Tuesday, November 8, 2011

IS ECONOMIC DISPARITY INHERENT IN MUTUAL EXCHANGE? A critique of Cielito Habito’s ‘solidarity economy’ article


I normally don’t bother correcting or refuting Cielito Habito’s ideas in his Inquirer column, but in today’s ‘Propagating solidarity economy (November 8, 2011),’ he seems to be making a fundamental point, the error of which is the basis of his wrongness elsewhere.

Habito ponders
a new economic model built on the pursuit not only of profit, but of the welfare of people and the planet as well.

To him, profit does not go hand in hand with social well-being. Why so?
[C]onflict and tension are inherent in the prevailing market economyAdam Smith postulated that these tensions will comprise an “invisible hand” that automatically yields the right allocation of the economy’s resources and the goods and services they produce.
The problem is, “right” allocation here doesn’t necessarily imply that it’s fair or equitable… In everyday transactions within a competitive economy, there are bound to be winners and losers; win-win outcomes are not the rule, but the exception.


FREE MARKETS AS OPPOSED TO WHAT?

Even granting that win-win outcomes are the exception (which they aren’t), the real question is, what is the alternative to free markets? How would further constriction of choices (via regulation, taxes, congressional franchising of ‘essential’ services, etc.) make for an improvement of the situation? How would those in charge of ‘redistribution’ know the desired ‘fair’ allocation?


WHY NOT AVOID EXCHANGES ALTOGETHER?

Habito doesn’t even explain how individual entities manifesting their subjective preferences could, as a rule, be at the “shorter end of the stick.” Really? So if you tabulate your purchases for the day, you would find, according to Habito, that they weren’t mutually beneficial; either you, or the other party, got screwed. Why then did you buy those groceries? Or get a cab? Or go to the office? If you were losing in these transactions, wouldn’t you have done something else, or gone elsewhere, long ago?


GOVERNMENT PROMOTES ECONOMIC DISPARITY

The mistake is in assuming that the disparities as exist today are a result of free trade, when in fact there is nothing free about the international central banking system ― government is the problem of the world’s financial woes, as it has been for millennia.

I bet that if you were to look for purchases in which you felt ripped off, it would be with regards to your Meralco or water bill, or how your cash keeps getting less valuable year on year: all government’s doing!

Habito himself may not realize it, but this ‘solidarity economy’ fluff he envisions, were it to be implemented on an anti-market framework, would just be more state interference in our daily lives (plus the ensuing anti-market rhetoric).


FINAL REMARKS

If you’re skeptical that free trade isn’t to blame for economic problems, I challenge you to give me an example where government isn’t the real perpetrator. You’ll find either that government somehow intervenes in that sector, or that government intervention would exacerbate the matter of scarcity and conflict anyway.

Being ‘socially responsible’ need not be done in so obvious a way as talking about being socially responsible, as Habito seems to think. If the rich-poor disparity is to be addressed, it is the government-franchised monopolies, the cronies, and all sorts of anti-competitive bureaucracy, not to mention central banking itself, that should be targeted. 

More accurately, it is the mentality of people ― who think that they have to be protected from ‘free trade’ by a coercive institution ― that would have to change.