Cooking the Books: Market failure (2007)

The Cooking the Books column from the April 2007 issue of the Socialist Standard

Businesses never spontaneously take into account the interest of the capitalist class as a whole, let alone that of society in general. They have always acted on the basis that, as Thatcher put it, there is no such thing as society. One result has been the current global overwarming, which Nicholas Stern, in his report to the Labour government on the economics of climate change, described as the biggest market failure ever.

Businesses leave it to governments to represent the overall capitalist interest but, even here, they are reluctant to let governments interfere with their freedom to make profits in the way they want. Not that, these days, governments want to impose coercive restrictions on capitalist businesses. Environment minister David Miliband has openly declared:

“Climate change is, according to Sir Nicholas Stern, the greatest ever market failure, but the answer is not to replace markets. Instead, we need to price pollution into markets and extend market mechanisms so that they work more effectively” (Times, 12 February).

In other words, calling on Beelzebub to cast out Beelzebub. But some supporters of Beelzebub are not content even with this light touch. In an article entitled “A free market solution to global warming” the US business correspondent of the Times, Gerard Baker, put it ironically:

“Man-made global warming is, if the critics are correct, the biggest example of market failure in the history of the planet. It makes Marx’s critique of capitalism look like nitpicking. Inequality and labour alienation we can live with. Global warming is a bit harder” (20 February).

He then went on to point out that the sort of measures envisaged by Stern and Miliband wouldn’t be enough:

  “Despite reassuringly low-cost estimates from the likes of Sir Nicholas Stern, attempting to arrest and then roll back carbon emissions by relatively mild taxation and regulatory measures over decades looks a tall order. If you are really serious about it, you need to be thinking in terms of an internationally mandated programme of regulation and control over economic activity that will surpass anything ever seen in human history”.

Capitalism, he implies, just couldn’t afford this: “The real present-day cost of reducing carbon dioxide levels in the atmosphere substantially below where they are now is almost certainly prohibitive and ruinous to economic growth”.

As an alternative to what he calls “the leap into the socialist abyss” he advocates “measures to limit the effects of global warming – improving sea defences for example”. One better than King Canute but likely to be just as ineffective in the long run.

Not that socialists advocate “an internationally mandated programme of regulation and control” over capitalist businesses. What we want is for the production of the useful things that people need to live and enjoy life to be taken out of the hands of profit-seeking enterprises altogether. We want the means of production to be owned in common by the whole community as the only basis on which production can be organised to take account of the overall interest of all the members of society.

In socialism there won’t be any profit-seeking capitalist enterprises to regulate; just democratically-run productive units producing, in an ecologically and socially acceptable way, what people need.