The Market and Social Order - Assignment Example

THE ENCLOSING OF THE COMMONS TO MAKE GOODS AND SERVICES PRIVATE PROPERTY IS NEITHER JUST NOR PROGRESSIVE Introduction There exist an extended practice among libertarians and property theorists concerning private property and common property as downright opposites (Heller, 1999, pp.1163-1223). For them, human beings are organically dedicated to self-interest and private property and consider cooperation and collaboration in the quest for the accomplishment of joint objectives as an attribute of little or no consequence at all (Bethell, 1998). They assert that there is private property, which refers to sole ownership, and there is the commons or having open access, and nothing much else in between. However, this perspective is exceedingly deceptive and paradoxical. In any case, private property is insignificant or of no value at all, unless people cooperate with each other, and value or show consideration for each other's property and implement laws against larceny. As it is, a commonwealth or a civil society is imperatively necessary to administer any property regime. There must be collective national standards (Sen, 1996, pp. 148-163). As a matter of fact, the free market system necessitates an array of public institutions and standards to shore it up (Fried, 1998). From this standpoint, the free enterprise system is in itself a type of "commons regime," that is, a collaborative undertaking to improve and develop well-being founded on rights of private property, contracts and market exchange. The concept that some types of property are intrinsically public has its origin in Roman law (Lee, 1956, pp.109-110). Some forms of property, the Romans believed, due to its nature and character, should not be under individual ownership and control. These types of property were called res extra commercium, in contrast, properties that could only be used in common because they were indivisible (e.g. waterways, ocean, land) were known as res communes. Derived from this belief, courts came up with a unique line of "public trust" analysis to categorise certain forms of property, like natural resources, traversable waters and roads, (Sax, 1970, p.471) as innately public property. In recent years, the lawful notion of the "common heritage of mankind" pertained to deep seabed minerals, human genetic structures, the global atmosphere and other resources that should not lawfully be appropriated by any one individual or state (Buck, 1998). The Enclosure Movement in England The allegory of market enclosure was taken from the enclosure movement in England, which took place several times beginning in the late 1400s, specifically in the 1500s and during the Industrial Revolution. All throughout the Middle Ages, the conventional use of land was known as the open-field system, wherein arable lands were not fenced and jointly managed by everyone in the community. Peasants communally held rights to sizeable sections of meadow, moorland and forests. The commons utilised these to feed geese/sheep/cows, grow crops, furnish firewood and peat, and cultivate beehives and fruit trees (Williams, 1973, pp.96-110). As a means of supervising and handling lands in stable, pre-modern communities, the common lands did not lend themselves to new, more productive processes of agriculture. With these lands being employed for survival and not market purposes, the incentives were visible. Nevertheless, the lands were an important communal resource for coping with daily needs in many communities - and a complementary resource in other villages. Likewise, these lands had emotional and psychological significance to the villagers because these were community resources of which they had some direct measure of control. As the landed classes of England realised that wealth could be had by developing common lands, they began to push Parliament to permit the seizure of the lands, on the pretext that there is a need of "improving" them. Basically, enclosure appealed to these proto-capitalists because fresh breeding procedures for sheep made wool production more lucrative; the export market for wool was booming; and crop rotation and other agricultural methods could boost the productivity of arable land. In the 1700s till early 1800s, a series of 4,000 acts of Parliament authorising the seizure of some 7M acres of common lands followed. About 2/3 of the lands were open fields that belonged to cottagers; another 1/3 were woodland and heath commons. Village-owned lands were enclosed and given to private interests. In one account, "ambitious landlords found that by enclosing and amalgamating several farms and applying [new agricultural methods] they could raise the rents of their lands by phenomenal amounts. The government was happy to sanction this process, since it could derive increased taxes from these higher rents." (The Ecologist, 1994, pp. 21-58). The enclosure movement and other transformations that took place during the Industrial Revolution steered a multitude of technologies that were phenomenally fruitful, and propped up the deliverance of liberal democracy and individual rights. However, they also brushed away a firm, safe and dependable agrarian society, and gave free rein to vicious social manipulation and exploitation, utter disregard and a huge inequity, as narrated with such insight by Charles Dickens. The manual worker, craftsman and un-propertied poor were left to fend for themselves in a wage-based economy that had no place for them, even as the moral economy of the village was being brushed off and cleared away. Enclosure and Market Values The English enclosures were vital to the founding of a market-based society. This carried with it problems which continue to this day. As Karl Polanyi, an economic historian intimated, "Instead of economy being embedded in social relations," social relations are embedded in the economic system" (Polanyi, 1944/1957). He christened this "The Great Transformation." The rise of the market celebrated an exclusively fresh ordering principle for society. In place of the autonomous community controlling the terms of the economy, the principle of an independent, self-determining market has become the prevailing ideal of social governance. With this, considerable stress and importance were given on competitive individualism, material acquisitiveness and rational calculation. On the other hand, it likewise gave insignificance to cooperation, community and the collective good - qualities that are supposedly essential. The coup of the market as a new and enhanced stand-in for democracy is compellingly depicted by Thomas Frank in his book, One Market Under God. The moguls and the big shots and advocates of the New Economy scorn the concept that the market breeds economic elites and create social inequities. Current business leaders view themselves as populist revolutionaries, emancipating the world from labor unions, environmentalists, anti-globalists and other malcontent "elites" who risk defying the "democratic" verdicts of the market (Frank, 2000). Outcomes of Market Enclosure The escalating rate and mounting regularity of market exploitation of the commons is disconcerting for five reasons. It unnecessarily drains off hundreds of billions of dollars away from the public coffer each year, preventing numerous types of societal investment, environmental security, and other public initiatives. Strong inclination towards the promotion of market concentration that diminishes competition and lifts consumer prices. The power to enclose is basically a privilege of the biggest firms, which use their power and influence in purchasing public resources (patents, copyrights, use of public lands, federal R&D, university research, etc.) to reinforce and widen their market supremacy and control. This can be viewed for instance in the manner that biotechnology companies seek to utilise proprietary seeds to pin down the market for a given crop, and in pharmaceutical companies' use of federally-sponsored drug research to prevail over specific drug treatment markets. Endangers the environment by giving preferentiality to short-term manipulation over long-term stewardship which results to pollution of the earth, the air, and the water, and externalizing health and safety risks onto the public, including future generations. The blatant exploitation and neglect of public lands by timber, mining and agribusiness firms provide perfect examples of this behavior. Impose new limits on citizen rights and public responsibility, as private decision-making steps into the shoes of open procedures of democratic polity. The privatisation of Internet domination, through the creation of ICANN (the Internet Corporation for Assigned Names and Numbers), provides an upsetting case in point of how a democratic method of open standards, overtly arrived at through civic participation, can be prejudiced through market enclosure. Likewise, big firms have the proclivity of using complicated proprietary designs (e.g., Microsoft's Window's operating system; Monsanto's bio-engineered foods) to frustrate important consumer choice and confuse democratic omissions. Place on top materialistic values in unsuitable domains - in the community, in family life, in public institutions, and democratic processes. The success of market standards over other important values is typically eminent because the economic "gains" are measurable and culturally esteemed (e.g. GNP; enhanced bottom lines), while the social, environmental and democratic effects are nebulous and strewn all over (community dislocations, ecological stress, public health risks). The delusion of market efficiency has a lot to do with faulty metrics and cultural habit. There isn't even any simple numbers for evaluating the malicious and destructive outcomes of market enclosures. This logically makes it easy to disregard them or disconnect them from market activity (Cobb, Halstead and Rowe, 1995; Daly and Cobb, 1989). PRIVATISATION AND COMMERCIALISATION OF PROPERTY Privatisation To explore and comprehend the privatisation of the commons, there needs to be a distinction between tangible and intangible goods that are derived from the use of common property resources (intangibles included as common property resources are knowledge, customary rules, inventions and innovations). Privatisation is understood then as the transfer of tangible and intangible assets into the hands of private ownership. Privatisation is habitually aligned with industrial or service-oriented firms, like mining, manufacturing or power generation, but it can also refer to any asset, such as land, roads, or even rights to water. Lately, government basic services such as health, sanitation, and education have been specifically aimed for privatisation in several nations. Advocates declare that privatisation assists in establishing a "free market," as well as promoting capitalist competition, which its backers contend will provide the public greater choice at a competitive price. Conversely, free-market cynics regard privatisation negatively, declaring that handing over private businesses with control of basic services diminishes the public's control over them and paves the way to unwarranted cost cutting in order to obtain profit which will correspondingly result in poor quality service. In addition, opponents of privatisation usually bring up questions about the method of awarding contracts. In most cases, the government will not advertise a contract for bidding but will simply award it to a company of their choice. Critics stress the potential for campaign financing to be influenced by the awarding of contracts. Privatisation was common during the immediate post-World War 2 era, but it became an extremely dominant economic trend (especially within the United States and the United Kingdom) during the 1980s and 1990s. This fad of privatisation has often been characterised as part of a "global wave" of neo-liberal policies, and some observers argue that this was greatly influenced by the policies of Reagan and Thatcher. The term privatisation was created in 1948 and is considered to have been popularized by The Economist during the 1980s. ARGUMENTS, FOR AND AGAINST Advocates of privatisation dispute those governments run businesses unproductively and incompetently for the following reasons: Performance - the government may only be paying attention and concerned in enhancing a business firm in cases when the performance of the company becomes politically sensitive; Improvements - on the contrary, the government may defer improvements due to political sensitivity - even in cases of companies that are run well; Corruption - the firm may become prone to corruption, that is, company employees may be chosen for political reasons rather than business ones. Goals - the government may seek to be at the helm of a company for social goals rather than business ones; Capital - it is claimed by champions of privatisation, that privately-held firms can effortlessly generate capital in the financial markets than publicly-owned ones; Unprofitable companies survive - governments may "bail out" inadequately-run businesses with money when, economically, it may be better to let the business fold; Political influence - nationalized industries can be susceptible to intrusion from politicians for political or "populist reasons." A classic example would be asking a specific industry to buy supplies from local producers (when such may be more expensive than buying from abroad), or compelling an industry to restrict/control its prices/fares to please the voting public. It is contended that such procedures and dealings can cause nationalized industries to become unprofitable and flaccid; Profiteering - private firms make huge profits by convincing consumers to buy their products and not the products of their competitors. Proponents of privatization argue that private corporations thus need to serve exactly the needs of their clients; and the more their clients are willing to pay, the better they serve the needs. Advocates also suggest that this means the corporations need to concentrate on even more marginal groups (who might not get their voice heard through the democratic system, yet still can pay for services). Specifically, the Performance, Goals, and Unprofitable companies survive justifications are considered to be of great importance because money is a scarce resource -- if government-run companies are losing money, or if they are not as lucrative, this money is inaccessible to other, more competent and more productive firms. Therefore, the efficient organisations will have a harder time seeking and generating capital, which makes it a lot complicated for them to raise production and generate more employment. The essential line of reasoning given for privatisation is that governments have few enticements to guarantee that the firms they own are well managed. Conversely, private owners, it is said, do have such an enticement -- they will lose money if businesses are poorly run. The theory holds that, not only will the enterprise's clients see paybacks and profits, but as the privatised firm becomes more efficient, the whole economy will benefit. In an ideal world, privatisation pushes the establishment of social, organizational and legal infrastructures and institutions that are basic for an efficient market economy. Another argument for privatisation is that to privatise a company which isn't earning the way its suppose to be or has generated grave losses, when state-owned, means taking the burden of financing it off the shoulders and pockets of taxpayers, as well as freeing some national budget resources which may be subsequently used for something else. Opponents of privatisation argue the contentions made by the proponents of privatisation, especially the ones regarding the so-called dearth of incentive for governments to guarantee that the enterprises they own are well run, on the grounds that governments must be accountable to the people. It is argued that a government which supervises nationalized enterprises inadequately will lose public support and votes, while a government which runs profitable enterprises will obtain public support and votes. Therefore, democratic governments, using this argument, do have an incentive to maximise efficiency in nationalized companies, due to the pressure of future elections. Furthermore, opponents of privatisation argue that it is objectionable to let private businessmen own public institutions for the following reasons: Profiteering, private firms do not have any objective except to maximise profit. In a democratic system, each person gets one equal vote, but on the market, people "vote" with their money, so those with more money get more "votes." Critics of privatisation thus argue that a private company will only serve the needs of those who are most willing (and able) to pay, as opposed to the needs of the majority. Then there's corruption. Buyers of public property have usually used insider positions to enrich themselves grossly. Also, there is no public accountability. The public do not have any control of private companies. Then there's the existence of cuts in essential services. If a government-owned company providing a basic service, for instance, water supply, to all citizens is privatised, the new owner(s) could stop providing this service to those who are too poor to pay, or to regions where this service is not lucrative. Another argument is inefficiency. A centralised enterprise is usually more cost effective than smaller ones, because of the economies of scale, lack of duplication, and higher levels of organisation. As it is, splitting up a public company into smaller private chunks will diminish competency, productivity and profitability. Privatisation will not result in true competition if a natural monopoly exists. Also, privatisation assures the concentration of wealth in a chosen few instead of being available for the common good. With privatisation, there is insecurity. Nationalized industries are usually assured against bankruptcy by the state. They can therefore be lent money at a lower interest rate to reflect the lower risk of loan default to the lender, unfortunately, this does not apply to private industries. In instances where public services or utilities are privatised, it can spawn conflict of interest between profit and maintaining an efficient and adequate service. A private company can resort to cut backs on maintenance or staff training etc, to maximise profits, this is known as downsizing. Finally, with privatisation, there is waste of risk capital. Public services are by nature low-risk undertakings that don't need scarce risk capital (which is needed more somewhere else). Realistically, there are several downsides to privatisation. It has seldom worked out because it is so entangled with political matters, specifically in post-communist economies or in developing nations where corruption is rampant. Even in countries with progressive market economies like Britain, where privatisation has been popular with governments (if not all of the public) since the Thatcher era, problems focus on the fact that privatisation programs are exceedingly politically sensitive, bringing up numerous legitimate political disagreements. Questions like who decides how to set values on state enterprises Or does the state accept cash or government-provided coupons Should the government permit workers or managers of the enterprise to gain control over their own workplace Should the state allow foreigners to purchase privatised enterprises Which levels of government can privatise which assets and in what quantities In the short-term, privatisation can likely bring about huge social turmoil, as privatisations are often associated with massive layoffs. If a small firm is privatised in a large economy, the outcome may be insignificant. If a one big company or many small firms are privatised at once and upheaval results, specifically if the state bungles the privatisation process, a whole country's economy can plummet into destitution. Take the case of the Soviet Union, lots of state industries were not profitable under the new system, with the cost of inputs going over the cost of outputs. After privatisation, 16% of the workforce became unemployed in both East Germany and Poland. The social outcomes of this process have been overwhelming, draining millions, and to so small social benefit in many post-Communist countries. Alternatively, proponents argue that Poland's and East Germany's economies will fare better later on in the long term, with positive social effects that one can already see. In the process, Russia has gone from having one of the world's most equal distributions of wealth in the Soviet era to one of the least today. There has been a dearth of large-scale investment to modernise Soviet industries and businesses still trade with each other by means of barter. In the absence of clear and visible market system, privatisation will lead to assets being possessed by an oligarchy of a few very rich people at the cost of the general population. This can bring into disrepute the process of economic reform in the belief of public and outside observers. This has occurred notably in Russia, Mexico, and Brazil. Further, where free-market economics are swiftly implemented, a country may not have the bureaucratic tools necessary to standardize and police it. This has been a significant predicament in Russia and in many South American countries, though some other Central European countries, such as Poland and the Czech Republic, fared better in this aspect, partly because of the support of the European Union. Ironically, while Britain has long had a market economy, it also faced this issue after it privatised utilities in the Thatcher era; Britain's utilities regulator was often criticised as being ineffective. Privatisation can also have an undulated effect on local economies. State-owned enterprises are regularly asked by law to support national or local suppliers. Privatised companies, basically, do not have that limitation, and therefore will shift purchasing elsewhere. It is also possible that local and national economies may be affected by increases in prices resulting from privatisation - especially with services vital to business, such as postal, public transport and utility services, without which they cannot survive. Bolivia underwent a painstaking privatisation program in the mid 1990s, with damaging results on the local economy in the short term. Summing it up -- the driving force of a private company is profit, not public service; the public welfare may be sacrificed to the demands of profitability. That is what happens with privatisation. REFERENCES Heller, M.A. (1999). "The boundaries of private property." 108 Yale Law Journal, 108, pp. 1163-1223 (1999). Bethell, T. (1998). The noblest triumph: Property and prosperity through the ages. St. Martin's Griffin Sen, A.K. (1996). "Rational fools: A critique of the behavioral foundations of economic theory." In Aafke E. Komter, The Gift: An Interdisciplinary Perspective. Amsterdam University Press Fried, B.H. (1998). The progressive assault on laissez faire: Robert Hale and the first law and economics movement. Cambridge: Harvard University Press .Lee, R. (1956). The elements of Roman law. 4td ed Sax, J. (1970). ."The public trust doctrine in natural resource law: Effective judicial intervention." Michigan Law Review, 68, p. 471 Buck, S. J. (1998). The global commons: An introduction. Island Press Williams, R. (1973). "Enclosures, commons and communities. "The country and the city. New York: Oxford University Press The Ecologist, Whose Common Future: Reclaiming the Commons. Philadelphia: New Society Publishers, 1994), pp. 21-58; Tate, W.E. (1967). The English village community and the enclosure movements. London: Victor Gollancz Ltd. Polanyi, K. (1944/1957). The Great Transformation. Boston: Beacon Press Frank, T. (2000). One market under God: Extreme capitalism, market populism, and the end of economic democracy. New York: Doubleday Cobb, C., Halstead, T. and Rowe, J. (1995). "If the GDP is up, why is America down" The Atlantic, October, pp. 2-15. Daly, H. and Cobb, J. (1989). For the common good: Redirecting the economy toward community, the environment and a sustainable future. Boston: Beacon Press Bollier, D. (2001). Public assets, private profits: Reclaiming the American commons in an age of market enclosure. Washington, DC: New America Foundation "The Wiring of America." The Economist. 1998 Dec 19 p. 42 http://www.benkler.org/CoasesPenguin.PDF http://www.marxists.org/reference/subject/politics/locke/ch05.htm http://www.marxists.org/archive/marx/works/cw/volume35/index.htm http://www.commoner.org.uk/02federici.pdf http://www.marxists.org/archive/marx/works/cw/volume06/index.htm http://www.eco.utexas.edu/facstaff/Cleaver/350kPEESmithonEd.html http://www.publications.parliament.uk/pa/cm200304/cmselect/cmsctech/1199/1199.pdf Read More