ABSTRACT
The role of the market in stimulating economic growth – through the optimisation of production – is a subject which has, of late, given rise to considerable debate. There has also been some confusion – perhaps with justification – between the proposition that markets are an essential feature of the capitalist system, and the assertion that markets (and untrammelled consumer choice) are essential elements of a free society. Liberal thinkers have, in fact, tended to identify the market economy with not only a capitalist society but also a democratic polity. This chapter proposes to examine the logic of both assertions. It is true that, historically, socialist economies (such as have existed in Eastern Europe and elsewhere) have experimented with the organisation of the economy without a market system. It is also true that, historically, markets have thrived in countries which have a capitalist system, and often political democracy. But democracy is not a necessary condition for the functioning of a market system; in fact, the existence of highly autocratic regimes has helped in the development of a flourishing market economy. Nor is it essential for a democratic country to have a ‘free market’; indeed, as will be argued later, a truly democratic country cannot have a totally free market; and it is also possible to envisage an essentially socialist economy – at least one with a socialistic pattern of distribution – with a functioning market system for a considerable part of the social product. Markets do have an important role in mediating between production and consumption of goods and services. But neither the manner of organisation of production (that is, the capitalist or socialist modes), nor of the distribution of the social product need necessarily be dictated by the norms of (or mediated through) what has come to be described as a ‘market economy’.
