by KHADIJA SHARIFE
The fundamental market theory of equilibrium, in economics, can be compared to notions of justice conceived in other disciplines, such as electoral democracy and politics. After centuries of trading trials and wars, we were told by leading governments (who may be called ‘geographies of power’) that the magic bullet for the greater common good could now be achieved. But whilst the Market is equated with self-evident truth, its routine consequences are characterised by inequality. The question then is whether these routines are naturalised through the system, or naturally occurring? Put simply, is the world’s large and increasingly impoverished population poor and dispossessed in spite of the market’s current architecture, or because of it?
The market phenomenon is propagated as existing for a purpose that is greater than technical global regulation structured to govern self-seeking economic actors and geographies of power. The metaphor thus exists that there is a higher moral currency to the market, a ‘fact-based’ value to the scheme of it, a logic to the design. Developing government intervention – such as generic medicines, subsidised agriculture, pro-poor taxation and the like, is perceived as disrupting an efficient pricing mechanism located within the broader structure of multilateral systems.
The design posits statements that economic efficiency (Pareto optimality) is a rational expectation, and consequence, of the Market, provided there is little or ideally no intervention; or alternately, as a system dynamically developing devising the best way forward.
Far from being just ‘theories’, general equilibrium (GE) models such as Arrow and Debreu’s ‘Existence of an Equilibrium for a Competitive Economy’ 1954 are cited as unquestionable proof that such logic generates viability and efficiency via a self-adjusting system.
Nobel prizes by the Bank of Sweden were doled out. Stanford University’s Professor Peter Hammond rightly called it the basis of ‘almost standard assumptions’. It was lauded as a major advance in economic theory, and considered proof of rational engagements with ‘commodities’ – unbundled and precisely quantifiable goods – mediated by markets (existing for every time and place), relative also to microeconomics. Conventionally, it includes markets like human resources, with labor presented as a temporary state until the economy functioned efficiently.
Socializing risks, privatizing profits
But this logic, of zero tolerance for intervention, clearly does not apply to geographies of power, peddling such economic medicine: entities like Bear Stearns, the US’s fifth largest investment firm, received over $30 billion, in public funds, from the US Fed to guarantee the company’s riskier investments. Here, we see risk socialized and profits privatized.
And not for good reason: About 75% or more of the company’s ‘investments’ were conducted in secrecy jurisdictions such as the Cayman Islands, via the Walker Group. Others, like Bank of America, would claim $2 trillion. Far from being isolated incidents, over 80% of hedge funds globally, and 39% of foreign direct investment (FDI), operate through commercialized sovereignties, like the Caymans, that peddle secrecy to corner the market in immobile and mobile capital. And from these secrecy jurisdictions operating on the quiet and sly, island ‘offshore’ economies are usually satellite offices to the major ‘onshore’ secrecy havens. For instance, over 50% of the world’s secrecy havens are controlled by the UK.
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