In a recent article in The New York Review of Books, Michael Tomasky suggested the lack of any alternative big theme gave the free marketeers a head start in shaping and continuing to dominate the United States economy. The free market big theme may have been planted by Adam Smith, but it developed on the open prairies of North America where land was the free resource – confirmed by the Homestead Acts – which drove the early development of the US economy. So the big theme was not just markets freed from government interference and control, but personal freedom to claim a bit of America and the right to defend it with guns to fight off its previous occupants, the native Americans. That tradition gave primacy to ownership. When Friedman declared that corporate officials had no social responsibility other than to make as much money as possible for shareholders, it was hardly a shot out of the blue, but the confirmation of a long tradition.
The British tradition was different. Instead of empty prairies there was a village system which had to be destroyed for the enclosure of land and the dispossession of village labourers which was later partially compensated by more enlightened regulation. Until the Thatcherite swing to American values, Britain was more ambivalent about the primacy of ownership rights above everything else. It was generally accepted that all human beings had the right, the basic human right, to an education, health and social services, provided and defended by the state, and paid for out of taxes, it being not unreasonable, as Adam Smith pointed out, that the rich should pay a rather more than proportionate rate of taxation.
The big theme of latter day free marketeers is free trade, small government, minimised public sector, minimised and non-progressive taxation, and, so far as private industry is concerned, complete dominance of shareholders over all other stakeholder interests. These elements are all woven into a logically consistent, and simple to communicate, justification of corporate tyranny by the financial sector. The result has been massive inequalities, unsustainable depletion of resources, pollution, damage to the climate and eco system, and the rape and pillage of real economy firms, as referred to in other postings on this site, as well as the continuation of booms and busts which reveal the self-defeating flaws in the big theme itself.
The alternative, logically consistent big theme produced the centrally planned, totalitarian, socialist states, which so spectacularly collapsed in 1989.
Why is it so difficult to accept that big themes, ideologies of whatever persuasion, simply don’t work? Evidence is all around where the free market ideal has not been blindly accepted. In Japan and Germany, for example, a more balanced approach to corporate governance still rules, with long term gains given priority. The same is true in the emerging economies, such as China and India. And they are all rather more successful than the post-mature economies of America and Britain.
Maybe the British tradition of muddling through has something going for it. Its distribution of wealth and income, may or may not have been efficient, but its semblance of fair play, might have encouraged a more co-operative level of enterprise from which the economy as a whole could gain.