Today, that faith is in question. The financial crisis did more than cast doubt on the ability of markets to allocate risk efficiently. It also prompted a widespread sense that markets have become detached from morals, and that we need to somehow reconnect the two. But it’s not obvious what this would mean, or how we should go about it.
Some say the moral failing at the heart of market triumphalism was greed, which led to irresponsible risk-taking. The solution, according to this view, is to rein in greed, insist on greater integrity and responsibility among bankers and Wall Street executives, and enact sensible regulations to prevent a similar crisis from happening again.
This is, at best, a partial diagnosis. While it is certainly true that greed played a role in the financial crisis, something bigger was and is at stake. The most fateful change that unfolded during the past three decades was not an increase in greed. It was the reach of markets, and of market values, into spheres of life traditionally governed by nonmarket norms. To contend with this condition, we need to do more than inveigh against greed; we need to have a public debate about where markets belong—and where they don’t.
Consider, for example, the proliferation of for-profit schools, hospitals, and prisons, and the outsourcing of war to private military contractors. (In Iraq and Afghanistan, private contractors have actually outnumbered U.S. military troops.) Consider the eclipse of public police forces by private security firms—especially in the U.S. and the U.K., where the number of private guards is almost twice the number of public police officers.
Or consider the pharmaceutical companies’ aggressive marketing of prescription drugs directly to consumers, a practice now prevalent in the U.S. but prohibited in most other countries. (If you’ve ever seen the television commercials on the evening news, you could be forgiven for thinking that the greatest health crisis in the world is not malaria or river blindness or sleeping sickness but an epidemic of erectile dysfunction.)
Consider too the reach of commercial advertising into public schools, from buses to corridors to cafeterias; the sale of “naming rights” to parks and civic spaces; the blurred boundaries, within journalism, between news and advertising, likely to blur further as newspapers and magazines struggle to survive; the marketing of “designer” eggs and sperm for assisted reproduction; the buying and selling, by companies and countries, of the right to pollute; a system of campaign finance in the U.S. that comes close to permitting the buying and selling of elections.
These uses of markets to allocate health, education, public safety, national security, criminal justice, environmental protection, recreation, procreation, and other social goods were for the most part unheard-of 30 years ago. Today, we take them largely for granted.