The 'Sole director of the fate of human beings'?: Revisiting the idea of markets as 'default'

Markets are often described by economists in an almost messianic way- as if they alone will solve all of the world's problems. Now, it is worth noting that markets do a great many things well- they can be great democratisers (in the sense that they in principle allow for a levelling of the playing field), they are often better at distributing resources than a centralised economic instruments and they are more free of rent-seeking and political influence than command economies. However, something they certainly are not is natural- they are like anything else institutions, Douglass North's 'rules of the game' or 'humanly devised constraints on action'.

Indeed, as Polanyi claimed what has really happened is a Market Society (for anyone interested in a more in-depth look at this idea I recommend Polanyi's The Great Transformation) has been created: a combination of market exchanges, industrial production and hedonistic consumption. In this blog post, I will briefly chart how this is different from the mainstream economic account of what market mechanisms are, before briefly posing some conclusions on how this might affect modern development policy (looking particularly at the experience of Russia in the early 90s). The key difference I posit is that along Polanyi's lines, markets are embedded in the social and cultural relations of a society, rather than existing as a separate mechanism alongside them as neoclassical economics assumes (actually neoclassical economists mostly just seem very disquieted whenever the word 'culture' is mentioned).

'The Invisible Hand': Modern Market Exchanges

Markets used to be largely places where often subsistence-based farmers, tradespeople or originally small-scale settlers or tribes would get items they needed but didn't have or couldn't produce from other people. They were often ad hoc, sometimes based on barter and very much not interconnected- prohibitions both religious and social against profit-making ('usury') were followed to various degrees. Modern capitalism changed all this. Modern market exchange is predicated on the idea that commodities have value because of the relationship between things, especially in terms of the translation into a monetary value. Trade is predicated on the substitutability of unlike goods and each participant having a different scale of values in order to produce mutually beneficial trades. Markets have to be embedded and naturalised within society, that is markets must have “institutedness”. As Polanyi observes, ‘free markets’ are instituted processes that must be articulated through social, legal and political strategies. 

This system of exchange is predicated on social acceptance, which is why Western development projects often include help setting up market economies, as a ‘charitable’ venture. Therefore, when confidence is lost in markets they cease to function and as a test of this hypothesis, the exchange system should also fail. This occurred amongst the Nentsy people of Northern Siberia when the bank accounts the Soviets had given them became valueless due to the depreciation in the value of the ruble in the early 1990s. As predicted, the herders switched from buying consumer goods off the Russians back to solely reindeer herding. 

Markets did not become successful because barter inherently transformed into modern capitalism- indeed as Polanyi notes, the really curious thing about laissez-faire capitalism is how planned it was- it needed helping although through establishing private property rights, creating and then dismantling large monopolies (like the East India Trading Company) and a change in attitudes to wealth accumulation, which brings us to consumption. 

'J'adore, Dior': Consumption Patterns and the Modern Corporation

Value in cultural terms is defined by how people expect the world and people in it to behave and how they judge that behaviour. The value of wealth accumulation has changed from the medieval view of public virtue arising from private virtue to the formal economists’ idea that public virtue can arise from private vice. Associated with this has been a popularisation of modern hedonism, characterized by the creation of cultural value in the self-conscious seeking of personal pleasure. These concepts have spread widely to the point where self-interest is taken for granted in most of modern Western society and through global media, much of the world. Consumer goods are in Western society associated with 'commodity aesthetics' in which people ascribe value solely on the basis of design or promotion. Companies have sought to create a 'hyperreality' (Baudrillard) or an aesthetic coating of the world that seeks to use images to generate a market-based society. Companies have also successfully in many cases proselytised to the developing world, for example a Power Rice Ad that was run in Papua New Guinea that was synchronised to the soundtrack recording of “Power to the People!” and featured a muscular man lifting the rice at a construction site. Foster also charts the rise of beauty contests and other competitions that serve to reinforce that cultural capital is to be gained through individual choices (see Materialising the Nation: Commodities, Consumption and Media in Papua New Guinea by Robert Foster). This is also related to what Jonathan Friedman calls homo consumens, "whose fragmented identity is constantly rearranged by the winds of fashion". But how is this all made?

'Work must not Cease’: Mass-Production'

Production is driven by the demands of the market, with an emphasis on creating surplus to trade with others and where the value is determined by what others will exchange for them. Perhaps the defining feature of the capitalist mode is its tendency to reproduce itself on an increasing scale. Production is also changed from previous reciprocal or household modes of production, because who makes the product is now irrelevant- i.e. all goods can at least hypothetically have their value translated into a monetary one (this is quite different to say the Kubo system where who gave you the pig is more important than the pig's 'worth' to you). Capitalism also means that production is no longer autonomous- capitalist production is the most interlinked of any economic system. Finally, high fidelity is ensured by industrialised production technologies, which can produce millions of copies of the same good (this is a key difference from say craft-based economies).

Moving from the Positive to the Normative: Some Policy Ideas

All of the claims I have made so far are what economists call 'positive', that is I've tried as hard as possible to make factual claims about what is not what should be (by hedonism for example, I do not mean a Catholicesque value judgment, I just mean the pursuit of individual pleasure). Now I will try and draw some tentative policy conclusions from what I've written.

The first is that we should not expect markets in the third world to just spontaneously exist- governance needs to get better before the 3rd world can open up to trade more fully and before those countries can actually prosper. In particular, Chicago School style 'shock therapy' is an appalling idea because weak economies with markets that are barely embedded in society will just collapse- witness Russia in the early 1990s. There is a role in international NGOs and other aid providers to tie further aid to institutional improvements- also Western governments should help here rather than just prescribing more of the 'Washington Consensus'.

The second is that the continued survival of markets means that institutions in every country have to be kept strong- there is a role for government policy in other words to stop the collapse in social relations that Polanyi discusses (though I obviously disagree with Polanyi's solution, which is to transition to either socialism or economic democracy).

The last is that while international finance and other forms of globalisation are breaking down national boundaries, there will be a continued role for nation states in the future to regulate these issues and that they will require a truly international response.

I would also make the empirical observation that economics needs to study these issues more- it should not be left to sociologists and anthropologists to fix up huge gaps in modern economic theory.

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Dan Gibbons is a third year Bachelor of Commerce (Economics) student at the University of Melbourne. He has a forthcoming publication in Intergraph: A Journal of Dialogic Anthropology (about memory and nationalism) and is currently submitting papers on the rise of modern consumerism, the role of criminology theory in literary criticism and the institutional theory of nationalism. Dan is a keen debater and public speaker.

Memory and Feasibility: Why Ethnic Conflicts Happen

Janjaweed Militiamen 

Ethnic rivalries have spawned some of the most vicious conflicts of our time- the Wars of Yugoslav Succession, the Rwandan Genocide and the Second Congo War (the most deadly conflict since the end of World War II) being some of the deadliest. There have been many theories on why they happen from Robert Kaplan's idea of 'ancient hatreds' to instrumentalist accounts of ethnic groups vying for power. 

Recently, there has been an increasing recognition that both ethnic identity and nationalism are reasonably modern and very malleable. As such research into ethnic conflict has proceeded along two lines: an 'identity' stream associated with sociological ideas such as memory, the construction of identity/barriers to identity etc. and a 'feasibility' stream associated with conflict studies which looks at whether parties have the resources to commit to such conflicts. 

I want to unpack some key ideas from both lines of study, before drawing some very tentative conclusions.

'Every Foetus is a Croat': Ethno-national Identities as a Source of Conflict

I use ethnicity here to mean any group of people who identify with each other as having a common heritage, with barriers to group entry meaning anyone cannot just declare themselves a member of that group (heritages are often deeply fictitious but often involve shared myths, language, customs etc.). In ethnic conflict, the key aim of the actors who are driving for ethnic conflict (e.g. Milosevic, Tudjman etc) is to both legitimate their own violent actions and delegitimise ethnic 'others'. In constructing a frame of mind for collective action I theorise that there are three components (after Gamson): injustice, identity and agency.

Injustice

Injustice is constructed by reframing collective memory to make past events into reasons to hate the 'others', either by playing up differences or blaming events on others (e.g. Milosevic blaming bad financial circumstances on Bosnians and bringing back images of World War II Croatian-aligned fascists etc). This triggers what cognitive psychologists call “hot cognition” where language or symbols trigger an emotional response via a series of associations. I would like to note I do not mean 'collective memory' in the sense used by Carl Jung to refer to a collective unconscious- what I mean here is the social framework through which ethnically conscious individuals can organise their identity.

Milosevic Addressing the National Assembly

As previously noted in a post about the Marketplace for Ideas, Price in his ‘Market for Loyalties’ propounded the strategy of attempting to monopolise the construction of collective memory by dominating media discourses, where a government may use “regulation of communications to organise a cartel of imagery”. It has often been a strategy of national governments in particular (but also other groups e.g. the Interahamwe in Rwanda) to monopolise the media in order to induce a sort of 'war psychosis' whereby a group will feel they are surrounded by enemies who are trying to wipe them out. 

Identity

Actors may also seek to emphasise ethnic difference, for example by forms of 'state chauvinism', including enshrining a national religion or language, or as suggested by this section's title, banning abortion to create more "fighting Croats". Often, previous economic differences are emphasised e.g. between the Tutsis and Hutus in Rwanda. For example, the Croatian government actively tried to turn Croatians on their neighbours, especially in areas outside of the Croatian republic proper, which had historically been harmonious.

Agency

Stressing agency is also a vital factor. Governments or rebel groups often imply a sense of being able to solve the ‘problem’ as a group and deny the “immutability of some undesirable situation” (Gamson). They seek to construct the collective memory to express the embodiment of individual agency only through the collective of the nation. Appeals to collective solidarity are particularly common, for example Serb People’s Council calls on the Serb people to resist the terror of the Ustashoid government” and “Protecting Serbs from the vampirical Ustashe” (Ustashe being the Croatian World War II Nazi-aligned government).

In all, ethnic difference is clearly an important factor and is often constructed around injustice, identity and agency. Interestingly, in a 2009 study by Collier it was found that ethnic polarisation was the only socio-political variable found to be a predictor of civil conflicts of any kind.

'A Spiral of Silence': Feasibility and Conflict

 However, this isn't a complete explanation for why ethnic conflict goes on- it does little to discuss what the incentives of certain groups to actually declare war might be. So, I am going to borrow from a broader series of studies on civil conflict to discuss how feasibility, that is having the resources to actually fight a war is important to understanding even ethnic conflicts. 

In Collier's study five feasibility factors are particularly important to triggering conflict: terrain, foreign support and an abundance of young males and resources. 

Terrain

Terrain tends to be more relevant when the conflict is between a civil insurgency and the government who are both ethnically different (e.g. Kurds v Turkish government) rather than the government or some other group slaughtering innocent civilians. In those cases, mountains and forests are relatively good predictors of all kinds of civil conflict as they make guerilla warfare significantly easier. 

Foreign Support

Foreign support comes in all different sources- sometimes ethnic actors are backed by foreign governments for ideological or realpolitik reasons, diasporas are a key to funding many ethnic military groups or armies (particularly the Jewish and until recently Tamil diasporas) and other organisations (often religious). 

It is particularly important in terms of conflict-specific capital e.g. weapons stocks to fight the war and keep military forces equipped.

Young Males

Particularly in impoverished countries, young men are often either the main source of productive labour or the main source of soldiers. Hence, when returns to labour are low, this increases their drive to be soldiers in a conflict (this is also a partial explanation for the relationship between economic conditions and the incidence of ethnic conflict).

Poverty and inequality both induce disadvantaged young males to fight against those they see as 'oppressors'. Further, there are many opportunists who seek financial rewards in such conflicts- one side or another may be the only way of providing for a family- particularly if the conflict itself is making other economic activity too risky.

Overwhelming support also leads to what the title of this section refers to, which is the idea that a strong ability to enforce an opinion may suppress a minority viewpoint or one held by a weaker group because any individuals in that group or minority will not speak out. This was particularly used by ETA to convince wavering Basques to support their cause.

Resource Curse Redux

Resources cause all kinds of curses, but in this case there are two particularly important ones: military financing and increased motive. Resources obviously provide a way of getting military capital- particularly if countries are able to trade petroleum for guns and other hardware, often in violation of sanctions. It also changes the motives of ethnic insurgents in particular- if an ethnic group can control the country it now has more to gain economically.

Thus, feasibility is an important component to any conflict, even ethnic ones.

Some Tentative Conclusions

Ethnic conflict is obviously a very complex issue- it goes beyond any 'ancient hatreds' Kaplan chooses to dream up and is rooted in issues of history, identity and feasibility of conflict. In particular, I have examined how groups construct ethnic (and often ethno-national) differences to legitimise conflict and how feasibility plays an important role in sparking and enabling conflict.

How do we go forward? Other nations should be careful in how they deal with ethnic conflict. For example, in the Yugoslav case it was almost certainly a mistake to give the nations a right to self-determination as this led to the collapse of a previously multi-ethnic state into warring ethnic factions- more work should have been done to keep a post-Communist Yugoslavia together. Preventative diplomacy may help in some cases, but it is my personal belief that military intervention may often be necessary where practical (justified under either R2P if you so choose or UNSC sanction). Enforcing sanctions is vital, particularly on military equipment (though this is difficult if the supplier is the PRC or Russia). In some cases, states may want to fund or support pro-democracy movements (though this comes with its own problems- are they tainted by Western funding?). More generally, Western nations in particular need to be more proactive at dealing with conflict and not sitting back and watch it pan out and either intervening at the last minute or not at all.

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Dan Gibbons is a third year Bachelor of Commerce (Economics) student at the University of Melbourne. He has a forthcoming publication in Intergraph: A Journal of Dialogic Anthropology (about memory and nationalism) and is currently submitting papers on the rise of modern consumerism, the role of criminology theory in literary criticism and the institutional theory of nationalism. Dan is a keen debater and public speaker.

Is Trade in Ideas Free?: Interrogating the 'Marketplace for Ideas'

Freedom of expression is often analogised to a marketplace, as if there are traders in 'ideas' that can freely trade with each other their religious, political, analytical or even banal gossipy ideas. This idea isn't especially new- it is often traced to Oliver Wendell Holmes, but in reality many of the ideas of John Milton, Thomas Paine or even Plato could be recast as a 'marketplace for ideas'. The problem is that this marketplace is in no way free and much of the time instead of 'ideas' being traded in what is really traded is loyalty, either corporate or political. A few specific flaws are worth discussing here in detail: 1) what is being traded and why are loyalties likely to create monopolisation, 2) markets are in reality institutions which constrain the scope of ideas that are discussed, 3) information does not always make for better decisions and 4) individuals are not all rational truth-seekers.

What is being traded?: A Marketplace for Loyalties?
Monroe Price theorised that any government or 'power holder' will seek to monopolise the media in order to control the production of 'identity' as a kind of good with loyalty as the price of identity. As Price illustrates "The buyers are citizens, subjects, nationals, consumers—recipients of packages of information, propaganda, advertisements, drama, and news propounded by the media. The consumer 'pays' for one set of identities or another in several ways that, together, we call loyalty or citizenship". Price theorised that this would lead state-owned media to attempt to maintain a monopoly over the media because any competition over ideas would lead to the weakening over control over identity and thus political structures. The problem with this market is Price's conclusion that breaking up state-owned monopolies would lead to a liberalisation of this market.

With the rise of a new generation of press barons, in particular the ever-present Rupert Murdoch and his vast News Corporation the idea of media as separate from the 'power holders' has become very tenuous indeed. The media now have the incentive (because jingoistic prose often sell best) or at least the power to  create and shape identity, meaning they don't just trade in writing or opinion- they trade in loyalty. The consequence of this is that there is scope for media regulation when power over different channels gives a media proprietor to reinforce their conception of loyalty across multiple platforms (such regulation might include cross-media ownership laws, for example). It is also an argument for more closely restricting how the media accesses government and the role of media as lobbyists for corporate or their own interests. Media companies have (sometimes successfully attempted) to monopolise particular media markets- I would claim not just for profit-related reasons but also for ideological reasons (witness The Australian being run at a loss but being hugely powerful over the cognoscenti in Australia).

Institutional Constraints

The idea that the marketplace for ideas is 'free' is absurd: in reality, the availability of quality substitutes for mainstream media in most countries is low and the barriers to entry are high (it is very expensive to run a media company and most small ventures fail). This market is an institution like any other, as Oliver North noted acting like 'humanly devised constraints that constrain society'. 

Why is this important here? Libertarians either implicitly or explicitly assume that the marketplace for ideas will contain the full scope of ideas so a fair contest can occur- which is clearly not the case here. It is particularly dire in Australia, which has very high media concentration (Ray Finkelstein covers this point much better than I can in the media inquiry- http://www.dbcde.gov.au/__data/assets/pdf_file/0006/146994/Report-of-the-Independent-Inquiry-into-the-Media-and-Media-Regulation-web.pdf, especially see p. 59-60). 

Ideas may succeed not because of their truth valency but instead just because of how they are packaged by an increasingly unipolar media industry or indeed just because of whether they get aired at all. The cursory debates over drug legalisation and euthanasia in Australia are evidence of this- where the government, opposition and Murdoch empire conspire to dismiss a viewpoint it will never get any hearing at all.

Information: Not always a 'social good'

It is often claimed that more information always makes for better decisions- by economists, political scientists, information theorists or even government agencies ('if only people knew that'...). The truth is rather more complicated- in low information environments in particular, small pieces of information that ill-informed actors get from the media may lead to incredibly poor decision-making. 

An example of such a bias is the 'anchoring bias' where even completely irrelevant information can be relied on heavily to make a decision when the actor hasn't got much time or other information to consider. Daniel Ariely found in a seminal behavioural economics study that if you get audience members to write down the last two digits of their social security numbers before valuing items that they don't know the value of- (wine, chocolate, computers etc.) that you will get much higher valuations (60-120% higher) for numbers between 80-99 when compared to low numbers i.e. 0-19. How is this relevant to the media? Highly gossipy reporting or just very selective reporting may actually make consumers less informed about an issue- Fox News is notorious for this in particular. 

Our Readers are Rational? Really?

John Hartigan in particular loves to pine that his readers are fully capable of making up their own minds. Apart from the aforementioned problem of media concentration, this is also unlikely because of time and cognitive constraints that mean that consumers tend to 'satisfice', that is basically to pick a goodish alternative instead of optimising their choice over all possible choices. This means that even in a better functioning market consumers might well just stay with the default option and only hear one opinion (which is also cognitively convenient- no one wants to fall into the trap of cognitive dissonance, this can be physically painful to one's brain). Behavioural economics and social psychology have done a very good job at showing that Homo oeconomicus is largely bunk- humans are bad at being rational choosers and quite bad at processing information, often.

Conclusion: Consequences?

Freedom of expression is an important right, indeed indispensable to our democracy. But media companies should not getting away with being much less regulated than other industries under the cloak of the 'marketplace for ideas'. This metaphor is deeply flawed and damages the discussion around media regulation by making a completely free media a sacred cow. 

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Dan Gibbons is a 3rd year Bachelor of Commerce (Economics) student at the University of Melbourne. He has a forthcoming publication in Intergraph: A Journal of Dialogic Anthropology (about memory and nationalism) and is currently submitting papers on the rise of modern consumerism, the role of criminology theory in literary criticism and the institutional theory of nationalism. Dan is a keen debater and public speaker.

Nationalism

This content is largely taken from a forthcoming paper entitled: ‘We Have Made Italy, Now We Must Make Italians’: On Anthony Smith’s ‘ethnic cores’ and New Institutionalist Theory

Almost all people think of nations as inevitable, hegemonic structures- permanent features of the cultural and political landscape. I want to tease out a different conception- that nations are instead tied to the fate of their constituent institutions and why this implies that a particular nationalism at least, is not destiny. Nationalism is often conceived as tied to an ethnicity in particular-, which is not a necessary feature.

 First off, it is worth considering what a nation is, precisely. The working definition of sociologists is generally that of a group of people who believe they belong to a particular territory who often claim a shared language, history or descent, however fictitious this may be. For example, Serbian and Croatian, which are mutually intelligible oral languages are subtitled in the respective other country to pretend that they are completely separate languages.

So then, why can’t nations be ancient, perhaps ethnically based entities? In medieval Europe, national consciences simply did not exist- the ordinary person might have been conscious of belonging to a town, language group, the great corporation of Christendom; but never the ‘nation’. Nations require a particular territorial consciousness, an attachment to a system, which passes itself off as a large family, basically. Nations are not natural entities- they appeal to our ‘tribal imagination’ but they are largely a product of a post-Renaissance emphasis on strengthening the state and constructing an ‘imagined community’ around them. Further, even the ethnic consciences that are allegedly inextricably tied to nations are very modern.

What does an institutional view look like then? I propose that nations should be analysed in terms of the structure and viability of their constituent social and political institutions. This allows for the national project to be an object in flux, rather than a fixed conception. I will illustrate this briefly with two examples- Basque nationalism and the breakup of Yugoslavia.

The Basque national project has spread through social institutions like the education system and an emphasis on the Basque language, in particular. Further, Basque nationalist groups like ETA have expertly used intimidation and propaganda to create a ‘spiral of silence’: where individuals feel less able to express their opinion if they feel like they are in the minority. However, Basque nationalism is still a contested space: Basque feminists have begun challenging the linguistic and social privileging of the Basque male in national spaces. It should also be noted that the idea of a unique Basque nationalism is in fact very recent, owing to institutions founded in the 19^th century, not an ethnic consensus.

The post-conflict Yugoslav situation is often blamed on ‘ancient hatreds’, yet the actual religious milieu of the pre-modern Balkans was generally free of conflict and barely delimited. Two events doomed the Yugoslav project: first, the central government lost legitimacy as the state was unable to provide basic welfare and second, national elites like Tudjman and Milosevic played up ethnic tensions. They used the provincial apparatuses of Croatia and Serbia respectively to create artificially blame on the ethnic ‘others’ and the West.

The effect of this institutional view isn’t clear- perhaps it allows for the bettering of all national projects, perhaps it dooms them to manipulation. That much is unclear.

Dan Gibbons

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Dan Gibbons is a 3rd year Bachelor of Commerce (Economics) student at the University of Melbourne. He has a forthcoming publication in Intergraph: A Journal of Dialogic Anthropology (about memory and nationalism) and is currently submitting papers on the rise of modern consumerism, the role of criminology theory in literary criticism and the institutional theory of nationalism. Dan is a keen debater and public speaker.