The Market: An Amoral Institution?

Introduction

One of the oldest controversies in political philosophy concerns an essential attribute of the Market: whether or not it is confined within the moral sphere of human behavior. This seemingly "metaphysical" question has extremely important implications not only in the field of political philosophy but also in a much more down-to-earth way in economic theories and political programs that ultimately govern many aspects of our lives (economic activity, work, justice, etc.). It therefore deserves attention, especially since the global economic and financial crisis of 2008 brought it to the heart of political debate.

Historical Retrospective of Liberal Thought

To properly frame the terms of the debate as it has been presented in political circles since the 2008 crisis, it is necessary to provide a brief historical retrospective of liberal thought.

Foundations of Economic Liberalism

If economic liberalism is the school of economic thought that places central importance on the free market and individual initiative, its principles stem from the liberal doctrine of political philosophy, which asserts freedom as the supreme political principle and its corollary of individual responsibility, and advocates the limitation of government power. This doctrine is based on the idea that every human being possesses fundamental natural rights that precede any association and that no power has the right to violate. Consequently, liberals want to limit the social obligations imposed by power and more generally the social system, such as morality, in favor of free choice and the interest of each individual independently of others.

John Locke and the Scottish Enlightenment

In his famous "Letter Concerning Toleration" of 1699, John Locke, an important thinker of the "Scottish Enlightenment," laid the foundations of modern liberal philosophy, with the "rule of law," by organizing and developing its main themes: the theory of natural rights, the limitation and separation of powers, the justification of civil disobedience, the affirmation of freedom of conscience, and the separation of Church and State.

Contributions of Hume and Montesquieu

Hume and Montesquieu, for their part, developed the consequences of their liberal philosophical positions in the political and economic fields. Montesquieu, facing the absolute power of the French monarchy, was mainly concerned with establishing a separation of powers to limit the abuses of the king's executive power and thus guarantee the freedoms of Parliament and Justice with "The Spirit of the Laws" (1748).

Economic Liberalism: Turgot and Adam Smith

In the economic field, we can cite Turgot and Adam Smith, who endeavored to link their demands for economic freedoms to the philosophical roots of liberalism, in the face of the then highly controlling state administration.

Divergence of Liberal Schools of Thought

From the mid-18th century, liberal schools of thought differentiated themselves both by their philosophical foundations, the limits and functions they assigned to the State, and the domain to which they applied the principle of freedom (economy, political institutions, social domain).

Classical and Neoclassical Schools

In the economic field, following Adam Smith, the English classical schools (Smith, Malthus, Ricardo, Stuart Mill) and French (Turgot, Say, Condillac) legitimized a certain intervention of the State in the economic sphere in return for strict duties: guaranteeing the security of all, justice, and building and maintaining public infrastructure.

The neoclassical school, born in the 20th century, sought to provide a "scientific" justification for "laissez-faire" based on the general equilibrium theory proposed at the end of the 19th century, which attempts to demonstrate that the rationality of actors, thanks to the supposed perfect coordination of their actions through the market alone, leads to the best possible situation. Some authors deduce the liberal precept that the State should not intervene in the functioning of the market, under penalty of degrading the overall situation. Others, aware that the notion of equilibrium and that of optimum rest on hypotheses difficult to verify in reality, are willing to admit certain State interventions, while differing on their exact limits.

Austrian Neoclassical School

For the Austrian neoclassical school (Carl Menger, Ludwig von Mises, Friedrich Hayek), the freedom to exchange and undertake is seen both as a particular case of the philosophical principle of freedom, thus a moral imperative that imposes itself independently of its consequences, and as a means that most likely leads to the greatest general satisfaction. For Hayek, attempts to "correct" the market order lead to its destruction ("Law, Legislation and Liberty," 1973).

Influence of the Chicago School

This point of view strongly influenced the so-called Chicago school (Milton Friedman, George Stigler, Robert Lucas), a true factory of Nobel Prizes, which in turn forged the ultraliberal ideological matrix of Reaganomics and Thatcherism.

Milton Friedman: A Major Influence

The case of Milton Friedman deserves attention as his intellectual influence was major in the 20th century. It is explained no doubt by the fact that he was much more than a "simple" economist: while he was a great specialist in the analysis of consumer behavior and inflation, he was also the great theorist of Monetarism (an economic doctrine implemented in the late 1970s by the Federal Reserve and the Bank of England, but abandoned a few years later), he was above all an indefatigable ideologue who brilliantly succeeded in popularizing the doctrine of free trade, being one of the first economists to host a widely watched television show, in addition to contributing technical articles to the highly respected journal The Economist.

Friedman's Political Agenda

Over the decades following World War II, he increasingly aggressively asserted a political agenda that can be described as libertarian (in the vein of Ayn Rand), proposing, for example, to abolish medical practice licenses or the Food and Drug Administration. His intervention in the very popular 1980s TV show "Free to Choose," his great talent as a pamphleteer never using economic jargon and peppering his speech with concrete examples, deeply marked the public's mind and allowed him to rally opinion to the principle of total "laissez-faire" in economic matters, paving the way for the ultraliberal revolution of the 1980s, with great deregulation.

Capitalism and Freedom

In his famous essay "Capitalism and Freedom" (1962), where he considers that arguments against free markets reflect a weak belief in freedom itself ("Underlying most arguments against the free market is a lack of belief in freedom itself"), he laid the foundations of an ideology that over the years would become absolutist: anyone who opposes free markets actually opposes the freedom that underpins American values. Unlike the Austrian school, which opposes market regulation by criticizing its consequences, Friedman posits the principle of non-intervention by definition, thanks to a highly moral argument, while claiming that the market is a fundamentally amoral institution.

The Great Depression and Market Functionality

If after the Great Depression of the 1930s, many people believed that markets could never work, Friedman had the intellectual courage and academic rigor to demonstrate that they can work, but as a staunch advocate of the free market, he ended up claiming that markets always work and that only (unregulated) markets work…

Financial Crises and Deregulation

Through such sophisms, governments were strongly encouraged to liberalize their financial markets despite warnings from many economists about the risk of violent financial crises. It is ironic that the most violent financial crisis since the wave of deregulation of the 1980s turned into a terrible economic crisis that severely affected… Milton Friedman's city (Chicago)!

Friedman's Moral Responsibility of Businesses

Milton Friedman also theorized in a famous New York Times article the moral responsibility of any business to maximize its shareholders' profits and therefore urged business leaders to work towards this sole objective, calling the moral legal entity that represents the business a "legal fiction" and bringing the academic endorsement and scientific prestige of his Nobel Prize to the famous mantra masterfully embodied on screen by Michael Douglas in "Wall Street": "Greed is Good."

Conclusion

Moral of the story: beware of dogmatism, whatever its political-philosophical tendency, in theories of human behavior, dogma never capturing the complexity of the human being.