“The Market Did It.”
Of the fallacies we hear in modern economics, few are more pernicious that those that attribute action to the “market.” The master example is Adam Smith’s substitution of the “invisible hand” for the tobacco lords, plantation owners, and slave traders, who brought about misery to the slaves in the Americas and “opulence” to Smith’s circle of friends in Glasgow. The legacy of this deception continues to infect current economic thinking.
A recent example is the financial crisis in Greece. It was not the “market” that brought Greece to its current situation, but financial speculators who sensed that they could turn a profit by investing and disinvesting in Greece’s future. One would have thought that a common currency (the Euro) would have limited such speculation, but since each state in the European Union has its own bonds and debts, it is still possible for speculators to treat money as a commodity rather than as a provider of credit.
Instead of pretending that markets are independent self-organizing systems we need to see them imbedded in social and political trends. When we hear, “the market did this or that,” we need to look for the individuals and institutions that are causing things to happen through their actions and inactions.