Modern Markets as a Dialectic
Chris Shaw |
@ChrisShaw93 |
Support this author on Patreon | November 11th, 2016
This essay argues that markets are an ideational construct, constructed through a milieu of ideologies, power structures and authority relations. Rather than modern markets being spontaneously ordered mechanisms that have evolved naturally from the progressions of history, they are in instead constitutions of power and ideas, acting as a semiotic mechanism for underlying socio-economic realities. In this sense, markets are viewed through a critical and constructivist lens, as constituted realities which are not static as they are in neoclassical models of the economy. Further, the underlying reality, that of capitalism in its historic and modern contexts, does not actually correspond to market mechanisms. Rather capitalist social relations are reliant on and dominated by state interventions and the hierarchies of firms, with markets playing a peripheral role. Thus, markets (in their ideational construction) and capitalism together constitute a conflictual dialectic, with the former subordinated to the power relations of the latter.
As seen through the neoliberal prism, markets are the glue of the modern economic system, directing prices and exchange information through the international economy. In this view, markets are fundamentally a material construct, there to facilitate the interaction of rational decision-makers which leads to the distribution of scarce resources. “Most see the environment in which firms and governments operate as predominantly material. The incentives, they argue, that actors derive from the material structure of the economy determine what firms and governments do”
[1]. The surrounding socio-economic structures are viewed as static, with power relations and institutions taking a secondary role to incentives and the rational decisions of market actors.
This view is a form of functionalism, “the belief that specialized international structures evolve in a quasi-automatic manner to perform new tasks or fulfil new needs as they arise”
[2]. Markets are seen as existing due to a mythical spontaneous order, their evolution and institutionalisation taken for granted relative to their theoretical existence. This materialistic view however is constructed by ideas, purposeful interventions and the dynamics of particular power relations. Modern markets need to be understood in the constructivist sense, as “collectively held ideas” that “shape the social, economic, and political world in which we live”
[3]. They are not static realities, instead requiring ideological confirmation and an institutionalisation, embodied in the market society. Modern markets and the material realities of capitalism need to be seen through a critical lens, as a constructed reality. A critical approach allows one to understand not just the mechanics of socio-economic relations, but their originating discourses and the alternatives that were obscured
[4]. There is a recognition that within markets, reality and its subjects are constructed and constrained via legitimating ideologies.
Markets then are ideational, being understood as structures that have an almost static quality in relation to existing capitalism. Epitomising markets as simple conduits of capitalist activity constitutes a form of authority, recognising instrumental rationality and its subsequent socio-economic actions as the generalised mode of action in a market economy. Thus things like “myths, identities, symbols, norms, and conventions that people construct to motivate and prioritize their actions”
[5] are treated as secondary issues relative to the authority given to rationalism. Markets are conceived as a rationalist discourse that has authority over alternative ones, removing other agencies and creating a dominant market agency in their place. But this does not correspond to the realities of actually-existing capitalism. Capitalist relations, while discursively recognised as market-based, are actually constructed through a multitude of different forces and material structures, which shape their distributional outcomes.
Between markets and capitalism, there then exists an antagonistic tension, as the dynamics of markets play a materially peripheral role in the relations of capitalism. The ideational market and capitalist reality act together in a dialectic. In the same way that labour is subordinated to capital, the ideational qualities of markets are subordinated to a capitalist construct which favours particular power relations and interests, with markets ideational qualities structured around capitalism.
In this constructivist sense, markets are a construct that have a peripheral role in capitalist relations. The authority relations of capitalism effectively mandate that the plethora of value structures forgotten in favour of a rationalist doctrine. Pathways of subjectivity are created whereby subjects are shaped by authority relations, as “discourse and identity” act “as the foundational elements of a social context, with the position a subject takes within a particular discursive field defining that identity”
[6]. Subjects are shaped by the abstractions of the ideational market, whereby decisions and institutions are understood as acting out of a rational context. Incentives, in the Smithian sense of self-interest, produce outcomes which allow for the reproduction of the market. Individuals, while being emplaced as ‘free’ subjects in the capitalist market, are treated mechanically, as acting rationally. Walras in his work on the market system furthered this abstraction by understanding a market economy through the assumption that such an economy already existed
[7]. He further assumes that autonomous, rational individuals exist and that market institutions are a given, economising Smithian political economy in the purest sense. The classic adage, “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest”
[8], is taken for granted as a normal state of affairs, thus abstracting the market from the real world and creating the definition of a self-regulating system of interlocking interests.
This rationalist political economy is itself founded on ideological constructions, particularly within the foundations of modernist thought in Cartesian philosophy. In the ideas of Descartes, we see a mechanical understanding of the body, with each individual body part treated as a component in the human machine. The body’s “limits are marked, their possibilities weighed with such a thoroughness that one has the impression that the ‘book of human nature’ has been opened”
[9]. Thus human nature itself is subordinated to a form of scientific rationality, which sets out “human faculties from the viewpoint of their potential for work and contribution to discipline”
[10]. There develops “a new bourgeois spirit that calculates, classifies, makes distinctions, and degrades the body only in order to rationalize its faculties”. To develop wage labour relations, a key component of capitalism, one needs to degrade and rationalise the body. The rationalism of markets acts in the same way, codifying social relations as identifiably rational and understanding capitalism as the system that best facilitates these rational desires.
In understanding market’s socio-economic organisation there is a continual assumption of functionality, in the sense that things evolve naturally. The market in its modern context is supposedly a natural evolution from previous forms of socio-economic organisation. There is an assumption of continual expansion outwards, with “the long-run trend toward integration seem(ing) to be for functions, authority and loyalties to be transferred from smaller units to larger ones”
[11]. Capital accumulation is justified as a natural force of historical evolution.
In a similar vein, the Hayekian concept of an emergent order shows the development of individual and private property as the inevitable consequence of human interaction, with the purpose of such interaction the development of the individual. For the development of trade, individual property is seen as indispensable, with these early property relations codifying particular hierarchies containing a “‘vertical’ division of property rights”
[12]. In the Lockean perspective of the labour theory of property, the concept of land enclosure is an ideational construct that makes private property, a linchpin of capitalism as Hayek notes, a legitimate development of market dynamics. “Locke’s version of primitive accumulation of land can be characterized as a variant of Thier’s ‘nursery tale’. Locke divides humanity between the ‘rational and industrious’ and ‘quarrelsome and contentious'”
[13]. For the Lockean conception of property, labour, as a rational and industrious activity, is the central element to determining ownership, ignoring other socio-economic conceptions. These dynamics are made ideational by the creation of ideas that show their historical evolution as the development of rational market-based interactions. These ahistoric views on the development of property make, once again, markets into a natural system with a non-controversial origin, rather than a functionalised, constructed reality.
The ideational constructs which surround modern markets, whether in their theoretical dynamics or their constituent compositions, do not actually correspond to the realities of capitalism. Rather much of the modern capitalist system has been created by systemic state intervention which accumulates economic power and restricts market competition. As Polanyi has shown, the original laissez-faire was planned by states in their pursuit of a market society.
The self-regulating capitalist market rests on a number of ideational assumptions: that people engage in economic activity to maximise wealth, that there are no bottlenecks in the equilibrium of supply and demand and that the commodification of land, labour and money are natural phenomena
[14]. Historically such a system was never in existence to the internationalised extent that it is now. Most markets were subsumed under a wider social structure, as in the regulation of market pricing via guilds and local governance systems
[15]. For example, much of the market activity surrounding grain pricing in 18th century England was delineated by the socially regulative force of the crowd in the local market. “The economy of the poor was still local and regional, derivative from a subsistence-economy. Corn should be consumed in the region in which it was grown, especially in times of scarcity”
[16]. Any sense of a national or transnational market created and informed by self-regulated structures was not conceived of as normal practice. “A self-regulating market demands nothing less than the institutional separation of society into an economic and a political sphere”
[17], which itself requires the development of a market society, something historically unprecedented. This means subordinating the fictitious commodities (land, money and labour) to the state when constructing this market society. The money supply is regulated by the state to limit inflation and deflation. Labour markets are regulated so as limit the levels of unemployment. Land is regulated so as to guarantee private property and delineate property claims, such as was seen during the enclosures of common land.
This is a process of historical materialism, where the conflicts of history develop a “process of a continual remaking of human nature and the creation of new patterns of social relations which change the rules of the game”
[18]. In this sense, capitalism is the material structure that market ideologies structurate. To create a capitalist economy in the sense of a self-regulating market, the wider economy (including markets) needs to be subordinated to the market society. Historical processes of primitive accumulation are the actual structuring mechanisms. The enclosure of common land for example subordinated the multitude of commoners and poor cottagers to the developing industrial factory system
[19]. Theories of spontaneous order and a seamless process of land enclosure have no historical context, with the need to develop such systems requiring the implementation of authority relations which subordinate production processes, embedded markets and labour to the needs of capital accumulation. Markets act as an ideational cover for these realities, making the residual conflict out to be a natural historical process.
This ideational cover produces a dialectic between the material realities of capitalism and the ideational construct of the market. There is the recognition that capitalism has subordinated the market in this dialectic, with “the knowledge that each assertion concerning reality contains implicitly its opposite”, in this case the ideational market being subordinated to its opposite, the capitalist system. Thus markets, as embedded structures, act in antagonism to the material realities of capitalism. DeLanda shows this in his dichotomisation of markets (as non-capitalist entities) with his concept of antimarkets. Antimarkets are the material epitomisation of capitalism, with market competition and supply and demand curves having no part to play in a system that is reliant on hierarchical command structures
[20]. This can be seen during processes of Bretton Wood-era trade liberalisation, when there was a predominant move toward intra-firm liberalisation
[21], with large oligopolistic firms creating an interpenetration of product lines that allowed for centralisation and diversification
[22]. The forms of centralised capital that are witnessed “must be seen as arising…from slow accumulations of traits which later become consolidated into more or less permanent structures, and not, of course, as the manifestation of some pre-existing essence”
[23]. The realities of capitalist antimarkets do not accord to a competitive market structure, described by DeLanda as a “meshwork structure”, an “assemblage of human beings by interlocking complementary demands”
[24] at the small-scale. Here we see the essence of this dialectical conflict of markets and capitalism.
Capitalist markets have consistently required intervention, never emerging from that “pre-existing essence”. Aglietta notes that in the development of American capitalism, the state granted railway companies created effective land monopolies, which increased the site value of the land and led to the need for higher profits and expansionary production outlets to afford these new capital costs
[25]. The pre-existing petty commodity production and agricultural economies were destroyed due to the artificial increase in the cost of commodity production and circulation. The expansion of capitalism went hand-in-hand with the state. For the continued maintenance of capitalist relations, the state also had to intervene, in this case mandating barriers to entry that “requires the neutralization of strong competitive tensions”
[26]. A form of competition is developed that takes the form of a “concrete process that transforms the social conditions of production”
[27], akin to processes of primitive accumulation. The internationalisation of the state produced similar upheavals, as the machinery of surveillance expanded under the British Empire, it produced local petty bourgeoisies and a wage labour force governed by capitalist relations
[28], thus transforming alternative economic systems into capitalist ones. Under the pax americana, similar processes occurred as trade was liberalised and production was internationalised under the guidance of international institutions and the hegemonic position of the United States. “The notion of international obligation”
[29] created an interlocking system, where government’s financial policies and economic institutions were harmonised, allowing for the internationalisation and centralisation of production. Transformations of this kind are impossible without the intervention of the state to guarantee productive economic lines and enforce socio-economic relations which guarantee the capacity for social upheaval and a process of cumulative destruction. Alternative economic systems are exorcised in the processes of capitalist structuration, as the pathways of subjectivity in capitalism shape and limit subject’s preferences.
Proudhon showed the dichotomy of property as theft with property as freedom
[30], recognising an innate contradiction in the conception of property which can lead to divergent definitions within the surrounding social structure. Private property is an illusion to mask prevailing power relations and maldistributive consequences. Markets in the current context act in exactly the same way, with their image as rational systems of resource distribution, with all resources open to processes of commodification, but with their existence and enforcement reliant upon the coercive power of the state.
Modern markets are an ideational conception, described by Walras as a static reality born of natural historical forces. However their material reality accords itself to other structures such as the state and the firm. Internationalisation of the state came in parallel with the internationalisation of capitalism, representing the innate dialectical conflict between the market as a socially-defined reality with the international marketplace domineered by capitalist social relations.
As a result, markets are a dialectic in the modern capitalist system. Their ideational qualities are subsumed to socio-economic relations inherent to capitalism, with Smithian language, that of understanding the moral principles that underpin market reproduction and the systems of self-interest and fellow-feeling which need to intermix to develop a functioning market, with market prices determined as much by the surrounding moral structure as they are by economic coordination
[31], being a semiotic guise for capitalist authority relations. Markets, as a meshwork of variable social relations which exist at smaller scales, are antithetical to capitalist constructions and in dialectical conflict with the wider capitalist system, with markets as an ideational cover for the wider realities of capitalism.
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