The state and the market are set for another needless collision course
By Victoria Bateman
- The state and the market are set for another needless collision course
- The battle between the left and the free-market has once again erupted
- The divisions of old between the state and the market are redundant
As the commemorations for the start of World War One fade, and with those for the conclusion of World War Two on the horizon, we grow increasingly aware of another war that plagued the twentieth century. In fact, it was a war that lasted significantly longer than either of these two, and which framed the politics, economy and society of the entire century: the war between communism and capitalism. For those living through it, it wasn’t always clear what the future would hold. A Marxist revolution rocked Europe and state intervention spread. Even the US succumbed to the forces at work. If you were a betting man, you might not have put your money on capitalism. Of course, if you had, you would have been rolling in it. By the end of the century, the Berlin Wall had fallen and China was well on the road with pro-market reforms.
Now, in what looks rather like the beginning of a rerun of the last century, the battle between the left and the free-market has once again erupted – and not only in response to the financial crisis but also in reaction to the longer-term phenomenon of rising inequality to which Piketty has drawn attention.
The increasingly popular argument is that the free-market model has been pushed too far, leading to a supposedly “inevitable” outcome in which the rich get richer and the poor remain poor. According to some, this rising inequality is the natural state of capitalism with the implication that the state should use its power to wade into markets: to regulate them, to tax them and to redistribute.
On the other side, free marketeers are on the defensive. They rightly point out that a good part of the recent increase in inequality has not come from free markets but, in fact, from their departure: from monopoly businesses, including (but certainly not exclusively) big banks. This “big business” economy is inimical to any free-market way of thinking. If we want to tackle inequality, we would sometimes do best to introduce more competition – more markets – rather than introducing more regulation and redistribution. That would help temper any unfair rewards at the top and ensure a better deal for those at the bottom. In other words, what we seemingly need is a good old dose of Thatcherism.
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