CORPORATIONS ARE NOT HUMANS : NOT EVEN CLOSE---Episode 15

                  MAINTAINING COMPETITIVE MARKETS 

    Although big business often whines that government interferes unduly with its affairs, most calls for freeing the market ignores a basic reality : the efficient function of market economy depends on a strong government. This need is well established in contemporary market economic theory and has been demonstrated in practice. In their exhaustive critique of corporate libertarianism For the Common Good, Herman E. Daly and John Cobb, Jr. list the conditions on which the market depends for its efficient function yet cannot provide for itself.

* Fair competition { Already discussed in last episode. } 

* Moral capital : Although market theory assumes self-interested individuals and real-world markets often reward greedy, dishonest, and immoral behavior, the day-to-day interactions of an efficient market depend on trust. A market in which participants are driven purely by greed and desire to obtain momentary competitive advantage by any means --- a market without trust, cooperation, compassion, and individual integrity --- is not just an unpleasant place to do business. It is also highly inefficient, incurring inordinate costs for lawyers, security guards, and other defensive measures. Neither a society nor a market economy can function efficiently without a moral foundation. 

* Public Goods : Many investments and services that are essential to the public good --- such as investments in basic scientific research, public security and justice, public education, roads, and national defense --- are not supplied by the market because once they have been produced, they are freely available for anyone to use. Even most corporate libertarians recognize a role for government in providing such public goods, at least those essential for the profitable function of private business. The actual work may be done by private contractors, but the bills must be paid by 
governments out of tax revenues. 

* Full-Cost Pricing : The market produces an optimal allocation of resources only when sellers and buyers bear the full cost of the products they produce, purchase, and consume. Rarely, if ever, will full costs be internalized in an unregulated market, because competitive pressures make it necessary to externalize costs whenever possible. A producer that successfully externalizes social and environmental costs will gain a higher profit and attract more investors and thus can offer a lower price and capture a greater market share. It is wonderful when a company discovers inherent economic advantages in reducing its waste and paying its workers a fair wage, but experience shows that there is nothing inherent in the workings of the market to ensure that social and environmental costs will be internalized without active governmental intervention. 

* Just Distribution : In a market system there is a strong tendency, especially during periods of economic expansion, for the owners of capital to increase their wealth and incomes while the incomes of those who sell their labor lag or decline. A market in which economic power is unjustly distributed will allocate resources to producing luxuries for those with money while depriving those with no money of even the most basic necessities of life, which is neither just nor socially efficient. Market efficiency and institutional legitimacy depend on governmental intervention to constantly restore the equity that market forces inexorably erode. 

* Ecological Sustainability : As the human economy grows to fill its ecological space, limiting the scale of the economic subsystem to maintain an optimal balance with nature becomes necessary for species survival. Carbon dioxide emissions must be maintained below absorption levels. Fisheries harvests must be held to sustainable levels. Unfortunately, the unregulated market is blind to countless such constraints. Government must set limits and ensure ensure that appropriate signals are sent to the market. Even proposed "market solutions" to environmental problems, such as tradable pollution permits, depend on government intervention to set the limits, issue permits, and monitor compliance. 

The market produces socially optimal outcomes only when government and civil society are empowered to act to maintain the above conditions of market efficiency. A market freed from governmental restraint is inherently unsustainable because it erodes its own institutional, social, and environmental foundations.