Regulating Markets

 

I need to say I generally support globalization, although not in its present form. This may surprise many on the Left, but I remind those critics that the Left has always stood for the International liberation of labor. I've always been a notorious "one-worlder," which means I am interested in raising the standard of living for billions of people, not just a few old white men. In its perverse way, the outsourcing of American jobs to Latin America and Asia is actually accomplishing the purpose of improving billions of lives.

What's wrong with the present system of globalization, what's wrong with Wal*Mart for example, is that increased suffering is also brought to millions of people. This probably can be justified by a Utilitarian calculation, 'the greatest good for the greatest number,' which is often cited by defenders of the present system. I don't accept that justification, however, as I am not a Utilitarian: I think you have to use Kant's standard of not valuing people as a means only. Thus I think that governments and corporations have a duty to improve life abroad and at home as well.

In passing, I would like to note that the Utilitarian calculation performed by those justifying the present state of affairs does not account for environmental factors. It seems to me that 'greatest good' would be significantly diminished if the environmental damage due to "globalized" production were factored in. Further, there are a lot of long-term human damages not being considered in allowing present methods. So, I think even the Utilitarian calculation is questionable, but that is not the main thrust of this article.

The ultimate reason many people protest against Wal*Mart, and sometimes prevent its locating a store in their area, is that they have no other means of regulating the trade, and the trade-offs. They protest because the government has failed to regulate the market. According to the now-reigning Bandit thought and market fundamentalism, the government should not regulate markets, so everything is working just as it should. I, about half the American population, most Europeans and most Asians don't agree with that. Wal*Mart and most other multi-national corporations get away with what they're doing because the United States government is not only lax, but powerfully influential.

My main point is this: in fact, markets do not behave as market fundamentalists (neo-classical economists) and ideological conservatives claim. Supposedly, monopolies cannot form. Supposedly there are always competitors because markets allow of easy entry and exit. But the evidence of my eyes is very little of that is true. In order to prevent unfettered markets from becoming abusive, or to correct the abuses they already impose, the government regulates. That regulation takes several forms, but ultimately starts with, legislation. The proximate form of regulation is Executive Order, government agency rules, procedures, standards and oversight, licensing and taxation. All of those methods intrude upon market players at every level in order to correct and prevent deviations from ideals.

For example, there is the myth practiced by Wal*Mart, a corporation based in Arkansas, an old Southern State, that people have 'the right to work.' Arkansas law, and conservative philosophy, deny and prevent the Union Shop, because it is proposed that each person should negotiate his/her own wage. The difficulty with that proposal is the utter inequality of the two sides, labor and management, most of the time. For most workers, there is no wage and benefit negotiation at all without a Union. What most workers get is whatever the managers are willing to grant. It is true a few workers are able to negotiate wages, hours and working conditions, but they are still the rare exception.

When the government refuses to allow strong Unions, it essentially sides with management. There is no level playing field between workers and management. We all know those things, even if somehow we fool ourselves into thinking otherwise a lot of the time. Government regulation of labor is required exactly because the free market does not work in our society as it is (even if it would work in some thought-experiment society).

In my recent discussions of Social Security, I have claimed the real problem is distribution, not production or taxation. If workers were paid enough to buy all (or almost all) of the product, there would be no problem. That there is a problem arises, in my view, from the skewed distribution of the surplus (the profit or benefit of production) toward the rich. That is, sufficient income is subtracted from workers and added to management and owners to prevent that equitable distribution of wages (hence taxes) which could support the Social Security system. Looking at income and wealth statistics for the last 25 years or so, when market fundamentalists have had the upper hand, it is clear that unregulated markets do not come to an equilibrium of equitably distributed wages. Free markets tend to monopoly in all things, including income, which results in rewarding the rich and penalizing everyone else.

The fundamental reason for having a Big Government is that we have a Big Society. Right now, we have a much bigger society than government, so things are running amok. The argument for more regulations, oversight and taxes is simply to adjust the size and scope of government to the size and scope of society, nothing more, nothing less. There is no other mechanism available for this purpose.