The Market System
The market system is a way of organizing economic activity that leaves individuals and companies free to produce whatever they want, and free to sell what they produce at any price they can get. It is a method of organizing an economy that does not rely on planning by a central authority such as a government. Competition between sellers is supposed to keep prices down and direct production to products and services that people want. âThe market,â that is, the totality of buyers and sellers, makes the important economic decisions, not any person or institution. The market system is usually contrasted to socialism and communism, but is also fundamentally different from feudalism, fascism, and other forms of authoritarian control.
Books about the effect of the market system on human psychology, morality, and social relations tend to be negative. Psychoanalyst Paul Verhaegheâs book What About Me: The Struggle for Identity in a Market-Based Society (2014) is a typical example. Verhaeghe sees âneo-liberalismâ and the market system as the source of all evil; politics, universities, unions, hospitals, information technologyâeveryone and everything has been tainted. But this view isnât useful for psychotherapists, who have to deal with all kinds of people. Some clients list to the left and some lean to the right. Psychotherapy is notânor should it beâa political seminar, which is why our book seeks to present a balanced view of the system.
The Power and the Glory
Most people donât realize it, but the most important function of the market system has always been to protect people from despotism. Since the discovery of agriculture, sometime between 12,000 and 10,000 years ago, despots have ruled the earth. Government was created to rule and rulers have understandably ruled in their own interests. They have, often mercilessly, exploited those they ruled. They have taxed to death and tortured to death their unhappy subjects. And they invented war to increase their power, their territory, and their wealth.
The market system, which was first formulated by Adam Smith in the 18th century, is one of the few mechanisms ever devised that actually limits the power of government. As we said before, in a pure market system, individuals, not government, run the economy. The laws of economics, notably supply, demand, and competition, regulate it. Decisions by individuals, made in their own interests, replace the centralized decision-making that is the province of government. As a result, there are sources of power in society that do not stem from government and are not subject to the whims of rulers or ruling classes. This triumphant headline from the Wall Street Journal tells it all: âMicrosoft Wins Fight With U.S.â (July 15, 2016).
It has not escaped our notice that in the real world today, corporations have themselves accumulated too much power. Clearly the growth of corporate power is a major problem and we will discuss it later. But what happens when private sources of wealth and power donât exist? Well, thatâs largely the story of civilization. A central authority runs everything and rulers have no constraints.
Freedom and Wealth
Because it frees people to pursue their own hopes and dreams, the market system releases vast amounts of individual effort, energy, and creativity. This fosters technological change, which tends to bring material progress in its wake.
When transferred from the west to what was once called the Third World, the market system brought tens of millions of people out of poverty. India, China, and other Asian countries have been transformed. Back in the 1970s, India, under Indira Gandhi, was mired in admiration for the Soviet Union and the socialist dream. A traveler to India at that time found hopelessness and mind-numbing poverty. People were sleeping on the streets while large rats bounded over them; rickshaw-wallahs were eating dinner made of uncooked flour mixed with water they scooped from gutters. There are still horribly poor people in India today, but fewer by far. The freedom generated by the market system passed this way and is still working its magic.
Freedom and Mindset
The coming of the market system did more than bring people out of poverty; it changed the way they thought. In The End of Karma (2016), Somini Sengupta, writing about a psychic shift in India, was blown away by the explosion of ambition and ingenuity that followed the market-oriented reforms that began in 1991:
The opening of the Indian economy went hand in hand with something far less tangibleâŚ. India is being propelled from within by what I regard as its most transformative generationâthose who have grown up since economic reforms began in 1991. Their demands are reshaping the country (p. 9).
Hope now walks the streets of India. Even the lowest castes, who previously accepted their lot as a matter of karma, have begun to believe that they can influence their destiny. For example, a landless woman from the Arundhatiyaar community, the lowest among the lowest castes in Tamil Nadu State, became the first woman from her caste to run for presidency of her local governing body. âI came to this village 20 years ago,â she declared,
to live with my husband after we were married. Since then, I have never seen anyone from here running for the Panchayat presidentâs electionâeveryone is afraid of upper caste landlords who hold most of the land here.
(Upadhayaya, 2013)
She did not win the election, but she did inspire others in her community.
In the 1970s the Chinese were being starved and slaughtered by Mao and his communist cronies in government. Five-year plans paraded past each other in time, duly accompanied by misery. The Chinese still havenât mastered the market systemâthe state keeps screwing it upâbut the fragments of free enterprise that their government tolerates have brought many of their millions to prosperityâas the wave of Asian tourists attests.
The Underside of the System
Poverty and Inequality
Alongside its glories, the market system has some well-known drawbacks. The most obvious: an inability to eliminate poverty. âPovertyâ is relatively new in human evolutionary history. According to anthropologists who have studied the foraging way of life (e.g. Sahlins, 1968; Lee and Devore, 1976; Marshall Thomas, 1959; Shostak, 1981; Turnbull, 1961; Balikci, 1970), poverty as we know it didnât exist in the hunter-gatherer world. The foraging peoples didnât know wealth. They didnât âownâ and they hardly possessed. They shared what they had, even if they did it grudgingly some of the time. Since our genes were formed in the hunter-gatherer world, most humans arenât comfortable with poverty, even when it afflicts other people. But poverty is an objective, material condition, not solely a mental misery. Unfortunately, there is no psychotherapy for poverty, so we will not be dealing with it in this book.
Inequality is another story. Inequality is a matter of perception and comparison. To register inequality, one has to perceive that someone has more or that someone has less, and then react to the difference. Inequality, therefore, is largely in the mind.
Inequality is not equally painful everywhere. In some cultures, people donât think they are responsible for having less than others. Inequality is seen as the result of a divine plan. But in a market system, where individuals are free to pursue their own interests and are held responsible for their fate, inequality can appear as proof of inadequacy and a sign of failure: âIf people are free to do well and Iâm not doing as well as that other guy, it must be my fault.â
Unfortunately, inequality is inherent in the market system. If people are free to pursue their own interests, the outcome will not be equal. The only way to eliminate inequality is to have government set everyoneâs income, which would put everyone right back under the thumb of a central authority.
Abundance, Inequality, and Obesity
It may seem strange to treat abundance as a problem, but too much of a good thing can be deadly. Abundance didnât exist in our ancestral environment so many of us donât have genes that protect against it, as obesity and its panorama of diseases reveal. The market system, fortunately and unfortunately, is an engine of abundance.
Humans are not designed to turn down food. For our hunter-gatherer ancestors, who have bequeathed to us so many of their genes, food was hard to come by and getting it involved significant physical effort. There were no obese hunter-gatherers. Agriculture required even harder work. But the market system has made it possible for people to eat, well, like geese being fattened for the slaughterâthe slaughter of heart disease, diabetes, and the like. Itâs the success of the system that gives us virtually unlimited access to the foods we canât turn down.
The problems donât affect everyone equally. Sugary cereals and drinks, starchy snacks, and fatty, salt-heavy meats cost less than healthier alternatives and are therefore attractive to people with low incomes. The prevalence of these foods, which are filling in the short term but lethal in the long one, results from the competition between companies for the consumer dollar. These companies and their foods are having a profound effect on human behavior and health.
The Merging of Money and Status
Humans have always desired status and recognition, but in some societies, they gained it by âdoing forâ other people. In foraging societies, for example, good hunters acquired status because everyone in the group benefited from the kill. In the market system, people can get status by getting rich, whether or not the wealth proves useful to anyone else. This encourages the pursuit of activities which donât benefit the community.
Status is only useful to the community if it is the payoff to good works; when you can get it without the good works, the common good suffers. Rich people often do add to their status through charity, which restores status to its previous role, but charity is not obligatory, as the difference between Donald Trump and Bill Gates testifies.
Competitiveness
The study of evolution has made it clear that some degree of competition is inherent in life. Organisms are designed to seek their own survival, which sometimes brings them into conflict with other organisms. Humans are no exception; competition is inherent in human interaction. But the American market system glorifies it and offers winners supersized rewards.
Individuals with strong competitive impulses and significant levels of ability tend to thrive in this environment. But those who donât thrive tend to feel defeated. And since âsuccessâ is relative, even apparently successful individuals may think of themselves as losers if they donât think they are as successful as they âshouldâ be.
The result is often depression, a toxic mix of shame, blame, regret, and hopelessness. Anxiety often accompanies the depression. People who feel defeated tend to have doubts about their ability to cope. They tend to imagine a future composed solely of disasters.
Instances of satisfying cooperation are relatively hard to come by in this system. To be sure, cooperation can be found in private, personal, and family life. But currently these cooperative experiences often donât carry as much weight as economic success. The human need to belong and to participate with others in the pursuit of common goals is rarely satisfied by working together in factories or corporations.
The Inevitability of âFailureâ
Infinite opportunity makes failure almost inevitable. Not absolute failure, like homelessness or hunger, but, as we mentioned in the Introduction, failure by comparison or relative failure. Take the case of David Foster Wallace, the author of Infinite Jest (1996). He was acclaimed as one of the most innovative writers of his generation. He was married and had a good job, teaching at a college in California. It wasnât enough. He hanged himself.
From childhood on, writes David Kessler, author of Capture: Unraveling the Mystery of Mental Suffering (2016), Wallace didnât want to be ordinary. He wanted to be special. âYet, as soon as he succeeded⌠he grew uneasy and then despairing. He wanted to be a good person but suspected something crooked about the way he had achieved successâŚ. Contradictory impulsesâyearning for greatness yet feeling like a fake with every new achievementâpushed him further into himselfâ (p. 4).
Kessler quotes Wallace as having scrawled somewhere: âGrandiosityâthe constant need to be, and be seen as, a superstar.â Grandiosity is, of course, the other side of the âworthlessâ coin. They both are what we have called pathologies of self-evaluation. These pathologies werenât born of the market system but they flourish there.
Perceived Uselessness
Many Americans suffer from the thought that they have no influence and no importance. To be fair, this perceived uselessness may be more a function of size than of the market system as such. But the market system produces size as it produces wealth. Too big to fail is bad for society; just plain TOO BIG is bad for individuals. It makes many feel too small to succeed. In vulnerable individuals, this feeling easily breeds a sense of futility that can bleed over into depression.
The Payoff to Selfishness
The prisonerâs dilemma is a game that purports to show under what conditions two rational individuals might choose to cooperate or not to cooperate. Hereâs a standard version of the game:
Joe and Ken, two members of a criminal gang, are arrested and put in jail. Each prisoner is put in solitary confinement and has no means of communicating with the other. The prosecutors donât have enough evidence to convict the pair. In an effort to prevent them from going free, they offer each prisoner a choice: Betray the other by ...