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.

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