I stumbled upon this debate about the future of markets. Part of the problem is that “market” is so poorly defined. Instead of digging through centuries of capitalist tracts or recycling paleomarxism, my understanding of markets is that they are simply the mechanism by which transactions of resources, manufactured goods, or financial instruments take place. Anywhere there is supply and demand for a particular thing, that creates a market.
So markets are definitely not limited to a capitalist economy.
The issue at hand is not if the current level of prosperity in the industrialized world can be maintained, but how long it can be maintained. The vector of history makes it clear that economic expansion for the last 2,000 years or so has been driven primarily by territorial expansion, mercantilism, and colonialism. Ever since the first Roman legion set foot in the Middle East, through the post-Imperial Dark Age, through the European Renaissance, and onward through the age of exploration, the colonial era, and the independence movements, economic expansion has been based on the seizure of resources and territory from other cultures that do not necessarily subscribe to European/American norms of property rights and individual liberty.
The end of this expansion started with the independence movements, spawned the Great Depression, and sparked WWI and WWII. It became clear that territorial expansion under the aegis of nationalism was no longer a workable solution. But what transpired was that the two remaining superpowers, instead of integrating their client states into their empires, merely subjected them their economic and cultural hegemony. All the benefits of territorial expansion without the downside of a far-flung integrated empire. (As an aside, this seems to be one of the big reasons the Western Roman Empire collapsed: they stopped offering citizenship to the people they subjugated.)
The USSR, much like the Romans, ended up splintering into separate states, their economy a shambles. The capitalists would have us believe that this was purely a function of their restriction of markets, but a retrospective makes it clear that it was the demands of maintaining a quasi-empire that bankrupted them.
The superpower client-patron relationship still requires vast amounts of investment in military power, and the War in Afghanistan and in Iraq is starting to demonstrate to the capitalist world that they are getting diminishing returns.
The key innovation of the Western World, the U.S. in particular, and Manhattan and Hollywood most specifically, is the exportation of culture without needing to invest so much in military power. Newspapers, magazines, radio, movies, television, and now the Internet have broadcast Manhattan and Hollywood culture to the entire world (and, theoretically, into space) This form of cultural hegemony has expanded markets greatly without needing to expend as much energy in subjugating other people.
But the expansion cannot continue on indefinitely. Besides the fact that various cultures are resisting Western influence (fundamentalist Islam and communist China being huge players that make up to 50% of the world’s population.) In a nearly-completely globalized world, the profit from mercantilist/colonialist arbitrage is essentially nil. There is very little profit in taking Product X from one industrialized country to another industrialized country. We are left with peddling our wares to developing and undeveloped countries, and it just seems like a losing strategy to base our prosperity on peddling our wares to poor people who don’t even have enough money for clean water and food.
One of the problems with market capitalism is that it requires the involuntary participation of subjugated peoples in the rural hinterlands. They are forced by the metropolitan elite who control the mechanisms of government to cede property to multinational corporations and become displaced, and they are forced to surrender their environment to frequently rapacious mining and logging operations, and to the dumping of toxic waste.
As our target markets expand into these countries, we are forced to deal with the paradox of taking raw materials from these places and sending them back as consumer goods that these people probably don’t really need.
We frequently talk about markets as abstractions, willfully ignoring the fact that markets are human institutions. They are the resultant emergent behavior of the interactions of all buyers and sellers. We talk about market efficiency, and maybe in a physical sense, this is true (market capitalism extracts the most amount of useful work/energy from all economic systems we’ve ever tried), but the problem is that the wastage is not some abstract thermodynamic phenomenon. We’re talking about the wastage of environment, of human lives, of human hopes, dreams, and ambitions. I think it is willful deception to not realize that markets are composed of human beings. To treat market capitalism as some sort of objective machine smacks of outdated Modernist thinking, part and parcel of the same soulless Positivist Rationality that spawned fascism, the Holocaust, and communist totalitarianism.
And just as sticking food into a bomb calorimeter and calculating how much energy you extract does not predict how many calories the human body will actually extract when that food is ingested, calculating market efficiency by just the numbers and figures does not accurately predict the wastage effects. There are some forms of wastage that we wouldn’t want to visit upon other human beings, if we were actually aware of these effects.
The reason why social networking is interesting is precisely because the margins of profit, the margins of success, are shrinking significantly. Again, one of the most significant reasons is globalization. While this phenomenon may be beneficial to the consumer, it certainly can cause a lot of market instability. This is one of the places where markets are inefficient. When a particular demand arises, everyone wants to cash in. But when the demand levels off, companies by necessity are going to die. Hence, the traditional boom and bust cycle. Hence, the bubble bursts.
What social interaction does is that it earns you other capital that does not have an equivalency as currency. Specifically, what you have the potential of earning is trust. No amount of money can buy that sort of capital.
This is one of the things that is made manifest by the Information Revolution. Money is no longer the only currency that is important. Reputation also has bearing, and sometimes reputation is what spells the difference between success and failure.