Market Failure – Not
Jeez, can we stop falling into the neoliberals’ trap of saying “market failure” when we’re talking about public goods!
Huh?
Let me explain. I'm in lots of meetings discussing how to come up with alternatives to neoliberalism. It's one of those terms that we all assume we know what we're talking about. Maybe? At one of them, Dorian Warren, co-president of Community Change (among other things), gave the simplest and clearest definition I’d heard. It went something like this: "It's relying on markets in every part of life." I think he said it better.
So, it stands to reason, then, that the neoliberal view is that markets and market mechanisms (different things) are the preferred way to meet our needs–alone as individuals, and together as a democratic society.
At that same meeting, I heard a colleague make an offhand comment about public goods, saying that the role of government was to step in when markets fail. He wasn’t a market fundamentalist and it was at a several-day meeting grappling with how to create alternatives to neoliberalism. A good guy.
I hear it in different places and contexts. Recently, a housing organizer referred to market failure on a conference panel discussing ways to transform the economy so it works for everyone. At a meeting at the U.S. Treasury, a Democratic appointee to a Federal Advisory Committee I was also on made the same statement.
Ok, so now you’re thinking, “Isn’t this just semantics? Why is he making such a big deal about two little words?”
Here’s why.
If we describe some of our fundamental challenges–climate, lack of access to health care, the high cost of childcare or college to name a few–as “market failures,” we’re basically giving in to the notion that the market should get first dibs on life’s essentials. From the get-go, it puts the market in charge of public goods and needs.
That’s wrong. In so many ways.
Ok, so let me repeat (and plead!). Can we stop saying “market failure” when we’re talking about public goods?
We all do it.
For example, Dorian Warren and Felicia Wong are two of the people I admire most among progressive thinkers, organizers, and leaders. (I, of course, also have a long list of musicians, but that's a separate list.) Both are decidedly pro-public; they believe in the essential public role in meeting the needs of the whole public.
But even these two super smart folks fall into the semantic trap of the neoliberals.
Here’s a 2020 article by Felicia Wong:
But the crisis exposes a broader truth about markets. Even under normal conditions, markets do not provide the necessities of a decent human life— access to health care, access to housing, for example —in a manner that we could reasonably consider universal, decent, or even fair. Government must, at minimum, soften market failure, and when markets fail badly enough, government must step in to provide directly.
And this from Dorian Warren in 2019:
Following in the tradition of their predecessors in the late nineteenth-century populist movement, the age of the Congress of Industrial Organizations and New Deal workers’ movements, and the mid-twentieth-century Black freedom movement, this groundbreaking grassroots effort planted the seeds for the political opportunity confronting us today. It brought the state back in to take on the market failure ushered in by the previous two decades of neoliberal political economy.
I’m also a follower of the Washington Center for Equitable Growth. I look to them for understanding, analysis, and guidance on how to create a fairer economy.
An Equitable Growth article on worker safety drove home the point for me:
U.S. workers also may be deterred from moving themselves and their families to new job opportunities because of important family and community ties in their present location, which in turn can lead to local labor markets that are riddled with market failures, such as unsafe working conditions.
“Market failure” sounds like some AI version of the invisible hand, stripped of human decision and power. Unsafe workplaces are failures of real companies and real people who own and manage them. It’s a failure of production, not a failure of an abstract market.
That brings me to a real case: childcare; in my view it’s a fully privatized public good in the U.S.
In 2021, the Treasury Department released a study on child care concluding that the system is basically in a state of market failure.
A similar recent report about the affordability of childcare for California families declared it a “market failure [that] results because the supply of quality early learning and care services is lower than the demand for these services, and the cost of care is higher than most families can afford, limiting the ability of families to access the services they need for their children.”
Ironically, they acknowledge that the “market failure hurts everyone: children and families; educators and programs; public, private, and civic institutions; and communities as a whole.”
We could say the same thing about the health care “market,” the higher education “market,” and, perhaps, even the housing “market” that, while it exists for many of us, is completely incapable of meeting the housing needs of the nation.
The bottom line: the market is simply the wrong tool for essential public needs!
There are market things and there are public things. If they are different things, then public things are "market inappropriate," not “market failures.” Ezra Klein summed it up well: “To criticize markets for failing to achieve them is like berating a toaster because it never produces an oil painting. That’s not its job.”
An alternative to neoliberalism isn't a more robust response to market failure for these things. It's a rejection of the premise. That starts by not saying “market failure” when it comes to public things. Please.