Introduction
Freedom for who? is a critique of free market capitalism. The report traces the ideology's historical context to the strategy for economic policy and analyzes the evidence support and against.
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Freedom for who? is a critique of free market capitalism. The report traces the ideology's historical context to the strategy for economic policy and analyzes the evidence support and against.
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This report āFreedom for who?ā analyzes the economic ideology and policy strategy of āeconomic freedomā. While this economic strategy may have worked well in the past, it is an imperfect simplification. This report explores several themes of how free market capitalism has shaped our current world and the implications for how fit-for-purpose that system is for the challenges of the 21st century.
Summary conclusions from a critique of free market capitalism
Capitalism is a means for large scale cooperation and urbanization transformation
Urbanization and investment of capital economize limited resource
Urbanization is driving permanent structural changes in the ways that we interact
There are signs of upper limits to future productivity and GDP growth rates
The distribution of surplus wealth are uneven and this has real social costs
Externalities are direct consequence of the profit mandate with limited liability
The science of human behavior challenges fundamental axioms of capitalism
At this juncture in history the shifts in society over the past century from globalization and urbanization merit a fit-for-purpose review as to whether the same system that has ushered us into this new world is optimal for sustaining it. Changes to energy, habitat, mobility, communication, population dynamics and our psychology have occured together with structural shifts in dominant forms of capital and types of services. The relative abundances of forms of capital are diversifying from physical forms of capital such as plant, equipment and land to human, social, political and intellectual. Likewise the forms of services are also diversifying to include mixes of both rival and non-rival, and excludable with non-excludable. As the scale and reach of private firms grow and moves into public common spaces the visibility increases for both positive and negative spillover effects.
A system which is driven by the primacy of shareholder profit mandate produces side-effects of social costs of mental and physical health, wealth inequality and externalities transferred out of the firms and households where they originated and across the borders of nation states. The basic foundations of the ideology's axioms appear to miss important details from the latest scientific understandings about human behavior, motivation and social networks as complex adaptive systems. Furthermore there is evidence that the basic driving forces of labor productivity growth and global trade growth that the strategy depends on may not be as reliable as in the past. To be sustainable in the long run, a new economic strategy is needed that is designed for the knowledge based service economy, deals directly with wealth inequality, maintains stable employment, moderate inflation and does not depend heavily on growth of incomes or labor productivity and with closer regional ties and less dependency on global volatility.
The challenge for deciding on a methodology for analysis is two parts, starting with a definition and measure of a universal shared meaning for equitable and sustainable prosperity. The next goal is to apply that definition with the body of scientific knowledge for the design of institutions and political economy optimized to realize that prosperity in the context of the current challenges of 21st century globalized society.
One way of getting to that common understanding is through a series of questioning - definition, analysis, reflection and design.
A description for the ideology of āeconomic freedomā includes the microfoundations of values and worldview, macroview of the global environment and future trends, policy agenda and models that logically connect the foundations to the policy prescriptions.
What are the microfoundations of the ideology of moral values and worldview theory of human motivation, behavior and social interaction?
How does it define and measure macroeconomic success and how does it model cause and effect to predict these outcomes?
Which policies and institutions does it prescribe for the state and what evidence does it use to support these policy recommendations?
What are the differences between the Reagan-Thatcher free market political ideology and the 1990 Washington Consensus for Latin America that extolled the Asian Tigers development model and to what extent does it characterize Singaporeās current economic strategy?
Each of the components can then be systematically assessed on their merits based on the weight of evidence. That analysis determines the weight of evidence to segregate between the strong and the weak claims.
What is a shared meaning of equitable and sustainable prosperity which could be used to measure the performance of the free market ideology against?
Which is the conclusion of the debate on free market capitalism supporters and critics have reached a consensus in the academic literature in fields of economics and sociology, and what are the remaining open questions to be resolved either as?
This analysis also provides a basis for reflection on uncertainties and choices. The sources of these uncertainties can be either gaps of information about the future, imperfect knowledge of how the world operates, or differences of perspectives to be negotiated through the compromise of political discourse.
Fundamental choices of values resolved through a political process of deliberation and compromise
Differences of opinion about the future and unknowable uncertainties
Knowledge and information gaps which could be resolved through further research
The insights from the strongest supported claims then becomes the foundation for policy reform.
What are the policy reforms with strong support from evidence?
What form of political economy and institutions are optimized to realize meaningful prosperity in the context of the current challenges of 21st century globalized society?
This scope of this report focuses on the first two questions of definition and analysis. It is organized around the strengths and weaknesses of free-market capitalism with a continuity between the analysis of a basis set of sources used throughout the report and supplemented in each section with sections-specific sources. The report is divided into 13 sections and 4 Appendixes. The report critiques free market capitalism using the language and concepts from mainstream field of Economics. The appendices are added at the end to clarity the meaning and use of certain terms and concepts in economics, establish a definition of free-market ideology and elaborate more detailed analysis of evidence in subtopics of sociology, behavioral economics and original statistical analysis. The report considers multiple perspectives to analyze the claims with evidence from various economists and direct analysis of statistical outcomes. At the end of the report the Scandanavian models (social democracy / welfare state) are described in brief as a case study of a political economy that fits with the evidence of the analysis.
The report uses the context of Singapore as a microcosm for the general debate on free market capitalism. The motivation for the use of Singapore is first because it is ranked as #1 in the Economic Freedom Index published by the Heritage Foundation, and secondly because recently since 2011 it is showing signs that it is in transition from free-market capitalism to a social democratic form of political economy.