The myth of "economic rationalism"

9:15pm 26th June 2006

Why is it that every time world hunger, poverty or other humanitarian problems are brought up, all solutions offered are couched in terms of "economic rationalism"? The fiction of economic rationalism is counter-productive at best, and abhorrent when applied to matters of conscience. The way to solve human hunger and poverty is not through "economic empowerment programs" funded by the IMF, the unregulated employment of third world labour by first world corporations or donations by public charities. Rather, the rejection of selfish utilitarianism and the re-discovery of compassion are far more likely to yield positive results in the area of humanitarian need. How about paying the third world fairly for the resources they provide? Pay a fair rate for copper mined in Chile, or a fair rate on natural gas from East Timor, or a fair rate on timber milled in Thailand, or a fair rate on labour provided in China. After decades of counter-productive activities, I think it is now clear that economic theory, financial restructuring and nebulous concepts of development are not the answer to any of the world's many ills.

The first world pays deflated prices extorted out of third world countries because desperation is easily exploited. If a man has to choose between being exploited and starving to death, he will choose exploitation. It doesn't mean the exploiter is helping him survive, although that may be the argument used to salve an easily silenced conscience. It simply means that the starving man has no option, and the exploiter is willing to make use of that knowledge to his or her own advantage. To make matters worse, the first world intervenes in the politics of lesser developed nations or overthrows legitimate governments to install corrupt client regimes that will sell their citizens' very soul for a few petty bribes, deliberately exacerbating the problem of already abusive conditions. Many would think this to be conspiracy theorists' ranting or alarmist, anti-establishment propaganda. Perhaps, but I would suggest that one look to examples where organized, governmental efforts are made to create conditions where big business can exploit the rights of the world's people. An example that people in the technology world would be familiar with is the draconian US law, the Digital Millennium Copyright Act (DMCA) and the corresponding government support of DRM, commonly accused of serving no purpose but the maintenance of the artificial monopoly that media production houses have on human creativity. Other examples include the history of Diego Garcia where a community was destroyed to provide a military base, the story of Britain's Opium Wars where a population was "pacified" and forcibly saturated with opium to create a market for a British trading company, the US mining of Nicaraguan ports, the overthrow of the elected Allende government in Chile and the hypocritical partaking in the Apartheid system. The list goes on so long that anyone who believes in the bona fide intentions of first world governments is either utterly misinformed or deliberately self-blinded to the truth.

The real answer to exploitation (and the "terrorist" reaction to it) is the rejection of greed as the motivation for human activity and replacing it with a sense of collective spirit. Markets, while they may be the natural order of things, are dangerous in the absence of communal consciousness. They can work for the good of society, but only if people think on a more mature level than "I want". This idea was put forward in the movie "A Beautiful Mind", where Russell Crowe's character comes up with a new economic theory when he and his friends are in a bar. According to his theory, members of a community need to be aware of the ramifications of their actions on the group, and take them into account when making decisions on how to go about achieving their personal goals. Acting with only their own interests in mind resulted in a negative result for all of them. People should be able to take into account social issues without a constant need for the government to tax them into a pattern of responsibility. There are cases where government intervention is required due to an issue's complexity or scope. Examples would be regulating the amount of fishing in an area or taxing the use of water from a river by local farmers. Such issues are beyond the judgement of individuals and need to be administered from a position of overarching information. Note also, these are not issues of personal morality or conscience. We cannot, and more importantly should not, rely on the government to apply community conscience in the form of taxes on cigarettes or legislation to prevent exploitation of workers. Paying workers a fraction of the real value of their work or deliberately causing others harm for profit should invoke Jiminy Cricket on short order. You know what happens when we let governments act as our consciences? They sell our collective soul, piece by piece. A little piece was sold on the market to the American organizations RIAA and MPAA, the title deed of which reads "DMCA". Another little piece was sold on the market to US defence contractors in a box on which was written "The PATRIOT Act". And then there are the unregulated international markets for insurance, financial services, the media, healthcare and education, markets that turn into feeding frenzies for corporations hungry to bite off chunks of our souls in the form of unreasonable insurance policies, exploitative mortgages, propaganda, disinformation, intellect-destroying "entertainment", socially asphyxiating security policies and the deprivation of medical care and education from all but the super rich. Community values are pieces of a society's soul, and they are being devoured wholesale by the government and corporate neo-noble plutocrats.

The myth that the market can solve moral problems by allowing consumers to "vote with their feet" and choose the most competitive and ethical options on the market is just that; a myth. An example of the way in which leaders arrogantly reject calls for community examination of market failure was in the answer Australian treasurer Peter Costello gave when asked about the possibility of government investigation into constantly rising fees in the Australian retail banking sector. He advised customers to just shop around when faced with unreasonable fees being charged by banks. This ridiculous stance was taken despite the glaringly obvious fact that consumers are unable to bank hop every few weeks or indeed, even every few years, as changing banks incurs massive expenditure of effort and energy. If banks are taking it in turns to hike rates by small amounts, then at any given point in time, consumers cannot reasonably change banks such that the benefit is worth the effort. This enables banks to raise fees, evaluating how much they can raise them by before they exceed the tolerance of their customers. Other banks see this, and raise their rates to match, or further if their marketing department tells them that the increase will not result in significant customer losses. Forget the fact that Australians already pay among the highest bank fees in the world as attested by foreign bank operators. Another example is the early market for broadband Internet access in Australia where customers faced heavy rewiring costs when changing from one provider to another. Consequently, the incumbent local carrier, Telstra, exploited the fact that they were "first off the block" with cable Internet, squeezing their existing customer base long after other companies had arrived with competing products. These are examples where market forces exploit the "hostage audience" phenomenon that occurs when a consumer product's nature places barriers against customers' exercise of choice. I am unaware of any acknowledgement of such "reverse price wars" in traditional economic theory, as it would undermine the principles of fundamentalist marketism currently dominating Western business, politics and economics.

Many would politely refute these ideas as idealist, unrealistic or utopian, or, impolitely deride them as communist. I reject this, and provide examples where ethics and community goals can be achieved and selfish impulses resisted within the ideology of market rationale. The change that is required is not a shift in paradigm from market mentality to some unworkable central administrative system or collectivist authority. Nor is it the complete degeneration into far-left wing anarchy. As with everything in this world, a balance needs to be struck. Market forces can operate effectively for society, provided society is made up of individuals not only concerned with self-gratification, but also social-gratification. To use economic terms, market agents have to act not only to maximize their own utility, but to maximize the total utility of the market as a whole.

The open source software movement is a community of developers who build products as a community. After much trial and error, successful business models have emerged around products like Linux, Apache, MySQL, PostgreSQL and PHP. They were all developed by people who were able to think in terms of community, community progress, meritocracy, and being motivated based on the unselfish desire to see humanity as a whole progress as a result of their efforts. Businesses often directly contribute money and staff time into developing these community projects. Examples include IBM, which restructured its entire operations to give a major focus to open source. This has proved to be an incredible success, despite the fact that IBM's contributions benefit their own competitors. IBM is now among the most skilled and profitable providers of Linux administration support and deployment consultation services.

Opponents of open source, such as Darl McBride and Mohit Joshi are fighting a bitter war against open source, labelling it communist, viral and damaging to innovation. Not only because it threatens proprietary software, but because it represents a fundamental shift in thinking from "I am the centre of my universe" to "The community is my universe". This way of thinking does not promote rampant consumerist behaviour or unfettered monopolist marketism, and as such is bad for corporate profits.

Other examples of self-regulated community conscience are to be seen in Ray Anderson's efforts with his company Interface, which required a huge leap of market-defying faith before dividends were paid. And paid they were, for Interface is now being rewarded by the market for its initial boldness. Unfortunately, community minded people are still in the tiny minority and generally labelled charlatans or hippies. Men like Ray Anderson are virtually non-existent in the business sector where profits this quarter are all that matter. Visionaries with sights on a better place for humanity, the arrival at which requires sacrifices on the bottom line this fiscal year, are unwelcome and derided as communist.

Pop culture convinces people that the only morality is satisfying the self. There is no reason that markets can't be self regulated by people with conscience. I agree that it is unrealistic, but only at this point in western history, because society has been conditioned by the panem et circenses of McDonalds, reality TV, credit cards and 34 brands of shampoo, all of which are elements of pop culture, acting in concert with the aim of convincing us that the only goal in life is self-gratification and consumption. It's no wonder that nobody thinks about the welfare of others; there isn't a game show that rewards altruism or a tabloid about people like Fred Hollows. Society as a whole has been saturated by depravity, and it is for this reason that the assertion that markets solve the ethical problem by creating a mechanism where consumers can vote with their feet for those market operators who engage in ethical practices is false. Society doesn't know, and has been conditioned not to care, about the ethical transgressions of corporations. Nike is still popular despite exposure of its sweatshops, Pfizer products are still among the most prescribed drugs despite its heinous transgressions in Nigeria and teenagers still take up smoking at record rates.

The answer to the poverty, hunger and war resulting from the gross inequalities between populations is not some socio-economic model of living standards, the issuing of "development loans" or even organized charities like World Vision and Oxfam, laudable though they may be. The answer is the re-discovery of social conscience. The answer is to recognize and resist the destructive elements of modern society such as spirit-crushing beauty magazines and depraved reality game shows. The answer is to re-introduce morality into society, reject the selfish consumerist values proscribed by pop culture and to re-realize that no man is an island. Helping one is helping all and in effect, helping ourselves. Only when we consider social gains to be intrinsically beneficial to ourselves, can we begin to cure social ills.