Nov 13, 2019

I wrote this column in November 2016, which is three years ago now. Recently, I couldn't help but rethink some of its contents. This led me to revisit and publish it, with the understanding that it is similar to any appreciation of our experiences, which makes it a partial perspective. Nonetheless, perhaps it can provide one of the many aspects required for a multidisciplinary view of the current social unrest.

"The moral limits of the market". I came across this concept in two interesting books written by Michael Sandel and Debra Satz. I have adopted it, because I believe it has a significant impact on the discussions and public tension in Chile today. For decades we have spoken of "economic issues" compared to "social issues," as if they were totally unrelated and even opposed to each other. The very simplistic theory is that economics and ethics are at best two parallel discourses and that their selection depends on decision-makers. Economics and ethics are not truly parallel, nor are they opposites. Markets can be judged not only in terms of the dichotomy between their existence or denial, for example when, how and where to introduce markets to the supply of public goods, but also in terms of their moral limits. Do we really want all the aspects of the supply of goods and services to be resolved by the market, which is everyone's willingness to pay? Or do we prefer that some goods are allocated on a need basis?

The question is valid even if one believes that markets are efficient allocators of resources because it calls into question the values that our society is pursuing. If it is only efficiency, then we should transfer all decisions regarding the allocation of goods to the market based on willingness to pay, and only be concerned about failures that can be corrected using minimally intrusive regulations, under the institutional framework of competition, or a justice system that usually takes a long time. Chile broadly adopted this path in the 1980s, when our principal economic laws were enacted, including those referring to public goods. But if society wants all citizens to achieve a standard of dignity that is consistent with a good life (again, Sandel), regardless of where we are born, or the decisions or fortune of our parents, then solidarity, justice, empathy and other virtues must be understood as fundamental for a community to achieve the required trust, common identity and cohesion to make it sustainable.

This would imply that the market should not decide as the arbiter of last resort how to allocate the goods or services that are vital to our lives in the community. However, choosing these goods and services is a naturally difficult matter, although legitimate policy and unbiased empirical evidence should have plenty to say about it.

Significant discussions of our times, such as the state of public transportation, education, pensions, health, borrowing rates and many other matters require identifying the moral limits of the market.

For example, we must discuss whether the Isapres (private health insurance companies) provide a good solution to the health insurance market when they deny coverage to those who already have health problems, when they increase premiums for the elderly until they are expelled from the system because they are deemed "bad risks", precisely when these contributors are about to use the coverage that they have paid for all their lives, or when they exclude catastrophic diseases that deny any semblance of a good life to those who suffer from them, and their families.

Or question the benefits of the system, when private pension funds are unable to provide a pension that reaches the minimum wage, which is precisely why they were conceived. Where these funds are built on purely individual savings that assume the labour market is equitable without considering a reality that punishes women who have taken care of others in need, among others. Where they are based on the false assumption that the behaviour of homo economicus is perfect, completely rational and who can obtain and keep employment, without facing any vicissitudes.

Or ask ourselves if an abundant supply of education is really adequate for the market to correctly allocate it, when universities can provide poor education, due to deficient regulation or supervision, resulting in professionals who can only obtain employment with an insufficient salary, part of which will be consumed in paying off long-term university loans, leaving a large social class frustrated as they believed in the promise that education supplied by the market would lead to a better quality of life.

We should also be concerned about the regulation of water and how sustainable is it to maintain a system that uses price signals to allocate water rights to those who financially value it most, with the consequent risks, when it is essential for everyone and even for activities that are essential for society. This is an issue that by its very nature questions the allocation of goods using purely financial considerations.

Therefore, genuine reflection on the moral limits of the market is essential. It is important to explore the reasons why a significant amount of anger, frustration and uncertainty is being suffered by a large segment of our community.

The answers involve integrating both economics and the humanities into the analysis. This seems especially clear after the global financial crisis in 2008, which highlighted the effects of systematically overstepping the moral boundaries of the market and the limitations of the economy to properly account for them. As Martha Nussbaum suggests, rescuing the humanities and understanding economics as another social science with all its strengths and weaknesses, is essential for rebuilding societies where decency and not just finance is an essential focus, in order to educate citizens who both question and respect democracy as a path to dialog and the construction of solutions.

Finally, the answers are not limited to evaluating greater State intervention through regulation or by directly providing public goods. That is one possible path, but certainly not the only one. Others also assume that civil society actively participates in finding solutions, where the State must provide effective institutional paths, not merely expectations. Companies also have a role to play by understanding that stressing the system in order to extract rents only morally bankrupts them (the time has come, if it is not already too late). Therefore, they must combine efficiency and humanity to serve the collective good by merging market decisions with those that may partially sacrifice financial goals, not only to satisfy their customer’s basic dignity requirements, but also as good corporate citizens by understanding, welcoming, and serving them.

Finally, I believe that people should collaborate so that society as a whole can express its needs and frustrations through institutional participatory mechanisms that must be improved when they are insufficient. These must be viable in the long term and thus collaborate in the construction of a truly sustainable and decent society.

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