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Yesterday I posited that the ideal of the Free Market was not the only, or even best, way to motivate ourselves to accomplish. For most people, whose (mis)understanding of economics is that Capitalism and Socialism are the only economic options available and that everything other than the particular brand of “free-market capitalism” that is current, is “communist”.

That is patently untrue, and it needs to be understood by more people that not only are there many more legitimate options economically for our society, but that what we have now as an economic order is not truly a “free market”, nor would most people want it to be.

I had originally intended to post a brief explanation of the ten most interesting, and understandable, alternatives, but as I did, I decided that they each deserved a better treatment than that, so I will give each one its own post over the next couple of weeks. So for today, I want to look at the current economic regime, so that I am being clear as to what the alternatives are alternatives to.

All free-market economics are based on Adam Smith’s idea of rational self-interest; its central premise that the market registers choices made by separate, sovereign individuals who freely consume for themselves. On top of this has been built a teetering edifice of pseudo-scientific balderdash stuck in the Newtonian mechanical view of the world. No where is this pseudo-science more evident than in the notion of “supply and demand” in classical economics. This “mechanism” is even regarded as a sort of universal scientific law by many economists and business people.

Unfortunately, Western economic theory has been conspicuously unsuccessful at making the kind of accurate predictions you would expect from a scientific discipline. The truth is that little in standard economics texts is known to be true, and that orthodox economics still has no effective answer for basic problems such as unemployment. It is more likely that market forces depend on specific cultural contexts and shouldn’t be seen to act in an impersonal, universal way – the market shouldn’t be revered as a neutral arbiter “out there”. Ask any fan of classical economics about Sweden and you will see what I mean.

More specific to the current regime in the United States (and Britian) is the idea that competitiveness is the sole measure of a nation’s/company’s/individual’s worth, and that profit-taking is the only measure of competiveness. Obsession with profit-taking is not a common factor in successful economies. Go ask the Germans, with their focus on technical excellence and quality, or the Japanese who see capitalism as a system in which communities serve customers, rather than one in which individuals compete to extract profits, or the Norse or Swedes, with their social democratic welfare state, substantial government control moderating economic fluctuations, and highest standards of living in the world.

Another important aspect of Anglo-American Capitalism is the belief in the universal nature of the market mechanism; a conviction that all-out competition is good for, and will work for, all levels of economic activity, individually, company-wide, industry-wide, nationally and internationally. This idea is being seriously challenged by the information technology revolution and the knowledge-intensive markets it has spawned. These markets seem to be proving that a co-operative free flow of information throughout a company (or industry) is likely to prove more effective than jealous guarding of privileged knowledge by ambitious individuals or companies, leading to commercial scenarios which the mechanistic metaphors of classical economics are unable to deal with.

Perhaps the largest failing of Anglo-American Capitalism is the idea that Margaret Thatcher so inelegantly stated summed up as “There is no such thing as society”. Fans of free-market economics have a deep, almost visceral hatred of terms like “society” and “social concern”. That is because the idea that social factors affect human motivation and behavior disrupts their naive notion of a ‘totally rational’ individual, completely immune from ‘social’ influences, the cornerstone of 18th century reductionist idea of the “free market”.

Critics of the competitive market system, of which I am one, argue that “free market” is itself a metaphor, an idealised abstraction whose central premise fails to take into account the vast array of social factors affecting human motivation and behaviour. Social phenomena such as advertising, state education and the mass media inevitably influence the value systems which determine what individual consumers will buy. Society has aspects which can’t be explained or predicted in terms of the rational choices made by its individual constituents.

More on specific alternatives to consumer capitalism soon!