The 21st Century Market…And How It Is Destroying Our Freedoms

One of the key concepts associated with capitalism is “free markets.”  But in recent times, the market has malignantly taken on a life of its own that is destroying individual freedoms. This modern — super-computer operated Market of 21st century capitalism — has become the guiding principle of our government and society in general. Politicians and economists all over the world consider if their Market is doing well, their economy must be doing well and so must be the people of their nation.When reading or watching the news, we constantly hear people talk about the “Market.” This is what the Market did today. Do not interfere with the Market. The Market is doing well. Let’s see what the Market will do tomorrow.  For an outsider’s perspective, it appears the Market has a human personality, a mind of its own, as an idol or even a god. With millions of people owning stock, the predisposition is to follow the Market. They wish, dream and pray the Market does well; in effect they are worshipping the Market, giving it more attention than other aspects of their lives.

While we refer to the Market like a person or a thing, it should be the name given to the place where the process of buying and selling occurs. The place could be anywhere. It could be at a local merchant, on the Internet or in a real estate office. For thousands of years, a market was just a place where the process of buying and selling occurred.  How has the location where the simple process of buying and selling occurs, evolved into society’s key guiding principle?  Actions at top governmental levels are often evaluated based on their ability to influence the Market or are influenced by actions of the Market.  Perhaps there is no other topic that the world’s governments spend more time on than economics, and their goal of achieving a strong economy continues to be ever more defined as having a strong Market.  However the Market should be viewed as an economic process, subordinated to and guided by higher principles and values of society such as fairness, honesty and responsibility to others to achieve the higher goals of increasing individual freedom to pursue personal happiness.  This inversion of achievement priorities between society’s higher principles and its operational processes such as economics reveals civilization has lost sense of its higher purpose to exist and if not addressed, contains the seeds of eventual collapse.  It results in behaviors that are characteristic of a primitive species.

Our philosophical opposition to interfering with an individual’s right to engage in the “free market,” compounds the problem. We believe that everyone should be free to participate in the Market. But the Market of the 21st Century is not the same market of free market capitalism where buying and selling occurs between people such as consumers and producers, but it is the virtual place of computers where individuals become investors buying and selling financial instruments such as bonds, equities and many other more exotic financial products based on receiving expected returns.  It is a speculation on future pricing.  The value of these financial products is not just dependent upon their own merit, but the perception of their earning potential and the level of their performance relative to the performance of other financial products.  For example if a person buys both stocks and bonds, the value of their bonds will go down if their stocks go up and vice versa as market demand for the products change.  What these investors are seeking is making the most money with their money.  But without a sense of fairness, honesty and responsibility to others, the pursuit of maximum profit and greed takes over as the sole purpose and motivating force of the 21st Century Market.  This manmade Market where investors try to make more money off of someone else has become the primary guiding principle of modern 21st century society.

We pretend that by everyone being free to maximize their own self-interest, without consideration of the consequences on our mutual interests, is the best way to ensure advancement of our economy and civilization.  The beneficial group effect on society of everyone pursuing their own self interest is the “invisible hand” of capitalism as first described by Adam Smith, the 18th century prodigy credited with being the father of modern capitalistic theory.  Smith believed that every worker or business owner being free to maximize profits produced the greatest value for not only themselves, but for society in general, even though benefiting others was not the intention.  This sounds logical, but over 200 years ago during his time, if a business failed to provide good service, everyone learned about it in the small communities and neighborhoods that made up local economies. There was another “invisible hand” at work protecting consumers.  Word spread quickly among local consumers and the detrimental effect on the business would be appropriate.  There was no need for government regulation to stop abuses.

But today in our global world of the 21st Century Market, where the provider of services is separated from the purchaser by many degrees, organizations or individuals can purchase stocks in nanoseconds and sell a few seconds later.  Millions could be traded without the consumer or employee ever knowing what happened.  Someone could make a fortune manipulating a stock or currency price hurting people in a community on the other side of the world without them ever knowing how it happened or who did it.   In Smith’s time, those that were wealthy enough to invest, did not do it through a computer, but through personal contact with the owner or entrepreneur. The 21st Century Market is not a place where buying and selling occurs between business owners and consumers, but where investors buy and sell financial products totally removed from the actual business function where value is added.  For example, an individual investor could buy stock in a mutual fund whose managing director oversees different department heads who buy stocks or bonds of different investment categories or different industries represented by different multinational corporations whose different operating vice presidents run divisions or subsidiaries operated by specific directors of strategic business units or profit centers.  If the organizational chart is followed down, it eventually leads to a worker providing service or product to a customer.  While this might be confusing, it gets really complicated trying to understand the more exotic financial instruments of the 21st Century Market such as puts and calls, futures and derivatives, bundles of products sold around the world, swaps and securities, and more that are even farther removed from the actual ownership of a specific company’s stock.

The financial industry has created a whole new level of trading based almost exclusively on speculation (betting) even more removed from the actual point where value is actually added to society.  And it can be easily manipulated like the peak oil price of 2008 or the “flash crash” of 2010.  This is not the market that Adam Smith was speaking of.  He was speaking of a flourishing market of individuals free to pursue their occupation and enterprise of their choosing to maximize adding value for themselves and their community.

The Market today is about extracting value from those people who actually perform the service of value to society.  Sometimes it is not even that, but pure speculation and repetitive selling of financial products to create the false image of financial wealth being “created” without any real value being behind it.  But wherever the transaction is in the financial system, it is dependent upon making money off of someone else’s labor, and this has become our world’s primary guiding principle and economic barometer. The financial industry that manages this process has slowly increased in size and now represents one of the largest segments of Gross Domestic Product or output in developed countries, but itself has not added any intrinsic value to society, but provides a service that manipulates, directs and extracts value from those that do.  There are cracks beginning to show in the industry as more people become aware that there is not much real substance backing up the financial industry’s value.

A result of all of this is that the beneficial effect of the “invisible hand” of Adam Smith is really becoming invisible in modern society.  Without higher principles to guide the “invisible hand” effects on the economic processes of the free market, this outcome was inevitable. The United States now has over 200 years of experience of the laissez faire effects of invisible hand on its communities and its economy.  Lacking a moral basis and values, society has evolved into a place where people have lost their sense of responsibility to the common good.  Government’s efforts to legislate fairness and morality with new regulation are met with growing opposition.  Government, heavily influenced by the money of multinational corporations, is now viewed as a place to pursue and protect self interests rather than a forum to address common interests. As a result, we watch our economic world crash and recover, crash and recover in unending cycles of recessions and recovery like an out of control car swerving down the highway leaving massive human upheaval, suffering and fear  in its wake.  It should be obvious that government can’t steer a car with an invisible hand let alone a nation’s economy using our current system.  It must be steered by higher principles otherwise it will be steered by individuals and corporations who are the economic winners more interested in attaining more money and power.  Adam Smith’s concept of maximizing one’s value to increase profits is different than the goal of having more than one needs, regardless of the cost to others.  He believed society was successful economically when every person was able to meet their basic needs, not amass huge sums of money beyond his wildest imagination.  A society that looses site of its purpose, that encourages individualism without consideration of or responsibility to others for the common good of all, has lost its way.  We become less of a civilization and more like a divided “separatization” of classes of people separated by levels of wealth.

Of course it can be argued that there have been many positives to society to hands off economic policies that first permitted free market and free enterprise.  After all, it was what made America the most powerful nation on earth, but originally there was a sense of responsibility to the union and each other that made the accomplishments possible.  The poor, the suppressed and the rejected from all over the world came to America, remembering what it was like to live under aristocracies and the importance of  people to self govern themselves for the betterment of all.  There is not an outpost or colony in the early settlement of America that would have survived if everyone acted in their own self interest.  They worked together to survive where each person contributed as best they could to support the collective effort.  As society evolved and became successful, these higher principles have been forgotten.  The American Pledge of Allegiance has become a bunch of meaningless words rather than a meaningful and passionate pledge of allegiance to all fellow members of the republic to ensure liberty and justice for all. As a result, America is losing its leadership in the world.  It is slowly losing what it has worked for and is now beginning to be viewed as being the source of much of the world’s problems rather than being the guiding force for good, freedom and solving  problems.  Having let go of its guiding principles to let greed and out of control economic processes lead the way, in the end, the financial need for government has only grown larger, ecological sustainability is now seriously threatened, and the gap between the wealthy and the poor has increased.   I believe America and humanity can and must do better.

Society’s use of credit through the little understood monetary system of the financial industry, controls the market process to the extent there is never enough money in the hands of purchasers for all the sellers to survive. Without enough money to pay the compounding indebtedness and interest, sellers and buyers have less money to maintain healthy levels of commerce. The guiding principles become reactions of survival, out of balance and destructive competition and self-interests, breeding grounds for corruption.  All of this compounds exponentially and combined with the growing influence of corporate monopolies, business failures and personal bankruptcies accelerate. As more people lose jobs and businesses close, their creditors are hurt which leads to more failures. Eventually it must lead to total collapse as it nearly did in 2008, if it was not for the tax payer bailouts by government to protect mutual interests.  This cycle of ever fewer buyers and sellers, leads to a loss of choice and freedom of what you can buy and who you can buy it form.  It also creates a greater need for government assistance for the losers.  This leads to greater taxation, which leads back to the beginning of the cycle and a recognition that this is not a sustainable system. Even Adam Smith worried about the threat of corporations dominating industries and governments inappropriately interfering with markets to thwart small business and suppress wages of workers. Today it is obvious his fears were justified; however, even he did not foresee the eventual dominance of the financial industry among corporations.

While our system of free markets and free enterprise has allowed individuals such as the Walton family to build Wal-Mart into the world’s largest corporation, but to what end?  By working out the inefficiencies of having many small local merchants in the same town, Wal-Mart has been able to reduce local retail employment by up to 40 percent (see Institute for Local Self-Reliance www.ilsr.org). Unfortunately, these savings and profits do not stay in the local community, but leave the area to support corporate earnings.

All of this is good news from the perspective of Wal-Mart shareholders, unless you are concerned about your community’s underemployed residents, vacant store fronts, increases in crime and drug use and little opportunity for youth to be part of a functioning community. Just try to start a shoe store, a clothing store, a drug store, a grocery store or many other businesses today against corporate giants like Wal-Mart.
Small business owners and wage earners, jostled by the real “invisible hand” of corporate giants controlling the economy and government, become frustrated, then angry and eventually defeated in the name of free enterprise competition operating under the protection of the claim – “It’s a free market” which means – “My corporation should be free to do whatever it wants.”  Whether it is manipulating the price of oil to record highs artificially raising utility, food and other prices, taking hundreds of billions out of the pockets of citizens, or charging up to 30% interest on credit cards and other exorbitant fees, to take billions more away, the financial industry and corporations have been able to achieve monumental earnings at the expense of both the small business owner and the individual consumer.  This drains desperately needed cash flow right out of Main Street communities. The small business owner does not stand a chance to fairly compete in this “Free Market.”

In an advanced free, civil society, should not people have the right to choose their enterprise and occupation? Their method of contributing to society should be their free choice. It is when they are most productive. Unfortunately, young adults entering the workforce and seniors forced to work to pay for rising costs have fewer choices. It is not just fewer jobs, but there are fewer choices, despite new opportunities in certain technologies that sometimes require hundreds of thousands of dollars of education. Jobs that produce living wages are even more limited.  What will continue to happen as our population increases?

While there are no laws prohibiting anyone from trying to start a locally owned business, legal authority alone is a poor definition of free enterprise. It ignores the insurmountable odds of succeeding against a massive corporation, or the challenges of operating a business in a society without adequate cash flows.

In summary, we are rapidly losing freedom of choice, most importantly choice of enterprises and occupations, and now even products as monopolies streamline their product lines.  Our once thriving free market system continues to contract dominated by fewer and fewer companies. This loss of freedom is occurring because of the fundamental confusion between what is an economic process and what should be society’s higher guiding principles. I do not know of any civilization which can survive the test of time using the maximum pursuit of self interest as its guiding principle. Without the founding American ideals of diverse individuals coming together to decide how best to act together for maximization of mutual interests and to ensure freedom and justice for all, a democratic society cannot exists. To successfully self govern, it takes strong individual character and mastery of selfish desires of our inner ego.  In this inner struggle, we do have choice and freedom to decide.  It is an inherent and inalienable right and no government, corporation or individual can interfere.  Unfortunately, we have chosen poorly in recent years, and its destructive effects are being felt everywhere.

Without simultaneously considering both mutual interest and self interests, our loss of freedom is inevitable. Sadly this is embedded in our culture.  Just ask yourself how many times you think about the consequences of your actions on others before choosing?  Gradually there are signs of change emerging as some investors who are concerned about certain issues such as the environment or fair trade seek to make socially responsible investments. But is still rare, because our culture has not taught us to think this way living in the cutthroat economic system of the 21st Century Market. The Market and its supporting monetary system, demands by its nature fewer and bigger winners, more losers and fewer choices in markets and enterprises as each generation goes by.  When mentioned earlier that humanity can do better, it was not about band-aids of new government regulation. It was about the need for the world to first develop new principles to guide the future evolution of humankind, and then develop a new monetary system which works better for the world by creating more economic freedom rather than reducing it .

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