In the economic current crisis the market is not the answer, the market is the problem.
Forces endemic to the structure known as "Wall Street" and/or the Free Market have exploited, defrauded, and deceived the public, which has come to depend upon those institutions for its establishment of economic value, for investment, and our national prosperity.
The marketplace is itself thought of as amoral.
In theory, the mechanics of the trade are said to be independent of the moral sphere. However, the marketplace has been corrupted with immoral and wicked individuals whose personal, greedy ambitions and criminal schemes and manipulations have been used to corrupt and rob the public of billions of their hard earned stores of savings and investment—all for the aggrandizement, power and wealth of a relative few. It has well within their powers to so "fix" the trading floor as to leverage great advantage for themselves.
See Below Updated Blockquote from: Spontaneous Order, Symbolic Interaction and the Somewhat-Less-Hidden Hand, Roger A. Lohmann
The iconic economist, Adam Smith, alluded to the "invisible hand" as that mythical force which acts in a purely functioning marketplace which evens out and smooths the ups and downs of human trends and catastrophes that effect the Market.
This faith in the "invisible hand" constitutes the basic confidence needed to "play the Market." If we expect Smith’s invisible hand to "maximize the efficiency" and produce corrections unfettered and unregulated, looking well beyond the careful judgment and discernment of any one individual or group, thereby producing a global economy that functions in a dependable and reliable manner, we are delusional.
In his paper, Spontaneous Order, Symbolic Interaction and the Somewhat-Less-Hidden Hand, Roger A. Lohmann expands on the figurative symbolism of Adam Smith's "invisible hand" making the following statement:
Frederick Hayek consistently presented the concept of spontaneous order as an idea grounded in the "hidden hand" of Adam Smith. Theoretically, the Smithian hidden hand serves as a kind of deus ex machina to account for or dismiss an extremely wide variety of possibilities from statistical error terms to fate or divine intervention.
In many respects, the hidden hand often functions as a kind of pseudo-explanation: "then something very interesting happened but we don’t quite know why". Granted that this is an excellent interim explanation useful in many context. However, it is not an entirely satisfactory long-term solution. Thus, claims of "hidden hand" explanations should always be seen, in part, as the jumping off points for possible further exploration rather than termina. (emphasis added) While we must certainly pay attention to mystery and the unexplained in seeking to understand the emergence of spontaneous order, simply writing wide swaths of social reality off to unexplained spontaneity, unpredictability and chance represents merely a virtual abandonment of the theoretical enterprise.
Some incautious followers of Hayek and Smith tend to treat the "hidden hand", which is to say the workings and processes of economic exchange that Smith noted in the 18th century, as equally hidden and mysterious today.(emphasis added) Such is clearly not the case along a wide variety of fronts in economic, social and political theory.
Is constant reference to the "invisible hand" a kind of naive belief in supernatural forces akin to belief in a Market tooth fairy?
Not to worry we are told, the "invisible hand" will intervene and put things right. On the other hand, how do we deal with the stark facts that the "invisible hand," however propitious, has become "sleight-of-hand" as "the smartest men in the room" have commandeered the inner workings of the Market and made it the engine of their profit and ambition.
Writer Joe Gregorio expands on the popular Free Market Fairy concept:
There is nothing benevolent about free markets, they are a natural force, like gravity, and aren't magical, good, or evil. The free market will maximize efficiency and it will do so in a manner that is blind to externalities...
The free market is amoral.
Be clear that is a very different statement from free markets being bad or evil, they're not. Like gravity and electromagnetism, or simple machines like the ramp and the screw, they have no inherent intent, they are tools we use on a daily basis, and the expression of intent is in how we apply those tools. I can use a hammer to drive a nail while building a house, or I can use it to cause bodily harm, in neither case is the morality of the action tied to the tool, and in a similar way the blind action of a free market is free of morality.
Intense scrutiny must be turned toward "the tool users" in the Market.
Since the deregulation days of Reagan and the subsequent laziness or reluctance of regulators to intervene in the Market and with the 2000 the U.S. Senate reversal of the laws prohibiting marketplace "betting" we have been on a steady path to our present ominous financial crisis. To pontificate on the neutrality and amoral nature of the Market is deceptive and misleading.
According to writer Joe Gregorio the Market need not be devoid of ethics and morals:
"If free markets are just a tool, then their morality comes from how we apply them. Herein lies the role of government, in setting up the rules and regulations for enterprise, the government is using free markets as a tool and in doing so is embedding our morals into that market. By putting a price on externalities we are giving moral weight to the operation of the market. It is through government that we as a people can shape and guide the force of free markets to do our bidding, and to do so with in a way that reflects our morals. While a perfectly free market is amoral, a regulated one need not be.
"Beyond rules and regulations there are other ways in which we can inject our morals into a free market, such as public supported universities and public supported research. Such research would never be profitable for a single company to undertake, but in the end benefits everyone."
The list of known corrupt and scandalous corporations, banks, financial institutions, rating institutions, accounting firms, PR specialists, business reporters,lobbyists, corrupted politicians, and con men is spectacular and growing: AIG, Lehman Brothers, Goldman Sachs, Arthur Anderson, Tyco, Madoff, Enron, Adelphia, WorldCom and more. One can scarcely keep up with the unfolding sensational and unprecedented scandals.
Americans have been so schooled, carefully acculturated, to accept the concept of a "free market" that they are truly unable to sort out the good from the bad. They are so bamboozled and beguiled by the corporatist media, both print and electronic, that they are unable to fathom the kind of snake-pit--the erroneous beliefs centered around market fundamentalism--which our ignorance has populated.
The way out will not be easy.
Changes to a economic system that has made the Market a "god" will not be easy. But left to "things-as-they-are" we are well on the road to perdition and ruin, both as individuals and as a nation. Business as usual for the market will not and cannot be the answer to our national economic woes. It’s time we took the mature step of rediscovering both the true nature of the Market, the flaws and failures of blind dependence on the "goodness" of a "Free Market" and the reality that investors have been duped by thieves and con men. We need to clean house and rediscover the power of the axiom: Monetary systems and a trading floor must first operate in a manner that merits and builds "the full faith and confidence" of the public.
If we allow ourselves to believe that the "Market" unfettered and unregulated will solve our housing slump, the credit crunch, improve Social Security, and or make medical care for millions of Americans more accessible or affordable, we will fail.
We have been carefully schooled, propagandized and taught that the Market is the pure vehicle of prosperity and innovation, that entrepreneurialship, rugged individualism, and risk taking--as they are currently manifest and practiced in the marketplace--are self-correcting and capable of future unlimited success. We were deluded and beguiled.
For some the "Market" is the "organized exchange of commodities between buyers and sellers within a specific geographic area and during a given period of time." The influence and reach of the "Market" is far more invasive and pervasive than any of us realize. The "Market" does not work for or directly benefit us, in reality we (the public)work for, and directly benefit or suffer from the Market. The Market, as it has evolved, is a voracious octopus with its tentacles around and squeezing every aspect of our lives.
A failed understanding of the Market is our national black hole.
Our ignorance of the "market," its complexity, its ability to control, and its power to compel individuals to act against their own best interests and that of their children, is a great flaw—it’s this snare that will have more to do with our national survival and future prosperity than any foreign enemy or threat.
Former CEO Paul Stiles has concluded,
"...(P)eople commonly personify the market. The market is given emotions, desires, personality, intelligence. It is very much alive...if you were to make the statement ‘the market is running our lives.’ Or ‘the market is the most powerful force in America today,’ many people would undoubtedly stand up and second the motion. But when it comes to explaining how this can be, we have fallen down on the job. We recognize that there are many market-related facets deeply entwined with modern life. Market principles, market values, market culture, marketplaces, and market prices are just some of them. But what we have not done is the obvious. We have not assembled all of these diverse forces into a single unified paradigm, the market with a capital M."
THE MARKET BAAL
The fawning worship of the Market Baal is anathema to the Judeo-Christian morals as nominally subscribed to by most Americans. So much so, that the challenge of the Market to our concept of God is such that Atlantic Magazine ran an article entitled "The Market as God." We have surrendered our homage to a moral god to a material god, hitherto we have pledged "In God we trust" only to replace that solemn vow with "In the Market we trust." In that article Harvard Theologian, Harvey Cox expounded on what he had discovered:
"The lexicon of The Wall Street Journal and the business sections of Time and Newsweek turned out to bear a striking resemblance to Genesis, the Epistle to the Romans, and Saint Augustine's City of God. Behind descriptions of market reforms, monetary policy, and the convolutions of the Dow, I gradually made out the pieces of a grand narrative about the inner meaning of human history, why things had gone wrong, and how to put them right. Theologians call these myths of origin, legends of the fall, and doctrines of sin and redemption. But here they were again, and in only thin disguise: chronicles about the creation of wealth, the seductive temptations of statism, captivity to faceless economic cycles, and, ultimately, salvation through the advent of free markets, with a small dose of ascetic belt tightening along the way, especially for the East Asian economies."
It is no small coincidence that the market can be made symbolically to describe itself in animalistic terms—bull or bear.
As one observer has noted, "The market is a beast, raw, primitive, aggressive, tough, brawny, and dangerous." One trader reflected, "To most traders and investors the market is a dangerous and undependable animal. Their mottos are: ‘Don’t count on it,’ and ‘Get out before it gets you."
Before the Market Nature Ruled Our Economic Destines.
In the historic past, it was the role that raw nature played that dominated human daily life and determined our economic survival. Nature has been superseded, except on rare occasions such as Katrina, by the impact of the Market. The power of the Market has replaced mother nature as the determinate factor in our daily and national life, our economy and prosperity.
"The fascination, and challenge, of exploring the nature of the Market is that it quickly leads to the loftiest questions, those normally reserved for philosophers, theologians and system theorists. Since it exists in the economic realm, the Market is not a physical principle, like gravity...we know that a higher power must be ruling our economy, because we cannot explain it otherwise. The market price of a commodity, for instance, is beyond the control of any individual or corporation. It is purely the product of the Market. So if the Market did not exist, there could be no commodity pricing, the entire market economy would collapse. Just as clearly, the Market must be an active agent in our lives. Something must be judging us with the market price, selecting winners and losers. And since our lives are market-driven, as anyone today would be hard pressed to deny, then what is doing the driving?" Paul Stiles,: Is the American Dream Killing You?: How "The Market" rules our lives"
Humans have the high order intelligence and soul enabling them to weigh moral questions and make judgments based on religious mores and the acquired institutional wisdom which is within the culture sufficient to provide the moral and ethical high ground. The Market, so revered and so powerful—as it has become-- has no ability to act morally or with values-driven reflection, it only pushes ahead as the tools, the emotions of its participants, and its hidden manipulators allow. Its goal: more production, more profit. The Market is considered amoral, but it also is capable of easily being used as a tool for the unscrupulous and the thief.
Stiles wants better answers:
"Since the market is such a vital part of modern life, the uncertainty surrounding its nature has bred all kinds of political conflict over how it operates and what role it should play in our lives, from clashes between political factions within America to situations as extreme as the Cold War, an era when the future of mankind hinged on the reassuring notion of Mutually Assured Destruction. More recently, we have had violent demonstrations over globalization, terrorists have struck down the most well-known symbol of the global market, the World Trade Center, and an unprecedented wave of corporate scandals has spread across America. Far from being put to bed, as so many in the post-Cold War era predicted, the market debate is alive and well. So the most pressing question, today as yesterday, still remains: What is the nature of the market?"
Paul Stiles ventures an answer:
"The Market is "a higher power bent on making us more productive—regardless of the repercussions...the Market is not ‘the collective will of the people.’ While a human being is defined by his ability to distinguish between good and evil, to the Market good and evil are nothing but profit and loss—a very different standard. The Market may represent one side of human life—the collective judgment of individuals acting as traders—but it is not the voice of mankind...It (the Market)is the amoral spirit of prices."
From: Is the American Dream Killing You?: How "The Market" rules our lives
We are compelled by Market promoters to worship the Market as though it had higher powers, magical abilities and as though it were possessed of a god-like quality. We ascribe it as somehow supernatural, but such is not the case.
In fact Harvey Cox found:
"Soon I began to marvel at just how comprehensive the business theology is. There were even sacraments to convey salvific power to the lost, a calendar of entrepreneurial saints, and what theologians call an ‘eschatology’ -- a teaching about the ‘end of history.’ My curiosity was piqued. I began cataloging these strangely familiar doctrines, and I saw that in fact there lies embedded in the business pages an entire theology, which is comparable in scope if not in profundity to that of Thomas Aquinas or Karl Barth. It needed only to be systematized for a whole new Summa to take shape.
"At the apex of any theological system, of course, is its doctrine of God. In the new theology this celestial pinnacle is occupied by The Market, which I capitalize to signify both the mystery that enshrouds it and the reverence it inspires in business folk. Different faiths have, of course, different views of the divine attributes.
"In Christianity, God has sometimes been defined as omnipotent (possessing all power), omniscient (having all knowledge), and omnipresent (existing everywhere). Most Christian theologies, it is true, hedge a bit. They teach that these qualities of the divinity are indeed there, but are hidden from human eyes both by human sin and by the transcendence of the divine itself. In ‘light inaccessible’ they are, as the old hymn puts it, ‘hid from our eyes.’ Likewise, although The Market, we are assured, possesses these divine attributes, they are not always completely evident to mortals but must be trusted and affirmed by faith. ‘Further along,’ as another old gospel song says, ‘we'll understand why.’"(Emphasis added)
The clever power of deceit and the strong pull of greed have soiled the inner workings of marketplace and made its outcomes--which are commonly revered as self-correcting and positive (nominally reliable beyond any accepted risk inherit in ordinary market trades.) Such blind faith in the Market has allowed it to become the playground of rouges and thieves, insider traders, criminal minds and destroyers of lives and fortunes.
What incomprehensible set of devices and machinations were embedded in the advent and creation of Securitization--that process of taking an illiquid asset, or group of assets, and through financial engineering, transforming them into a security? If a Market instrument is so complicated it cannot be understood by international investors or foreign governments, doesn’t that smack of the potential for fraud?
We have clumsily and ignorantly entered the desperate and dangerous resource wars of the 21st Century accelerated under the failed leadership of George Walker Bush—it’s all about oil and who controls the world’s oil rich regions. It has led to trillions of dollars of national debt and a very difficult and daunting debt challenge undermining our national future.
How utterly mind bending is the image of debt-ridden Uncle Sam hobbling on bended knee to Communist China with a tin cup, begging for borrowed money to carry on a resource war in the Middle East, begging from our great import/trading partner and most serious rival for the future of manufacturing, world resources and human capital in the uncertain century we have just entered.
Mind boggling and yet realistically this is our lot. We face the subordination of our national security and our economic sovereignty to a robust, thriving Communist State-run Capitalism--soon to be every bit our challenger for leadership of the entire world.
GET BUSY
We have been led to this precipice by the attitude and collective assumption that individuals and the nation can be redeemed if only they become more productive and wealthier by means of finance and investment, regardless of the damage or the negative outcomes to our health, our families or future. The negative consequences have grown evident to so many in recent months. It’s as though the compelling hand of the Market God were placed as a motto over the lintel of our homes constantly demanding and hectoring us to "Get busy."
How did this Market obsession become so dominate?
Harvey Cox ventures an opinion:
"Since the earliest stages of human history, of course, there have been bazaars, rialtos, and trading posts -- all markets. But The Market was never God, because there were other centers of value and meaning, other "gods." The Market operated within a plethora of other institutions that restrained it. As Karl Polanyi has demonstrated in his classic work The Great Transformation, only in the past two centuries has The Market risen above these demigods and chthonic spirits to become today's First Cause."
The pastor of a large and very conservative congregation in the heartland gave a three part sermon series entitled "Crisis." In those sermons the preacher pinned the blame for our present national economic crisis on the materialistic "worldly" individual who pursues that which he "wants" to his own downfall and bankruptcy, and thus we as ordinary consumers have collectively brought on this national crisis by our raging urges. He opined "a crisis is when you do not get all that you want."—this assertion is the perfect ministerial evaluation and condemnation of our consumeristic culture fostered and fed by the enticing power of the Marketplace God and compulsive shopping/buying.
The pastor was wrong. The present crisis is clearly better described as being a real crisis brought on by conditions leading to "a time when you do not get all that you need." A crisis that has been accelerated and expanded by the systemic Wall Street evils of greed, deception, and invasive corruption tainting the Market at its deepest levels.
The Market is not the answer, the Market is the problem. Wall Street cannot save itself. Wall Street is the problem, not the answer. Market "heal yourself" will not suffice.