by cheating. In the absence of religious or other extra-economic commitments to play by the rules, the strongest incentive created by market competition is the search for an escape from competition, legitimately or otherwise.

Opportunities to cheat are entwined with the fourth flaw in the theory of perfect competition: all participants in the market are assumed to have complete information about products and prices. Adam Smith’s consumers were well-informed through personal experience about what the baker and the butcher were selling; their successors in conventional economic theory are likewise assumed to know the full range of what is for sale on the market, and how much they would benefit from buying each item. In the realm of finance, mortgage crises and speculative bubbles would be impossible if every investor knew the exact worth of every available investment – as, stereotypically, small-town bankers were once thought to know the credit-worthiness of households and businesses in their communities.

So many choices, so little time

The assumption of complete information fails on at least two levels, both relevant to the current crisis: a general issue of the sheer complexity of the market; and a more specific problem involving judgment of rare but costly risks. In general terms, a modern market economy is far too complex for any individual to understand and evaluate everything that is for sale. This limitation has inspired a number of alternative approaches to economics, ranging from Herbert Simon’s early theories of bounded rationality through the more recent work on limited and asymmetric information by Joseph Stiglitz and others. Since no one ever has complete information about what’s available on the market, there is no guarantee that unregulated private markets will reach the ideal outcome. Regulations that improve the flow of information can lead to an overall improvement, protecting the unwary and the uninformed.

When people buy things about which they are poorly informed, markets can work quite perversely. If people trust someone else’s judgment more than their own – as, for instance, many do when first buying a computer – then decisions by a small number of early adopters can create a cascade of followers, picking a winner based on very little information. Windows may not have been the best possible microcomputer operating system, but a small early lead in adoption snowballed into its dominant position today. Investment fads, market bubbles, and fashions of all sorts display the same follow-the-leader dynamics (but without the staying power of Windows).

When people have to make excessively complex decisions, there is no guarantee that they will choose wisely, or pick the option that is in their own best interest. Yet in areas such as health care and retirement savings, individuals are forced to make economic decisions that depend on detailed technical knowledge. The major decisions are infrequent and the cost of error is often high, so that learning by experience is not much help.

The same overwhelming complexity of available choices exists throughout financial markets. The menu of investment options is constantly shifting and expanding; financial innovation, i.e. creating and selling new varieties of securities, is an inexpensive process, requiring little more than a clever idea, a computer programmer, and a lawyer. Such innovation allows banks and other financial institutions to escape from old, regulated markets into new, ill-defined, and unregulated territory, potentially boosting their profits. Even at its best, the pursuit of financial novelty and the accompanying confusion undermines the traditional assumption that buyers always make well-informed choices. At its worst, the process of financial innovation provides ample opportunity to cheat, knowingly selling new types of securities for more than they are worth. Information about the reliability of many potential investments is ostensibly provided by bond rating agencies. One of the minor scandals of the current financial crisis is the fact that the rating agencies are private firms working for the companies they are rating. Naturally, you are more likely to be rehired if you present your clients in the best possible light; indeed, it might not hurt your future prospects to occasionally bend the truth a bit in their favor. The Enron scandal similarly involved accounting firms that wanted to continue working for Enron – and reported that nothing was wrong with the company’s books, at a time when the top executives were engaged in massive fraud." (http://www.paecon.net/PAEReview/issue48/Ackerman48.pdf)


Related book: Frank Ackerman and Lisa Heinzerling, Priceless: On Knowing the Price of Everything and the Value of Nothing (The New Press, 2004)


Infinite Growth Mechanisms

Stefan Merten on the infinite growth aspect of capitalist markets:

"WC: Within capitalism we have M-C-M'

The really important sign here is the apostrophe, which you forgot. It indicates the entirely different dynamics of pre-capitalist markets and capitalist markets. Lets look a bit into it.

BC: Goods are generally produced for self-suffiency. To obtain goods someone is not producing, the overplus of the produced goods are brought to market: Either to exchange them directly with other goods or via money being the mediator. At the end, there is not a "surplus good", but only an "other good". There is no (effective) driver for progression. Things develop slowly and under circumstances of personal dominion.

WC: Roles and relationships of C (or G) and M have completely changed (ignoring why and how). When BC the good and thus the needs are starting and end point of the cycle, now money takes this place, and commodities are in the roles of the mean. From the standpoint of the cycle logic, the purpose concerning needs aren't of interest at all. The products may be food or bombs, it doesn't count. The only purpose is to make money.

However, the purpose is not simply to make money, the purpose is to make _more_ money than invested before. This more-logic comes from competition of those producers who want to sell the same commodity on a limited market. A single capitalist can't say "my way of production is ok, I'll do it for the rest of my live", because the competitor doesn't sleep and produces the same commodities cheaper to overtake market share from the competitor. Why overtaking market share? Because of the economics of scale: On a bigger scale you can produce cheaper (more efficient in terms of value). Conclusion: All participants have to strive for increasing the productivity of work to make their products cheaper - by punishment of downfall. They have no choice if they want to stay inside.

"Having no choice" means a coercion to follow the rules of the things (the commodities). This leads to a reversal of the relationship between the social and the things. In capitalism it is no longer the case, that we organize socially what things we want to produce to satisfy our needs, it is reversed: The things seem to have a life of its own, they move and say to us, want we should do, to satisfy their "needs". They say: Produce me cheaper or you're out of the game. This really weird behavior was named "fetishism" by Marx, and this was one of his most important discoveries (and not the exploitation stuff, which of course it true anyway).

Marx in his own words: "Thus the participants in capitalist production live in a bewitched world and their own relationships appear to them as properties of things, as properties of the material elements of production."

StefanMn uses another term addressing the same topic: alienation. Production in capitalism is alienated, we don't do it for us, we do it for M' in M-C-M'. Thus the "C", the products, are only a by-product of an alienated logic, they are not the aim. Being only a by-product also means, that it cannot be controlled, what they are (food, bomb, etc.), because they all serve M'. And moreover, other externalities cannot be controlled too: CO2-emission etc. Ok, states try to implement some controllings via prices, however, this doesn't really help. Stop.

Conclusion: The built-in infinite growth feature of capitalism finally eats the planet -- and us." (Oekonux mailing list, January 2008)


What are markets good for

Paul Cockshott is a planning advocate, and was asked for what particular type of goods markets may be necessary or optimal:

"The labour used in communal free software is part of the social surplus labour. It is only possible for it to be produced insofar as there are people who are either able to put time into it because they are in an academic environment where they have surplus paid time, or because the advance of technology has reduced the working week sufficiently that people have time after paid work to do it.

As I said in an earlier post, goods whose marginal costs of reproduction tends to zero fall into one of the categories for which even indicative markets are not appropriate.

I specified that I thought that the role of a consumer goods market was limited to those goods whose labour of reproduction remained considerable, and for which no objective assesment of need can be arrived at. Where either of these criteria are absent, a market is not appropriate. Information goods -- scientific laws, mathematical theorems, software, electronic copies of music, etc should be distributed freely. Goods that require substantial labour input but for which need can be objectively assesed, should be free but not ad libitum, distribution has to be rationed on the basis of need: examples would be surgery, speech therapy, communal childcare etc." (email, August 2008)


Different Markets are good for different things

Stan Rhodes:

"The free market, in theory, is the closest we've come to solving the supply and demand issue: under the right conditions the market tends toward pareto optimality or better; exchange chases market equilibrium (I assume that's what you mean by "unity"). However, as Yogi Berra says, "In theory, there is no difference between theory and practice. But, in practice, there is." It turns out that there are classes of markets that humans find market equilibrium in easily and naturally (even with imperfect information!), and ones they do not: they're not so good at asset markets, such as the stock market. This opens an area of continuing debate between theory and reality, which is huge, and outside this email.

The problems of information asymmetries and externalities--essentially, the absences of pieces of information that are needed for good decision-making--are present in the modern day economy, just as they are present in your proposal. These factors make sustainability hard. However, it's no easier in either your proposal or the modern day economy. You've essentially found that, no matter how you shuffle the backing of the units of exchange, the same problems pop right back up. If you don't see that as a big problem yet, you eventually will.

A common solution is calling for "regulation." However, this doesn't solve the problem, it just gives it a name and puts in into the hands of an authority. Each component piece of regulation--with the overall goal of resource management, as identified by people such as Elinor Ostrom, and others in the field of common pool resources--has a practical cost.

A quick list (from Ostrom, via Wikipedia, edited a little):

  1. Clearly defined boundaries
  2. Congruence between appropriation and provision rules and local conditions
  3. Collective-choice arrangements allowing for the participation of most of the appropriators in the decision-making process
  4. Effective monitoring by monitors who are part of, or accountable to,

the appropriators

  1. Graduated sanctions for appropriators who do not respect rules
  2. Conflict-resolution mechanisms
  3. Recognition of the rights of agents to organize


Historizing Markets

Andrew Kimbrell:

"So at the outset it is essential to understand that the market system is not based on natural laws but in fact is profoundly unnatural, even for humans. It is new in the history of humankind and the earth. Most of us assume that humans have always been competitive creatures involved in market economics. We even envision cave men clubbing one another in the competition for food or for the right to drag a particular unfortunate female around by the hair. These stereotypes of early “market” and competitive humans are fallacies. Historian Marshall Sahlins reminds us that cooperation, not competition, was the credo that bound early men and women to one another: “The emerging human primate, in a life and death struggle with nature, could not afford the luxury of a social struggle. Cooperation not competition was essential. . . . Hobbes’s famous fantasy of a war of ‘all against all’ in the natural state could not be farther from the truth.”

The same can be said for the market itself. Though trading was an important adjunct to early societies, the competitive market was never the means by which these societies solved their basic economic problems. The use of nature, the allocation of a community’s resources, including human work and the distribution of goods within a community, always occurred outside of the marketing process. The societies of antiquity never saw the market as an autonomous entity that could or should exist apart from laws of nature or the socio-religious strictures and interrelated limits of any given culture. As noted by economic historian Karl Polanyi, “Never before our own time were markets more than accessories to economic life.”

Even in Western society, market forces played only a limited role compared to the cultural and religious beliefs, the traditions, and social patterns that governed the lives of our ancestors. All this changed in the mid-eighteenth century. Within one generation the concept of the market was transformed from a literal place of trade and barter to an ideology upon which an entire social system was created and upon which major assumptions about nature and human nature were based.

The intellectual history of the market began with those Enlightenment thinkers who committed themselves to discovering rules of human behavior that were as efficient and predictable as the mathematical laws Newton and others had recently discovered for the physical universe. Eighteenth century philosopher Francis Hutcheson rejected benevolence as the basis for human interaction and discounted any other ethical norm. Instead of turning to nature for his answer, he looked to the growing industrial sector and came up with what he thought was the answer: self-interest. Self-interest according to Hutcheson was to social life what gravity was to the physical universe: “Self love . . . is as necessary to the regular State of the Whole as gravitation.”

It was left to Hutcheson’s famous student, Adam Smith, to transform self-interest into a revolutionary new social doctrine. "

(https://centerforneweconomics.org/publications/salmon-economics-and-other-lessons/)


How the Capitalist Market Produces Fictitious Commodities

Andrew Kimbrell:

"Not everything is a commodity. In the economic context the word “commodity” has a limited and precise meaning. Commodities are defined as manufactured goods produced for sale. Whether clothes, cars, or computers, they are produced by people, sold, and eventually consumed. That is their origin and purpose.

Clearly, central aspects of any society do not fit the definition and purpose of commodities. Human labor, for example, which is not manufactured for sale and consumption, is not a commodity. It is both artificial and misleading to attempt to neatly package and commodify labor, thereby separating wage work from the rest of the life of each of us. Labor is not a product—a watch or motor. It is a personal, intimate, and intrinsic part of ourselves. Human work cannot be separated from the whole person. Whoever has purchased labor has purchased not just the work of an individual but also a significant and indivisible portion of the life, thoughts, and creativity of the worker—his or her full presence. For the hours of the work day or work night, the employer controls the environment and well-being of a person, not a working “machine.” Moreover, the buying and selling of labor determines far more than just how and by whom it will be done. Labor affects major aspects of a worker’s life, including where the worker and the worker’s family will live and how they will live. When searching for buyers of their labor, workers know that not just their work but their societal worth, their future, and the well-being of their families are on the line. In sum, it is a market fiction that there is a separation between the human being and human work. We should no more be able to sell our daily labor than sell our very being.

Land is not a commodity either. Land and the productivity of land are just other names for a part of nature. Nature with its creative capacities is, of course, not produced by people for the purpose of sale and consumption. It is a given, a gift. It has intrinsic worth and meaning that can never be measured by the reductionist concept of marketplace value, which is determined by supply and demand. E. F. Schumacher among others has argued that nothing created from non-renewable resources can appropriately be treated as a true commodity. This is because little or nothing in nature, if left to itself, reproduces in response to human supply-and-demand needs. For example, we know there is an increasing global demand for tuna, but sadly for the marketeers tuna is not a commodity that can be produced at will to fill that demand. (Tuna cannot even be “farmed,” for they do not survive in captivity or in close confinement.) No rational person would suggest that somehow tuna around the world have become aware of this supply problem and are therefore desperately trying to conform to market laws and increase their reproduction rate to meet the new demand. The same is true for innumerable elements of nature such as topsoil, another fictitious commodity, which urgently needs to be replenished. Yet we cannot make it, and it does not magically increase itself to meet our demand, for it can be created only in its own time and circumstances. As a substitute we now grow our plants in fertilizers—that is, we grow our crops in oil not soil—again not fully realizing that oil too is not a commodity that will recreate itself as the market demands.

Nature, when acting without human interference, creates and reproduces according to its own laws and needs. The theories of Smith and most economists are completely alienated from this obvious reality. It was this alienation of the market theory from the realities of nature and human nature that led Schumacher to write in Small Is Beautiful, “[T]he logic of capital is neither that of society nor nature.”

The noncommodity status of key aspects of any society or industry, including labor and land, presented a crucial challenge to the advocates of the market system. If mar- ket ideology was to be the central law of a society, higher than religious or cultural traditions, it had to extend to all important aspects of social life. Work and nature could not be left out of the market equation, for they were the very bases of the system. They could not be left under the control of tradition, cultural values, or other means of social organization because then the whole system would become nonviable. Vital noncommodities had to be subsumed under the definition of commodity, treated like any other commodity, and subjected to the supply-and-demand laws of commodities, no matter how irrational this appeared.

By a breathtaking philosophical maneuver, market proponents have for well over two centuries simply ignored the distinction between commodities and noncommodities. They have created the fiction that elements of human society and nature such as labor and land are commodities to be sold and consumed. This bold sleight of hand by which key “fictitious commodities” were created gave the market system control of virtually all aspects of social behavior and nature, allowing the market doctrine to obtain political and philosophical hegemony over Western society and increasingly over the entire globe. As summarized by Karl Polanyi in his seminal work The Great Transformation:

Liberal economy, this primary reaction of man to the machine, was a violent break with the conditions that preceded it. A chain reaction was started—what before was merely isolated markets was transmuted into a self-regulating system of markets. . . . The crucial step was this: labor and land were made into commodities, that is, they were treated as if produced for sale. Of course, they were not actually commodities, since they were either not produced at all (as land) or, if so, not for sale (as labor). Yet no more effective fiction was ever devised. . . . Accordingly, there was a market price for labor, called wages, and a market price for use of land, called rent. . . . The true scope of such a step can be gauged if we remember that labor is only another name for man, and land for nature. The commodity fiction handed over the fate of man and nature to the play of an automaton [the free market] running in its own grooves and governed by its own laws.

Polanyi further points out, as did Schumacher, that the market system and its commodity fictions are “disembedded” from all social and ecological relationships. The market system with its supply-and-demand dogma is an abstraction that for more than two centuries has been imposed in procrustean manner on all people, on all the animate and inanimate elements of the earth, a market system that is completely oblivious to their needs, to their laws, to their logic.

The social history of the past two centuries has in many respects been the result of the contradictions and tensions inherent in the market system’s creation of fictitious commodities. Over time, treating certain noncommodities as commodities became a double-edged sword. On one hand, as modern market economies spread over the face of the globe, it led directly to massive increases in wealth, technological development, and consumption, but it also led to the downfall of the pure laissez-faire market system as the “invisible hand” showed itself capable of causing very visible havoc.

The earliest evidence of the fatal contradictions in the market system accompanied the treatment of human work as a commodity, which began with the industrial revolution. During the late eighteenth century the word “labor,” which had referred primarily to childbirth, became the term used to describe both human work sold as a commodity and the pool of human commodities to be hired by the burgeoning factory system. Before mechanization, workers sold many of their products but not their work as separate from those products. The mechanized division of labor first accomplished in the textile industry provided Adam Smith with the concept that human work could be commodified on a supply-and-demand basis like any other product. The commodification of work as mechanized labor became the linchpin of his market theory.

The commodification of human work and land were, and remain, closely tied together. In England the industrial revolution became possible only because peasants were forced en masse off the land they had tilled for centuries by landowners who wanted to convert that land from subsistence farming to the more profitable growing of sheep. This process, which continued for over two centuries, was called Enclosure. Thanks to a series of Enclosure Acts the ruling elite were able to amass huge profits from the export of wool through this enclosing of the land, which prevented its use by the people. Witnessing the huge flood of peasant refugees into the cities as a result of the enclosures, Sir Thomas More was led to quip that “sheep devour people.” As the profits from wool and other exports amassed, they became the original capital used to build the machines and factories of the early industrial age.

Conveniently, the hundreds of thousands of dispossessed peasants whose land had been enclosed now crowded together in the new factory towns and competed for the low-paying jobs in the early “satanic mills” of the industrial age. This reality inspired Smith with the idea of human labor as a commodity whose price would be determined by supply and demand regardless of the impact on the human beings involved. It is important to note that this enclosure movement continues today throughout the world as entities such as the World Bank and the International Monetary Fund encourage many so-called developing countries to enclose their lands for the production of valuable export crops such as coffee or sugar in order to stabilize their economies and pay back their debt to these institutions. Subsistence farmers by the millions are thereby expelled from the land. The dispossessed farmers and peasants now crowd the slums of Bhopal, Mexico City, and countless other blighted urban areas just as they did the cities of England centuries ago. Deprived of their food independence, they have to take any available job in the urban environment to avoid starvation. They are simply the most recent victims of the current round of capitalization of land and labor required for the market/industrial system to expand.

As with today’s poverty-stricken bloated urban areas in the developing world, the conditions for workers in the early industrial era in England were grim. Often hazardous work, up to 80 hours a week, the mass employment of children, unbreathable air, and undrinkable polluted water were the norms in the factories. Worse yet were the slums that the majority of workers returned to after their exhausting daily travail. Given the high rate of infant mortality, life expectancy for English workers in the first decades after Smith had articulated the market theory of labor was 17 years—a figure that reflected a child mortality rate of 50 percent.

The extraordinary extent of exploitation involved in the free-market commodification and consumption of human “labor” soon led to open revolt. Workers rebelled, and their strikes and disruptions threatened the stability of society itself. Thinkers throughout the nineteenth century, most notably Karl Marx and Friedrich Engels, began to imagine the complete overthrow of the then current market-based labor regime. In response to the threat posed by workers and their newly formed unions the industrialized countries began to buffer and alter the free-market commodification of labor by passing numerous laws to restrict child labor, reduce the work hours, and mandate worker safety. By the early twentieth century government agencies were being set up to protect labor, and over the next decades further anti-free-market legislation became commonplace, initiating unemployment insurance, a minimum wage, and social security for workers after retirement or because of disability.

As with labor, government has tried to restrict the free-market commodification of the Earth in order to avoid the collapse of the capitalist system, in this instance from ecological catastrophe. It became evident by the dawn of the twentieth century that the rapacious destruction of land and resources by the unrestricted free market was not sustainable. The Reform Movement, headed by such leaders as Theodore Roosevelt and Gifford Pinchot, began to foster laws and policies designed to protect nature from the market. Over the next decades zoning laws, creation of protected parks and wilderness areas, and numerous other legislative controls were implemented in an attempt to put some U.S. land off-limits to the market. Additionally, in the early 1970s a series of statutes was enacted in the United States that sought to protect our water, air, and land from industrial pollution. Most European countries and now the European Union have passed similar and at times more comprehensive laws.

As we consider the all too familiar list of global environmental problems—global warming, ozone depletion, water scarcity, topsoil loss, oil depletion, species extinction, deforestation—we are beginning to see the inadequacy of those protections and are being forced to assess the full legacy of treating nature as a commodity, a legacy that is threatening the very survival of a viable planet. As a result, international protocols and treaties are urgently being sought to once again attempt to protect the market system from the consequences of its contradictions.

Given the continuing history of government “bailing out” the market system, it is ironic how vehemently advocates of laissez-faire continue to argue for less government regulation, especially when they see it as limiting the economy or the use of natural resources. They often criticize, correctly, the mammoth government bureaucracies set up for such regulation. Yet at the same time they refuse to recognize that it was the very contradictions in the free market—its treatment of noncommodities such as humans and nature as commodities—that forced government to regulate, lest the entire market society collapse in chaos over its mistreatment of people and its complete disregard for nature. Government regulation is not a threat to the market system but rather its savior, for without its buffering impact the market would long ago have ceased to be the basis for human economic activity.

Looking back over the two-hundred-year history of the attempts to buffer the market system, it is now clear, based on the dire environmental crises we face, that these attempts have failed. We cannot continue to prop up an economic system that is profoundly disconnected from fundamental natural and social relationships."

(https://centerforneweconomics.org/publications/salmon-economics-and-other-lessons/)