Left-wing criticism of the free market

This paper is written to address what I believe is an abiding shortcoming of leftwing criticism of the market: that it fails to reproduce anything like Hayek’s awareness of the inner determining principle of the action that is to be regulated by ex ante regulation.¹ This has emerged very clearly from the left-wing proposals for financial regulation in the wake of the crash. In one of the most theoretically penetrating exposures of the shortcomings of financial regulation that played their part in causing that crash, Professor McVae has shown that the assumption that the market is ‘a natural - or at least naturally preferred - form of social organisation’, which leads to the general conception of regulation as ‘an essentially ancillary and subservient’ response to market failure, is unjustifiable (McVae 2005: 416,431). McVae is right in this, and also is right to go on to argue that, rather than confining our view of regulation to what I have called social and ex post economic regulation, that view must include ex ante economic regulation: ‘the state represents the cradle within which all markets [including] sophisticated financial markets - are constituted and sustained’ (McVae 2005: 431-32). He sums up his views thus:

The so-called free market amounts to nothing more than ‘a social choice for a particular kind of regulation, not only in its negative features of [relative] nonintrusion upon private agreement, but in its positive features of enforcing those agreements ...’ as well as endorsing - or at least tolerating - the often predictable outcomes of such arrangements. As a result, proponents of freer markets must argue the merits of their preferred approach in much the same way as those who support a less free market must do for theirs (McVae 2005: 432-23, quoting Rubin 1988: 1267).

Whilst I wish to stress my agreement with this rejection of the concept of the free market, I believe it contains a series of unsustainable implicit arguments. What had been described as ‘constituted and sustained’ is redescribed as ‘social choice’. But are we free to ‘choose’ social arrangements in this way? If the task of ex ante regulation is the channelling of the autonomously defined selfinterest of economic actors, then ‘social choice’ is not an entirely happy term because our choice is so constrained that, in important respects, there is no choice. If one acknowledges the autonomous definition of one’s self-interest (in the face of scarcity) as the fundamental principle of free economic action, one can regulate for a productive general economy only by facilitating market action. One could, of course, instead choose to regulate on some other basis, such as, if this term may be allowed for purposes of argument, altruism. However, if economic actors are themselves to have the freedom to define what constitutes altruism, then such altruism is indistinguishable from autonomously defined self-interest. An economic actor may choose to commit his resources to the purchase of degrading pornography, or an improving book, or ^[1]

equipping a foundlings hospital. But, if it is he who chooses, then whether one calls his motivation self-interested or altruistic is irrelevant; the crucial point is not the substance of the choice but that the choice is autonomous. Whilst the concept of piecemeal social regulation turns on recognising that non-market action may well improve welfare in some defined instances, this improvement is secured by an exercise of coercion which extinguishes that autonomy, and the implicit claim in McVae’s way of putting it, that one can choose a general nonmarket economy, is incompatible with a general recognition of freedom of choice.

If by ‘freer markets’ we take McVae to mean use of a market, then he is also wrong to think the choice of market and non-market organisation should be placed on the same basis. If one identifies optimal welfare with voluntary choice, an optimising general economy must take the form of a market, and the ex ante regulation of the general economy must seek to create a market. Arguments for creating non-market spheres must be conceptualised as piecemeal cases for social regulation by state intervention. Of course, the choice of market and non-market governance should be open and balanced in any particular case, and it is obvious that the concept of deregulation is based on a biased approach to this choice (McVae 2005: 431). But the Pigouvian conception of intervention commits, as it were, the opposite error to that involved in the concept of deregulation. Instead of no regulation being necessary, all regulation can be social regulation because all regulation is conceived of as intervention. I have argued elsewhere that the Pigouvian tradition rests on this conceptualisation of all regulation as intervention, so that the argument for necessary ex ante regulation is taken to justify social regulation when, indeed, the two are opposed (Campbell 1999). McVae subscribes to this conceptualisation:

it is disingenuous to depict state intervention which goes beyond the realm ofcorrecting market failure as somehow unwarranted and in any more need of justification than markets that operate with a bare minimum of state involvement (McVae 2005: 432).

The sophisticated question McVae thereby leaves us with is not whether markets must be based on regulation. It is whether the fact that markets must be based on regulation leaves us with an unconstrained social choice of forms of general economy; in essence, whether the necessity of ex ante economic regulation equates to unlimited possibilities of social regulation. I do not remotely pretend to give a full answer to this question here. What I instead propose to do is examine the outstanding attempt to give expression to this purely social view of regulation: that of Marx.

Marx has written some of the most important passages that have ever been written in the history of social theory, and amongst them I would include the following:

The economists [claim that] everyone pursues his private interest and only his private interest, and thereby unintentionally and unwittingly serves the private interests of all, the general interest. [But this] abstract statement could rather lead to the conclusion that everyone mutually hinders the assertion of the interests of everyone else, and instead of a general affirmation, a general negation results from this bellum omnium contra omnes. The point is that the private interest is itself already a socially determined interest, which can be achieved only within the conditions of society and with the means provided by society.... It is the interest of private persons; but its content, as well as the form and means of its realisation, is given by social conditions independent of all (Marx 1958: vol. 28, 93-94).

I believe that this passage anticipates all that has of value emerged in the leftwing conceptualisation of regulation as a criticism of the free market. However, it is not on the strength of Marx’s views expressed in this passage that I will dwell, but on their weakness. This understanding of the social construction of the private led Marx to give an account of capitalism the value of which one would have said it was impossible to exaggerate, were it not that the history of the twentieth century was in substantial part the history of its exaggeration. But it also led him to posit a communist alternative which so decoupled social possibility from the existential constraints on that possibility which capitalism recognises that, against Engels’ and Marx’s most profound intention, it amounted to a mere utopia. I have made my own contribution to the analysis of this tragic failure elsewhere (Campbell 2003a; 2011). Here I intend to explore how disregard of these constraints and a consequent utopianism informed the central concepts of Marx’s economics.

• [1] For a statement of the general position I wish to criticise by one of the most interesting at allrecent contributors to Marxist social theory, see Meiksins Wood (1981: 72): ‘Marx’s purpose ...is to stress not the dualism of the “material” and the “social” but the definition of the material bythe social’.