INTRODUCTION

In general, the development of the market concept within economic theory has been from the less to the more abstract, and as we move through different levels of abstraction we should probably expect to encounter entirely different types of market concept. Not that this is revealed in the economics textbooks too often. They tend instead to present students with only one market model, that based on neoclassical demand-and-supply dynamics. It is conventionally known as the partial equilibrium model to denote the way in which it depicts how the pricing structure might balance demand and supply in one market alone at one moment in time. Sometimes the textbooks will use this as a precursor to introducing the general equilibrium model, a much more abstract model that explains the conditions that would have to be in place for demand and supply to be brought into perfect harmony in every conceivable market at all moments in time. But this is by no means the norm.

It is only on occasions, then, that there is some attempt to show what came after the neoclassical demand-and-supply model in the long march towards the highest imaginable level of abstraction. However, this is typically not mirrored in attempts to show what preceded it.

INTRODUCTION

Alfred Marshall spent most of his academic career at the University of Cambridge, eventually retiring as Professor of Political Economy there in 1908 after more than forty years’ academic service within the UK. He was an important theorist in his own right, but he is perhaps best remembered today as a brilliant synthesizer of existing ideas, bringing flashes of insight from various parts of the literature into a single theoretical system (Hodgson 2001). More than anybody else, he was responsible for fleshing out the contributions that various marginalist techniques could be expected to make to economic theory as if they had all come from the same hand (Maloney 1991). The ideas on which he drew were therefore by no means all his own, although he did put his distinctive gloss on them in his renowned book, The Principles of Economics. It went through eight editions, eventually totalling 870 pages, and it was quickly seized upon as the authoritative text for learning about the market concept in what I have called its analytical form. For a number of decades it was as if economics in its orthodox Anglophone guise was specifically Marshallian. George Stigler published his Theory of Price in 1946 and Paul Samuelson his Economics in 1948 in an attempt to dislodge Marshall’s Principles of Economics as the dominant teaching text. Their aim was that they might showcase the work of a newer generation of neoclassical economists.

So great were Marshall’s skills as a synthesizer that theoretical discoveries were often attributed to him retrospectively, even when they had appeared earlier in their original form in someone else’s writings.

INTRODUCTION

In the move between the analytical and the formalist phases of the market concept, the presentation becomes much more abstract and the argument more technical. It is also where an explicitly mathematical mindset very obviously takes over. It is not as though the analytical market concept lacks mathematical underpinnings, as is perhaps best illustrated by the fact that Alfred Marshall’s predecessors tended to provide an algebraic account of market-clearing dynamics before subsequently representing those dynamics pictorially on the forerunners of what is now the classic demand-and-supply diagram. Yet largely at Marshall’s inception the mathematics remained hidden from view (Hart 2012). Instead, the most common way of explaining the market concept in its second phase is using words to describe what the reader can see on the diagram. Becoming familiar with those words is what it takes to learn how to speak in an avowedly “economic” manner, and in this way it is made to look as if an economic logic exists prior to the underlying mathematical structure. In truth, though, this is actually the use of an economic logic to strategically redescribe in economic terms relationships that are already revealed by the underlying mathematical structure. It is as if an attempt is being made to mask how much of the analytical process is produced mathematically. As the market concept reaches its formalist phase all such pretence is dropped (Ackerman & Nadal 2004). This is economics for only the most mathematically gifted, whereby a training in economics, counter-intuitive though it surely sounds, might well be a disadvantage to the academic economist relative to a training in mathematics. Perhaps unsurprisingly in these circumstances, conventional teaching texts in economics venture only tentatively onto the territory occupied by the formalist market concept.

WHAT I HAVE DONE

There is almost certainly no way around the central conundrum running through this book. Economic theorists will certainly continue to build models based on their market concept, as this can plausibly be understood as their very raison d’être. Neither should we expect any sudden respite from hearing politicians talk about the future in ways that invoke this thing called “the market” that imposes its will on the whole economic environment. We might recently have witnessed the rise of a populist nationalism that is attempting to harness a backlash against globalization, but what is this in economic terms if not the flipside of market ideology? It is not the wholesale dethingification of “the market” that I have advocated, so much as an objection to the outcomes that its thingified presence has caused us to have to accommodate ourselves to. There is thus unlikely to be much change in the continued coexistence of the market concept and market ideology. But this will continue to present the problem of the single word “market” being used in two very different contexts and in two very different ways. Will we be able to trust ourselves in the future to always be able to distinguish the two uses from one another when all we hear is the one word? Given how difficult it ever is to call out a conflation of the two uses before the moment has passed, could we even trust ourselves to be able to do this just some of the time?

Hopefully the preceding chapters have helped in the task to separate the market concept from market ideology and to keep the historical development of three very different market concepts distinct from the ultimately confusing idea of “the market” as a discrete thing.

INTRODUCTION

It is hopefully clear by now that “the market” is not something that can do anything to us of its own volition. It is not an essential being; it has no innate force that demands obedience; it does not ask us to think carefully about our preferences or tell us that we must satisfy its interests; it plays no active role in our lives in and of itself. It really is not a thing to which agential characteristics might be ascribed. And yet this is still the most likely image that is being created when appeal is made politically to “the market”. There remains, then, a tension between the market understood conceptually and “the market” understood ideologically. The absence or the presence of the inverted commas still does make a big difference. The objective of the final substantive chapter is to explore the extent to which this gap remains fundamentally unbridgeable by seeking to learn more about the political rhetoric of “the market” and how it is not always clear whether that rhetoric is being applied to something that most obviously reflects the conceptual or the ideological use of the word.

If the market concept as developed in economic theory provides no basis for saying that “the market” is something that does anything to anyone, there must still be something in it that has allowed this idea to become so prevalent. There might remain a jump, a big jump even, between the market concept and market ideology, but that jump must still appear to be navigable to at least some degree if market ideology is to resonate with people’s sense of what is going on in their everyday lives. That is, there might still be aspects of the market concept that anchor the images that are transmitted through the use of market ideology. It is very difficult to think that this something, whatever it is, relates to the descriptive market concept, where the market is understood as a physical marketplace with all the attendant personal interactions that bring such physical spaces to life in human experiences.

THE POWER OF “THE MARKET”

In May 1981 François Mitterrand was elected President of France, the first Socialist Party President of the Fifth Republic. The Socialists then gained a handsome parliamentary majority in a legislative election held just six weeks later, enabling Mitterrand to enact the radical programme for government on which he was elected. This was the so-called “Cent Dix Propositions pour la France” (Cole 1994: 35). The sixteenth to thirty-fifth propositions largely covered economic policy, attempting to create new sources of domestic demand that would lead to high levels of job creation. Mitterrand’s egalitarian instincts saw him use the tax system to redistribute income from the wealthiest to the least wealthy members of society. The real value of transfer payments rose significantly, the minimum wage likewise, workers were given the right to more paid leave and the length of the standard working week was capped at a much lower level than previously (Tiersky 2003: 133). The Socialist leader’s political popularity remained sufficiently strong for him to win the next presidential election in 1988 with a substantially enlarged majority, and the French electorate never voted down his reform programme. However, Mitterrand made a spectacular U-turn just two years into it, compelled to give up on his dream of a more equal society, it appeared, by pressure on the French franc making it more difficult for him to execute his European policy of ever deeper integration (Dyson & Featherstone 1998: 92; Callaghan 2000: 107; Parsons 2003: 170). So the conventional account of this episode has it, “the market” forced him into a significant change of heart.

In July 1997 the monetary authorities of Thailand decided to allow their country’s currency, the baht, to find its own price level on global foreign exchange markets. Later that month the monetary authorities of the Philippines, Malaysia, Indonesia and South Korea took exactly the same decision (Griffith-Jones 1998: 4).

INTRODUCTION

There now exists something approaching a cottage industry of authors attempting to detail “what Adam Smith really meant”. His text provides the most reliable insights into his thinking, but on its own it can only take us some of the way towards his innermost thoughts. To get the whole way would require explanations of the relationship between the content of his work, the specific context in which it was written and why his ideas were being propelled in a certain direction at a certain moment in time. Such an account could only have come from his own hand, but unfortunately these were not reflections that he left for his subsequent interpreters to mull over. Meanwhile, almost all generations since Smith’s death in 1790 have put him to work trying to solve their problems as opposed to his. The Wealth of Nations is, after all, a famously open-ended book that permits multiple readings (Rothschild 2001). It acts almost as an invitation to read your own perspective into its pages, allowing later generations to persuade themselves that they have found there what they specifically set out to look for (Tribe 1999). Yet this means that they are positing a Smith of their own creation and not necessarily citing faithfully what he committed to the page in his own words.

The Transatlantic Trade and Investment Partnership was intended to be the cornerstone for a new multilateral trading system. The agreement would lower costs for firms doing business on both sides of the Atlantic. It would raise employment related to the trade in goods and services in Europe and the United States. And it would promote a new pattern of regulatory cooperation that would leverage the common values shared by Americans and Europeans to create binding standards for manufactured products, service provision, labour relationships, investment protection and conservation of the environment. In short, it was a deal that had something for everyone and offered few incentives for opposition from those who would be part of the agreement. Non-participating countries such as China might complain about the necessity for dealing with a Euro-American condominium, and yet the principals on both sides of the transatlantic partnership had nothing to lose and everything to gain.

Paraphrasing the Scottish poet Robert Burns, “the best laid plans of mice and men oft go astray”. The Transatlantic Trade and Investment Partnership was not negotiated on “one tank of gas”, as US Trade Representative Michael Froman promised in July 2013. Instead, it languished in the shadows of the US-led Transpacific Partnership negotiations on the American side of the Atlantic, while confronting unexpected (and unexpectedly intense) opposition in Europe. Business leaders in large multinational corporations remained enthusiastic about the prospects for an agreement, and trade negotiators remained committed to fulfilling their brief. Nevertheless, the new partnership fell prey to a growing distrust of complex trade agreements, outright rejection of third-party arbitration, and a lingering sense that the dense web of trade and investment that makes up the global economy is not a good thing.

Events also conspired against the agreement. The June 2016 UK referendum vote to leave the European Union (EU) challenged fundamental assumptions about what a transatlantic partnership would mean. The US election of Donald Trump as 45th president the following November only deepened scepticism about the prospects for (and desirability of) agreement on both sides of the Atlantic.

Although European public opposition to TTIP has attracted the lion’s share of media and academic attention, the challenges of intra- and intergovernmental coordination, particularly in the US, contributed significantly to the limited progress of the TTIP negotiations prior to the Brexit vote and Donald Trump’s election. The challenges of coordination were particularly intense in the TTIP negotiations because of their focus on “behind-the-border” measures. The emphasis on regulatory cooperation required, at the very least, the engagement of regulators and sometimes state and local governments in the US and member-state and subnational governments in the EU. Addressing public procurement and subsidies crucially engaged subcentral governments. At the very least, the breadth of the agenda increased the number of actors that needed to be involved in the negotiations. The number and diversity of the governmental actors affected by the TTIP negotiations, therefore, presented substantial coordination problems.

These coordination problems were more acute in the US than in the EU. US regulators are more independent of central authority than their European counterparts, and US states are subject to fewer disciplines regarding government procurement and state aids than are EU member states. These institutional features impeded the US’s ability to make concessions sought by the EU. At the ratification stage, however, the EU’s multilevel polity asserts itself with a vengeance. TTIP would have had to be ratified by the EU as a mixed agreement, which would mean that European national and subnational legislatures would have to give their assent to it, in addition to the Council and the European Parliament (see Chapter 1). There would, thus, have been many veto players in the EU, which had the effect of amplifying the political implications of the popular opposition discussed in Chapter 5.

This chapter begins by describing how the ways that the EU and the US make regulatory policy mean that the US had greater horizontal coordination problems and it identifies how those problems have aff ected the TTIP negotiations. It then explores the vertical coordination problems experienced in the US and the EU, including a discussion of the likely ratification process in the EU and how that heightened the policy significance of popular opposition.

Traditional trade negotiations centre on exchanges of market access: one jurisdiction offers improved access to its own market in some areas in exchange for greater access to the other jurisdiction’s market in others. As discussed in Chapter 3, such reciprocal negotiations have both domestic and international political implications. Domestically, it is suggested that the primary contestation should be between export-oriented firms (and their workers), which support domestic liberalization affecting others in order to secure greater foreign market access for themselves, and import-competing firms (and their workers), which want to avoid increased competition from imports. Internationally, reciprocity suggests that firms in the same industry should be rivals – improved access for one jurisdiction’s firms means increased competition for the other jurisdiction’s firms in the same industry. The business politics of TTIP looked nothing like this.

There was strikingly little opposition to TTIP from business interests on either side of the Atlantic. Thus, domestic contestation among firms was unusually muted. Moreover, European and American manufacturing, services and peak associations cooperated extensively, adopting common positions on a range of issues. Such extensive transnational cooperation is unique to TTIP.

This chapter argues that the prevalence of transatlantic business alliances in TTIP was due to two reinforcing factors. First, extensive cross-investment means that the same firms are established in both markets and are prominent in the associations in both jurisdictions. As a result, they are not dealing with rivals, but with themselves. Second, for manufacturers and service providers, the main aim of the TTIP negotiations was to enhance their effi ciency by eliminating nuisance tariffs and mitigating the adverse trade effects of regulatory differences. Such effi ciency gains do not have the same distributional implications as market access: all parties expect to gain, albeit not necessarily equally, rather than some gaining at the expense of others. These conditions do not exist in transatlantic agricultural trade and are largely absent from other preferential trade negotiations. The extensive business support for TTIP encouraged expectations that the negotiations would be relatively easy and swift.

There is today a resurgence of interest in the history of economics, but students often lack the opportunity of taking a systematic course that introduces them to the ideas, policies and writers who played a part in the development of economic thinking from the seventeenth century up to the present day. This book offers a partial solution to this problem by providing a template for students and teachers seeking orientation in the subject. It is based on the material that we have taught to third-year undergraduates at the University of Birmingham for several years, augmented with some material that one of us has covered with graduate students at the University of Oporto and at Erasmus University Rotterdam, expanding it a little beyond our 20 two-hour lectures. We have structured it in such a way that shorter courses could be based on a selection, and we make some suggestions regarding this below.

That this is not a conventional textbook will be apparent from the formal presentation of each lecture, beginning with aims, then providing an annotated bibliography and the relevant chronology before moving on to the subject matter of the lecture. Each lecture ends with a series of questions for discussion that could provide a framework for class discussion or individual reflection. In scope and presentation, then, there is a clear difference here from Roger Backhouse’s Penguin History of Economic Thought (published in North America by Princeton University Press as The Ordinary Business of Life), the textbook we recommend our students to read for initial orientation and which covers the history of economic thought from the ancient Greeks onwards. Likewise, chapter 2 of Keith Tribe’s Economy of the Word provides an extended overview of the transformation in the use of the word “economy” from the Greeks to the 1960s that provides a more discursive initial orientation.

From the 1920s onwards economic argument rapidly became more formalized and academic, so that what had hitherto largely been public economic debate increasingly becomes debate between academic economists. Before the 1920s economic thinking was both more diverse and less institutionally defined; indeed, part of the story we tell here is the conversion of a broad tradition of political economy into the new university discipline of economics.

Aims of the lecture

• 1. To demonstrate that, by the later 1880s, there was a broad international consensus that a “modern” economics centred on the choices made by an economic agent, and not on a framework of production and distribution involving land, labour and capital.

• 2. To emphasize that while Walras pursued a complex algebraic approach to this problem that provided the foundations of general equilibrium analysis, he regarded his work as part of this general line of thinking, not as separate from it.

• 3. To emphasize that while there was some diversity in approach to economic analysis, there was no imperative to reduce this variety to uniformity.

Bibliography

The reference text for Carl Menger is the four-volume Gesammelte Werke (Tübingen: Mohr Siebeck, 1968–70) edited by Friedrich von Hayek. For Walras the reference text is the fourteen-volume Oeuvres Économiques Complètes of Auguste and Léon Walras, edited by Pierre Dockès et al. (Paris: Economica, 1987–2005).

There are modern English translations of the principal works of Walras and Pareto. For Léon Walras, see Elements of Theoretical Economics: Or, The Theory of Social Wealth, (Cambridge: Cambridge University Press, 2014), and for Vilfredo Pareto see Manual of Political Economy, A Critical and Variorum Edition, Aldo Montesano, Alberto Zanni, Luigino Bruni, John S. Chipman and Michael McLure (eds) (Oxford: Oxford University Press, 2014).

An older but still usable translation of Menger’s Grundsätze published by the Ludwig von Mises Institute (2007) is available, but unfortunately it is marred by introductions by Peter G. Klein and Friedrich von Hayek that are best ignored for our purposes here. Indeed, much of the commentary to be found on the web relating to Menger and Walras is questionable, in terms of both scholarly reliability and judgement. Besides the work of Yagi and Endres noted here, you will generally find that commentary that is contemporary with the immediate reception of Menger’s work is far more illuminating than anything written since. The problem with commentary on Walras is rather different; the development of general equilibrium theory “creatively” modified Walras in a way that obscured the qualifications and reservations that he had made, progressively distorting later understanding of his work.

In the face of European public opposition and American coordination problems, the TTIP negotiations were struggling, if not on the ropes, in mid-2016. The second half of 2016, however, saw two body blows land on the negotiations. On 23 June, the British public voted by 52 per cent to 48 per cent to leave the European Union. On 8 November, Donald Trump was elected president of the United States on a populist, vigorously anti-trade agenda. Both of these developments dramatically undermined the prospects for reaching agreement on the broad agenda launched in 2013.

Even before the Brexit vote and Trump’s election, officials and observers on both sides of the Atlantic had anticipated that TTIP negotiations would eff ectively halt for the first half to three-quarters of 2017. Any new US administration takes time to find its feet, and the USTR tends not to be a high-priority appointment. In addition, the French presidential elections in April/May and parliamentary elections in June, and the German elections in September were expected to preoccupy Europe. Brexit and Trump’s election, however, have had a more profound effect than simply pausing the talks.

In January 2017, Peter Navarro, the head of Trump’s National Trade Council, said that the TTIP negotiations had been “killed”. European officials were marginally more optimistic. In December 2016, EU Trade Commissioner Cecilia Malmström described the negotiations as “in the freezer”. The metaphor of the freezer suggests that the negotiations might resume later in the Trump administration. As of the time of writing (June 2017), the administration had not taken a public position on TTIP. This chapter considers how the two developments have impacted the negotiations and argues that TTIP, as it was conceived, is dead.

The UK bows out

On 29 March 2017, the United Kingdom formally submitted its intention to leave the EU. The UK’s decision has two main implications for the TTIP negotiations, both of which reduce the likelihood of a successful conclusion.