Lets be clear, there is no such thing as “The Market”; there are markets. A market is a human invention and, like all human inventions, sometimes they work well and are very useful; sometimes they don’t work and can be malign.
A market is defined by a set of rules, so, for example, a street market, like the one where I buy my vegetables, has a well-established set of rules known and understood by the traders.
Other markets, other rules. Rules are not immutable and if the market does not work, then they can changed.
It is to everyone’s advantage that any particular market should work well, so that particular issues can be regulated automatically in a neutral way.
However there are certain markets that do not work properly and could be improved. But before considering particular cases, let us look at what markets do in the longer term:
When I go and buy a cabbage at my local market, the price depends on the cost of growing it. If they are in short supply, then the price goes up and there is a greater incentive for farmers to grow more. In short the market is a controller for the production of cabbages and the price is the control signal.
This is a bit analogous to controlling, say, the temperature of an oven. There is a temperature sensor which sends a signal to the controller which switches the power to the oven off when the temperature too high and on when it goes too low. This is an example of a “control system”. The point I want to make here is that a seemingly simple system can show complicated and often counter-intuitive behaviour. If the control system has been set up correctly temperature of the oven can be regulated with remarkable accuracy; however, if it has not been set up properly, the regulation can be wildly unstable, with drastic results, maybe the destruction of the oven. (I speak from experience!)
With markets the situation is much more complicated but the message is the same, get the control system wrong and disaster follows, as was dramatically demonstrated by the crashes of 1928 and 2009, with global malign results.
When a control system or market works properly, it can be left to do its job automatically and the user can get on with more important things.
Some markets deal in money. (Money is another human invention and is defined by an agreed set of rules.)
The idea of capital seems to be a useful one, and markets in capital seem to also be useful; but there are issues.
I suggest these include:
• Exactly what is “capital”? and could we use the idea in a better way?
• The governance of money markets. This seems to controlled by the people that profit most from dysfunctional governance. Not a good idea.
• Currently the natural trend of these markets is towards causing greater inequality.
• The rules that define them have evolved from historical usage. This leads to the totally irrational view that they are an unchangeable, god-given natural law. They are not. These markets are just as much a human invention as any other and we can change the rules. It is just rather difficult to do so.
There are also issues in the market for labour. The cabbages in the street market do not care about their price, but wages matter.
The operation of the labour market, over time, results in a relentless erosion of all wages and thereby towards inequality. Historically this trend has been opposed by industrial strife which imposes a heavy political burden on the whole of society.
From every point of view this is dysfunctional. A market that systematically generates industrial strife is a bad market and giving unions a special place in the democratic process is bad for democracy.
There is an urgent need for better rules. (ok, not a trivial problem!)
I do not think there is a single fix applicable to all markets. Some just need better governance. Some could be improved by upgrading the rules. In others it could be a case of developing a parallel market that does the same function better. The development of crowdfunding is interesting in this context.
There are situations, such as some of the service industries where a crude market system has been imposed We should do what was really needed, the more difficult task of developing proper governance.
Some markets have failed because they have fallen into effective monopolies, particularly in the field of IT, eg, Windows, Google, Amazon and various social media. This new technology seems to be in need of a more appropriate type of market.