The last book we tackled in the No Due Date book club was Do Markets Corrupt our Morals by Virgil Storr and Ginny Choi. I really appreciate the way the book is laid out. Instead of referencing the work of others in an offhand way, expecting the reader to know the inferences intended, the authors pulled lengthy quotes. Then there is further clarification of the material. To make it even easier to follow up, bibliographies are listed at the end of each paragraph.
This makes for a useful book. One worth hanging onto.
One of the questions the book seeks to answer is why there exists an ongoing criticism of capitalism when the data seems to indicate that open and free economies generate positive returns for societies. No need for uncertainty here. If nothing else, the authors confirm through thoughtful data and analysis that economies consisting of open and free trade, with higher levels of transparency and clear property rights, out perform every other system. And yet, the nasty, opportunistic men and women of the market live out vivid roles in the minds of the public.
Storr and Choi start off Chapter 4 with a virtuous market story. An enslaved person, Boatswain, is a skilled craftsman. His owner is progressive enough to allow him to market his skills in the greater Bahamian marketplace and for Boatwain to retain some of his earnings. Here, market forces encourage the relinquishing of a social norm so that the greater community benefits, Boatswain internalizes profits and undoubtedly his owner is relieved of some maintenance expense. All parties win.
Let’s look at a few not-so-appealing market stories. Bernie Madoff was a financier of considerable skill. He also had access to individuals with large amounts of resources with seemingly no direct demands upon them. So Mr. Madoff creates a story to draw those funds out and into his pyramid scheme. Perhaps hubris kept him going. Perhaps he began to believe his own deception. Regardless of the human foibles that perpetuated the deception, when he fell, the destruction was deadly.
But also let’s consider the market for public funds. The state of Minnesota has an 18 billion dollar surplus at the moment. There is talk of large amounts of money being directed into non-profits in a disadvantaged part of the metro area. The fear is that the dollars will not have a sufficient market disbursal system and there will be pressure on the 501c3 people to internalize the liquid assets.
Or consider a situation where two markets exist in close geographic proximity. When a group of ex-pats from a wealthy country takes up residents in a country of substantially less means, it is not long before a submarket is created. Members of the host country develop surcharges on goods in open markets. There are fees imposed at gatekeeping opportunities. This extraction of funds from one group to the next is called corruption. But could it be that this is a market force for the wealthy to support the less wealthy?
Bernie Madoff was simply a sophisticated thief. But he used a network, not simply business means, to accomplish his ruse. The demand for public money in the second scenario is justified, but the mechanisms for distribution are lacking. On many past occasions, this scenario has ended with an appropriation of funds. The last situation generates the example of a secondary market, or a black market, springing up when two distinct groups, with divergent standards of living, coexist nearby.
So I agree with the authors that the Bernies of the world get an outsized airing in the media. People love a good scandal. But I also would like to suggest that some other scenarios which appear to be theft are the result of weak, unidentified, or poorly implemented markets.
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