Free markets are a fiction

Mainstream economists in Pakistan seem to have fallen into the trap of fetishizing the “free” market, a natural consequence of the imperial enterprises of international financial institutions and multilateral donor agencies over decades. This has had the effect of hampering any nuanced, substantive, and productive conversation about public policy that responds to the interests of the general populace, leading to a historical trajectory that has resembled a downward spiral.

The first rule of economics is, after all, that people respond to incentives. Knowledge production in Pakistan currently operates on the whims of global bureaucrats, who crowd out local research with massive influxes of funds for “development” projects, capturing intellectual capacity and subordinating it to their political motives. This process of collaboration between domestic and foreign elites has worked to shape politics, turning key institutions into enablers for big capital and stymieing any hope of real structural reform that can undo years of plunder and plunder under colonial rule.

This, of course, is not entirely the fault of economists themselves, but the possibility of a higher education system that operates under the false pretense that social science disciplines can somehow be studied in isolation: commercial activity, we are told, has no relation to politics, history, culture, religion or any other “non-scientific” field studied by the humanities. Philosophy is particularly frowned upon, perhaps because the first class to sit for is principles of logic – but I digress.

What matters instead is narrow, instrumental self-interest: people compete in a free-for-all to the death. There is no disputing this fundamental assumption, it is the gospel. The neoliberal troika of “privatize, deregulate and liberalize” is therefore the hegemonic mantra and ideology to which those who populate the main decision-making arenas must pledge allegiance. Regardless of the contextual details, pushing the “free market” is a surefire strategy for growth, prosperity, and development. But how “free” is it really?

Freedom is intimately linked to resources. In the “markets”, a dollar (or a rupee, in this case) has a vote. The more funding available, the greater the ability to influence/distort market conditions – a good illustration being cryptocurrency, widely touted as the most “decentralized” platform today. In the context of a postcolonial country with massive power differentials, this works well for unproductive elites – who can continue to ensure that competition is kept to a minimum by blocking access to education, health care, social security, etc. for the others. The “free market” is thus rigged from the start, making the link between “markets” and “meritocracy” a mere abstraction of the imagination. Indeed: KSE-100 board members were found to come from 31 primary families according to a recent PIDE study. This is not a bug but a feature: the inevitable consequence of the “free market” – sterilized of regulations and procedural checks and balances.

The working classes, forced to sell their labor to survive, do not have the “free choice” to accept and leave a job. This would only be true if they had an infinite number of alternatives to switch to at any given time – which they never do. With children to educate and food to put on the table, ordinary people must nod, say “yes, sir” and carry out orders – failure of which usually means dismissal. In Pakistan, workers are not even given the opportunity to get involved in trade unions that operate around the world to minimize the huge power differentials between employee and employer.

Historically, it is well documented how, at the start of the industrial revolution, children as young as 6 years old were expected to be in factories. Today, child labor legislation is everywhere, and even the most ardent supporters of Milton Friedman dare not challenge it. The same goes for the 8-hour working day and the 5-day working week, for which the socialists fought tooth and nail. Regulations against environmental degradation are increasingly common. Pharmaceuticals must meet impeccable standards for their drugs. The list continues. In other words, the limitations of markets for the “greater good” are and have been consciously designed and imposed by society, and are now taken for granted and assumed by default. Therefore, any position on potential interventions has nothing to do with “freedom” per se, but rather which rights come first: companies or employees, armies or citizens, capital or nature. , etc.

Rather than getting bogged down in outdated public vs. private debates, Pakistani economists would do well to focus on how to improve democratic standards. Governments are not inherently efficient or inefficient, they react to incentives. These take the form of meeting the needs and desires of ordinary people, in return for which parties can hope to be re-elected for subsequent terms. In Pakistan, politicians do not address the general public but specific centers of power: the security apparatus, landed elites, industrial bigwigs, entrenched bureaucrats, etc., whose interests differ radically from those working masses.

Rather than recklessly promoting the privatization of state-owned enterprises, for example, which will inevitably lead to monopolies/oligopolies and make essential services unaffordable, the conversation should focus on how to rethink their internal organizational dynamics and incentive structures to improve performance in a way that involves all stakeholders. This will naturally involve large investments in the public sector which is now a failure in policy circles which have embraced denationalization as one of the core tenets of their modus operandi.

The imposition of uncritical free markets only serves to further empower privileged circles by removing obstacles in their path and granting them more leeway in their quest to capture resources and develop the “cascade” economy – which extracts from the vulnerable and delivers to the powerful. Examples of this in Pakistan are the proliferation of closed housing projects and the emerging “tourism sector” in the northern regions of the country, both of which have led to land grabbing, displacement of indigenous communities and land degradation. pest of environmental resources.

Just as much as “freedom from” (buying, selling, working, etc.), the economy should focus on “freedom from” (coercion, exploitation, precariousness, etc.) – only after basic needs are met that people can truly expect to participate and contribute to society in a dignified, voluntary and enthusiastic way. The blind laws of neoliberalism will never allow this.

Published in The Express Tribune, August 30e2022.

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