In part seven of our multi-disciplinary Millennium Project series, Adrian Walsh argues that a humane market asks something of us that we may not want to give.

Global challenge 7: How can ethical market economies be encouraged to help reduce the gap between rich and poor?

The world we live in is dominated by the market. Perhaps there are different kinds of markets in different regions, but they are markets nonetheless. It is also a world in which there are vast disparities of wealth: any number of statistics can be found to demonstrate the growing gap between the top 10% and much of the earth’s population—and in which there are enormous levels of poverty.

For the foreseeable future, the market would appear to be the only form of social organisation on offer. If markets generate inequalities, as many studies suggest they do, then does that mean we must accept ongoing inequality and poverty? If so, then that is an extremely depressing state of affairs. We might call this – with apologies to others who have used the phrase – the “repugnant conclusion”.

The UN’s Millennium Project takes a far more optimistic attitude towards the role of markets in alleviating poverty and inequality. Published this year, the Project lays out 15 Global Challenges, the seventh of which asks how we might employ ethical markets to reduce inequality. The central claim of the authors is that free markets are capable of lifting people out of poverty. Leaving aside the empirical veracity of that claim, there are important conceptual questions to ask about the relative priority we ascribe to alleviating poverty and reducing inequality, and about what makes for an ethical market.

The first point to note is that their idea of a free market is a long way from that being championed by the Adam Smith Institute or Chicago school economists. They speak of economies that require – amongst other things – improved fair trade, business incentives that comply with social and environmental goals, an honest judicial system, reduced corruption, and general access to land, capital and information. The term “free” here seems to indicate freedom for all citizens to participate in the market, rather than the absence of government interference. They contrast the free market (or “relatively free” markets) with “decentralised, individualised private enterprise”.

Such markets might well be able to lift people out of poverty – that is an empirical question that I cannot explore herein — but will they realise more egalitarian societies? This seems far more unlikely. If that is indeed the case, should we choose relieving poverty over ending economic inequality?

The influential North American political philosopher John Rawls famously argued in his seminal text A Theory of Justice (1971) that while equality should be our default principle of justice, if inequalities make the worst-off better off, then they are permissible. This is his so-called “Difference Principle” and his thought is that we should prefer a society in which the worst-off have increased levels of social welfare to a more equal society in which the base levels of income are lower.

Should we also give priority to the alleviation of poverty, even if that is at the expense of equality? The use of market solutions is unlikely to create more equal societies, even if the worst-off improve their general levels of well-being. The authors of the Millennium Project document avoid this question by conflating inequality and poverty, but it is a question that is likely to continue to rear its head as market solutions are increasingly applied globally to solve social problems.

The other significant conceptual problem not addressed in the Millennium Project document concerns the make-up of an ethical market economy. What is it? Their focus is clearly upon the establishment of institutional safeguards, such as insured property rights, and an honest judicial system, to ensure that there is a level-playing field for all to engage in market activity. An ethical market economy would appear to be one in which the system is designed so as to reduce poverty. But ultimately systems require people to operate them. One is reminded here of T.S. Eliot’s comment in his poem “The Rock”:

They constantly try to escape

From the darkness outside and within

By dreaming of systems so perfect that no one will need to be good.

Eliot’s point is well made. But the hard question is how, in a market economy, can goodness be fostered. What if immersion in a market economy – where the profit motive is the primary incentive – undermines our abilities to be ‘other-regarding’?

One step forward I would suggest is to distinguish between kinds or species of profit-motives. Typically, talk in the marketplace is of the profit motive as if it were a single unified thing. But some people pursue profit with moral side-constraints upon their action: there are certain things, such as selling contaminated foodstuffs or child pornography, that they would never do. For other people, let us call them lucrepaths, there is nothing they would refuse to do in pursuit of a dollar – nothing that is out of bounds. The profit motives of these two character types are quite distinct. What we require is a general recognition that the pursuit of profit does not immediately rid us of all moral obligations. Too often, becoming a player in the market involves adoption of the view that this is a morality-free zone. This is mistaken. Instead, rejection of the lucrepath needs to become an explicit feature of public discourse surrounding the morality of market economics.

What might this mean for our repugnant conclusion? It means that those engaged in market activity should avoid engaging in activities that worsen poverty. Concerns with the living standards of others should be one of the side-constraints that motivate market agents, no matter what their other goals might be.