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market fundamentalism

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Market fundamentalism (or free-market fundamentalism) means the conviction, based on an incorrect understanding of economic theory, that free markets are universally beneficial. The term has been made popular in 1998 by George Soros [1] in his book The Crisis of Global Capitalism (1998): "This idea was called laissez faire in the nineteenth century... I have found a better name for it: market fundamentalism" [2]. The expression market fundamentalism is now used by various economic authors to signify some exaggerated and irrational belief in the ability of markets to solve all problems in a society. It is also used to rebate the arguments of the evangelists of the "virtues of radical free-market economics" or, in Soro's own words, agaisnt the ideology which "has put financial capital into the driver's seat." [2] Joseph E. Stiglitz also used the term in his autobiographical essay in acceptance of Nobel Prize to criticize some IMF policies: "More broadly, the IMF was advocating a set of policies which is generally referred to alternatively as the Washington consensus, the neo-liberal doctrines, or market fundamentalism, based on an incorrect understanding of economic theory and (what I viewed) as an inadequate interpretation of the historical data." [3] People and organizations it refers to generally reject the label as a pejorative term. The meaning can be considered economic liberalism or laissez-faire capitalism taken to an extreme.

Philosophy[edit]

It is based on the idea that the free market is "always" beneficial to society and that the common good is "always" best served by market forces, as if guided by the invisible hand described by Adam Smith in The Wealth of Nations - without taking into consideration Smith's own constraints to it. Smith's message is in fact very different from the popular understanding of it; namely that greed - including the following of market price signals for the sole purpose of maximising individual profit - is best both for individuals and their communities. Rather, his message is that our social consciences lead us to re-evaluate our self-interest, without our being fully conscious of the process. The so-called "free market" has become highly manipulated over the last two and a half centuries.

A "fundamentalist" approach to market capitalism, not unlike fundamentalism in religion, reduces it to a blind adherence to the strictly financial bottom line. This single focus on profit motives has become the mantra for market fundamentalists; in practice this may signify that the markets may work, sometimes, in conflict with the public good.

The functions that cannot and should not be governed purely by market forces include many of the most important things in human life, ranging from moral values to family relationships to aesthetic and intellectual achievements. Yet market fundamentalism is constantly attempting to extend its sway into these regions, in a form of ideological imperialism. According to market fundamentalism, all social activities and human interactions should be looked at as transactional, contract-based relationships and valued in terms of a single common denominator, money. Activities should be regulated, as far as possible, by nothing more intrusive than the invisible hand of profit-maximizing competition. The incursions of market ideology into fields far outside business and economics are having destructive and demoralizing social effects. But market fundamentalism has become so powerful that any political forces that dare to resist it are branded as sentimental, illogical, and naive.
Yet the truth is that market fundamentalism is itself naive and illogical. Even if we put aside the bigger moral and ethical questions and concentrate solely on the economic arena, the ideology of market fundamentalism is profoundly and irredeemably flawed. To put the matter simply, market forces, if they are given complete authority even in the purely economic and financial arenas, produce chaos and could ultimately lead to the downfall of the global capitalist system. [2] George Soros, op. cit.

Critics of this "fundamentalist" attitude argue that "perfect markets" produce beneficial results, but "imperfect markets" usually produce negative results. They argue that where the market works for the public interest, it should be allowed to do so, and where markets work against the public interest, state regulation should step in.

Targets[edit]

The term may be used, pejoratively, to criticize some groups which are mainly viewed as advocating strongly against "any" state regulation and defend a "totaly" free market, such as:

See also[edit]

References[edit]

  1. BRESLOW,Marc. George Soros: Beware Market Fundamentalism. Dollars & Sense, issue #221, January-February 1999
  2. 2.0 2.1 2.2 SOROS, George. The Crisis of Global Capitalism Public Affairs, 1998.
  3. Autobiographical essay in acceptance of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel

Bibliography[edit]

Publications on Market Fundamentalism[edit]

Books
Articles

External links[edit]

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