As I write these words at my home in a small Irish town, the shop down the street from me is offering Easter eggs for sale at the price of €2.99, or about twenty minutes work at the legal minimum wage. These milk chocolate eggs are presented in a glossy printed cardboard box, and the egg itself is wrapped in brightly coloured tinfoil. Inside the hollow shell of the egg is even more chocolate, this time in a bar wrapped with colourful paper and more bright tinfoil. The chocolate bar itself contains a sweet, creamy centre that melts delightfully on the tongue.
It’s far too easy to take such a product for granted. Within a mile of my house dozens of shops offer a wide variety of similar chocolate eggs at similar prices, and by Easter there will be few homes in the town where at least one of them hasn’t been eaten. These spring treats are simply the background to the changing seasons, along with the bluebells and the lengthening evenings. Yet each one of them is a miracle.
The cocoa in the chocolate came from a tropical farm; the milk from a cow at another farm in another country; the sugar from beets or cane at yet another farm somewhere else. The cardboard in the box came from trees or recycled paper, as did the paper in the chocolate bar wrapper, while the metal in the tinfoil has been mined from deep within the earth somewhere on this planet. The gloss finish and the various inks that decorate the wrappings have been created from complex chemical processes involving petroleum oil pumped from desert wells. All of these elements and more have been collected, cooked, shaped, formed and otherwise processed into an attractive, delicious and coherent whole before being shipped across the world to arrive at my local shop.
A great many people have been involved in the creation of my chocolate egg and it’s journey to small town Ireland. Farmers tended the cocoa, harvested the sugar beets and milked the cows; lumberjacks cut down the trees and mill workers pulverised them into cardboard and paper; miners dug the metal and roughnecks extracted the oil; mariners steered the ships and drivers drove the trucks; Others supervised and managed and regulated their own tiny parts of the process. Even my local shopkeeper played his part by maintaining his shop, displaying the egg and making it available for my purchase. All of these people and many more worked together to make my chocolate egg possible in an astoundingly co-ordinated display of human effort. No government, no organisation, no ‘Ministry of Chocolate” or “Department of Easter” could ever organise such widespread and diverse activity to produce something of such high quality for such a low price.
But even more incredible is why all of these people did what they did to bring my chocolate egg to me. They didn’t do it in celebration of Easter, or because of their love of confectionery, or because of an altruistic desire to improve the quality of my life or widen my range of choices.
They did it for the money.
Every single one of the individuals involved in making that Easter egg available to me was paid for what they did. Some of them were paid very well and some of them (particularly the cocoa farmers) were paid very little. But every single one of them was paid enough to make their effort worthwhile to them. And what is really, really amazing is that all of them were paid out of the sale price of only €2.99.
This is the power and the magic of a free and global market. Human beings are not consciously capable of such vast co-ordination and such ruthless efficiency, and the market is not a construction. Instead it is an emergent property of freedom. When human beings, with their desires and needs, are left free to participate in a free market with whomever they choose as they see fit, then wonderful things can happen. My delicious chocolate Easter egg is one of them.
Of course, a chocolate Easter egg is just one small and relatively mundane part of the vast variety of market miracles that surround us. Similar magic can be seen in a light bulb, a box of cereal, a pair of shoes, an automobile or a cup of coffee. Its there in every supermarket, every electronics store and every corner shop – thousands and thousands of miracles of effort, efficiency, co-ordination and co-operation. The global market puts food on our tables, clothes on our backs, and roofs over our heads. It transports us, entertains us, and enlightens us. The market creates technology, enables expression, and expands possibilities. It is the very foundation of our modern, technological and global 21st Century life.
Due to the power of the market, products, services and experiences that were once unimaginable or reserved for the very rich are now ubiquitous and widely affordable. Near where I live, for example, one can buy a grass-fed sirloin steak at the German discount retailer Aldi on special for only €2, the equivalent of less than 15 minutes work at the legal minimum wage. Potatoes, onions and other trimmings cost less. Across the road at British catalogue retailer Argos, a washing machine can be bought for the equivalent of only 25 hours work at the legal minimum wage, while a 22″ flat-screen television with a host of functions costs less than 20 hours of what is considered low-paid labour. A flight from Dublin to Paris on budget airline Ryanair costs only €25, or about 3 hours work at the legal minimum, while a return flight across the Atlantic is available from Air Transat for only a week’s worth of low-paying work. Compared to the lives of any of our ancestors, in many ways we are living in an ‘Age of Abundance‘.
Market-driven technology is revolutionising our lives at an accelerating pace, largely for the better. Interconnected computers, smartphones and other electronic devices have opened up possibilities and enhanced human freedom in ways that we have only begun to explore and understand. The free-for-all, zero marginal cost world of the Internet has created a new frontier of enterprise, creativity and innovation, providing a vast range of free and inexpensive services and democratising opportunity for nearly half of humanity. Every one of these individuals has access to more information, knowledge and potential connections than was available to the president of the United States just a few decades ago.
And today’s technological and market miracles pale in comparison to what’s coming tomorrow: driverless cars and trucks, disruptive solar power, virtual reality, big data, deep machine learning, and ubiquitous artificial intelligence. Technology makes the impossible possible, and the powerful combination of technology with a free market has greatly enhanced our choice, freedom and opportunity. Much of our information, entertainment, artistic creations and other cultural forms are already distributed freely around the world at zero marginal cost (i.e. once created, the cost of producing additional copies is zero). Similar economic dynamics are happening in sectors ranging from online services to solar electricity, and the development of 3-D printing and the ‘Internet of Things’ promises to further reduce the economic cost of a wide range of physical products and services.
The global free market has unleashed human creativity and potential on an unparalleled scale. It allocates capital and resources to tech startups, giant infrastructure projects and small businesses alike. It researches, creates, and develops an incessant stream of innovative products and services that it quickly and effectively distributes around the globe. It weeds out the useless, the inefficient and the wasteful, and encourages the effective, the efficient, the desirable and the valuable. The rewards it offers motivate entrepreneurs, employees and governments, and the opportunities it creates enable countless people to better their lives and the lives of their families and communities.
While the global free market certainly favours the rich, the benefits of the power and dynamism of market forces are not confined to them. Despite a growing global population, the number of people living in extreme poverty (i.e. less than US$1.25 per day) is less than half of what it was in 1990, with corresponding improvements in access to education, healthcare and clean drinking water. This is a real and significant improvement in the lives of over 700 million people, most whom are the beneficiaries of free market reforms, particularly in China. Over 70% of Africans now have mobile phones and over 26% have access to the Internet. These achievements come not as a result of development aid or charity but as a result of market forces. Across the developing world there are few impoverished villages without at least some examples of cheap chinese consumer products. Even governments, NGOs and the development industry depend on the market for much of what they do. Indeed, they compete themselves for investment, funding and donations.
The market is by no means perfect, but there is an unquestionable beauty to the ability of human beings, operating for their own ends in a relatively free and unrestricted space, to efficiently organise and co-ordinate in the creation and accomplishment of wondrous things. Much of the vast leap in human development we have seen in recent decades has been the result of technology created and distributed in a free and global market in which effort, enterprise and efficiency is encouraged and rewarded. The free market economy is the basis upon which our entire modern world and the well being of billions of people depend.
But something is wrong with free market capitalism.
(1) The money supply is dysfunctional and insufficient. Most money is created from bank debt and now, drowning in debt, we can no longer borrow enough to supply the market with the medium of exchange that it needs (that’s why we have QE). The supply of money to the market has become dysfunctional and insufficient, resulting in financial instability, economic shocks, austerity, restricted growth and slack demand. But the money supply isn’t the only market flaw.
(2) A technologically efficient market is eating its own demand. As technology and globalisation devalue labour they reduce wages and increase job insecurity while unavoidable costs rise, growing numbers of people have less and less to spend on technological products and services. In other words, the market’s technological innovation and striving for efficiency and reduced costs is eating its own demand while causing vast financial stress, pain and insecurity to the hundreds of millions of people trying to make ends meet in a low wage, unequal, zero-hour contract, freelancing and rapidly changing world of work. This disruption and displacement of paid work is accelerating.
(3) The market can’t see climate change. Since the market operates through the medium of money, it cannot ‘see’ costs that are intangible, or that are sufficiently removed from tort law to avoid direct accountability. Most urgently, the market can’t see climate change or the catastrophe it could become. So it acts as if climate change, and a thousand other acts of environmental degradation, did not exist. As a result the temperature on our planet continues to rise.
A dysfunctional and insufficient supply of money, a market so technologically efficient that it eats its own demand, and a market that can’t see climate change – three damaging, destabilising and unsustainable market flaws that cause much pain for hundreds of millions of people today and, if not resolved, for billions more in the future. The problems that stem from these market flaws are all around us – most dramatically in the surge of angry populism across the western world. And that populism is no friend to the global free market.
We need to stabilise the supply of money, secure incomes in a changing world of work, and internalise at least some of the considerable costs of climate change into the price of carbon. The rapidly emerging policies of People’s QE, a Basic Income and Fee & Dividend are the only practical ways to do this – and in a potentially self-funding way. And they are certainly the only way to do it while maintaining global market freedom.
People’s QE, a Basic Income and Fee & Dividend are capitalist policies, free market policies and self-interested policies. By changing the way we create money, by partly separating income from work, and by internalising the costs of climate change we can energise and grow the market, remove barriers to work, retraining and enterprise, and protect the future for all of us and for those still to come. If we want the market to continue creating its miracles, then we have to hack it. For those who love market freedom, the three emerging policies of People’s QE, a Basic Income and Fee & Dividend offer a real and credible alternative to financial instability, weak incomes and demand, and climatic disaster.