Article originally published July 1993, Volume 24 Issue 3; original IDS editing is retained here.
Abstract
This Bulletin stems from a dissatisfaction with the way in which the idea of 'the market' or 'the free market' is currently used in
conventional discourse on development issues. One notion is particularly
dominant, implicitly or explicitly: 'the market' seen as a flexible, atomistic
realm of impersonal exchange and dispersed competition, characterized
by voluntary transactions on an equal basis between autonomous, usually
private, entities with material motivations. This etiolated model of the
market derives from the universe of neo-classical economists and, in the
world of development policy, serves to provide intellectual support for their
prescriptions. This 'ideal-type' market has been elevated to the level of an
ideological principle and ethical ideal, providing a policy panacea which
promises both efficiency, prosperity and freedom. The main theme of this
Bulletin reflects my own concern as a political scientist that, by and large,
conventional economic theory, in most of its manifold incarnations, has
either ignored or downplayed the role of power in economic processes
generally and in markets in particular.
1 Introduction
The basic rationale for attempting a political analysis of markets has
been briefly laid out in the Editorial Introduction to this Bulletin.
During the 1980s, 'the market', or the 'free market' became the
key catchword of international development discourse and took
on virtually magical qualities as a developmental panacea. In the
world of ideas, it was an intellectual juggernaut given political force
(and therefore intellectual credibility) not only by the dominance of
neo-liberalism in the key metropolitan countries (notably 'Reaganomics'
and 'Thatcherism'), but also by the notion of 'market socialism' in
the former (and, in the case of China, still) state socialist countries.
As a powerful ideological slogan, it had to rely only partly on its
intellectual and practical plausibility. I have been constantly appalled
by the simplistic way in which 'the market' is introduced into policy
debates, not the least in the Chinese context with which I am the most familiar, where 'the market' has taken on the aura of an unproblematic
economic and political saviour.
Fortunately, some of the ideological dust seems to be settling in the
early 1990s and the time is ripe for a basic reconsideration of both
the concept and the reality of markets. Much of the intellectual and
practical case for the beneficial economic consequences of markets is
now widely accepted across the political spectrum. Now we need to
take our understanding of markets one step further. At the conceptual
level, it is important to move analysis away from an overly abstract,
simplified and ideologically loaded conception of markets which, when
fed into policy, can have damaging results. To do this, it is necessary to
go beyond the rarefied categories of conventional economic analysis:
through innovation within economics itself and the introduction of
ideas from other disciplines, ideally fused or overlapping in a crossdisciplinary
fashion. At the empirical level, an effort to 'deconstruct'
the market is all the more pressing in a new global politico-economic
context in which the old polarity between 'centrally planned' and
'market economies' has been replaced by a situation in which, while
only 'market economies' are on offer, it is becoming increasingly clear
that there is a wide range of variation between market economies.
Today, we talk about the differences between Japanese and Western
capitalist market economies; in future we will have to talk with much
more precision about a far wider variety of market economies which
differ in fundamental ways (Korean capitalism, Chinese capitalism,
Brazilian capitalism). If the neo-classically derived paradigm of 'the
market' was inadequate in the past in elucidating the dynamics of real
markets, so much more in the future as the range of systemic diversity
increases. The kind of analysis presented in this Bulletin represents
merely one component of a much wider intellectual and practical
dissatisfaction with the conventional paradigm of the market and its
practical effects in the industrialized, industrializing and Third Worlds.
2 A political analysis of markets
The main points of my argument have already been stated in the
Introduction to this Bulletin. The abstract conception of the market
deriving from neoclassical economics overrides variations in real
markets which are very important for considering and tackling
practical problems of development. (For this issue, see Mackintosh
1990.) It also abstracts from social, political and institutional aspects of real markets which cannot be dismissed as 'exogenous' factors but are
inherent, and indeed may be essential, characteristics of the functioning
of markets in the real world. In particular, conventional economic
analysis of markets by and large ignores or marginalizes the presence
of power which is a glaringly visible characteristic of real markets and
a political analysis of markets is needed to reveal the manifold ways in
which power and power relations influence the structure and operation
of real markets. Using a power-based notion of the 'political', one can
classify the politics of markets into at least four major forms: the politics
of state involvement; the politics of market organization; the politics of market structure; and the politics of social embeddedness. My purpose
here is to discuss these ideas and arguments in more detail.
First, we need to be more clear about the notion of power. The concept
is much discussed and contested. (For valuable treatments of the
concept, see Bardhan 1991 and Lukes 1986.) Much of the discussion
tends to revolve around what could be called a behavioural and a
structural view of power. The first concentrates on power mainly in
dyadic relationships between two agents; superior power is reflected
in the ability of agent A to influence the calculations and behaviour
of agent B to the effect that agent B chooses to do something which
he/she otherwise would not have done (with the implication that B
is somehow worse off as a consequence). If one views a market as
made up of a myriad of individual exchanges, this micro-level notion
of power is essential for understanding the specific dynamics of each
exchange event. However, the behavioural notion of power has severe
limitations. It tends to take the initial endowments of power resources
of each agent as given and is not concerned to inquire whence they
came, preferring to focus on the mechanics whereby power is exercised.
However, each real market is a patterned set of social relations with its
own specific constellation of power; if the power relation involved in a
micro-level market exchange is to be understood, therefore, it must be
situated in the context of a structural analysis of this wider system. The
power-patterning of markets affects an agent's choice by determining
the boundaries of available choices, influencing the operational calculus
of the chooser and shaping the relative attractiveness of various choices.
A combination of behavioural and structural analysis also allows us
to capture the dynamics of the operation of power within markets as
a systemic process in which agents make their own market history, as
it were, though not within circumstances of their own choosing. Just
as spectacles are usually preferable to monocles for good vision, the
behavioural and the structural conceptions of power are both essential
to understanding power in markets.
If we incorporate this idea of power within our understanding of
markets, their characteristic economic features embody political
processes of conflict and cooperation and political relations of
domination and subordination. From this viewpoint, therefore, market
man or woman is less interested in bartering and trucking' or making
rational choices in response to given signals and more interested in
seeking to protect, consolidate or extend their power within the market.
For example, Victor Keegan (The Guardian, 9 June, 1991), commenting
on an OECD report warning about the escalating dangers of oligopoly
in the industrialized world, notes wryly that 'The natural state of
the sentient capitalist is one of unqualified monopoly, with qualified
monopoly as decidedly second-best, but often the condition to which
competition and regulation reduce him'.
This notion of the market as an arena of power struggle between competing interests is conveyed well by Alan Cawson who notes (1988) that: 'The real world of trade politics is a far cry from the notion of competition as an impersonal mechanism for allocating resources, and much closer to the idea of economics as war pursued by peaceful means'. Here Cawson is drawing explicitly on an intellectual tradition deriving from Max Weber who made a similar analysis of prices and money:
Money prices are the product of conflicts of interest and of compromises; they thus result from power constellations. Money is not a mere 'voucher for unspecified utilities', which could be altered at will without any fundamental effect on the character of the price system as a struggle of man against man. 'Money' is, rather, primarily a weapon in this struggle; [money prices] are instruments of calculation only as estimated quantifications of relative chances in this struggle of interests:
(Weber (1922) 1978: 108, cited in Granovetter 1992:8–9)
Weber is referring here to the specific instrumentalities of economic power. However, power is a protean phenomenon and power resources in markets are many and various. We would therefore wish to extend our analysis to involve four dimensions of market power – the state, association, economic assets and socio-cultural status (labelled p1 to p4 for ease of reference). Each of these constitutes the basis for a specific form of market politics. The substance of market politics is characteristically about a number of issues: about the position of an agent or agents in relation to others within a market and their differential ability to extract resources through exchanges with other market participants; about the rules of the game and the nature of market institutions; and about the boundaries of the market (for example, with the public sector or the household). Participants in the politics of a specific market may involve both actors in that market, actors in other markets with intersecting exchanges and interests, and in other social spheres, such as the family or the state.
With these analytical clarifications in mind, we can now investigate each
of the four categories of market politics in more detail.
π1 The Politics of State Involvement
This is the most familiar arena of market politics since it is commonly
discussed under the rubric of the state-market paradigm. Our analysis
differs from the latter in two respects. First, the conventional statemarket
paradigm predisposes us to think in dichotomous terms of two
distinct spheres: on the one side, there is the realm of politics which
has to do with the state and other institutions making up the system of
formal public politics; on the other side, there is the realm of economics
in which economic agents of diverse kinds produce, exchange and
distribute through the modality of markets. In the real world, of course,
the realms of state and market, public political and economic systems,
are densely and inextricably intertwined. Second, rather than separate
the realms of politics and economics as the state-market paradigm
does, we regard both the state/public political system and the economy as matrices of politics – from this perspective, 'economic' events and
processes are not 'outside politics' or 'non-political' but themselves
embody diverse forms of politics.
State involvement in markets takes two common forms. The first
is when the state, usually through one of its specific institutional
components, is a direct participant in a market through direct control
over production, accumulation or exchange (for example, industrial
parastatals or state farms, state banks, agricultural marketing boards).
State enterprises may play a monopolistic role in the provision of
key industrial inputs to downstream private firms, notably energy
and basic raw materials such as steel and coal. The state may play a
crucial monopsonistic or hegemonic purchasing role in a variety of
markets: for example, as contractor for the services of private defence
and telecommunications industries in Western European nations
(Cawson et al. 1990) or in the purchase of agricultural produce in many
developing countries. In the latter case, the work of Jonathan Barker
(1989) and Robert Bates (1981) has been particularly valuable in tracing
the political dynamics of interactions between state agencies and
peasant producers in the context of African agricultural markets. Bates,
for example, analysed African agricultural markets as political arenas
characterized by specific constellations of conflicting political actors and
interests and showed how these political dynamics led to consequences
which were economically deleterious but, from the point of view of
state actors at least, political rational.
The second dimension of state involvement in markets is that of regulation, a phenomenon which has several layers of market penetration. The first layer is the relatively superficial one of parametric policy intervention by the government of the day to facilitate market operations, correct market distortions, achieve social or developmental goals and the like. At a deeper level, the state's involvement is pervasive; it is the source of a complex network of institutionalized arrangements which permeate markets and influence the way they operate: for example, the legal definition of property rights, licensing laws, standardization of weights and measures, creation and validation of money and the regulation of contracts. At an even deeper level, state power saturates market exchange in invisible ways, an immanent quality which is redolent of Michel Foucault's 'capillary' notion of power which acts to 'permeate, characterise and constitute the social body' (Foucault 1976, in Lukes 1986, 228). For example, in the context of a highly developed consumer market characterized by a dense network of state regulation built up coral-like over a long period, a simple transaction such as buying a bar of chocolate is saturated by state power, which may regulate hours of sale, precise measurement or description of contents, the positioning of chocolate on the counter and its proximity to other goods, the environmental soundness of its wrapping, the price paid and the nature and value of the money used to pay for it, and so on (and this is disregarding other provisions regarding its production and distribution).
The nature and degree of this institutionalized saturation by state power
is intellectually important for classifying different types of markets
and measuring their degree of 'maturity' and practically important
in conditioning their operational effectiveness. This 'institutional
patterning' of markets by state power needs more investigation since
one of the features of the development of markets seems to be that this
role is increasingly transferred from more traditional social institutions
such as kinship, religion or locality (which we discuss under the heading
of π4) to the modern state, a process of historical 're-embedding'.
π2 The Politics of Market Organization
This is a form of power and politics internal to the market, whereby
participants in the market act to alter the operation of the market to
favour their own interests and enhance their capacity to pursue them.
They may do this among themselves or in cooperation/conflict with
actors outside their specific market (in the state or in other markets). To
the extent that their action results in the creation of established rules
of the game or institutionalized practices within the market, this form
of politics can result in what might be called 'endogenous regulation'.
At its roots, this represents an attempt to achieve 'organizational
transcendence' of the market through various forms of collective action.
From a Weberian perspective, this can be seen in terms of two
concomitant and competing processes: social closure or usurpation.
Successful social closure undertaken through the collective action of
market participants results in the establishment of conditions which
protect or extend the market position of those actors, often at the
expense of other groups within the market. Usurpation represents a
counter-attack by threatened or subordinated actors, such as workers
or consumers, to improve their power within the market (these
notions are discussed in depth by Parkin 1979). As Cawson (1988)
remarks, these 'social bonds which develop out of self-interest between "competitors"… are not an aberration from the free market but define
the essence of the exercise of power in the market'.
The exercise of associational power takes a number of commonly
observable forms, of which three are particularly important: formal
association, network and hierarchy.
Formal association provides much of the substance of the politics
of 'civil society' and takes a wide variety of forms, e.g. business
associations, commodity cartels, trade unions, consumer groups and
professional associations. For example, highly skilled professionals
provide classic examples of occupational groups which feel themselves
threatened by a potentially fully-functioning competitive market and
organize to evade or transcend it. Their strategy is based on what
is called 'credentialism' (which is a major symptom of the 'diploma
disease') which gives rise to institutionalized mechanisms operating
to define and protect their own privileged position in the market and
to limit the claims of other (actual or potential) market participants.Obvious cases which spring to mind are the medical and the legal
professions.
This phenomenon raises interesting questions about the role played
by the formal associations of 'civil society' within the market. Current
political discourse tends to regard civil society as a 'good thing',
particularly as a bulwark for freedom and autonomy in the face of
potential state Leviathans. But what about its role in relation to the
market? Opinion is much more divided on this issue. Some argue
that the exercise of associational power has a negative economic
or developmental effect since it creates unearned rents and thereby
distorts the 'proper' operation of markets; others argue that such
organizations may have many positive effects, for example in amassing
and distributing information, setting and monitoring standards, and
providing mechanisms for arbitration or sanctions. This needs more
thought and investigation.
Networks take a variety of forms, the basic idea being that of informal
coordination and cooperation between market participants, individuals
or firms, who are ostensibly competitors in the market. Powell (1990),
who has documented the importance of networks in the craft,
construction, publishing, film and recording industries in the United
States, calls this 'patterned exchange' which 'looks more like a marriage
than a one-night stand but there is no marriage licence, no common
household, no pooling of assets'. The network is a distinctive, semiinstitutionalized
form of interaction which counteracts the workings of a
competitive market. (For a useful discussion of the idea, see Granovetter
1992: 9–13.) Examples would include collaborative ventures between
firms, or agreements about market share or price based on reciprocity,
trust and mutual dependence. Industrial economists have identified
networks as a crucial ingredient in the success of local industrial
regions in Western Europe, notably the cases of Baden-Württemberg
in Germany and Emilia Romagna in Italy. (For example, see Schmitz
1992, and Best 1990). Students of East Asian business systems have
also documented the crucial importance of networks in coordinating
activity between firms in Japan (in fact, Kumon 1992 has called Japan a
'network society') and between business and government in China (Wank 1992). In current discourse on industrial development, the economic
role of networks is regarded as positive, not the least because they have
been identified as one component of a number of highly successful
economic experiences in Western Europe and East Asia. As in the case
of formal associations, however, networks could well function as ways
of amassing unproductive rent as 'conspiracies against the public', so
the phenomenon needs more investigation before any form of policy
prescription can be advanced with confidence.
Hierarchy: I am using Oliver Williamson's word here (1975) to
describe the most fundamental form of social closure within the market,
the firm. In Williamson's view, the firm, and the hierarchy which it
embodies, should be seen as an attempt to internalise transactions and resource flows that might otherwise be conducted in a more costly
fashion in the market; it is the substitution of the visible hand of the
manager for the invisible hand of the market. In other words, firms
are 'islands of planned coordination in the sea of market relations'
(Richardson 1972). While Williamson does not incorporate power into
his analysis, the firm is in fact acting as a 'governance structure' (Coase
1937) and as such is a node of power and a rich field of micropolitics
– of authority, control, cooperation and domination. From a power
perspective, the firm can be seen as a kind of 'combat unit' designed
for battle in the market; hierarchical controls operate internally to
maintain the discipline necessary to carry on the market struggle,
competitive or otherwise, in ways which are economically advantageous
to the firm's owners, private or otherwise (in the Marxist tradition
this involves the extraction of surplus value). The firm expands and
contracts, and changes its 'foreign policy' and internal organization in
response to changing conditions in the market. As recent discussion of
the rise of 'post-Fordism' in the industrialized countries has suggested,
the relationship between the micro-politics of markets at the firm level
and the politics and economics of markets at meso/macro levels is
interactive and highly dynamic.
π3 The Politics of Market Structure
This is a conception of markets as a structure of power relations between
agents with differential control over market-relevant material and
mental assets. At the micro level, participants come to specific markets
with unequal endowments in terms of resources (cf. Sen's notions of
capabilities and entitlements; 1984, chaps. 13 and 20). At the macro
level, this results in widely different market structures characterized by
more or less equal or unequal power; each specific structure of power
conditions the way markets operate at the macro-level, shapes the
character of exchange relations between individual market participants
and influences their relative returns from exchange. As Bardhan points
out in a recent paper on power in economics (1991:267), 'power may
be centrally involved in causing the existing pattern (and in defining
the existing parameters) of trade in the first place'. This idea is also
present in Bhaduri's idea of 'forced commerce' wherein 'the "market
mechanism" is… better understood not in terms of its allocative
efficiency, but as the mechanism for extraction of surplus by one class
from another… the function of exchange is not to "clear" the market
in some cases, but simply to gain advantage to one party at the cost of
another'; he talks about the 'class efficiency' of markets.
Whereas in π1 and π2, we were looking at the transcendence of market exchanges by means of conscious, organized political action, in π3 the politics is a process which is one aspect of the relationship between market participants in the act of exchange, operating whatever the degree of competitiveness within that market. Markets can thus be analysed as political games in which outcomes are structured in terms of choices taken in the context of variable but structured asymmetries in the capacities of participants, which vary across specific markets and which may in certain contexts result in systematic exploitation through unequal exchange. Dyadic market exchanges may thus be expressions of relations between dominant and subordinate classes.
Conventional economic analysis, through its work on monopoly,
oligopoly and 'market power', and more recently game theoretical work
on bargaining within markets, has made some limited contribution
to understanding this process. (For assessments, see Bardhan 1991
and the article by Baland and Platteau in this Bulletin.) In the context
of agricultural markets, the work by Indian economists on 'fused' or
'interlocking' markets involving 'triadic power relations' (for example,
Bhaduri 1986 and Bharadwaj 1974, discussed by Janakarajan and
Olsen in this Bulletin) has analysed the ways in which the interlocking
of markets for credit, product, leasing, labour, processing and
transportation in rural contexts serves to give certain strategically
situated groups an ability to dominate transactions with other market
actors and benefit from unequal exchange. As a means to track these
locations of strategic control, the method of tracing filières is useful in
that it identifies the chain of exchange from production through various
links in marketing, processing and circulation. A filière map helps one
to pinpoint precise locations of profit and accumulation (for example,
Barker (1989) has argued that trade is a more favourable location than
production for accumulation in agricultural markets in Africa) and
thereby identify precise points at which privileged positions can form
and, more generally, relations between super- and subordinate classes or
strata can coalesce.
The above models of 'fused' and 'interlocking' markets are limited in
their application because they have emerged from and been applied
to relatively undeveloped agrarian markets still in transition from
pre-capitalist systems of economic exchange. However, recent work in
the Marxian tradition on more advanced markets in the industrialized
countries has attempted to demonstrate how asymmetrical power
relations exert influence, and domination and exploitation take place,
in markets which are operating in ways more closely approximating the
standard model of a competitive market. For example John Roemer
(1982, 1988) has argued that 'capitalist exploitation' takes place within
a context of 'free', 'voluntary' competitive exchange by virtue of
unequal ownership of property. In their theory of 'contested exchange',
Samuel Bowles and Herb Gintis (1990) have attempted to establish 'new
micro-foundations for political economy, one that illuminates rather
than obscures the exercise of power'. There is also work on international
exchange by David Evans where he argues (1990: 1295) that 'systematic
consideration of class, inequality and power can be brought to bear on
trade and development issues without loss of analytical rigour'.
From the point of view of a strict economist, this last methodological
point is important since one of the usual arguments against the
incorporation of power into economic analysis is that it cannot be
done rigorously. However, conventional analyses of monopoly and game-theoretical approaches have far more potential for incorporating
a rigorous analysis of power than they have so far demonstrated. The
triadic power relations characteristic of interlocked markets have been
modelled formally by Subramanian (as an appendix to Janakarajan
1992) and it has been suggested that the methodology of neo-classical
economics can provide a precise and empirically testable measure
of power by extending the theory of monopoly (Ritson 1977). One
is tempted to conclude that it is really a question of whether or not
economists are willing to put their minds to it. A 'power theoretic' and a
'choice theoretic' approach seem logically inextricable and empirically
necessary. Take the prisoners' dilemma, for instance, – the dilemma
lies not merely in the fact that their choices have sub-optimal outcomes,
but also in the fact that they are prisoners in the first place.
π4 The Politics of Social 'Embeddedness'
This idea is drawn from (but goes beyond) Karl Polanyi's notion (1957)
of markets as 'embedded' in wider social values and institutions. It
implies that other principles of social organization permeate markets and
shape their structure and dynamics. It also implies that the motives of market actors cannot be reduced to mere considerations of maximising
self-interest and making profit. The latter sentiment is echoed in deGregori's exasperated remark (1979: 55) that 'the economic man in the
marketplace of conventional economics is an individual without culture
and therefore without existence'. Much recent analysis, for example,
has emphasized the crucial importance of trust and moral conceptions
such as fairness or duty in regulating exchange between actors in a wide
variety of markets in more 'traditional' and more 'modern' contexts.
(For a discussion of these issues, see Granovetter 1992: 58–63.)
The notion of embeddedness opens up a vast area of interaction between markets and social processes, uniting the terrain of economics with the traditional concerns of anthropologists, sociologists and psychologists: kinship systems, cultural values, religious beliefs and institutions, social differentiation based on gender, ethnicity and race, and so on. My own concern here is far narrower: with the effect on the operation of markets of the power relations which may themselves be embedded in these social beliefs and institutions. One example is the impact of gender on the role of women within markets – both materially through the influence of the gender division of labour in the economy at large and attitudinally through the influence of gender ideologies inherent in established cultural or religious beliefs. (For an analysis, see the article by Alison Evans in this Bulletin.) These social factors often operate to subordinate women by restricting their access to markets, limiting the resources they can use in market exchange, defining rules of the market game which are prejudicial to their interests and distributing them invidiously between markets. From this point of view, markets are one social arena in which the pervasive power game between male and female interests is played out. Similar analyses could deal, for instance, with the role of race in the operation of markets in South Africa, or the role of religion in the operation of markets in Iran.
3 Concluding Remarks
At the analytical level, we hope to have convinced the reader that real
markets are social amalgams interacting with and pervaded by the state
and society at large, and political entities permeated by power relations
of diverse kinds. Though we have described the political nature of
markets in terms of four separate categories, there are, of course,
complex 'boundary exchanges' between them. For example, while we
have emphasized the impact of state politics (π1) on markets, we have
not discussed the ways in which the associational politics of π2 affect
state politics (for example, through the influence of powerful economic
lobbies on officials or the 'pull' exerted by personal networks linking
business people and politicians). There is also a systematic relationship
between the power relations of π3 and the associational possibilities of π2: a small group of large landlords, for example, may well find it easier
and more productive to organize in their own interests than a much
larger number of small tenants. The power definitions and distribution
inherent in a religiously-based caste system (in category π4) may well
structure the allocation of market power in π3. We can thus conceive of
class formation in political terms as the result of a process of mutually
enforcing interaction between power differentials in these four spheres. By contrast, power relations in each sphere may be in conflict, as when
powerful trade-unions arise to challenge the power vested in unequal
ownership of the means of production, or when workers influence state
power, through votes or revolution, to secure regulation of markets in
their interests or to bring about a redistribution of marketable assets
(as through land reform). Using these categories, we can also approach
the explanation of market institutions in political terms, as a necessary
complement to theories which stress transaction costs or information.
Market institutions can be seen as a consequence and expression of
power relations and political struggle in and between these four areas of
market politics.
But does the political analysis of markets have any practical value for
the world of development in which analysis exists for the purposes of
action? In relation to successful policy intervention, it should caution
against operating with too starveling or utopian a conception of 'the
market' or the 'free market' and sensitize policy-makers to the structural
and institutional diversity of real markets and the complex political
processes which shape and underpin them. Any one-sided and/or
economistic definition of market 'distortion', for example, runs the
risk of coming up with simplistic policy conclusions which mis-specify
the problem and underestimate the possibilities of change. It not only
faces the familiar problem that, even where markets may be working
'well', they may have unacceptable welfare consequences, for example
by increasing the vulnerability of the poor to market fluctuations.
It also faces awkward questions about the existence of apparently
highly successful markets which are systematically 'distorted' in ways
analysed above. There is here an important range of questions about
how variations in the power structuring of specific markets affects
developmental outcomes. This goes beyond the usual questions about the nature and extent of state regulation to include the 'endogenous'
regulation of markets: for example, the pervasiveness of networks
in Japanese or Italian industrial markets; the function of industry/
trade associations in improving their members' ability to compete
in international markets; or the role of professional organizations
in regulating skilled-labour markets. The problems for investigation
here are why some of these forms of markets organization are
developmentally beneficial and some not, and how the former can be
encouraged and the latter discouraged through policy.
Moreover, the manipulation (and in the Eastern European case, the creation ex nihilo) of markets through policy intervention would seem to require far more than the application of an analytical blancmange mould derived from conventional economics: a knowledge of context and variation, and of the complex social, political and institutional dimensions of real markets. As I remarked at the outset, variations in markets partly reflect a wider differentiation between market systems, between forms of capitalism, which offers a range of alternative institutional incarnations of markets. (For an example of this range of options in the context of current Chinese financial reforms, see Bowles and White 1993.) This variation does not bedevil analysis because these variations and processes can be classified and analysed systematically, ideally through inter-disciplinary endeavour.
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