John Kay, Britain's leading "stakeholder" economist, separates the virtues of market economics from the vices of aggressive individualism. He argues that individualistic market economies are less productive, less secure and more crime-ridden, than co-operative ones. Legislating for co-operation is not possible, but government can still promote "inclusive" marketsby John Kay / May 20, 1996 / Leave a comment
The 1970s and 1980s saw the revival of faith in market forces -reversing 50 years of disenchantment. Belief in reducing the economic role of government became a universal clich? even before the collapse of the planned economies of eastern Europe.
The victory of the market system was prefigured in the battle of ideas. The leading intellectual apologists for markets (no longer apologetic) found an attentive hearing in the 1980s under radical right wing governments in both Britain and the US. They are mostly American-although the doctrines they preach are partly attributed to the Austrian, Friedrich Hayek and, implausibly, to Adam Smith. They include political philosophers such as Robert Nozick and Ayn Rand; aggressive free market economists such as Gary Becker and George Stigler; and another school of economists-led by James Buchanan of the University of Virginia-who have developed a sceptical view of government action: the theory of public choice. I will label these individualist philosophers, neo-classical economists and conservative politicians “the new right.”
The premises of the new right are austere. Private property is the most important social institution; self-interest the central human motive; insecurity the engine of progress. Government is inherently coercive and corrupt; fairness and justice mean respect for other people’s property; trust is established by good attorneys and watertight contracts. If there is a place for nobler sentiments, such as altruism and sincerity, it is in our family lives, not in commerce; the social responsibility of business is to maximise profits.
Maybe this harsh view of human nature is realistic. There is ample unhappy experience to justify it: the dictators of eastern Europe seized economic power on behalf of the people, but used it to maintain their privileges; African politicians who took control of their economies often stole what they controlled. As we uncover the ecological disasters in the former Soviet Union, we understand that the environment is best protected when somebody owns it.
The new right position is self-reinforcing; people who are told that there is no need to apologise for selfish behaviour tend to behave selfishly. Perhaps Ivan Boesky went too far in proclaiming that greed was good-or so the courts thought when they sent him to prison-but he captured the spirit of an age. Senior executives justify their large salaries and stock options by reference to fairness and market forces. Thirty years ago, such behaviour was constrained by unwritten codes of behaviour; corporate…