$ markets the spot
We live in a period where free market dominance is being openly questioned in terms of efficiency and sustainability – among other reasons. No doubt this has a lot to do with the financial crisis’ effect on every economy in the world, which is then retransmitted and multiplied due to globalization. Even the most fortified and/or isolated systems felt the disturbance knocking on their door.
And while there is a strong debate concerning neoliberalism’s failure to deliver, from a Pareto efficiency perspective, it is yet unclear what kind of market we want, need, can or should have. It may seem clear enough that we can have whatever we want, but is that so? Ideally, if we can bring all the involved players to light while explaining all the undergoing processes and interactions on a global scale, this may be the case.
Unregulated – Free Markets have been considered capable of regulating themselves in an optimal way without state intervention for a long time now. On a theoretical basis, a complete state’s “absence” from market practices is being clearly advocated. Roughly speaking, an analogy between unregulated markets and political anarchy can be noted and discussed.
In no case should states hinder market functionality, but this is totally different to an unconditional surrender and withdrawal from the game of market and economy formation. Market obstruction can be active – targeted, with specific regulations directly and/or indirectly affecting entrance to the market, capital and goods mobility etc. But it can also be passive – non targeted, through the presence of extremely complex, inflexible and opaque systems rendering the specific market unattractive to invest to. The latter is for example the case with bureaucracy, volatile taxation and the like.
State’s withdrawal from the game and market’s ability to self-regulate are exposed to criticism especially due to questions raised and assumptions made. For example:
- who is the true beneficiary of the markets’ supposed self-regulating ability? If only the interacting players benefit then what happens to those left or thrown out of the game?
- how can anyone advocate the equal starting point and power of every player involved?
- what prevents the growth of an oligopolistic elite once it gets going?
- why the state cannot or should not have a regulatory role without hindering the market?
- what happens to specific markets (e.g. housing sector) where few players are involved from start and so the path remains unclear concerning their improvement and the existence of options?
In specific markets like housing, with very specific characteristics and needs state’s absence may have far more severe effects in terms of supply, effectiveness, affordability and welfare.
If we think markets as flows, we can say the state can work as a container or a duct with the scope of making a good use of the flow while trying to prevent negative spillover effects and failures. Routing the flow does not mean obstructing it. Of course international players do not want states telling them “how” and “where” to do things with their money, or limiting their overgrowth for whatever the reason. Instead, these players are seeking states’ errors and exploit them in any way they can. Tax heavens and shadow economy are among the tools used by international players to boost their profits on a global level.
While international players are not – at least officially – to blame for the creation of a national market’s financial loopholes, their interaction with local actors surely does not promote a solution to the problem as long as there is individual profit to be made. This is usually excused based on the idea of economy and para-economy being interwoven together in a symbiotic link. That being said, if states keep pushing by imposing more taxes they are likely to see their economies going underground even more, thus creating a vicious cycle.
When persistently and absolutely advocating a single theory, system, ideology and the like, a deterministic and simplistic approach is often lurking. This has often to do with what seems easier and politically safer to do, at least in the short-term. For example it is more convenient for some governments to give in without terms, initiating a full-out privatization and deregulation process under the pressure of international actors and supranational institutions, than to work on devising and implementing a sustainable solution. Of course, such a voluntary surrender may as well be presented as a political ideology turn.
Truth is that today’s world is far more complex than ever despite the technological advances and some procedures’ simplifications. With the global economy becoming gradually more open, additional players tend to enter each hub and interact internally and externally in different – often opaque – ways, trying to establish and fortify their own interests. Political, social and financial conglomerations are formed for that matter and adjust according to changing conditions and needs. Each conglomeration and hub is in its turn interacting with numerous others creating a dynamic and vibrating global network. This dynamic has to be understood and embraced in order to stay flexible and adapt to the ever fluctuating balances.
Any such interplay, totally or partially non-material, is directly or indirectly connected to some game of power, having most of the time a very real, material and tangible impact. This is for example the case with urban design policy and its implementation, which will be discussed extensively in another article.
Tsachageas P. Dimitrios is a PhD Researcher in Urban Studies, under the supervision of Professors Mark Stephens and Glen Bramley. His research is focused on affordable and social housing systems and relevant policy issues in South-Southeastern Europe. Among other things, he is also writing articles for Greek journals and newspapers from time to time.
You may also be interested in Dimitris’ previous post on this blog: Optimism returns and who’s afraid of the Big ‘Bad’ Greek State