Markets and the left

This post from Tim raises the question: why does the "left" regard markets as a "right-wing" device?
We certainly can't blame the salience heuristic here. If you go to any proper market, you'll see people trading freely and as equals, and without gross exploitation or causing big inequalities. People have been selling fruit and veg on Leicester market for 700 years, and no-one thinks unacceptable inequalities have emerged as a result.
Everyday eyeball evidence should, then, show that there's nothing for the left to complain about in well-functioning markets.
Much of what they object to about markets shouldn't be (and isn't) markets as such but the same things rightists object to - market imperfections.
Instead, I suspect the left's instinctive hostility to the principle of markets stems from two sources.
One is a form of category error. They identify markets with business. Markets, they think, consist not of honest fruit and veg sellers making an ordinary living, but of rapacious managerialists. They fail to recognize, as Adam Smith saw, that business is the enemy of markets.
The other is a conservatism bias. The combination of the Great Depression and Keynesian economics caused the left in the 1930s to abandon market-oriented forms of socialism in favour of statism. And they've stuck to this position ever since, despite overwhelming evidence that the state perpetuates inequalities. They just haven't updated their Bayesian priors properly.

Comments

[Luis Enrique]

Come come, that's not overwhelming evidence. That's merely what you get if you remain in hoc to big business, and fail to implement 'proper' socialism. It's not that the state perpetuates inequalities, it's that we have yet managed to elect the right state (or haven't been statist enough).

[Matthew]

If there was overwhelming evidence that the state perpetuates inequality then there would be a good negative correlation between government spending as a % of GDP and inequality, which there isn't.

Maybe the left is suspicious of markets in health and education because it believes they don't work very well. And maybe it's right.

[ivan]

Sometimes it's just genuine confusion. we have had here in Belgium an example of a left-wing minister who was appaled when critics called him anti-market. He responded that there was no other minister in the current government - left or right - that had took more pro-business measures than he did.

[Phil]

Um... Partly because of the pressure to introduce markets into areas where the conditions for them to work don't exist, as Matthew says. But fundamentally because of the existence of a market in 'labour', which systematically privileges those with capital over those with nothing to live off but the immediate sale of their working life.

Have I been trolled?

[Luis Enrique]

"But fundamentally because of the existence of a market in 'labour', which systematically privileges those with capital over those with nothing to live off but the immediate sale of their working life."

erm, well even Marx would have said only if capital is scarce and labour plentiful. What with stock markets and a competitive banking sector providing capital to anyone with a half decent business idea, your assertion is not on such firm ground.

I don't know where to find the data (I'd be Chris does) but I'd be interested to know what the trend on return on capital across the economy has been. If it's heading towards zero excess profit (what do you reckon, 8% return?) then we are on the way to having eliminated exploitation aren't we? At least, in the Marxist sense.

And another thing, exactly how do you propose to eliminate a market in labour? Wages set by commitee, with job allocation by coercion? Even if you set wages how you see fit, you'd still have a market in so far as people would compete for the plum jobs.

[dsquared]

I am not actually aware of very many leftwing people who are opposed to their local fruit and veg market on the grounds that it is a market.

In general the establishment of "markets" in things where freely associating rational actors have not actually chosen to have a market, tends to involve taking people who had previously been more or less happily co-operating with one another, and making them compete against each other. People on the left tend to note that

a) this causes a lot of unnecessary stress b) it tends to involve a lot of risk transfer onto workers who are not well placed to bear that risk
c) it is all too often used as an excuse or smokescreen to reduce the overall level of compensation for the job
d) the promised efficiency gains are often surprisingly elusive.

By the way, the words "overwhelming evidence" above seem to link to one Joseph Rowntree Foundation press release saying that the welfare state has not eliminated all inequalities, perhaps partly because it has not been trying to, and one post by you about the limits to the progressivity of the UK tax system. I confess that my Bayesian prior remains substantially unmoved because I really don't see how this evidence can be called overwhelming.

[Robert Schwartz]

The answer is that the left has always really wanted to instantiate Plato's Republic, with themselves as the guardians (vanguard of the proletariat). They have no interest in seeing the lesser orders do things without their (the guardians) supervision and approval.

[Luis Enrique]

Sufferin' succotash d2, you've got it! left wing people DO NOT tend to object to fruit and veg markets. What were you thinking Mr S&M? Sometimes I don't know why I read this blog, if you're going to be so wilfully obtuse.

But what's this establishing of markets in things where freely associating rational actors have not actually chosen to have a market, of which you speak? Can you be thinking of those paradigms of spontaneous and harmonious order, the NHS and the education system?

[chris]

Sorry, gentlemen. I think you've missed the point.
Of course, no sane leftist objects to fruit and veg markets (though these are, D2, stressful - just look at how the sellers holler). But these are the nearest we see to textbook perfectly competitive markets. This suggests to me that what the left should object to about the introduction of markets in healthcare and education is not the principle, but the practice - that the markets will be impefect, even rigged in favour of big business and the middle-class.
D2 and Phil - you're right, markets can be hard on workers who are unable to bear risks and have no background assets. But the solution is not to oppose markets, but to give them background assets (a basic income?) and develop better markets in risk-bearing.
As for the "overwhelming evidence", maybe I was overstating the case - the trouble is that there's no obvious counterfactual; what would society look like if market socialism had been adopted and developed instead of Bevridge-Keynesianism?
Matthew - cross-country correlations between equality and govt share of GDP are of course problematic. Maybe very inegalitarian countries have low state spending because the rich are powerful enough to oppose taxes. And maybe egalitarian countries have higher spedning because equality generates social solidarity. That said, countries like
Japan and South Korea show that low state spending can be compatible with reasonable equality and good health and education outcomes.
UK evidence on profit trends is here:
http://www.statistics.gov.uk/pdfdir/prof0106.pdf
There was a trend fall in the profit rate after the 60s, but it was reversed in the 80s and 90s.
You can cobble US figures together from the flow of funds data - pre-tax profits in ther flows tables and tangible assets in the balance sheets.
http://www.federalreserve.gov/releases/z1/current/data.htm
These show a trend decline up to 2003 and a huge boom thereafter.

[Luis Enrique]

oof, 6% return for manufacturing companies? I think that means the workers are exploiting the capitalists. Bad workers!

However, the owners of services companies seem to be laughing all the way to the bank, eh? 16% return! My only reservation is to wonder how they measure capital upon which they're getting a return. What would an advertising agency look like, as far as invested capital goes?

[Chris Williams]

As an ultra-leftist, I'd like to point out that I regularly buy stuff off Leicester market, although not from Gary Lineker's dad because his fruit is over-priced.

Aside from that - what Phil said. And this nugget: "Economic accounting is unthinkable without market relations." Guess the author.