Limiting Resources: Market-Led Reform and the Transformation of Public Goods

Preface

P R E FA C E As this book went to press, the global economy was experiencing its worst crisis since the Great Depression. One could look just about anywhere and find bad news, even in the supposedly healthy U.S. economy: from a collapsing financial system resulting in multi-billion-dollar taxpayer bailouts to burst real estate bubbles and foreclosures at record highs. Unemployment and underemployment plagued the working poor, while the ‘‘misery index,’’ that is, the sum of the unemployment and inflation rates, was rising fast. Increasingly intense hurricanes fueled by global warming wrecked coastal cities—and oil spewed into our waters—as we fumbled around, hopelessly inadequate to the task of reducing our dependence on fossil fuels. Moments like these bring Karl Polanyi to mind. In his 1944 book The Great Transformation, Polanyi referred to land, labor, and money as ‘‘fictitious commodities.’’ Applying excessive market rationality to these realms, he argued, distorts the substantive relationship between the economy and society in ways that create insecurity and threaten the social fabric. What we are experiencing is the predictable result of a societal restructuring that made market exchange the key organizing principle in places it did not belong, a rich-country version of the market fundamentalism that was thrust on the developing world by Washington in the 1980s and 1990s. Conservatives from Ronald Reagan on sought to change how America is governed—to strip from government all its functions except those that reward their rich and privileged benefactors . They are quite candid about it, even acknowledging their mean spirit in accomplishing it. . . . Grover Norquist has famously said he wants to shrink the government down to the size that it could be drowned in a bathtub. More recently, in commenting on the fiscal crisis in the states and its effect on schools and poor people, Norquist said, ‘‘I hope one of them’’—one of the states—‘‘goes bankrupt.’’ So xii PREFACE much for compassionate conservatism. . . . And what happens once the public’s property has been [drowned]? Privatize it. Sell it at a discounted rate to the corporations. . . . It is the most radical assault on the notion of one nation, indivisible, that has occurred in our lifetime. (Moyers 2003) This fundamentalism led to the deregulation of the financial system, the removal of safeguards against speculation and greed, the dismantling of social safety nets, the easing of environmental regulations, and, increasingly , the privatization of risk. The exception in our drive toward a market society, of course, was fiscal austerity policies that forced developing countries to limit deficit spending—the United States did not hold itself to those same pesky standards, especially when it came to spending on warfare. Given the terrible consequences for humans and the earth, it was particularly perplexing that market fundamentalism went so far for so long. Part of the explanation, as I argue in this book, was a distorted understanding of public goods at the core of economic thinking. In contrast to popular understandings of ‘‘public goods’’—where education, health care, water, and infrastructure are ensured by government, with an implicit social agreement to promote well-being and justice for the people—economists were trained to evaluate public goods devoid of social content. ‘‘The public’’ (you and I) was reduced to prisoner’s dilemmas and collective action problems , while state intervention was incorporated mainly as a last resort to remedy market ‘‘failure.’’ One result of this thin understanding of the full social significance of public goods was a turn to markets wherever possible, through unbundling, contracting, granting concessions, and privatizing. At the same time, taxes were reduced to levels that could not sustain robust social programs. The resulting excessive reliance on markets diminished the pool of resources considered ‘‘public’’ and precluded important nonmarket alternatives, in developed and developing countries alike. The effects of ‘‘free’’ markets in money, land, and human beings (Polanyi’s ‘‘fictitious commodities’’) were just as visible in the United States—meager responses to environmental threats and an abysmal health care system—as they were in supposedly ‘‘undeveloped’’ countries. So complete was the hegemony of markets that even with the neoliberal model collapsing all around us, people were still clamoring for market solutions and were panicked about state intervention. The public was dismayed and distrustful of the state, just as intended. But eventually something will have to give: ‘‘business as usual’’ is likely leading to a breakdown PREFACE xiii in our...