In contemporary debates over economic policy, we often hear that government intervention in markets should be limited as much as possible. According to the neoliberal school of thought, the market is a self-regulating mechanism sufficient unto itself, a system naturally suited to achieve the best outcomes overall. But the faith of neoliberals in the intrinsic beneficence of self-regulating free markets becomes untenable when we look closely at the actual, practical basis of markets. So-called free markets are not actually free. Recognizing this, we are at liberty to evaluate economic life by other, higher criteria than market freedom.
Neoliberals often invoke a dichotomy between public and private: The private (“the market”) operates according to competitive self-interest, whereas the public (“the state”) is a coercive expression of politics. But the foundation of markets in western economies is the commercial corporation, and commercial corporations are not simply private. As David Ciepley has pointed out, they are neither fish nor fowl. They rest on private initiative but depend on the state to co-create and sustain them. The distinctive features of commercial corporations are impossible to maintain without the state’s ensuring them. Ciepley explains: “The business corporation depends on government for its contractual individuality, or ‘personhood’—its right to own property, make contracts, and sue and be sued as an individual. . . . The corporation depends on government for its governing rights: its right to establish and enforce rules within its jurisdiction.” The corporation is defined by its government-created and -conserved properties: limited liability, asset shielding, and asset lock-in. The corporation as a market institution is a product of the state, and what it means to be a corporation is inseparable by its very nature from governmental power.
This fact has devastating implications for those who subscribe to the notion of a self-regulating market. A laissez-faire economy that has corporations is a contradiction in terms, since in corporations the private is intertwined with the public. In the age of corporations, a truly free market is as mythical as a unicorn. Once we recognize this, and discard the public/private dichotomy, we can cease to decry state intervention as such, and begin to think about the best way to manage our economy. Intervention should be judged on its merits—how well it serves the common good—rather than condemned on principle. And the common good, contrary to neoliberal tenets, is not a utilitarian aggregate of material goods, but the order of justice and peace participated in by all the members of a society. This order and its demands are the true basis for assessing government intervention.
One alternative to the neoliberal paradigm is offered by Pius XI in his encyclical Quadragesimo anno. Pius argues that the state has a role to play in fostering intermediary institutions. He views modern individualism—rather than the encroachment of government into private life—as the force that disintegrates these institutions. (For a discussion of this the individualistic “revolution from below,” see Russell Hittinger’s recent essay.) Though it is true that disintegrating encroachments by the government may take place (vide the U.S.S.R.), Pius was not concerned with that scenario. Nor should we be shocked by his position, since it is the state that incorporates not just commercial enterprises but schools, churches, and any number of other corporate bodies that play a crucial role in our societies. In this vein, Pius recommends that the state should create syndicates of professions, as well as syndicates of employers. The aim of these syndicates would be to overcome the division between capital and labor. State-established syndicates of workers and employers would work together, with the state acting as a judge of last resort when no agreement can be reached.
Pius’s proposals are hardly the only option for moving beyond the neoliberal conception of our economic life, though they can’t be dismissed out of hand. All options should be measured by the common good of political society. The common good should be the rule and measure of government intervention into markets; it provides us with a standard by which to judge concrete actions of the state, corporate bodies, and private individuals. By contrast, the neoliberal conflation of the common good with so-called market freedom leads to confusions such as this one: a recent panel discussion on Christianity and the poor, in which the president of the neoliberal Acton Institute criticized the creation of laws against child labor in Thailand. Such inversions of the proper order, together with the great shifts now occurring in the West, make us keenly aware of the need for fresh insights and approaches to economic questions.
Andrew Strain writes from Washington, D.C.