This economic doctrine claims the market as its foundation, and entrepreneurial liberty and free competition as its natural allies. It is also a frame of mind that allows each person to be satisfied with his status and which defines liberty as the starting point of an ongoing creation, not a state of nature which should be preserved intact. «Originally, liberalism was a political philosophy for which the French Revolution became the solemn consecration. In the mid-17th century, John Locke had already set himself up as the ardent defender of individual rights, the roots of which he stressed were to be found in Man’s nature, something which suddenly forced governments to recognise and protect them»(1) . The liberal doctrine of the 19th century bore within itself the seeds of future “human rights”.

Liberalism conceived trade as an expression of individual freedom within which commercial interactions were to develop with no constraint other than competition. Other limitations to trade were accepted only as exceptions. However, nature has a different “philosophy”! For her, all interactions are subject to rules of symmetry which set limits, without exception! Gravity, electromagnetism and radioactivity are sometimes constraints and sometimes opportunities which we accept naturally. So why would we not accept the rules of symmetry that govern them?

Liberalism was able to free itself from the restrictions imposed by the States but failed to regulate itself and set adequate moral limits. It eventually swept away the western world in the excesses of its quest for liberty and individualism, all too often ignoring the principles of proportionality, balance, fairness, solidarity, social justice and responsibility. “The market will fix all that!” said the liberals. It is because man’s initiative has too long been silenced by the leaden cloak of former totalitarian regimes that the rejection of state control has been so violent and – let us give credit where it is due – so creative. However, this impetus of some to amass wealth was often at the expense of those least able to defend themselves, and its excesses contributed to the rise of socialism, a reaction to liberal abuses. In the wakes of the past century’s wars and their parade of suffering, liberalism found itself severely limited, and state interventions became extensive in all fields. In turn, the abuses of state interventions (nationalisations, protectionism, production and export subsidies), coupled with the conviction that the market could settle problems better than the State could, was the reason for a major reform, wherein the GATT gave birth to the World Trade Organization (WTO).

The neo-liberal theory developed by the Chicago school of economics and promoted by the International Monetary Fund laid the foundations of a new economy, deregulated in some ways and badly regulated in others, whose negative effects are visible everywhere we look. According to Milton Friedman(2)  economic theories need not be based on true or realistic assumptions as long as they are predictive(3) . The critics have easily demonstrated that these new economic theories, completely out of touch with reality, predicted neither the stock market crashes nor the numerous recessions. How could they when the decisions of each agent, often irrational and sometimes imbued with morality, retroact on the system? Can we still speak of “economic science”? Is it not rather an ideology, a determinist(5) one at that? 

The WTO became the champion of neo-liberalism based on free trade. Alas, this very same WTO is not at liberty to correct its mistakes, hindered as it is by the national interests of certain influential Member States. Is it customary for a gentleman farmer to compete with an Egyptian fellah for the production of rice, cotton or lentils? According to this organisation, it is, as the States signed the agreements by consensus. Yet no one would think of setting up a boxing match between a heavyweight and a featherweight; a beginner does not challenge the world tennis champion; football is not played ten players to twelve. Why? Because the rules of symmetry are omnipresent in sports. The dominant school of thought in economics believes it may escape these rules by stating loud and clear that the freedom to conduct business and free trade fosters progress. But what progress? In the shantytowns of the large megacities, millions of peasants ruined by asymmetric competition can bear witness to their experience of free trade and market efficiency.

With the financialisation of the economy and the “maximisation of profits”(4), the new, popular financial theories have imposed unrealistic performance criteria. Return on equity has to be at least 15 to 20%, otherwise companies are declared non-performing. Why 15% and not 5% or 30%? No objective reason has been given except that capital being scarce, it must be used wisely and its return maximised. This new « truth », largely accepted by the academic and financial communities, has imposed severe constraints on States and companies, all the while profoundly transforming society.

The consequences for “non-performing” companies have been tough because the interest rates at which they borrowed, threatened to increase. The pressure on managers has been considerable in all sectors where margins are low. In turn, managers have exerted pressure on staff and suppliers so as to improve performance. Gradually the spirit of cooperation that could reign in companies gave way to an ever-tougher spirit of competition and tensions became apparent between employees under stress.

For the sake of productivity, companies were subjected to the dictates of return on equity and have adapted. They have sacrificed a little quality here (particularly in services), and a little security there, and some have relocated their production facilities. Elsewhere risky conjectures have been engaged in. Some companies have cheated and falsified their accounts. Finally other companies and banks bought back their own shares. Thus, by reducing their capital stock, they have given the illusion of higher returns; suddenly they are vulnerable and were put at risk when the financial crisis erupted in 2008. Fortunately other companies threw themselves into innovation, often successfully. In agriculture, on the contrary, innovation with transgenic seeds was not unanimously received.

Globalisation and the opening up of the markets was an economic necessity recognised by the majority of large companies. Increasing their market share allowed production costs to be lowered and ambitious financial targets to be achieved. This is what happened to many innovative companies. But the opening up of the markets has created competitive conditions that have weakened many traditional companies. If with a budget of 1 million dollars a company can employ 10 people in the West while in Asia it can employ 50 or more with the same budget, there is a competitive distortion, an asymmetry that could be compared to a football match taking place between a team of 7 and a team of 15. The result is a foregone conclusion. The disproportion comes to an end one time or another by claiming its dues. The victims regularly fall into the net of the social services.

The banks have adapted in their own way. In addition to share buybacks, the large institutions have located themselves in emerging markets, which is fair game. The investment banks have succumbed to the lure of financial mathematics. Most of these formulae being built on deterministic models  completely out of touch with reality, these banks existed in the illusion of reliable predictions and have engaged in financial speculation as disproportionate as it is senseless. They have developed products and systems for automated high frequency trading just as the pirates who roamed the seas in olden times. Some 150 years ago American merchants invented the futures market to mitigate the risks for grain producers, millers etc. In turn, the financiers developed derivative products with the same intention: to protect themselves from ruinous fluctuations. But by some warping or other, these products have been widely used to speculate excessively on anything and everything, including the property of others. Certain so-called “synthetic” products are even disconnected from their underlying base. These abuses of freedom of trade by some, dangerously impinge on that of others. They discredit liberalism and show the dark side of banking practices under the guise of neo-liberalism: a minimalist ethic. The leverage effect of all of these products is so powerful that the central banks are powerless to control them. The systematic risk caused by these products eventually burst like a soapy bubble. The collapse of the mathematical models generated losses so large that the States had to intervene enormously by getting into debt to support these institutions and to avoid the overall collapse of the economy.

While the companies and banks were adapting, the governments applied the new theories with the support of the major holders of capital. Capital being king, taxes perceived on the great fortunes had to be cut  and the wrangling that impeded their freedom of movement had to be removed. The governments of Ronald Reagan(6) and of Margaret Thatcher worked towards implementing the framework conditions to foster the growth of Wall Street and of the City all the while being emulated across the world, even as far as China. Numerous prestigious achievements such as citations in major journals and the media or even the many Nobel Prizes in economics have added the finishing touches to the structure giving the Chicago school of economics an unprecedented credibility. The new ideology became a scientific truth.

Some decades later, the day of financial reckoning was nigh. The European and American governments are heavily indebted. The tax breaks for the wealthy and the social compensation for the victims of the system revealed the extent of the disaster. The race for excessive returns in an area of almost infinite freedom has led to serious imbalances, tensions and much suffering. It has generated phenomenal inequalities while destabilising the system which has now lost credibility and legitimacy.

Would this mad dash for money, this focus on capital, be one or other of these “initial” conditions(7)  to which the current financial chaos would have been sensitive?  When in 2008 M. A. Greenspan(8)  testified before the US Congress and acknowledged that there was a “flaw” in the financial system, to which flaw was he referring? To this initial order to maximise profits? To this belief in rationality and market efficiency? To this complacency towards capital?

The eminent biologist Pierre Curie offers us an answer through his famous « Curie principle » which says:

“When certain causes produce certain effects, the elements of symmetry of the causes must be found in the effects produced. When certain effects reveal a certain asymmetry, this asymmetry must be found in the causes that produced them”

Is it a coincidence that the excesses of the financial incentives and orders are found in the excesses of economic and financial imbalances? If the inequalities in the tax treatment of the rich and famous 1% is found in the social inequalities that affect the other 99%?

The outraged(9) denounce the treason of the elites who promoted neo-liberal dogmas without a critical mind-set. Is it not absurd to require so much effort from workers, always pushing them to produce more, sometimes in defiance of nature, often in defiance of their health, while simultaneously, the financial system destroys the wealth produced to the tune of tens of billions? Is it not absurd that this finance still awards its players so disproportionately in relation to their contributions to the common good and their risk management?

The incentives to seek personal gain at the expense of the common good have of course inflated the individualism and egocentrism of certain financial operators. Three centuries earlier, B. Spinoza stated, “When each man seeks most earnestly what is most useful to himself, that is when men are most useful to each other”(13) (Ethics, IV.) Might this vision also have influenced the individualist conception of neo-liberalism?  This concern over profit is old and neo-liberalism has further reinforced it so that Western societies are deeply marked by this tireless quest for personal gain. It is useless to exalt this natural desire that is enrooted in each of us. Living together requires other values.

The instability created by financial and monetary imbalances provokes other disturbances. To shelter their assets from devaluations, the investors buy “strong” currencies. These transactions, with respect to free trade, look perfectly harmless – in fact, are they not encouraged by the guaranteed freedom of trade? They are and yet they can ruin the healthiest economies. Why? Because currency is not merchandise! Exchanging a strong currency for a weak one without any compensation is a fool’s bargain, because the exchange rate does not reflect the objective value of the goods exchanged, because there are not any! It reflects the subjective value of the fear and despair of investors affected by the collapse of the credibility of their benchmark currency. The freedom of the financial operator interferes dangerously with that of the entrepreneur and of the workers who can no longer sell their products at their fair values. It destroys what liberalism seeks to promote: trade without barriers. It becomes a barrier itself.

The proponents of liberalism generally forget that freedom is a “non-normative” value (One can do good or evil in its name). It is therefore essential for it to be accompanied by normative values. The liberal economy is not a science of economic life that can be described with a detached perspective (what is)(10). It should be a normative science to serve the living rather than capital, to serve others rather than oneself. It should raise the question of "what ought to be done"(11)  and how to do it.

Freedom of trade is not an untouchable dogma; sooner or later this freedom will have to be better structured, in the interests of fairness. After years of globalisation and liberalisation, will the excesses of commercial and financial imbalances promote the return of the State in organising the world? Will it promote an ethically responsible organisation?

The International Monetary Fund was supposed to preserve the stability of the international monetary system. How could it, having not ceased to promote extreme theories and solutions? Let us hope that one day the Fund will make an example of itself in developing a reliable code of ethics to guide its own actions.(12)

This slow swing of the pendulum, between the freedom of the individual – which was deemed the guarantor of efficiency and progress - and the fairness and solidarity of individuals, the guarantors of social cohesion, has transformed into more frequent and more violent destabilising oscillations. Over the last thirty years, the Western world, under the influence of neo-liberalism, has given the impression of being completely obsessed with a need for limitless individual freedom, at the expense of the most basic ethical values. The damages caused by an unbridled market economy are the results of its mercantile worldview, one which ignores that the common good is built on inalienable fundamental principles. Can it be blamed when, to this day, there still exists no objective universal ethical system to guide its actions?



1) F. Balle Encyclopaedia Universalis (back)
2) Winner of the prize in ecomomic sciences in memory of Alfred Nobel. Commonly referred to as the "Nobel prize in Economics" (back)
3) "The methodology of positive economics" (back)
4)Milton Friedman suggested that companies did not have any higher social responsibility than to maximise their profits. (back)
5) The Brownian motion, the Gaussian function, (bell curve) etc. (back)
6) "Too much taxes kill taxes" declared President Reagan (back)
7) See the chaos theory (back)
8) Former President of the Federal Reserve Bank (Fed)  (back)
9) Reference to the book "Les indignés" / "Time for outrage" of Stéphane Hessel
and the protest and "occupy" movements throughout Europe and USA. (back)
10) Positive economics (back)
11) Normative economics (back)
12) The IMF has a code of ethics for its staff but none to guide its actions. (back)
13) This point of view fosters individualism and may cause problems when practised on a large scale (back)