Posted on 29-1-2002
Market
Rules
By John Ikerd*
From Adam Smith's observations of more than 200 years ago,
neo-classical economists developed the fundamental assumptions
that
underlie 'free market' economic thinking, even today. Although
contemporary economists try desperately to rationalise arguments
to the
contrary, these assumptions must hold good before the invisible
hand of
competitive capitalism can transform the pursuit of individual
short-run
self-interest into the greater long-run good of society in general.
1. First, markets must be economically
competitive - meaning the numbers of buyers and sellers must
be so large
that no single buyer or seller can have any noticeable effect
on the
overall market. In such markets, no one has the power to retain
profits
by exploiting anyone else.
2. It must be easy for new sellers to
enter enterprises that are profitable and easy for sellers to
get out of
unprofitable enterprises, so that producers are able to respond
to market
signals of consumers' wants and needs.
3. Consumers must have clear, informative
and accurate information concerning whether the things they
buy will
actually meet their wants and needs.
4. And finally, consumers must be
sovereigns - their tastes and preferences must reflect their
basic values
- their tastes and preferences, untainted by persuasive influences.
None of these assumptions holds in today's society.
* Today, agricultural markets are
dominated by the large agribusiness corporations, certainly
at every
level other than farming, and increasingly even at the farm
level.
* In addition, it is not easy to get into or out of any aspect
of
agriculture, and it is becoming increasingly harder to get into
or out of
farming.
* Consumers don't get accurate, unbiased information concerning
the
products they buy, but instead get disinformation* by design,
disguised
as advertising.
* Finally, consumers are no longer sovereigns. The food industry
spends
billions of dollars on advertising designed specifically to
bend and
shape consumers tastes and preferences to accommodate mass production
and
mass distribution, which enable corporate control of agriculture.
There is no logical reason to believe that the corporate
agriculture of today is evolving to meet the changing needs
or wants of
consumers. Instead, corporate agriculture today is designed
specifically
to generate profits and growth for corporate investors. In fact,
we no
longer have a competitive, capitalistic agricultural economy.
Capitalism
requires that individuals make individual decisions in a competitive
market environment.
As corporations extend their control horizontally "within" the
same
functional levels, such as marketing, storage, transportation,
processing, or retailing, they increase their ability to protect
profits
from competitors. As corporations extend their control vertically,
"across" functional levels, including additional
different production and marketing, they gain control over decisions
concerning how much of what is produced, when it is produced,
how it is
produced and for whom.
Those decisions are made to maximise their short-run profits
and growth,
not to meet the long-run needs of society.
John Ikerd, Professor Emeritus, Agricultural Economics,
Missouri University, USA. Abridged extract from SAREP Conference
Presentation, March 2001.
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