The "Free" Market: Ideology, Not Reality

Explains John Laughland:

A key conservative tenet is realism. By realism, I do not mean that cynical pragmatism which many British Conservatives have adopted as their political creed. I refer instead to the metaphysical doctrine according to which truth and value is said to inhere in real things. The greatest formulator of this doctrine was Aristotle, whose brand of realism was integrated into Christian philosophy by St. Thomas Aquinas.

A realist attitude in politics is the opposite of an ideological one. Ideology seeks to bend reality to pre-conceived concepts; it is based on the assumption that reality can essentially be created, or at least fashioned by thought. Examples of ideological thinking include revolutionary movements or constructivist ones like the European Union which assume that societies can be easily moulded, and reality changed, by political fiat.

Ideology has held much of the so-called Right in Europe and America in its grip for many years now. The principal ideology is that of the “free market”. Like many ideologies, it has some foundation in truth. However, it has been grossly extended to become an all-engulfing concept which seems to provide the answer to everything. Its power as an ideology is only increased by the fact that attachment to the “free market” is invariably conjugated with internationalism (because the fully free market is global) and progressivism.

Ideology stops people from thinking because it encourages them to believe that they do not need to pay much attention to reality. The ideology of the free market has had exactly the same stultifying effect on people’s brains as Marxism did in the old Soviet system. Just as there as always an answer to be found in Marx or Lenin for all possible social and international questions, until the whole system came crashing down, so since the end of the Cold War all possible social and political questions have been unquestioningly answered with references to “free trade”, “liberalisation” and “democracy”.

Perhaps the most pernicious aspect of this ideology was its propensity to make people support big corporations, however corrupt. The shenanigans at Enron, caused by corruption in the world’s most prestigious accountancy firm, did nothing to shake people’s faith in the power of big corporations to solve all the world’s ills. The intellectual indulgence shown to banks was even more egregious than that shown to other sectors of the economy, mainly because the free trade ideology of total de-regulation was itself easily conjugated with a culture of debt encouraged by the world’s central banks themselves.

Since none of these state-controlled institutions ever re-pay their own debts (the currency they issue is a title to nothing); since all Western governments live beyond their means by running massive budget deficits and by carrying huge amounts of state debt (not a single member of the EU or either of the North American states runs a budget surplus, in stark contrast to, say, Russia); and since economists have been telling us for years that countries can run trade deficits indefinitely without any consequences (importing more than they export and paying for the difference with debt), it is no wonder that the world’s private banks have themselves operated on the basis of the same culture of debt (perhaps “gambling” would be more accurate) for many years. The very fact that the world financial system is based on the dollar, a paper currency which is a title to absolutely nothing, underlines that the world financial system is merely a modern variant of the ancient (and bogus) art of alchemy.

I mean that these banks have all got into the habit of lending money they do not have, borrowing it from other people instead and essentially gambling that their loans would not be called in at the same time. They have scraped the barrel ever further in search of new business to put on the books. The quaintly-named “sub-prime” housing market was in fact a dirty racket practised by banks to get more and more people to sign up for loans who never had any chance of repaying them – a classic illustration of how ideology (and greed) flaunt reality – merely so that they could use that “business” as collateral for yet further loans.

Reality has a funny habit of returning, however.

The system worked for as long as more people put money in than took money out; as soon as that pyramid started to invert, it collapsed.

Reality has therefore now caught up with the fantasies invented by private bankers and central bankers, in the form of ever more obscure financial instruments designed to gamble with debt. Whereas throughout the 1990s, the heyday of so-called “globalisation”, the talk was only of the internet, cyberspace and other aspects of virtual reality, it is now widely understood that in fact the world economy turns on three of the most fundamental things which human beings need: food, energy (for warmth) and shelter (housing).

Food, energy and housing prices have all risen in terms of debased paper currencies, precisely because the money supply has been so recklessly increased over the past two decades. Production of these basic commodities, unlike paper money, cannot be expanded indefinitely or by simple command. That is why there is such a brutal return of the real into the very heart of the world financial system.

This is something which conservatives should welcome. But the intellectual work which now needs to be done in order to renew contact with reality is massive. It involves nothing less than the wholesale abandonment of decades or even centuries of unrealistic economic and political thinking, especially the belief that states can defy economic gravity by issuing currencies which are not a title to any commodity like gold. The challenge is all the greater because the Right’s long flirtation with free market ideology has had certain physical consequences which will be difficult to reverse, in particular the West’s (especially America’s) de-industrialisation and the relocation of its major industries to China. Given that most of its hydrocarbons also come from abroad, and that the paper currency used to pay for these imports is rapidly losing value, the crisis is serious indeed. I suppose that realists everywhere need to start praying for a miracle.

While we are at it, if you have not already read John's A History of Political Trials from Charles I to Saddam Hussein, then read it. Now. Before there is any other war.