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Market Fundamentalism

from Asad Zaman

Market fundamentalism refers to a deep-seated ideological belief in the magical powers of the free market to solve any economic and social problem. The term ‘fundamentalisFreeMarketFundamentalismm’ conveys the quasi-religious certainty expressed by contemporary advocates of the free market, who continue to maintain the belief in face of overwhelming amounts of empirical evidence to the contrary. Surprisingly, the term was invented by George Soros, one of the 30 richest men in the world, who has made billions in profits by exploiting this ideology.

The vast wealth of Soros comes from his deep understanding of the weaknesses of the free market.  He became known as “the man who broke the Bank of England” when his short-sale of $10 billion worth of British pounds forced the Bank of England to devalue the pound, earning him $1 billion in profits. Free market ideologues support and permit short sales, even though their damaging effects are well documented. The Great Depression was precipitated and prolonged by short sales, which allowed financial sharks to profit from the misery of millions, just as Soros profited at the expense of a whole country. Later, during the East Asian Crisis, Soros also made profits from short sales of the baht and the ringitt, Thai and Malay currencies, as they were declining. However, he got out of the market early because of the justified fears that Mahathir Mohammad, who is not a free market ideologue, would impose capital controls.

Soros was once a student of Karl Popper, one of the greatest advocates of the free market as a key component of an open society. However, he is among the rare few billionaires who have become disenchanted with the workings of the free market which has created their wealth.  Whereas his mentor regarded Communism and Fascism as the greatest threats to the “Open Society,” Soros has come to believe that the largest current threat is from market fundamentalism, which prevents the regulations necessary to allow a market to function efficiently, for the benefit of all.  read more

  1. Alan.
    March 10, 2016 at 12:27 am

    What’s especially amusing is that Smith was used by Greenspan and others to justify banking deregulation. The dangers of financial speculation were already well-known to Smith.

    WN II.2.94. To restrain private people, it may be said, from receiving in payment the promissory notes of a banker, for any sum whether great or small, when they themselves are willing to receive them, or to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed.

  2. March 10, 2016 at 3:38 am

    “Whereas his mentor regarded Communism and Fascism as the greatest threats to the “Open Society,” Soros has come to believe that the largest current threat is from market fundamentalism, which prevents the regulations necessary to allow a market to function efficiently, for the benefit of all….It is free market fundamentalism which enables the rampage of uncontrolled capitalism which is threatening to destroy the globe and society in its unquenchable thirst for profits. Unless humanity as a whole can chain this monster, as was done after the Great Depression, the future looks bleak.”

    According to the Handbook of Psychopathology,” Psychopathy also known as—though sometimes differentiated from—sociopathy, is traditionally defined as a personality disorder characterized by enduring antisocial behavior, diminished empathy and remorse, and disinhibited or bold behavior.” Sounds to me like market fundamentalism and psychopathology have much in common. It may not be as simple as all “market fundamentalists” are psychopaths, but as a clinical psychologist I’d recommend treatment for all of them. But psychopaths are good at escaping the consequences of their actions, including avoiding treatment.

  3. Alan
    March 10, 2016 at 2:36 pm

    What’s especially amusing is that Smith was used by Greenspan and others to justify banking deregulation. The dangers of financial speculation were already well-known to Smith.

    WN II.2.94. To restrain private people, it may be said, from receiving in payment the promissory notes of a banker, for any sum whether great or small, when they themselves are willing to receive them, or to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical.The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed. (emphasis added)

    • March 10, 2016 at 6:27 pm

      Finance and banking are today inherently anti-social. This level of anti-social actions is pathological. Psychologists are beginning to address the need to treat this strain of anti-social behavior. Psychologists are all too familiar with this level of anti-social behavior in other areas, including serial killers and serial rapists. It is destructive of both individuals and societies. But the chances of addressing it successfully in banking and finance are small, considering that’s there’s been little success in addressing it with serial killers and rapists over the last 30 years. So far the only solution for serial rapists and killers is permanent incarceration. And even this is not always successful.

  4. blocke
    March 11, 2016 at 11:02 am

    “The term ‘fundamentalism’ conveys the quasi-religious certainty expressed by contemporary advocates of the free market, who continue to maintain the belief in face of overwhelming amounts of empirical evidence to the contrary.”

    Asad,

    Where do you get this idea that economists are advocates of free markets. According to surveys presented in Daniel B Klein and Charlotta Stern, “Is There a Free Market Economist in the House? The Policy Views of American Economics Associations Members (American Journal of Economics and Sociology, 66:2, Apr. 2007, 3009-34), “a large majority of economists are generally favorable or mixed on government intervention, and hence cannot be regarded as supporters of free market principles. …[Only] 8% can be considered supporters of free market principles, less than 3% may be called strong supporters.’ (p.310)

    • March 11, 2016 at 8:19 pm

      Surveys (polls) can be interesting and fun. But I think it more insightful to examine what economists do rather than what they say. For example, when asked by a client for advice or to answer questions from business persons, or to help write public policies or design a college class lesson plan what do economists do, . How do economists want the world to look and life to be lived in such situations? Following economists around in their dally lives (as Anthropologists do) can provide more understanding of the way economists live their lives and influence events around them than any poll or survey.

      • blocke
        March 11, 2016 at 11:06 pm

        Ken, who has time or inclination to follow economists around all day. Polls can be instructive if they are supplemented by field work. Read the Klein and Stern article and see what you think.

      • March 12, 2016 at 6:42 am

        Science studies has been “following” scientists (the term anthropologists use is ethnography) for over 4 decades. Some sources in that work you might want to look at are “Science in Action” by Bruno Latour, “Laboratory Life” by Steve Woolgar, “The Social Shaping of Technology” by Donald MacKenzie. For economics you might want to look at “Do Economists Make Markets” edited by Donald MacKenzie, “The Laws of the Markets” edited by Michel Callon, “Economic Life: How Culture Shapes the Economy” by Viviana Zelizer, “Anthropology, Economics, and Choice” by Michael Chibnik. Some of these studies (following) lasted years. So succinctly put, Anthropologists do follow economists. Think of polls and surveys and the like as observing some (only a small subset generally) of the results that have been created. Ethnography (following) allows us to see in action at least some of the work in building these results. The extent of what can be seen and written about depends on the age of the construction work, the submersion of this work, the skills of the observer, and the amount of time spent observing. An anthropologist who has spent over ten years observing and interacting with gravitational physicists told me once that in most situations he had become accepted as one of them. One of the dangers of “following” is “going native.” Harry may be near to “going native.” Which limits many useful insights his research might provide.

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