Posted tagged ‘markets’

Politics and markets and public intellectuals

February 22, 2012

The President of Ireland, Michael D. Higgins, this week used the occasion of a speech delivered at the London School of Economics to develop a little more his theme of a society that has lost its way, and of an academic profession that should accept the responsibility of restoring it to intellectual health. His starting point, which he had already given an outing a few weeks ago when conferred with an honorary doctorate by the National University of Ireland, is that a political orthodoxy of unfettered markets took hold of public discourse and policy and led to the recent economic disaster. He attributes this movement largely to to the late Austrian economist Friedrich von Hayek, whom he credits with the view that markets are necessarily rational and that they should be ‘unregulated’. The President continued:

‘We have, as a consequence, been living through a period of extreme individualism, a period where the concept of society itself has been questioned. The public space in so many countries of the EU has been commodified, and it is as calculating rational choice maximizers, rather than as citizens, we have been invited to view our neighbours. That is the mark of our times, the hegemonic version, by which it is suggested, we live our lives together. Our existence is assumed to be, is defined as, competing individual actors at times neurotic in our insatiable anxieties for consumption…’

In fact what President Higgins attributes to Hayek could be questioned. In his seminal book The Road to Serfdom, Hayek confirmed his preference for as little state regulation as possible, but also stated that where markets are distorted or abused state intervention is necessary. And in Law, Legislation and Liberty, Hayek argued not that markets are rational, but that people and organisations experiencing fully competitive markets – i.e. with proper levels of competition – will tend to behave rationally. Hayek was indeed the high priest of neoliberalism, but his views were a little more nuanced than suggested in the President’s speech.

As for society, it was indeed questioned, in particular in the famous (or infamous) statement by Margaret Thatcher that there is no such thing; but whether it was forced to give way to a set of purely commodified relationships is much more questionable.

As I have mentioned before, the desire on the part of President Higgins to stimulate debate and encourage academic leadership in this debate is wholly to be welcomed. The issues he raises and the questions he asks are good ones. He is justified in encouraging debate about the nature and purpose of society. And he is right to highlight the role of the public intellectual, and thus of the academic community.

I am less persuaded by his own analysis of these issues. His thesis, that we are all the victims of a fashion for unregulated markets, is perhaps questionable. As neoliberal policies took root from the 1980s, markets were opened up but were then subjected to significant regulation; indeed the levels of regulation increased substantially after the Enron and WorldCom disasters of the last decade. Whether this regulation was appropriate or good is another matter; there is actually one school of thought that there was too much of it, meaning that some of it had become too complex to be effective. Another view is that there was adequate regulation, but that it was inadequately enforced.

All of this is open to debate, and academics should indeed seek to lead it. But that debate will be better if its basic assumptions are not too simplistic. President Higgins has a significant opportunity to prompt a national and even international dialogue. I would hope that his own contribution takes account of the considerable complexities that got us where we are, and from where we want to escape.

Going to the market?

November 4, 2010

Malcolm McVicar, Vice-Chancellor of the University of Central Lancashire, yesterday published an opinion piece on the Guardian website in which he made the following comment on the Browne review (on university funding):

‘As a matter of principle, I do not believe market forces alone should determine the allocation of the country’s higher education resources. The principles on which you operate a multinational oil company are not those on which you should operate a higher education system.’

Dr McVicar doesn’t particularly explain in what way the Browne proposals (whether good or bad) suggest that the ‘market’ should determine higher education resources, or how they are derived from the operation of oil companies; but he does get some backing in comments added to the article by readers. One of these suggests:

‘How many humanities places should be funded? How many for science, or for medicine? What percentage of the population should go to university? Where should our universities be – concentrated in the big cities? Regional? Teaching distributed at local FE colleges? Those are big choices. They can be made in a way that benefits the whole of society, if we accept that Big Government can make these choices in a way better than the Dead Hand of the market. But if we allow the Dead Hand to make these choices for us, then rest assured that not only will education be more expensive and even more difficult for the poor to attain, but that the entire system will be structured for the benefit of the individual, especially individuals in the elite, and not for the good of the country as a whole.’

I am raising this because, over the past week or so, I have regularly encountered critical comments suggesting that the government in England, and perhaps in Ireland, are introducing market mechanisms into higher education, and that this must be bad. I guess this may be based on the idea that tuition fees will reflect student supply and demand, and that less ‘in demand’ universities will attract lower fees and thus face financial risk. But actually, the financial fortunes of universities have long been heavily influenced by student demand, and some newer universities have responded very skillfully to that, and probably will be able to do so again in a fees context. In any case, I am not sure that those who fling around market accusations actually have anything very specific in mind when they do so, beyond wanting a term that shows their disapproval of what is being proposed.

My concern is that the ‘market accusation’ is an intellectually lazy way of arguing, in which it is suggested that markets (as capitalist devices) are being inappropriately harnessed to undermine educational values. I fear that if this particular view takes hold of people’s minds they may start to conclude, as the person who added the comment to Dr McVicar’s piece did, that the answer to this aberration is tighter government regulation (or bureaucracy). Of course governments make policy judgements about the allocation of facilities and resources in the public interest, but it is far from clear that tight government management of university strategies is the answer to the problems faced by higher education.

The key requirement for success is institutional autonomy within a framework of resourcing that allows innovation and intellectual curiosity to flourish and diversity to be maintained. I suspect most people and commentators would subscribe to that. Rather than letting fly with insults, it would be better to explore how this can be realised within current financial constraints and in a way that protects higher education excellence and diversity for future generations.

Educational markets

May 26, 2010

If you are following what the new British coalition government is announcing, particularly with regard to education, you might want to have a look at this article in yesterday’s Guardian by Estelle Morris. Ms Morris (actually now Baroness Morris of Yardley) was herself Education Secretary for a while in Tony Blair’s government;  in 2002 she resigned, having rather disarmingly said she did not feel up to the job – I have always had a soft spot for her since then, as such honesty and modesty is not a common political trait. She also has a university background, as she subsequently was appointed Pro-Vice-Chancellor of the University of Sunderland.

The main theme of her Guardian article is the ‘marketisation’ of education, and in particular the extent to which this is at the heart of the new government’s policies. The question of course has to be that if education is to be in a ‘market’, then what are the key ingredients of that market: i.e. what is being sold, and who are the purchasers and vendors, and what are the factors influencing supply and demand? If the ‘commodity’ is education, then you are only going to have a free market if all education is private and if quality is reflected in price, so that wealthier people can afford to buy the best education, and poorer people buy a lower quality version or maybe end up not being able to afford it at all. But in reality nobody wants a market quite like that, and anyone advocating it wouldn’t fare too well politically. So instead the ‘market’ concept has revolved around something much more limited, which is the competition between schools for students, or really for parents. At the heart of this is the belief that you need to inject ambition into educational establishments, and that this will only materialise if they have some discretion as to which students they will select.

Markets are an important and generally effective device for distributing goods and resources and services, but education is not particularly suited to this kind of approach. Education determines all sorts of social, economic and cultural issues in society, and a modern country needs to ensure that quality in education does not particularly follow privilege and wealth. A political imperative must be to raise educational standards at the lowest social level; but a market will depend significantly on a strong differentiation in quality between the best and the worst.

It seems to me to be right that schools should be free to be creative and entrepreneurial, and they should not be bureaucratised and controlled. Equally there needs to be transparency as to quality and performance, so that league tables ought to be beneficial. But allowing schools and parents to build up a class-based educational system is not one of the things we should tolerate. It is, I think, too early to see what the Conservatives and Liberal Democrats have in mind, but we should watch this space with some interest.

The ideology and reality of markets

July 26, 2008

For ten years, while I was Professor of Law at the University of Hull in North-East England, I lived in what is usually described as the old ‘market town’ of Beverley. Beverley does indeed have a market. The centre of the town is dominated by the old market square, going by the name of ‘Saturday Market’. And indeed today, as on every Saturday throughout the year, market stalls will have been erected and the casual shopper will be able to purchase a wide variety of goods, from fresh fruit and vegetables, through electrical and consumer good, to textiles and footwear – with lots of other things in between. People will come from the surrounding countryside, and in some respects the scene will not be that different from what it has been for hundreds of years. Markets such as this were usually established in the Middle Ages when the monarch granted the right to local noblemen (usually), so that people from something like a six-mile radius could purchase goods that would have been produced locally.

A ‘market’ in this sense (and in pretty much any other sense) is a place or an interaction where buyers and sellers of goods or services meet to agree a price for the transaction. It works best when there is ‘competition’, that is where there are several buyers and sellers, thereby assuring a reasonable rate for the exchange based on its objective value. Or put another way, a market is a distribution mechanism for goods and services, designed to ensure that the price is objectively reasonable.

As the analysis of trade became more sophisticated by the 17th and 18th centuries, the concept of a market acquired more and more significance in the emerging economic theory. The basis of modern market theory was in particular expressed by the philosopher Adam Smith, in his famous book An Inquiry into the Nature and Causes of the Wealth of Nations (1776), in which he argued that a free market was both the most efficient and also the most benign way of securing and sustaining prosperity.

In England supporters of the concept of free markets as an economic and political tool were by the 19th century styled ‘Liberals’, and in some contexts the label of ‘liberal’ still has that meaning. Indeed ‘liberal’ ideology not only pursued free market goals in economics and trade, but also in personal morality and conduct, as liberals disliked restrictions and regulations and taboos in these areas, thereby providing the bridge to what most people nowadays consider a ‘liberal’ outlook.

Not everyone was enthusiastic about markets as a form of liberalisation or even liberation. Hegel and Marx both were opposed to the free market concept – a particularly interesting critique of Adam Smith can be found in Marx’s Grundrisse der Kritik der Politischen Ökonomie (1861); although it might also be added that the concept of ‘market socialism’ emerged later in the 19th century.

By the 20th century – and the late 20th century in particular – the market had for some become a major ideology in the economics sphere. Markets were no longer just rational mechanisms for the exchange of goods and services, they were a mystical concept with opaque but unstoppable powers. The expression that you could not ‘buck markets’, which was popular in particular in the British Conservative government of Margaret Thatcher and in the writings of some of the high priests of the intellectual movement underpinning Thatcherism and Reaganism (particularly F.A. von Hayek), suggested that markets were not trading or policy devices but forces of nature. The ‘market’ became the God of the capitalist West, set against the ‘Evil Empire’ of the Soviet-style planned economy based on Marxism.

Of course all things must pass, and this particular form of market ideology did, too. And as the ideological battlegrounds of the Cold War disappeared from view after the fall of the Berlin Wall, the certainties of market ideology were also somewhat diluted.

Perhaps the early 21st century is a good time to re-assess markets. I have had a long interest in the idea and use of markets. It is arguable, for example, that you could trace the development of social policy through law by using market metaphors of supply, demand and distribution. And closer to my own current professional life, you could look at universities and education and ask whether markets can provide a useful tool for the development of policy. Furthermore, the restraint and regulation of markets is of major significance in almost all modern activities, and deserves close attention.

In other words, markets are not just locations (as in Beverley) or activities, but a market is also a metaphor for the analysis of policies, activities and conditions.

From time to time in this blog I shall develop this thinking a little further. This is a selfish activity, as I am working on a book on this general topic, and I am looking here for feedback and stimulation. So I am hoping for comments here. Maybe I also need to write a piece on plagiarism, so that I remember to give proper credit to any inspiration I may get.