The competitive market process is first of all a discovery process, then a selection process. It is an evolutionary process. The great advantage of a society coordinated indirectly via markets rather than directly via explicit cooperation is that there is no need to get everybody’s or indeed anybody’s agreement before trying out a new venture, product or service. That’s where the evolutionary dynamism of the capitalist take off of human civilization resides. This vitality is being choked off the more safeguards, guarantees, protections we demand or allow our nanny state to impose. It was Hayek’s profound insight that “competition is important only because and insofar as its outcomes are unpredictable and on the whole different from those that anyone would have been able to consciously strive for; and that its salutary effects must manifest themselves by frustrating certain intentions and disappointing certain expectations.” The problem is that democratic political power has been called upon, offers itself and is being used to avoid these necessary disappointments. These local, temporary disappointments or losses that are the inevitable flipside of the game of progress, a game that will be a global non-zero-sum game with net gains, if it is allowed to play on along its unpredictable upward path. The crisis and stagnation we are witnessing in the last 6 years and that are being decried as the failings of capitalism are rather due to a rampant interventionism that is crippling the discovery – and selfregulation mechanisms of capitalism proper: The Bernanke put (updating the fateful “Greenspan put”), bail-outs, deposit insurance, morgage guarantees, employment protections, pension promises etc. etc. Capitalism withered away during the 20th Century, and in particular in the last 6 years. Capitalism degenerates if it is not to allowed to be a profit and loss system. Can there be capitalism without functioning capital markets? Capital markets are being manipulated out of existence by central bank interventions. All the interest rate repression, bail-outs, subsidies, and restrictions on business have finally sapped the vital juices of capitalism, i.e. the vitality of our civilization. Our economic system is no longer capitalism but a statist pressure group cronyism. That’s nimbyism writ large. Every pressure group is claiming its own protection from “unfair” competition, demanding subsidies, guarantees, privileges, entitlements … This starts with the banks, investors, big business but also includes home owners, the professions, trade unions and benefit recipients. The latest anecdote in this sad farce: Nick Clegg wants to guarantee house prices by a government promise to purchase or compensate those who’s house values might be adversely affected by new developments (projected new towns) in South-east England, in order to diffuse the expected nimby resistance to any new development. When the preservation of prices finally becomes an entitlement markets cease to exist altogether. Everybody is calling for state protection, to be shielded from competition. Can we all protect each other from each other? To let some air back into this stagnant civilization we have to allow risk back into our life. Neo-liberalism is a myth when in many European countries (including the UK) more than 50% of GDP is consumed, distributed or managed by the state. In France this figure has reached 57% and seems to be rising inexorably in all advanced countries. This suffocation cannot be stopped unless we stop clamouring for the state to intervene whenever something or someone upsets us or our evermore sensitive sense for political correctness. We have to risk rolling back some of these suffocating (and ultimately illusory) guarantees and bear some of the inherent uncertainty of the adventure of a global evolving civilization, to get back onto a path that allows us once more to reap its unpredictable fruits, to let us surprise ourselves once more.
Posted on: Tue, 05 Aug 2014 04:08:56 +0000