page 17

The Eclipse of the Market

George Fraser

One of the Most startling results of the early development of capitalism was the swift break-up of an organic society (held together by the threads of church and state) into a Babel of unconnected individuals. No sooner was this apparent than it was embossed with the blessing of an eternal principle—the doctrine of enlightened self-interest, which laid it down that each, by pursuing his own interests, was contributing to the welfare of society.

Looking at Dickens, with his gory pictures and absence of any idea of revolution, one is surprised that such apparently calamitous changes could have been brought about with so little coherent or successful opposition. No doubt a condition of punch-drunkenness was induced, leaving many dazed with shock; ambition was another factor—the belief that by hard work, thrift and initiative, every cotton mill worker could be a Courtauld, and every foundry hand a Guest, Keen or Nettlefold.

But surely the greatest and most frustrating factor was the postulating of an unpersonalised God, the market, and the relating of all effects to its automatic working. This quality of impersonal automatism remained its strength up to the present day, and the attempt to gain control over it proved to be the most vulnerable point in reformism and the political economics of the welfare state.

When the market became master, the difference between good and bad became a matter of degree. Gradgrinds, Engels, Morrises and Bounderbys all had to keep in step with the same tune; murderers of children in the pits together with despoilers of hamlets and the countryside all sheltered behind its screen. No-one could be blamed—the market could not even be identified with banks, joint-stock and limited liability companies. These also were its victims. All prices and ill practices were ultimately attributed to it. It was in truth the classical economists' Monster.

Of course even Dickens himself challenged the market as an institution, but it was not until well into the present century that the challengers could muster enough political strength to relegate it to second or third place. The implications of this decision, introducing the welfare state with its price controls, subsidies, full employment and social legislation, have never been fully understood by the challengers. While there is still oratorical room for argument between the partisans of free (sic) enterprise and the planned (sic) society, the welfare principle is so firmly established that the market can hope at the most for only a temporary recrudescence. The dominance of the welfare principle in Britain is clearly indicated in the following extract from the London Times editorial of the 9th February of this year:

'... it is in their social policies and in their common adherence to the so-called welfare State that the parties stand most plainly on common ground.'

New Zealand experience, however, has shown that while repudiating the market the majority of the people are opposed to the consequences of that repudiation. It page 18 appears that the customer is only king by the grace of the divine market, and that without this god the average man must accept a humbler position in the economic scheme.

In this quasi-capitalist society of ours, full employment must involve a policy of inflation; in fact the body politic has become like the body diabetic, and its continuous existence depends upon regular intravenous injections of the insulin of spending power. Inflation means more money than goods, more tram fares than seats, more students' fees than desks, and once this stage is reached we leave the ancient economics of supply and demand, and enter the stage of controls, priorities and shortages, politely known as war economics. And here's the rub—instead of the anonymity under which naked capitalism was able to operate, the Government in a multitude of ways becomes more and more responsible for the break-downs and imperfections in the supply of goods and services.

Let us take the practical example of an ordinary housewife—because it is assumed that this group made their household bills their election manifestos and the shop counters their polling booths. Let us assume that she is really an ordinary housewife, and not the wife of a doctor, a brewer, a bookmaker or an importer of ball-point pens; in her shopping assays, instead of being confronted with a range of nearly-as-may-be alternatives as in the good old days, she will continually find that her itemized demands are thwarted by non-availability, and that her traditional course of changing her retailer is likely to worsen rather than improve the situation. She will be offered ducks' eggs for fowls' eggs, barley for rice, Ruritarian pilchards for sardines, and so on. Naturally she will be angry, but how much is that anger warranted? For some psychological-cum-sentimental reasons people to-day tend to think of full employment and more adequate money wages as compatible with the same supply and demand pattern which existed when jobs and money were scarce. This attitude is purely an illusion of grandeur, and the fact is that unless consumers have improved their class or bargaining position in the past decade (for example plumbers who have become sanitary engineering contractors) they are basically the same breadliners as they were ten years ago.

This assertion can be explained statistically: since about 1939 the total volume of consumer goods has risen by per cent., but the number of people to be fed and clothed has also increased. Meanwhile total money incomes have risen by over 100 per cent., and the net increase in the volume of consumer goods available per capita has risen by no more than 11 per cent. But a large part of this increase must consist of luxury or near luxury goods (in greater supply because less effectively price-controlled) and I hope that it is now becoming clearer that if we were working plugs in the 'thirties we are still working plugs in the 'fifties; a bottle of whisky will still require an entrance fee of four dozen bottles of beer unless we happen to know someone who knows someone.

There is nothing wrong with the feeling of annoyance which this generates as long as we also appreciate that full employment is not synonymous with full enjoyment, and that because 'welfare' has taken the place of the market we are necessarily better off than we were in terms of material goods. If we remain unaware of this we will continue to make judgments on standards which no longer apply, and allow suppliers, politicians and producers meantime to get away with murder.

To-day, the following cause-and-effect sequence can be multiplied: there are not sufficient eggs to go round; producers blame the shortage on the inadequate Government subsidy and the lack of sufficient fowl food, which in turn is blamed on the high extraction rate fixed for baker's flour, which has been fixed to make our local cereal production stretch further, which is done to conserve our overseas currency. The net result is that page 19 if you have a car and pass that little place you know on a Sunday you can get all the eggs you can pay for. If you are a tram traveller you probably do not need the extra protein which driving a Fortyniner requires anyhow.

Talking of cars, imports may give a better example of what I have been trying to explain. In the 'Thirties only a fraction of those who wanted a car owned one, but who ever heard it said that too few were being imported; our friend the market saw that all who could afford them had their choice; sturdy boots and bogeys for fifty-six seaters were imported for the remainder. The changeover is significant and easily understandable. An internal currency policy aimed at maintaining purchasing power and thus employment within New Zealand cannot permit that local currency to be spent indiscriminately abroad. Free trade is as dead as the dodo, as also is the fluid exchange of currencies; unless we are willing to import slumps as well as booms, imports must continue to be controlled and every permit for one type of commodity must of necessity mean an exclusion of another. Government 'responsibility' in this field is clearly unwarrantably unpopular and misunderstood.

Controls, particularly import control have had a paradoxical impact on the habits of the commercial community. May I quote from a pamphlet 'Stabilization or Socialisation?' published by the New Zealand Fabian Society:

'The trader, especially the wholesaler, has become an agent, in many cases selling his goods in advance of delivery; scarcely handling them . . . and charging his price on the basis of a considerable percentage mark-up on total costs.'

This is particularly applicable to the importer whose energies are now diverted from selling his goods to the securing of a license, but once that license is obtained it becomes a negotiable instrument and is frequently exchanged as such.

The eclipse of the market has not only affected physical goods and services; our pattern of living is being unconsciously altered. One example will have to suffice: a secondary or university education is no longer the monopoly of the wealthy and for that reason no longer will the watersiders, the miners, and the W.E.A. continue to throw up leaders of the ability or astuteness of Harry Holland, Peter Fraser or Walter Nash; these leaders will as likely as not be stockbrokers, university lecturers, scientists, or administrators.

In the cultural field, the welfare principle leads to the appointment of many people to physically unproductive jobs—librarians, teachers, musicians, museum curators, research men, disc and saddle jockeys may well enhance the quality of living, but unless the remainder of the community can take advantage of more efficient industrial techniques and increase production, the volume of available material goods is certain to fall. This is not going to lead into an exhortation to work harder. National orchestras and library services and less crowded classrooms may well be better than extra butter and cakes twice a week; they could well build a more cynical and discriminating community, but we can only have them if we put out of our mind the notion that we can have Havana cigars, French brandy, unlimited choice and full employment all at the same time. What's to be done?

Unless we are prepared to change society radically and step up physical production, and thus have it both ways, the one obvious course at the moment is to recognise that the market is finished as a primary mechanism, root out our own illusions of grandeur and set about putting something in their place and thus make sure that if we do not get the quantity which we would like at least we can get variety and quality. Against the growing power of the government as a successor to the market must come the page 20 growing power of the consumers, who must set up their own organisations to police our shops for quality, price, and supply. Consumers must not be fobbed off by nominated representatives on national tribunals or boards of trade, but must start right off on a local basis. There is no insuperable difficulty preventing housewives setting up their own organisation to analyse the production costs and dietetic value of the patent foods and medicines which they buy. (If the law of libel is archaic it must be brought up to date.) There is no reason why men should continue to pay the same price for tobacco which is 90 per cent, stalk as they pay for that which is only 75 per cent, stalk, or the same for beer which is 5 per cent, alcohol as for that which is7½ per cent. Without such organisations, the repudiation of the market will continue to mean cheap milk but dear wine, free education but expensive books.

If we are willing to allow the same small groups to ride the Fortyniners the ordinary men and women cannot be expected to increase the volume of production leaving the shares in the same unequal proportion, but we can ensure that those goods which are available are worth buying.

If we have banished the market let us banish the judgments with which it is associated as well as our illusions of grandeur. Let us take the commercial community at their word and demand the service which they profess to strive for. The consumers could be the most powerful force in New Zealand to-day—they have nothing to lose but their chain stores.

March 1950