8 Concluding Thoughts

The End of the Market is primarily about economics and is essentially designed to promote fresh thinking about economic ideas and business practice.

But economics has never been precise, either in the way it worked or in the issues it tackled. As chapter 1 shows, what are now generally viewed as economic ideas were at one time considered to be issues of philosophy and theology. And, as the history of economic thought suggests, economists always had their eye on wider issues.

Thomas Aquinas pondered the role of price because he wanted to save souls.

Francisco de Vitoria believed free trade would promote the universal brotherhood of man and heaven on earth.

William Petty needed to make England’s Irish conquests pay (They did, at least for him. He got Kerry).

Jean-Baptiste Say was trying to help the king of France save his realm.

Adam Smith and David Ricardo wanted to reduce the power of landowners.

Karl Marx wrote about economics to provide the intellectual underpinnings for his belief in the inevitability of proletarian revolution.

Ludwig Von Mises used economics to validate his view of the importance of private property ownership, Keynes to empower the liberal state and Friedman to help defeat Soviet Communism.

The reason why these writers still resonate is not because they proved that economics was a science that could not be ignored. Their achievement was to make economics relevant to the times they lived in, not to change the world forever. But in doing so, they established economics as a discipline with enduring intellectual appeal.

Cometh the moment, cometh the economist.

The recurring question, however, is this: does economics justify the effort involved in mastering it?

Does it produce anything worthwhile at all?

Does it act on human thought in the way that the grain of sand in an oyster produces a pearl? Or is it more like a stone in a shoe. Both are irritants. One produces treasure. The other a sore foot.

The use of metaphor in this and previous chapters serves to highlight one of economics most enduring themes. More than any other intellectual discipline, it’s metaphorical.

Economists have often waxed lyrically on their subject using imagery from everyday life to validate their arguments. Whether they explained economics by referring to a farm or a factory or drew on physics or biology, they were obliged to be allusive.

Economics claims to be a science. But it is science expressed as parable, or, perhaps, parables rewritten in scientific form. The fact that economics has always been so, and must continue to be, is an abiding reminder of its imprecision.

But the metaphor, the most powerful way to express abstract ideas, is also economics’ greatest strength. It strikes the heart as well as feeds the brain. As every economist should.

Economics invariably has a message and a mission. Economists who claim that their work is to inform not to convince are missing half of what economics has always been about. The purpose of the discipline is to provide compelling language to describe the way things unchangeably are or should desirably be.

There’s only been two types of economics: the sort that seeks to preserve and the sort that tries to change.

The End of the Market argues that economics can coherently do both.

It also highlights the contemporary relevance of subjective and objective theories of value. As it explains, there was a debate stretching over many centuries about the best way of understanding and justifying why different amounts were paid for different things and services.

This debate ended, temporarily as this book argues, in 1890 with the publication of Alfred Marshall’s Economic Principles, essentially a derivative work though it expressed ideas in a new way. The result was a theoretical explanation of how a market-clearing price could emerge that used logical thought as well as scientific methods. It was a moment that changed the world.

And for more than a century, the idea of value as something which could be expressed by anything other than the market-clearing price fell into disuse, if not disrepute.

The rise of the service economy, and the resulting separation of process from relationship in service transactions, has restored the relevance of the debate about value. Those who firmly believe that it is no more than what people think it is will once more be freed to have their say. And those who want the world to understand value as the result of production costs are similarly liberated to make their case. So this is not the end of economic thought, just a further evolution in a way of looking at the world.

It may be too soon to say that the idea of the market-clearing price deserves to lose its supreme position in economic thought. But economics, as a result of the rise of the service economy, has entered a new era in which different insights about its role in human society can be expressed.

The ideas of the value-seeking individual, the interactive relationship and intuitive community, which express in economic terms concepts that others have framed previously as ethical and political categories, are too compelling to be quickly dismissed. The internet and instant, global communications, the processes that make these concepts live and breathe, are too pervasive and too familiar for people not to recognise that the world has changed in ways that conventional economic analysis and ways of looking at business has so far failed to explain.

It is of course possible that such technologies, unleashed in a divided world with so much avoidable human suffering and hate, could actually serve the goals of the anti-value seeking individual and the value-destroying community. The 9/11 attacks, the lamentably misconceived invasion of Iraq, the Darfur humanitarian crisis, civil war in Sri Lanka and other evidence of humanity’s inhumanity are vivid reminders that dystopias exist in reality as well in angry people’s imaginations.

It is the author’s hope that the compulsion to collaborate, which has permitted humanity to survive everything the natural world has thrown in its direction, will dictate the future direction of our affairs. But it can not be assumed it will all just happen automatically. People have to make it happen. Each of us has his or her part to play in our value-creating activities and within our value-creating communities. The ordinary person’s role in humanity’s wider struggles has been restored.

You can make a difference, here and now.

The End of the Market is about economics and economic ideas. But it inevitably raises political issues as well. A reassessment of the role government should play in economic affairs is briefly outlined in Chapter 6. The larger opportunity is for stakeholders in the world’s remarkably diverse network of value-creating communities to work together to remove the obstacles to value-creating interaction and to the production of high-quality, low cost processes that make that interaction possible.

But there may be a larger agenda to ponder.

The end of the tangible era may also mark the end of the liberal era of politics, one in which society was seen as an association of rational individuals governed by rights. Intuitively defined, value-creating communities connected by obligations are now the proper focus for political investigation and action.

Liberalism was never a single body of thought. And after the American and French revolutions, which established constitutional government as the liberal ideal, it divided into elitist and populist forms.

Elitist liberals believed the full rights of citizenship should be restricted to those qualified by education, wealth and, usually, by gender and race as well.

Populists argued for them to be extended to as many as possible. Populist liberalism became dominant after the 1st World War, but immediately split between those who wanted a minimal state and others who justified government action across a wide spectrum of social and economic affairs.

Maximalism was adopted by parliamentary socialist and social democratic parties. They presented themselves as distinctively different from liberals but accepted most of their principles. Like minimalists, they viewed the individual as the building block of society. Through education and political agitation, they sought to develop the individual’s political consciousness, but principally for electoral advantage rather than to change society fundamentally.

Maximalists regarded the state as a means to an end, just as the minimalists did. The dispute between them was about the extent of government intervention, not whether it was right in principle; even cautious minimalists believe the state matters.

And the debate about the distribution of the benefits the market delivered was, for both maximalists and minimalists, essentially an argument about outcomes, not one of principle.

The apparent anomaly in populist liberalism was Marxism. Its apocalyptic forecast of permanent class warfare and utopian vision of a stateless society smacked of pre-liberal Christian millenarianism. But its intellectual origins were in classical liberalism.

Never developed into a coherent programme for political action by the author himself, the writings of Karl Marx, nevertheless, coloured the policies of socialist parties contending for votes in constitutional liberal states in the decades leading up to the outbreak of the 1914-18 war. The war undermined European constitutional government, discredited parliamentary populist liberals and created the opportunity for a Marxist sect to seize power in Russia.

The Communist regime in the former Soviet Union -- which imposed similar systems in European countries it occupied after 1945 and inspired Communist governments in China, North Korea, Cuba, Vietnam and Cambodia -- used bureaucratic methods to manage economic development. Private property was largely abolished and investment and production were entirely controlled by the state. In its most advanced form, Communism allowed the market-clearing price no role and individual choice in practically every area of life was denied. Across the Communist world, tens of millions were put to work as slave labour and uncountable millions were executed or killed through overwork and starvation as the state sought to displace the market with plans. It was quickly obvious that Communism was brutally inhumane. Its deficiencies as a system for raising production were only comprehensively exposed in the 1980s.

Communism appears to be the polar opposite to liberalism. But Communist Russia and the regimes it inspired owed more to liberal thinking than its rulers and critics could admit. The abolition of the monarchy and land reform were populist liberal goals. Communist programmes of collectivising agriculture and nationalising industry had political objectives but were also designed to advance economic development more swiftly than conventional liberal economic prescriptions apparently could. They were usually presented externally as technocratic innovations and initially secured the admiration of foreign liberals, and not just maximalists, for that reason.

The Communist political system assumed some of the features of elitist liberalism. Provided he or she paid homage to the leaders of the party and worked within the rules of the Communist system, an individual Communist could continue to think and act autonomously and enjoy career progress through structures of government and production that mimicked American corporations, the apotheosis of minimalist liberal economics. Equality of income was quickly dismissed as unnecessary in the Soviet Union. Wage differentials between government officials and technical specialists on the one hand and the rest of the labour force on the other were often larger in Communist states than they were in their capitalist equivalents. It was the clearest possible evidence that Communism couldn't survive without the market-clearing price.

The tangible era, therefore, needed the market-clearing price, or an administratively-applied analogue embedded in Communist economic plans that was designed to do the same job. The language of Communism was luridly apocalyptic, but its practice was rooted in the ideas of efficient tangible good production accepted by Western economists.

Fascism, a radical variant of elitist liberalism, was based on deemed ethnicity rather than social status, the form it took in the US, Britain and France. In Germany, it was combined with theories of social Darwinism to produce genocidal Nazism. And yet, essential liberalisms remained central to Nazi ideology. These included the importance attached to the self-mastering individual provided he or she conformed to the Nazi ideal, and to rationality, the highest liberal competence, warped though it was under Adolph Hitler. And like liberal economists, Nazis were obsessed with the challenge of increasing the quantity of tangible good output.

The war destroyed Naziism as a political ideology, though milder, non-racial variants survived in Spain, Greece and parts of Latin America. It also forced the Soviet Union to abandon the essential elements of its own world view.

Communism in power almost immediately stopped being goal achieved through spontaneous popular action and became something to be imposed by force. This was radically at variance with every strand of liberal thinking. In economic affairs, however, the gap between Soviet and non-Soviet economic practice narrowed after the death of the Soviet dictator Joseph Stalin in 1953. Moscow’s economic policy was principally motivated, like the West’s, by the desire to maximise tangible production. Soviet economic policy was based on the belief that markets were technically and socially inefficient and that government intervention increased the output of tangibles and distributed them better. This was essentially a managerial issue, not a political one. Ideology was dead in Communist economic theory, as it was in Communist political practice, from the early 1950s.

In Western Europe, the theory of market failure was acknowledged as providing the intellectual basis of social democracy. Anthony Crosland, the seminal post-war thinker of the British left, renounced nationalisation for any other reason, though the Labour Party retained a formal commitment to public ownership as a matter of principle, rather than practice, until 1995. Crosland argued that less inequality, rather than abolishing capitalism, was Labour’s proper purpose and it was to be achieved through tax and the state welfare system, impeccable populist liberal policy instruments. The market-clearing price, managed where occasionally required, would do the rest.

The theory of market failure which justified government intervention to increase tangible production was a strand of liberal economic thought (though the idea of compensating those punished by the market was troubling because it was seen as undermining individual responsibility). It was consequently vulnerable to challenges from within the liberal intellectual tradition itself.

By the end of the 1960s, an alternative approach to market failure had been developed by minimalist liberals critical of the expanded peace-time role of the state. They coherently argued that structural market failure requiring direct government ownership was rare. And where it did exist, market failure was best addressed through regulation designed to increase competition rather than through government ownership and control. Minimalists comprehensively demolished the intellectual foundations of Keynesianism, a term used to cover a range of maximalist liberal policy options designed to counter perceived market failure at the macroeconomic level.

By the end of the 1970s, minimalist liberalism was triumphant. It was largely a bloodless victory. Most maximalists reluctantly recognised their intellectual position was hopeless and surrendered. The market-clearing price, unadorned and obvious, was the common solution to all economic challenges.

The resurgence of minimalist liberalism, and the failure of planning to promote tangible production, also precipitated the collapse of Communism. In 1987, the Soviet Communist Party approved limited economic and political reforms but continued to assert its formal attachment to Marxism. But its leaders had already accepted the compelling logic of the minimalist case. Tellingly, former Communists were the most prominent beneficiaries of free market policies introduced before and after the end of the Soviet Union in 1990. Communist regimes in China and Vietnam have travelled a similar road. Cuba is now moving in the same direction. Only North Korea continues to adhere to Communism in a form that Stalin would recognise and approve.

The collapse of the Soviet Union in 1991 has been seen as the moment that practical socialism expired. But socialism was an illusion that could never work and had never existed as anything other than a maximalist version of liberalism. The end of Communism in Europe was the consequence rather than the cause of socialism’s demise.

The collapse of the Soviet Union coincided with the emergence in Western economies of a synthesis between liberalism’s minimalist and maximalist strands. This entailed maximalists conceding that the state should abandon or limit discretionary intervention in economic affairs. But minimalists were also required to accept the validity of a comprehensive welfare net to safeguard the increased proportion of the population exposed to the improving exigencies of the market. In the UK, the liberal synthesis was articulated in the programme of the Conservative government led by John Major (1990-97). It called for market principles to be applied to state-owned service industries, notably in health and education, whilst increasing government expenditure on both. The liberal synthesis was adapted and adopted by the Labour government of Tony Blair (1997-2007).

Until the summer of 2008, the liberal synthesis seemed to work. Simultaneously, the British economy grew robustly and public expenditure expanded while private wealth increased and income differentials widened. Unloved by minimalists and maximalists and derided as intellectually incoherent, the liberal synthesis nevertheless had the merit of appealing to the majority of the British electorate for the simple reason that it seemed to benefit everyone. And since 1990, it delivered four general election victories to two political parties campaigning on synthetic liberal platforms. It may have been bad economics, but the liberal synthesis was electoral magic.

The credit crunch of 2008 and its aftermath have undermined, but not destroyed, the conviction that the synthesis constitutes an imperfect but lasting solution to what was the biggest unresolved issue within liberal economic thinking: the proper size and role of the state. Most analysis of the causes of the present economic downturn, consequently, falls into two categories, both consistent with the liberal synthesis.

One asserts that the minimalist prescriptions for the UK economy have failed to produce the hoped-for increase in production and should now be reversed, though not renounced. The developing minimalist counter-attack is that the credit crunch is in reality a delayed reaction to inflationary government policies and a failure to pursue market-based policies with sufficient vigour.

Despite the rhetoric both sides are now deploying, the two views are in reality calls for the maximalist-minimalist armistice to be renegotiated, not rejected. This debate is at the centre of the tensions within the coalition government involving the Conservative Party and the Liberal Democrats that emerged from Britain's general election in 2010. It is reverberating across the world.

But the rise of the service economy has shattered more than the maximalist-minimalist liberal political synthesis. It is calling into question the foundations of liberal economic thought, the dominant ideology in the UK since the end of the 19th century.

The liberal era was shaped economically by the production of, and trade in, tangibles, physical items that could be commodified, stored, processed and traded on a mass market. The economies of most advanced economies, in contrast, are dominated by intangibles, invisible items that can't.

In the liberal era, relationships were institutionalised in contracts and secured with tangibles.

In the post-liberal era where the economy is dominated by intangibles, people interacting to create value will be essentially motivated by faith in something which does not take a physical form.

As The End of the Market explains, tangible production which the liberal era validated required markets or government administration. In the post-liberal era, direct interaction will be preferred because it increases confidence that what is promised will be done.

In the liberal era, the community was defined by the individuals around whom it was constructed. In the post-liberal era, the individual is defined by the community or communities of which he or she is part.

In the liberal era, the individual was active in a hierarchy of managed organisations including the family and the state. In the post-liberal era, an individual must work horizontally and simultaneously across communities without institutionalised command structures.

The dispute between the maximalist and minimalist strands of populist liberalism about the balance between the corporation, or the state, and the individual -- the dialectic that produced the liberal synthesis -- becomes redundant in the post-liberal era. Economic efficiency, or the average cost of service production, depends upon the technical capabilities of those vested with responsibility for building and operating tangible processes. Value production can only occur when it is shared among all those involved. The former may invite state control or ownership. But the latter is spontaneous and requires no form of corporate intervention, whether public or private.

The implication is that the debate that has gripped the world for more than a century is now outmoded.

A new political discourse is required that will reflect the economic realities of the daily lives of the overwhelming majority not the voting balance in legislatures and which personalities occupy the highest levels of government.

They need politicians who will help them develop value-creating competences and sustain communities they are active in.

They will want policies that will release, not imprison, the value-creating capacities of people working in service production in government and the private sector and that will reduce the cost, increase the quality and expand the availability of the processes that value-creation requires. And they want leaders who will seek to apply such principles at the international level.

Politics still matters in the post-tangible, post-liberal era, but in a radically different way.

The End of the Market argues that the credit crunch crisis of 2008 is not a bump in the road of the liberal era, but its end. But out of the ashes of rational individualism, a new vision is emerging where the community is the defining organisation and obligations, freely accepted and willingly discharged, become the engine of human progress.

This should be an encouraging prospect.

And if The End of the Market serves any ultimate purpose it is as a reminder of humanity’s limitless capacity to love family and friends, to befriend a stranger and to forgive an enemy; to affirm belief in the possibility of a better world and to express the hope that we will be there to see it.