>> Home <<

 

The economy of the free market and democracy

PT, 25 april 2004

 

Introduction

When on the 9^th of November 1989 the Berlin wall tumbled down, a period of 40 years cold war had come to end, as well as decades of state communism in the eastern European countries. Large groups of people were boisterous. First of all of course all who had suffered the hardships of the state terror and the lack of freedom of thought. But there was also a group of outsiders who celebrate up to today this moment as the victory of the free world, the world of democracy and the free market. Communism, an idealistic political system that was corrupted by perfidious minds of individuals, was defeated and had proven to be impracticable and inhumane. Here we saw the bankruptcy of a system of restriction. Simultaneously it seemed to be obvious that the only practicable system was the one with only few restrictions and ‘natural’ regulations.

The scorn was not only mend for the communistic leaders of the countries in question. In fact it was the activists and the ideologists in the western countries that were to blame in particular. Finally it was proven they were credulous, narrow minded and badly informed. Shame on them. Some of them were forced to a public penance, others turned out to be suffering of amnesia about their former convictions. For the concerned inquisitors this was one of the crowns on their own political conviction. They had proven to be in their right. From all political and economic systems the combination of democracy and the economy of the free market is in favour.

 

No one will dispute the benefits of the modern western democracy. Despite all imperfection and weakness it is at the moment the better effort for freedom and some of the basic human rights. Assaulting modern democracy, especially by someone who himself enjoys its benefits, is generally not appreciated in the western world. Democracy is indubitable. Democracy has become a kind of panacea for global trouble. And because there is a strong but barely justified belief that the free market is the best guarantee for democracy, these days the free market itself has got a moral aureole too. Disputing the free market is often regarded as more than an economic objection, it is felt as an assault to the democratic achievements. Not seldom this confusion is interwoven in the critics on our former Marxist and socialist friends.

 

Unfortunately things are never as simple as that and the modern inquisitors might miss some important lessons that history has to teach us. Any system can be affected and corrupted by the perfidious human mind. Celebrating the defeat of communism as a decisive victory also could include one of those frequently appearing mistakes in history, namely self-legitimacy. It is the human mind itself that needs to be challenged continuously. If there is a main lesson to be learned, it’s not primarily dealing with systems but affecting our own individual minds. Like one of the greater problems of mankind, the continuous, satisfactory, loud and premature stressing of our own legitimacy. Especially in the political debate an exercise in modesty, quietness and provisionality is needed, more than ever. Much of the failures of the defeated system also stick to ours, simply because we individuals are no other than the ‘former enemy’.

On some distinctions and definitions

First of all, it is necessary to make a clear distinction between a system level approach and an individual level approach. It looks a bit like Wittgenstein’s distinction of specific use of language in different cultural settings – he called them ‘linguistic games’, not because of the playful art of our cultural behaviour but because of the specific rules that govern the discerned linguistic behaviour. The distinction between the two economic – or should we say social or behavioural – approaches is necessary because of the specific characteristics, but surely not because the levels are isolated in any way. They are strongly involved in each other. For instance, religion affects both personal and system level but the effect within the level is very specific and affecting forces of complete different impact. But the primary effects will always and eventually affect the other level. The distinction is similar to that between psychology and social psychology, or between molecular and organic biology. I think it’s crucial, talking about political regulations, measures and results to indicate the specific level effect. Take for instance the recent discussion about the social and economical effects of fundamentalism on societies. Some months ago I asked a colleague what Islamic fundamentalism is telling us today. He replied: ‘Nothing! We shouldn’t talk with extremists.’ Obviously level confusion at work. Probably we’d better not have a discussion with individual fundamentalists, but the message for our society is quit clear and to be understood. And so administrations react – whether or not in the right way.

Another point of interest is the use of definitions in many disputes. For example what exactly is called democracy? What are it’s characteristics? When not clearly defined, democracy appears to be a kind of panacea, appealing to any kind of freedom of thought and speech, even in the weakest form –  though of course that in itself sometimes is extremely worth while, even when nobody hears the speech or notifies the thought.

 

On the economy of the free market

Well, let’s have a look at the economy of the free market by expressing some statements.

 

1. Just like the evolution by natural selection is considered as the most natural state of development of live on earth, the free market economy is the most natural state of economical behaviour of mankind.
2. It is that kind of natural because it requires the least ingredients of all economical systems. The only ingredients are the people’s needs, the products that meet those needs combined with the possibilities to produce them, and finally one of the fundamental human habits in surviving, namely greed. In strict sense no more is required. But if one of these ingredients misses, a free market will not emerge.
3. Unlike most other systems it doesn’t require super- or self-imposed regulations or restrictions. Generally, restrictions prohibit the free market effect, which somehow is reflected in the name itself. This is one of the objectives of the nowadays efforts of western administrations for deregulation.
4. Thanks to the free market many needs have been fulfilled. But we cannot stop with fulfilling. Because once the needs are fulfilled the free market tends to extinct. So needs have continuously to be created. Amongst others this is the field of advertising. Modern companies spend a growing amount to advertising and this turns out to be decisive, the modern key to success. Modern economy has persistently been transformed from need resolving to need creating.
5. Needs can be created both at personal and system level. Commercials appeal to some fundamental individual properties like fear (for getting older, for disease and death, for loosing grip on situations, for being of no interest or importance, etc), greed (which in fact is based on fear), belief (in immortality, in everlasting prosperity, in superhuman possibilities, in abundance, in ideal personalities as well as bodies and ways of living), fantasy (I can be a millionaire, an astronaut, pollution nor global warming up is affecting me), hedonism, individualism (only my opinion matters, I want it and I want it now). I could continue for another page but you could as well. One of the characteristics of the commercial is the fact that it is more or less unreasonable, unscientific and deceiving. Arguments pro and contra are used at random. For example, in the promotion of a sun protective body cream the growing hole in the atmospheric ozone layer is emphasized, while an Australian tourist office will stress the decrease of the same hole.
   I am ready to assume that one day – God may prevent it – when the hole in question reaches catastrophic proportions and when a chemical company promotes a possible protection, a super protective body milk for which production an extremely ozone ruining gas is required, the body milk will turn out to be a bestseller. Which unfortunately will demonstrate a basic assumption on human behaviour: nowadays fear is by far the most powerful force in economics.
6. As with state guided economies, needs are also created by ideas and ideologies on system level, like:

-          Live is material,

-          Live is to be put at one’s hand, live is manufacturable (in fact a Christian ideology),

-          Coca Cola is a way of living,

-          Eventually within the free market men will find a solution to all problems,

-          Where the free market governs, democracy settles or is within reach.

7. It doesn’t really matter which needs have to be fulfilled. Whether dealing with bread, cars, medicines, films, weapons, porno, it will be produced in the market as long as there is a profit. One of the results is for example an exceptional inequality in budget for developing medicines for tropical diseases such as malaria and for western welfare diseases like high blood pressure.
8. The free market is fundamentally a-moral. The only moral to be found is that human prosperity lies within the satisfaction of needs. In itself this is a high moral for the greater part of humanity, since there is poverty all over. For the western world however this moral has been pervetered into a boundless materialism. Nowadays the western standards have become Walt Disney, Coca Cola, Mercedes and Microsoft. They are the new gods. Did our former gods –  Zeus, Baldur and Jahweh f.i. – appeal to some human ethics like generosity, hospitality and charity, the modern gods mainly appeal to our individualism, selfishness and greed. Especially in Western Europe the culture looks like that of the old Rome in the expiration days. Sometimes the only happening to look for seems to be the world championship soccer or the GP at Monaco. Give us food and games and we will not rebel. The uselessness, boredom and missing of deeply felt high moral standards is serious feeding stuff for religious fundamentalists. Note this.
9. Inevitably, economical power gets clustered in the market. It looks like the generally accepted presentation of the cosmic evolution, where at some stage of ‘history’ clusters emerge, in the shape of matter, stars, solar systems, and so on. The free market deals with economical, financial and commercial clusters which can be characterized as growing and less restricted to nationality and culture. By nature these clusters are not regulated by religion, ethics or morality. Recently notorious politicians mixed up different kind of systems in their need for good news. The national economy was said to be improving because some multinationals showed better expectations. For example Philips had a pretty good trimester report. Unfortunately Philips is ever more decreasing the number of Dutch employees and investments in favour of Chinese and Easter European. In fact the Philips score is no longer substantially related to the Dutch economy or it should be the presence in the AEX-index and the psychological consequence for the believe in Dutch economy. Nowadays some of the clusters turn to be economically more powerful than national states.
10. As economical power concentrates, welfare does as well, especially on personal level. It is one of the phenomena peculiar to capitalism. The difference in individual welfare still grows steadily. The moderation in salary rise which has been pleaded by western administrations because of the recession does not affect the earnings of the top management. Here something turns up which is characteristic for the free market economy as well for the evolution by natural selection: the survival of the fittest deals with courts and households and not with individuals. The free market economy is in itself a-social.
11. Especially the playing field of the bigger clusters is having benefit of the absence of regulations and restrictions, a fact that is often confused by saying that the free market is accompanied by democracy – in a next part I will reflect on this.
12. Within the cluster though the opposite happens. Here everything is firmly regulated and restricted, in fact here’s an a-democratic culture. It is no coincidence that many orders of the chair get the popular communistic nickname ‘oukaze’. Working committees and trade unions are mainly considered as a pain in the ass. If possible production will be moved to countries with less regulations and no organized labourers. The main reason for democratic principles within companies are the profits, such as public image and less obstruction of trade unions. In fact most individuals, except perhaps for the shareholders are reduced to cost-benefit aspects.
13. Although joint ventures are common practice in the search for expanding power and decreasing risks, the common attitude of the actors in the playing field is competition, not cooperation.
14. The free market benefits from some other intrinsic conditions such as growth and accelerated speed of productivity. Stagnation is decline and delay is intolerable. A consolidation of production and profit means regression. The effect on the society is the presence of some uncontrolled phenomena from which we say: It’s inevitably human. Life’s speed accelerates steadily, technology expands exponentionally and the need for energy rises boundlessly. Within the free market self restriction of individuals and companies is fundamentally considered as ‘back to front’.

 

These are some of the well known characteristics of the free market economy. Now, as we all know, to prevent the free market participants from unethical and unmoral behaviour and because of the average absence of self-regulation, restrictions need to be imposed by administrations and social and other interest groups. And here for decades the field of conflicts is laying. Nowadays the conflicts seem to decrease, but only because the influence of the regulating administrations and interest groups decreases.

Through the years men have objected many of the harmful side effects of the capitalism. And as everybody admits, not without reason. Like the evolution by natural selection, the free market is based on the more primitive human instincts. Although the confession of our deep motives, whether they are animal or not, is a blessing of the modern time, we’re all convinced too that mankind is ever pressed to fight the a-social, a-cultural and unethical effects of our animal way of live. Not even a mere liberal will resign himself to these effects.

 

In this light I want to brake a lance for all of our former Marxist fellows who now are regretting their past or are suffering a weird kind of Alzheimer. Sure, narrow mindedness, denial of facts and the refusal of being well informed is to blame. And sure, highly educated students who were pleading in their armchair for the liberation of the poor labourers without ever visiting a factory, were grotesque. But let us face some of the original intention, the believe in ideals and the opposition against the abuse of capitalism. Ever since, that still should be indisputably one of the main objectives of modern politics.

The fact that the guided economies all seem to have failed doesn’t imply that the free market has succeeded. Therefore the global abuse and misstandings are simply too pregnant. As long as individuals turn back to their easy chair feeling of self legitimization, which mainly is the base of criticizing others, also democracy and free market economy will lead to an inhumane world. And let’s wish that the positivists of today’s free market do not bring upon themselves their slander on the former Marxists on the moment when man, nature and earth will have been polluted, exhausted en collapsed under today’s production pressure.

 

On democracy

Actually we do not really know what democracy is. Democracy is an experiment that started around 600 BC in a small and slender way. In the Ionian and Attican city-states democracy was a completely new way of people’s commitment in administration, but it was just for the happy few. Only a part of the adult free males were involved. One of the conditions was the atmosphere of eloquence. One needed to be mastering persuasion and rationality. Other conditions were the small scale of the city-state, the flowering trade in the Aegeian See and the existence of slavery. This kind of democracy, though still a monument in cultural history, can hardly serve as a standard for the concept of democracy.

Nowadays democracy is still not actual as a state of commitment of a whole people. Perhaps this ideal will be an everlasting promise. In the modern western world we have several variants that match with the concept of democracy by delegation on the base of political interest parties. Let’s face some characteristics of this modern kind of democracy.

 

1. Unlike the free market economy democracy seems to be an unnatural state of mankind. There are several reasons to suppose this. First of all democracy requires precisely regulations and restrictions for flowering. Democracy often needs to be defended against restrictionless groups and systems. Is very vulnerable and can be corrupted. It’s a cultural achievement. In the cultural history modern democracy it is only a phenomena of the last two centuries. In the realm of wildlife democracy doesn’t emerge at all. Here we mainly see monarchist societies.
2. Democracy demands sophisticated mental capabilities of its participants. Human societies have grown immensely complex in comparison with the classical city-state. Although many modern politicians show the contrary, modern society cannot be comprehended by one-liners. The intricacy of the super system ‘society’ is so overwhelming that we need specialists on several fields and subfields of politics. In this way modern society is partly anti-democratic in itself because most of us do not really understand what is going on. Modern political debates take place in the ‘ivory tower’ of the parliament.
3. Modern politics cater to this incomprehensibility by trying to make it comprehensible. Every politician’s speech uses (over-) simplification. Since the sophistication and nuance are not very popular, oversimplification, polarization and short term are playing their role in the political debate. Scientific veritability has never been a real aspect of politics but increasingly unprejudiced investment is banned to the evaluation afterwards when the mistakes have been made. Premature action seems to be in favour of profound consideration. Especially in the Bush jr administration the one-liners (we’re fighting for democracy) and oversimplified arguing (the bad and the good guy, the axis of evil) and short term muscles and ‘balls’ seem to be popular. Also in complicated world politics. In the prelude to the second Iraq War straight lined thinking and demonising were common use. I sometimes felt bewildered that the world could be depicted in such a simple way. Only total commitment had to be shown by the future allies. If you were not totally supporting US you were against US. The conviction of western superiority – which of course is not a characteristic of democracy – and the enclosed denial of foreign identities is another serious food stuff for Muslim fundamentalists. To be noted too.
4. Because politics gets more and more a struggle for votes, the more primal mainsprings of the electorate is appealed to. Politicians tend to reject respectful nuance and apply populism, gossip, glorifying and slandering each other and giving rise to rather unjustified expectations.
5. Democracy tends to be based on irrationality and on image thinking. In this, the media are playing a crucial role. The favour of the electorate has become the central issue in media-democracy. Nowadays a war can be delayed, not because of war strategical arguments but because of the actuality of prime time news (and naturally because of the timing of the elections). No matter what you do, Schwarzenegger, win the media and show a nice face if you want to be elected.
6. More and more politics is a game of money. There will no longer be a president of the USA without a well sponsored and filled election treasury. But also outside the new world, f.i. in old Italy, presidents can’t do without their money.

 

Here I could continue some time more, but again, you could do it yourself. We all know the ugly face of so called democratic politics nowadays, which often tend more to aristocracy. And the habits are not new at all. They are as old as the world.

What then do we mean with the apparent benefits of democracy? First of all, it appears to be the best we have in our world today. And of course, we do not miss our water until our well runs dry. I do agree that we should defend our democracy furiously against all attacks from outside. But at the same time, all the dictators, totalitarians and fundamentalists in the world are no excuse to deny the assaults to the concept of democracy by oversimplification, polarization, image building and attempts to transform democracy into a primitive seduce of the electorate. Unlike the free market which is a robust natural phenomena, democracy is fragile and extremely susceptible of rape.

 

On the link between democracy and the free market

Politicians often refer to the fact that material welfare promotes democracy. In some way there indeed is a correlation between the two phenomena. I will reflect on it some later.

Another statement says that the free market is the best guarantee for democracy. I don’t know whether there is any kind of causality in this stated direction. There is one though in the opposite direction: the economy of the free market flowers on democracy, more exactly, it flowers in a non restricted society.

As stated before, the Attican democracy has been made possible amongst others by the commercial mentality of the tradesmen and the presence of slaves. I suppose these conditions are not completely by coincidence. In some way they have counterparts in the modern democracy, where we have a range of market actors, from adventurous entrepreneurs to the board of directors standing at the head of a clustered group of employees. Of course, an employee has a completely different status than a slave. Fact is though, as I mentioned before, that within the economical cluster things are firmly regulated and restricted. So it is not quite correct to say that the free market guarantees democracy. Within companies we often see an non-democratic culture. Of course no transports to Siberia and mustering in foreign places. No, the worst thing that can happen here – and that appears to be happening more often today – is a transfer of employment to India or Eastern Europe. The workers do not need to move, they just loose their job. The free market economy and democracy? That is to say. Amongst others, our free market is depending on the safeguarding of our raw material. No matter whether a foreign dictatorship must be settled (Chili), Islamic law and religion must be taken into bargain (Saudi Arabia), apartheid must be ignored (S-A) or pollution has to be trivialized (Nigeria). Simultaneously internal democracy appears to be defended by supporting foreign dictatorship (Saddam Hussein during the war Iran-Iraq; Pakistan) and by suspending fundamental human rights (Guantanamo Bay).

 

Since several years fundamentalism and terrorism are named to be the greatest threats on democracy. Right here we see that the proposed relation with material welfare is not so actual. There is for instance no relation between the existence of fundamentalism and terrorism on one hand and the poverty of the Islamic world on the other hand. In fact fundamentalism appears to be strongly supported from places within the western world. Many future terrorists are recruited in European countries. A fact that challenges our view on fundamentalism and terrorism. A fact that also indicates that fundamentalism is partly a problem of the western culture. In relation to this I mentioned before two spicy ingredients: the aggressive commercials of western superiority and the sole focus on material welfare resulting in uselessness, boredom and missing of deeply felt high moral standards.

 

Is the free market really the best guarantee for democracy? I’m not sure of this simple one-liner. But at least this statement can act as a perfect kind of populist commercial.

 

On threats and solutions

Climate change over the next 20 years could result in a global catastrophe costing millions of lives in wars and natural disasters. A secret report, suppressed by US defence chiefs and obtained by The Observer, warns that major European cities will be sunk beneath rising seas as Britain is plunged into a 'Siberian' climate by 2020. Nuclear conflict, mega-droughts, famine and widespread rioting will erupt across the world.

The document predicts that abrupt climate change could bring the planet to the edge of anarchy as countries develop a nuclear threat to defend and secure dwindling food, water and energy supplies. The threat to global stability vastly eclipses that of terrorism, say the few experts privy to its contents.

'Disruption and conflict will be endemic features of life,' concludes the Pentagon analysis. 'Once again, warfare would define human life.'

The findings will prove humiliating to the Bush administration, which has repeatedly denied that climate change even exists. Experts said that they will also make unsettling reading for a President who has insisted national defence is a priority.

The report was commissioned by influential Pentagon defence adviser Andrew Marshall, who has held considerable sway on US military thinking over the past three decades. He was the man behind a sweeping recent review aimed at transforming the American military under Defence Secretary Donald Rumsfeld.

Climate change 'should be elevated beyond a scientific debate to a US national security concern', say the authors, Peter Schwartz, CIA consultant and former head of planning at Royal Dutch/Shell Group, and Doug Randall of the California-based Global Business Network.

 

The above mentioned lines of an article look a little weird, but in fact the Observer happened to publish them on the 22^th of February.

Talking about threats it is to some extent tempting to confine ourselves to fundamentalism and terrorism. Sure they are serious threats, Twin Towers, Istanbul, Bali, Madrid, only to mention a few. But in some way they are also distracting ourselves from the above mentioned threats which are produced from inside our own system. The eleventh of September has dominated the international politics and not Kyoto, which was more like a scratchy pain in the ass.

But as I have already been focussing on self critics, let me now try to restrict myself to the threats from outside.

 

When Christianity rose in the early days of apostle Paul the Roman people were anxious for a return to a state of Barbary. And with reason. Christianity meant for the people who adored the Greek logos as the ideal of cultural humanity, a return to irrationality. In the first two centuries Christianity turned out to be a religion for the underside of the society, especially  in Greece and the Middle East. Paul himself had declared that God made men’s wisdom to disgrace. For those who lived in poverty and for them who loathed the divine glorification of Roman emperor this Christianity became a personal religion of the minor and illiterate. At that time of history though the Roman empire was quite vital. Gradually, after many slaughters, Christianity was adopted as the leading religion. But when in 476 Odoacer dethroned Romulus Augustulus the Empire was already suffering for decades from a decreasing vitality and expiration. Now the Vandals took the handles and the former Roman culture was imploding. A prolonged return to Barbary. In fact it was not until the Renaissance until refined rationality came again into picture.

 

Sometimes today's Western Europe resembles the Roman Empire in the days of decline. Western Europe is not vital anymore. We are spoilt with our material welfare and since decades we are pampered with all kinds of social splurge. But most of all we lost our ideals. The individual disinterest and hedonism is a main reason why our society is threatened. If I would suggest any solution for the modern threats of our society, it would be affecting our personal vitality. But at the same time I would stress some old values of compassion, charity and austerity. Especially the last one is crucial at the moment. In our current material abundance, the adventure of live has slipped away. The real adventure nowadays seems to be much more located in self fulfilled humbleness and a mild and joyful abstinence. The recent past has taught that the modern emphasis on system thinking is not profitable, it seems to me more like an alibi for not being affected personally. Sure the system is not unimportant but its problems can mainly be solved on a personal level. In a continuous challenge of our own limitedness, self-satisfaction and stubbornness. The main characteristic of the solutions I have in mind is Fransiscus-like and not really imposed by a system.

 

In the societies of Northern America and Australia the adventure of live seems to be more present. I suppose here people are more explicitly experiencing the survival of the fittest, which means literally a struggle for live for the underside of the society and the campaign for premiums and shares for the upper side. Some aspects of the culture there could be very refreshing for our society and in this way I’m not a fan of our own pampering social culture. Self responsibility and self management could be very stimulating.

But some balance is required. In the US three times as much people reside in prison comparative to Western Europe. There are up to fifty times as much people killed in gunfights. The difference in rewards exceeds ours by far. The US prospectless are left to the tender mercies of Christian churches or Muslims that take serious the Koran.

 

It is tricky to focus on vitality. Former thinkers have abused Darwin’s ideas by imposing them on men and race. For me there is another reason to be cautious with comparing human culture with animal life. Sure, our culture is just the crest of the peacock, a very thin translucent varnish on a body of mere animal behaviour. But exactly this thin varnish that offers the possibility to emerge the laws of wildlife. In this fragile area human culture can emerge, depending on our own efforts and intentions.

There are scientists who discard the difference between nature and culture, for example by pointing at the culture of bonobo’s and other social animals. I’m not tending to argue with them, but I only stress the radical transformation of earth and nature since the emergence of human culture. Considering this as a natural phenomena is like depicting an atom bomb as a product of nature.

 

In some way here the same effects of restrictions can be distinguished as mentioned before. Within certain boundaries nature is flowering and vital with the least amount of (human) regulations and restrictions, while culture needs restrictions to survive. Culture has to be cultivated. Here we may see some of the fundamental conflicts between economics and culture that were pointed out before within a broader perspective. By its own nature, culture sometimes needs to be defended, and nature needs to be restricted. A balance between animal vitality and human morality is one of the greater challenges of modern times.

I’m inclined to accept a more peppered society but simultaneously I want to challenge all of us, including myself, to resign of their own towering rewards in favour some cheerful sobriety. Lets go back to the basics. For me personally this is a major struggle of today.

 

To conclude my reflection I recall an intriguing scene in the movie Ghandi by Richard Attenborough, starring Ben Kingsly. Somewhere in the middle of the slaughter between Hindus and Muslims Ghandi is having a hunger strike on a roof terrace. He has nearly reached a coma. Than a Hindu man reaches the roof and asks Ghandi to stop his starvation. He can’t stand sharing in another death. He had his part in a raid on Muslim men. When Ghandi asked him for his motive he confessed his revenge for the murder of his own son by Muslims. ‘How can I be pardoned?’, he asked Ghandi. Ghandi answered: ‘Well, pick up a Muslim orphan from the street. There are plenty of them today. Raise the boy as your own child, but make sure he will be educated in a true Muslim way.’