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I Crisis and normality in transnational market regulation

The central problems of Marx’s economics and the nature of market regulation

David Campbell*

  • 1.1 Introduction page 9
  • 1.2 The meaning of ‘regulation’ 10
  • 1.3 Left-wing criticism of the free market 13
  • 1.4 Early British left-wing criticism of the labour theory of value 16
  • 1.5 The critique of capitalism in light of the labour theory 23
  • 1.6 Conclusion: The form of value 36

Introduction

It is a matter of grave concern that the explanation of the 2007-8 financial markets crash which continues to exert the largest political influence upon the attempts being made to reform the financial system is based on the concept of deregulation. The crash was a disaster the groundwork for which was laid by the highly aggressive and utterly incompetent government restructuring of the financial sector called in the UK the ‘Big Bang’. It took place whilst that sector was under the supervision of multiple regulatory agencies, against a background of legal and economic policies which gave every inducement to reckless (and much inducement to fraudulent) trade. It is by no means to exonerate private actors from their responsibility for the disaster to say that to regard the appalling government failure as an episode of deregulation is a major obstacle to the explanation of the crash and the formulation of an adequate policy for relief of the ensuing depression. I have argued this elsewhere on numerous occasions (most recently in criticism of Richard Posner’s version of the concept of deregulation (Campbell 2010a; 2012)), and do not propose to do so again.

Despite the bleak account I have just given of its influence on policy formulation, I do not think sophisticated regulatory theorists find the concept of deregulation plausible (though, of course, one has to guard against making

This paper was read to a conference on ‘A Behavioural Approach to Corporate and Financial Law’ held at The School of Law, University of Leeds, in July 2014.

what seems to be an accurate statement by means of mere tautology). In this chapter I wish to address a problem which I think besets such sophisticated theorists, and so those who continue to find great value in the concept of deregulation, who cannot even encounter, much less solve, this problem, must part company with me. The sophisticated theorists I have in mind regard deregulation, and the idea of an in some way wholly unregulated free market that lies behind it, as the illusions at the root of the shortcomings of the neoclassical economics of market allocation. I believe these sophisticated theorists are right in this. But this dismissal of deregulation and the free market very often is taken to imply that the defining welfare claim of neoclassical economics - that market allocation is the best form of general economy - is wrong. By analysis of the theoretical implications of some divergent concepts of regulation, I hope to show that this implication by no means follows from dismissal of the concepts of deregulation and the free market. And this is as well, for I believe that market allocation, were its conditions of existence made actual, is the best form of general economy.

In my opinion, the only truly non-market concept of economic action that demands our continued attention is that of Karl Marx. By discussion of the central problems of Marx’s economics, I hope to support the claim that the market economy is the best form of general economy. One of the results of this will, paradoxically enough, be to restate the kernel of sense in the concept of deregulation, which evidently makes it so attractive to the theoretically vulgar. The claim that market allocation is the best form of general economy is right, but only if the market is put on a sound regulatory foundation; precisely what is ignored in the concept of deregulation. But such regulation must be regulation of what must be regarded as, in a sense which will emerge, spontaneous economic action if the regulatory effort may possibly maximise freedom of such action.

 
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