A Reflection by Our Think Tank of Young Economists

Every episode of the online dialogues between visionary economists, organized as part of the Consultation, starts off with a personal reflection by one of the members of the Consultation’s Think Tank of Young Economists. This is the reflection of Jim Surie at the start of the dialogue ‘Free Markets & Inequality; An Inescapable Marriage‘ (19 October).

Today we talk with philosopher Elisabeth Anderson and economist François Bourguignon about the relationship between free markets and inequality.

In my view, in the end, it’s about the freedom of the people. Linked to this view, Scottish freethinker Frances Wright famously quoted, “Equality is the soul of liberty; there is in fact, no liberty without it.In the first instance, you might think that free markets will lead to free people. Anderson as well argues that the origin of the free market economy emerges from the need to get rid of unfree labor and slavery and to get self sufficient. Milton Friedman further states that free markets would offer decentralized decision making power. And yes, free markets brought us a tremendous range of benefits. 

However, in our current market economy freedom of one harms the freedom of another. A dominant free market economy combined with high inequality actually leads to the centralization of decision making power, which leads to even more inequality. Of course, this causality is restricted by social norms, but people are still subject to power structures which are enlarged by the dynamics of free markets. Anderson defines this as a negative form of freedom, where states have nothing to say about corporations. Within this form of freedom, we see the accumulation of power. We now find ourselves in a situation where most of the people work to make months-end while others passively, directly or indirectly via the financialization of our economy, benefit from this labor force. 

To repeat some numbers; Almost half of the global wealth is owned by 1% of the population. The value of the combined assets of the richest 10 people is higher than the yearly GDP of most countries. And in 2018, it took only 26 billionaires to equal the total wealth of the poorest 50% of mankind.

Read more:

A Capitalism for the People (cover)

Private Government; How Employers Rule Our Lives (2017)

Rethinking the Economics of Land and Housing

The Globalization of Inequality (2015)

In order to change this trend, today’s guests already gave some guidance. For example, democratizing corporations by empowering workers, correct free market failures via regulation, and a more equal distribution of opportunities like access to credit, health care, and education.

Quality instead of quantity

Furthermore, if we want to have peace, and a more free, and equal society with a growing population and the staggering decline of the quality of our natural world we must redefine the way we consume. Since a rise in welfare via materialistic consumption stresses our natural world, we may shift towards the ‘dematerialisation of our economy’. Here, we could focus more on immaterial consumption while simultaneously making our material economy more sustainable, circular and with a focus on quality instead of quantity. 

Pope Franciscus states in his encyclical Laudato Si that the root problem of the ecological crisis lays in our technocratic approach to the world in which we see no intrinsic value in lesser beings and no special value in human beings. Within this mindset we think that we can solve ecological problems by technological innovation and efficiency, but this may not be the case. The interaction between welfare and ecology can thus be extended with technology.

Bourguignon speaks about ‘jobless recovery’, where the economy grows without a similar increase in jobs. We see an increase in demand for high-skilled workers, but a decrease in demand for low and middle-skilled workers.This leads to more inequality. 

Ideally, technology leads to more free time, recovery of our natural world, and a higher standard of well-being for all of us. Because after all, why do we need to work so hard? Crucial in this view is the question who owns technology and who will receive the benefits of production?  

I believe that, in order to improve life on earth for everyone and everything, we have to organize a model which centralises the well being of all living things instead of holding on to a model which maximizes the wealth of the few at the cost of the many while destroying the living sphere of our planet.

Authors / contributors