“The Market” is a Reactionary Mystification: Reply to the Attack on Economic Populism from Franco Debenedetti and other Italian Economists
At the heart of the arguments put forward by Debenedetti and his friends is the notion that human reason is very weak indeed, and cannot attain a practical understanding or overview of how political economy works. Only the market, they claim, can do with this by totalizing so many separate facts. But they are not arguing from any empirical observation of how markets really work, but expressing the fetishism of an efficient market which was typical of von Hayek and other Austrians. They tried to portray markets as genuine epistemological tools, which provided knowledge which could not be obtained any other way. Even the Ayn Rand devotee Alan Greenspan has backed away from this extravagant claim in the wake of the catastrophic collapse of the New York banks in October 2008. When asked whether he had been led astray by his market ideology, Greenspan told a Congressional hearing: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.” (New York Times, October 23, 2008) Debenedetti does not share this distress. At the same time, the successful history of the Bank of the United States under Alexander Hamilton, the French Commissariat du Plan under DeGaulle, and the Japanese Ministry of International Trade and Industry (MITI)) makes clear to human reason is indeed capable of determining the main priorities of national economies.
Market fetishism is radically anti-historical. Everyone is aware of speculative manias, bubbles, panics, and the other recurring psychoses which make the judgment of any market totally unreliable in many critical moments. And what if there are monopolies, duopolies, oligopolies, trusts, combinations, or cartels of the February 8 type? Then the market is permanently distorted, which is what we have been seeing for decades.
Debenedetti wants “the market” to be seen as objective and impersonal, but it is not. “The market” has names and faces. If we find that half a dozen of the largest US banks control about 60% of all assets in the entire United States economy, then we can make that exorbitant control very personal and concrete. The owners of a majority share of the United States are bankers like Jamie Dimon of J.P. Morgan Chase, Vikram Pandit of Citibank, Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley, and Brian Moynihan of Bank of America/Merrill Lynch, and their respective boards. We can even know how many billions each one has been given in the form of bailouts at public expense.
The Austrian school makes the market into a metaphysical abstraction, a force above the rest of history, because it needs this mystification in order to defend the very concrete privileges of some very sleazy individuals who are the speculators. Some early Protestants tried to argue that the success of the speculator had been instituted by God. When this idea lost traction, apologists for speculation tried to argue that the speculators were morally or intellectually superior to the rest of humanity. When that did not work either, the Austrian school hit upon the trick of removing the speculators from consideration altogether by hiding them from view behind the anonymous and impersonal abstraction of “the market.” As the case of Greenspan suggests, this argument has also become untenable, and the entire edifice of Austrian thought is falling to the ground.
Debenedetti and his co-thinkers suggest that “the market” is able to detect the secret financial weaknesses of nations. But surely the shoe is on the other foot. The major US banks listed above were all, without exception, bankrupt and insolvent before US government intervention in the form of the bailout of October 2008. Today, any objective appraisal would conclude that Greece is far more economically viable and solvent then Citibank. Portugal is more viable than Goldman Sachs. Italy has a brighter economic future by far than J.P. Morgan.
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