This is a long post, and some of what it says may seem hard to believe. Do not dismiss it until you have read the UK Government Cabinet Paper cited at the end of the post.

What do Market Fundamentalists really want?

Philip Hammond is one of many former leading Tories who say that the Conservative Party has been taken over by extreme right-wing radicals. As another former Tory, Anna Soubry, put it, ‘The right wing… are now running the Conservative Party from top to toe. They are the Conservative Party.

Here is Hammond responding to a former colleague:

As he wrote in The Times,

The radicals advising Boris do not want a deal. Like the Marxists on the Labour Left, they see the shock of a no-deal Brexit as a chance to re-order our economy and society….That is manifestly not the will of the people.

This is a hugely important change politically: the most successful vote-winning machine in British politics is now being run by market fundamentalists: an extreme right-wing group with a radical agenda to reorder society. But what is that agenda?

To answer the question, we need to see what they believe and who they follow. And the answers are deeply disturbing.

Market Fundamentalists have an alternative morality

The Oxford Dictionaries define morality as follows:

 

Morality (noun) 1. Principles concerning the distinction between right and wrong or good and bad behaviour. ‘the matter boiled down to simple morality: innocent prisoners ought to be freed’

1.1 A particular system of values and principles of conduct. ‘a bourgeois morality’

1.2 The extent to which an action is right or wrong. ‘the issue of the morality of the possession of nuclear weapons’

 

 

For most people, this definition makes sense. Morality has to do with right and wrong, with good and bad. It is connected with values and principles. A moral person makes judgements – sometimes difficult ones – about what is right and wrong, based on values and principles.

But not everyone sees it this way. In Oscar Wilde’s play, Lady Windemere’s Fan, when Lord Darlington defined a cynic as ‘a man who knows the price of everything, and the value of nothing,’ Cecil Graham replied, ‘And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything and doesn’t know the market price of any single thing.

Graham is not alone in thinking that any value other than the market price is absurd. Many proponents of free markets think this way. This line of thought has an engaging clarity and simplicity: if a willing buyer and a willing seller agree on a price, what right has anyone else to say that this is not the fair value? (of course, in the real world many transactions are not between willing buyers and sellers freely assessing the value of the transaction. Most smokers buy cigarettes, not because they have assessed the value and found it worth the price, but because they are addicted. Workers being paid below the living wage accept it, not because they agree it is fair, but because they have no other choice).

Why bring subjective notions of right and wrong, good and bad into the question? Why complicate matters with systems of values and principles? Why not simply say that the market price is the moral price? As soon as this point is accepted, often as a near-religious tenet, most of morality can happily be left to the market. In the words of George Soros:

This idea was called laissez faire in the nineteenth century… I have found a better name for it: market fundamentalism.

Is Mark Lore, the CEO of Walmart, really worth US$236 million per annum? Let the market decide. Should there be more low-cost housing? Let the market decide. How much should a nurse be paid? Let the market decide!

This line of thinking produces results that most people find bizarre. In the US, an oncology nurse can expect to earn between US$74,000 and US$118,000. But each of the key executives of the tobacco company Philip Morris is paid more than US$5 million. If we accept that the market price truly reflects their moral value, we must conclude that each one of these executives does more good for society by producing, marketing and selling (carcinogenic) cigarettes than fifty oncology nurses do in tending those with cancer.

Most people would reject that explanation and say that, while the nurses clearly do far more good for society, their skills are not so scarce, their bargaining power is lower and so they are paid less.

Market fundamentalists view this rejection as absurd sentimentalism. If the nurses really were worth more, they would be paid more; if the executives really were worth less, they would be paid less.

When these people say, ‘markets are the best way to allocate resources’, they don’t simply mean best as in easiest: they mean best as in most moral.

Market fundamentalists view taxation as theft

A fundamentalist defines a market transaction as one between a willing seller and a willing buyer. By this definition, therefore, there is no coercion. (Athough, as we saw above, many commercial transactions are not really free exchanges). Tax, they say, is often not willingly paid: people pay only when they are legally obliged to do so (and not always even then). For a market fundamentalist, this is simply wrong: it doesn’t matter how much good the taxes will do – even how many lives they will save – or how frivolous the taxpayer’s alternative use of the money might be, the fact is that the money was effectively taken by force. That is theft.

And they believe that far too much is taken. As the American investor James Dale Davidson and William Rees-Mogg, the former editor of The Times, explain in their book, The Sovereign Individual:

… with the top 1% of taxpayers paying 30.2% of the total income tax in the United States (1995), it is not a question of the rich failing to repay any genuine investment the state may have made in their education or economic prosperity. To the contrary. Those who pay most of the bills pay vastly more than the value of any benefits they receive.

Market fundamentalists believe that, like a business, governments should view their taxpayers as customers, and charge them only for the services they receive, in a non-coercive transaction. As Davidson and Rees-Mogg put it:

Yet when you think about it, when customers really are in the driver’s seat it would be considered outrageous that they should not get what they want. If you went into a store to buy furniture and the sales people took your money but then proceeded to ignore your requests and consult others about how to spend your money, you would quite rightly be upset.

You would not think it normal or justifiable if the employees of the store argued that you really did not deserve the furniture, and that it should be shipped instead to someone whom they found more worthy…

The terms of progressive income taxation, which emerged in every democratic welfare state during the course of the twentieth century, are dramatically unlike pricing provisions that would be preferred by customers.

The answer, they believe, is for government to start acting like any other business. Of course, this will mean that taxation will fall dramatically, and with it, public spending.

Market fundamentalists view normal people as a burden

With income distribution at current levels, roughly half of the working population in both the US and the UK would be unable to survive without external help. Most people regard this as a sign that the system isn’t working properly, and they view providing the help as an intrinsic part of a civilized society.

To a market fundamentalist, though, these people are simply not worth what it costs to keep them alive. Their existence is not cost-effective, and being forced to sustain them is an unjustified burden.

Market forces, they say, are meritocratic – and the problem is that these people have too little merit.

Ira Sohn, Professor of Economics at Montclair State University, has pointed out that with technological advances, many of these people (i.e. people who have to work for a living) will no longer be needed at all:

The prospects for adopting labour-saving technologies in many of the labour-intensive sectors in the economy are improving annually: self-checkout at supermarkets, self-check-in and -out at hotels, self-ordering and bill settlement in restaurants, self-administered health diagnostic tests and so on all translate into a reduced need for workers per dollar of gross domestic product on the one hand, and fewer total workers along with higher levels of GDP on the other.

Horses were used extensively on the farm and in transport in eighteenth- and nineteenth-century America and Europe, but once mechanization and electrification were implemented, and the railroad, automobiles and buses became commercially viable as transport alternatives, owning horses became a hobby of the rich, and the horse population declined quickly and dramatically.

The same can probably be said about humans in the 21st century: we just don’t need that many of them – and, in the rich countries, they are expensive to ‘produce’ (prenatal and postnatal care), ‘assemble’ (nurture and educate), and ‘maintain’ (from adolescence to death). As technology continues to become ever more capable and most humans, frankly, do not, there is less and less need for workers to produce the goods and services required by society.

Most people today, Sohn believes, are like horses at the end of the nineteenth century. There will shortly be no need for them. And Chapter 5 of 99% shows that he may well be right.

This should give us all pause for thought.

For the market fundamentalists, there is a choice here: the more hard-nosed think that the redundant people should simply sink or swim; the more compassionate think that the most deserving should receive (voluntary) support from charities or wealthy individuals – but not, of course, at the levels that they have been used to.

And only if they appear deserving.

Mitt Romney, the US presidential candidate, explained to his potential donors his view that 47 per cent of Americans take no personal responsibility and make no contribution to society – and so his job is not to worry about those people:

There are 47 per cent of the people who will vote for the president no matter what… These are people who pay no income tax. Forty-seven per cent of Americans pay no income tax… And so my job is not to worry about those people – I’ll never convince them that they should take personal responsibility and care for their lives.

Davidson and Rees-Mogg explain their thoughts on what should replace government support for the roughly half of the population who depend on it:

The collapse of coerced income redistribution is bound to upset those who expect to be on the receiving end of the trillions in transfer programs. Mostly these will be ‘the losers or left-behinds’, persons without the skills to compete in global markets.

When the hope of aid for those falling behind is based primarily upon appeals to private individuals and charitable bodies, it will be more important than it has been in the twentieth century that the recipients of charity appear to be morally deserving to those voluntarily dispensing the charity.

The only barrier to making this happen is that the law would have to change, and both the UK and the US are democracies, at least for now.

Market fundamentalists view democracy as tyranny

Peter Thiel, the billionaire co-founder of PayPal, stated in 2009: ‘I no longer believe that freedom and democracy are compatible.’ He explained his reasons:

The higher one’s IQ, the more pessimistic one became [after leaving college] about free-market politics – capitalism simply is not that popular with the crowd… For those of us who are libertarian in 2009, our education culminates with the knowledge that the broader education of the body politic has become a fool’s errand. Indeed, even more pessimistically, the trend has been going the wrong way for a long time… Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women – two constituencies that are notoriously tough for libertarians – have rendered the notion of ‘capitalist democracy’ into an oxymoron.

Davidson and Rees-Mogg agree:

Mass democracy leads to control of government by its ‘employees’. But wait. You may be saying that in most jurisdictions there are many more voters than there are persons on the government payroll. How could it be possible for employees to dominate under such conditions?

The welfare state emerged to answer exactly this quandary. Since there were not otherwise enough employees to create a working majority, increasing numbers of voters were effectively put on the payroll to receive transfer payments of all kinds. In effect the recipients of transfer payments and subsidies became student employees of government who were able to dispense with the bother of reporting every day to work.

The answer, of course, is to do away with mass democracy.

So the short answer to the question is that they want to end progressive taxation and redistribution and therefore the Welfare State, the NHS, etc. And to achieve that, they would like to restrict democracy, so that the masses cannot vote for these things to continue.

Is this really plausible?

None of this is yet openly declared. And it may seem frankly incredible to imagine a British Government thinking this way. But the national archives contain cabinet papers from 1982 showing that some of these ideas were being discussed confidentially even then. You can download the papers at no charge on https://discovery.nationalarchives.gov.uk/details/r/C13318082

Here is the passage on health care, for example.

‘As living standards rise, individuals are likely to demand more and better healthcare. There is some social gain from improved healthcare, but it is mainly a matter of individual wants and choices. Hence it is arguably not appropriate for public finance, and puts a strain on the Exchequer by distorting choices and shifting the burden from consumer to taxpayer. Public health services also tend to be led by producers rather than consumers.

It is therefore worth considering whether, over a period, the provision of healthcare for the bulk of the population could be shifted from the state to privately owned and run medical facilities. Those who could not afford to pay would then have their charges met by the state, via some form rebating reimbursement.…

This would mean leaving to individuals how far they insured against facing high costs of healthcare, and it would be important to monitor the growth of private health insurance over the intervening period. Given that the state would in the last resort meet the costs of necessary healthcare, there could be a danger of underinsurance by a large part of the working population, and thought therefore might have to be given to a scheme for compulsory private insurance.’

And the passage on education:

‘This demand for education, as for health, is likely to be “income elastic” as living standards rise, people will want to spend a higher proportion of their income on more and better education for their children, and will be increasingly frustrated by the lack anyway of making this choice effective within the state primary and secondary system. In addition, however, there is a social interest, arguably greater health, in the quality and quantity of education, because that these will determine the capacity and versatility of the next generation of working people. Hence in our judgement it is probably not realistic to envisage, even as a long-term option, the wholesale privatisation of provision for education in schools. However it may well be desirable to make higher education more market oriented, giving more choice to consumers and making the system more responsive to the needs of both students and employers.

We therefore assume that the state will continue to provide universal facilities for children of primary and secondary school age, and to be concerned about quality. But the parallel system of private sector schooling will remain and may expand with increasing prosperity.

More parents should be encouraged to choose the private sector, at the margin, by schemes for vouchers or tax relief; but if such schemes simply relieved parents of part of the cost of education, they are bound to be expensive for the taxpayer. Hence as radical options for schools education, ministers may wish to consider a substantial reduction in the resources going to the public sector, or compulsory charging for schooling.

And on social security:

‘The present system indexes most benefits to prices, and a very large number of beneficiaries (9 million pensioners, 3 million unemployed, et cetera) have the real value of their benefits preserved, even at times when the working population suffered a cut in living standards. The government probably cannot avoid recognising preservation of real value to benchmark (as for tax thresholds). But it could avoid any commitment to prolong the link between benefits and prices, and take the first legislative opportunity to break the link.’

As Chapter 4 of 99% points out: we should take these ideas very seriously, especially if we disagree with them.