Anarchy as an Organizing Principle
By Sam Vaknin
Author of "Malignant Self Love - Narcissism Revisited"

The recent spate of accounting fraud scandals signals the end of an
era. Disillusionment and disenchantment with American capitalism may
yet lead to a tectonic ideological shift from laissez faire and self
regulation to state intervention and regulation. This would be the
reversal of a trend dating back to Thatcher in Britain and Reagan in
the USA. It would also cast some fundamental - and way more ancient -
tenets of free-marketry in grave doubt.

Markets are perceived as self-organizing, self-assembling, exchanges
of information, goods, and services. Adam Smith's "invisible hand"
is the sum of all the mechanisms whose interaction gives rise to the
optimal allocation of economic resources. The market's great
advantages over central planning are precisely its randomness and
its lack of self-awareness.

Market participants go about their egoistic business, trying to
maximize their utility, oblivious of the interests and action of
all, bar those they interact with directly. Somehow, out of the
chaos and clamor, a structure emerges of order and efficiency
unmatched. Man is incapable of intentionally producing better
outcomes. Thus, any intervention and interference are deemed to be
detrimental to the proper functioning of the economy.

It is a minor step from this idealized worldview back to the
Physiocrats, who preceded Adam Smith, and who propounded the
doctrine of "laissez faire, laissez passer" - the hands-off battle
cry. Theirs was a natural religion. The market, as an agglomeration
of individuals, they thundered, was surely entitled to enjoy the
rights and freedoms accorded to each and every person. John Stuart
Mill weighed against the state's involvement in the economy in his
influential and exquisitely-timed "Principles of Political Economy",
published in 1848.

Undaunted by mounting evidence of market failures - for instance to
provide affordable and plentiful public goods - this flawed theory
returned with a vengeance in the last two decades of the past
century. Privatization, deregulation, and self-regulation became
faddish buzzwords and part of a global consensus propagated by both
commercial banks and multilateral lenders.

As applied to the professions - to accountants, stock brokers,
lawyers, bankers, insurers, and so on - self-regulation was premised
on the belief in long-term self-preservation. Rational economic
players and moral agents are supposed to maximize their utility in
the long-run by observing the rules and regulations of a level
playing field.

This noble propensity seemed, alas, to have been tampered by avarice
and narcissism and by the immature inability to postpone
gratification. Self-regulation failed so spectacularly to conquer
human nature that its demise gave rise to the most intrusive statal
stratagems ever devised. In both the UK and the USA, the government
is much more heavily and pervasively involved in the minutia of
accountancy, stock dealing, and banking than it was only two years
ago.

But the ethos and myth of "order out of chaos" - with its proponents
in the exact sciences as well - ran deeper than that. The very
culture of commerce was thoroughly permeated and transformed. It is
not surprising that the Internet - a chaotic network with an
anarchic modus operandi - flourished at these times.

The dotcom revolution was less about technology than about new ways
of doing business - mixing umpteen irreconcilable ingredients,
stirring well, and hoping for the best. No one, for instance,
offered a linear revenue model of how to translate "eyeballs" -
i.e., the number of visitors to a Web site - to money
("monetizing"). It was dogmatically held to be true that,
miraculously, traffic - a chaotic phenomenon - will translate to
profit - hitherto the outcome of painstaking labour.

Privatization itself was such a leap of faith. State owned assets -
including utilities and suppliers of public goods such as health and
education - were transferred wholesale to the hands of profit
maximizers. The implicit belief was that the price mechanism will
provide the missing planning and regulation. In other words, higher
prices were supposed to guarantee an uninterrupted service.
Predictably, failure ensued - from electricity utilities in
California to railway operators in Britain.

The simultaneous crumbling of these urban legends - the liberating
power of the Net, the self-regulating markets, the unbridled merits
of privatization - inevitably gave rise to a backlash.

The state has acquired monstrous proportions in the decades since
the Second world War. It is about to grow further and to digest the
few sectors hitherto left untouched. To say the least, these are not
good news. But we libertarians - proponents of both individual
freedom and individual responsibility - have brought it on ourselves
by thwarting the work of that invisible regulator - the market.


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Sam Vaknin ( http://samvak.tripod.com ) is the author of Malignant
Self Love - Narcissism Revisited and After the Rain - How the West
Lost the East. He served as a columnist for Global Politician,
Central Europe Review, PopMatters, Bellaonline, and eBookWeb, a
United Press International (UPI) Senior Business Correspondent, and
the editor of mental health and Central East Europe categories in
The Open Directory and Suite101.

Until recently, he served as the Economic Advisor to the Government
of Macedonia.

Visit Sam's Web site at http://samvak.tripod.com