Markets, Solidarity and Interdependence

In his paper released today on Social Security, "Noble Lies, Liberal Purposes, and Personal Retirement Accounts," Will Wilkinson offers the following response to the critics of capitalism who claim that free markets lead to alienation and social disintegration:

The [anti-capitalist] worry about solidarity might be illustrated with a game kids play at camp to help break the ice and build trust in the group. In that game, everyone sits on the lap of the person behind her, and the line wraps around until the group forms a single interdependent circle. Everyone is supported by everyone else; they are “all in this together.” The move to personal accounts is like everyone simultaneously standing straight up, each person removing his weight from the lap behind, and removing his support from the person in front. Everyone stands alone, separate. Under a system of personal retirement accounts, then, society becomes a collection of free-standing, self-supported individuals rather than integrated network of mutual support.

However, this picture of social cohesion, like the game, is for children. Advanced market economies function through immensely complex networks of interdependence and cooperation. To provide citizens with a direct stake in the market is to integrate them more fully into a web of mutual support that is vastly more intricate and organic than the pattern of government transfers. As market-based interdependence develops, workers become ever more specialized, and therefore ever more dependent on the network of cooperative exchange. People in advanced market societies, who grow none of their own food, make none of their own clothes, and would not know how to build shelter if their lives depended on it, are truly “in this together.”

Modern highly developed market societies are the paradigm of interdependent, mutually advantageous cooperation, and are as far as can be imagined from a society of atomistic predators. Market societies are wealthy because they rely on and reinforce a high level of social trust and norms of cooperation. Empirical studies find that the level of trust in a society is strongly positively correlated with its level of economic development. Wealthier societies are more trusting and cooperative. And societies with strong market institutions are wealthier. World Bank economists Stephen Knack and Philip Keefer find that “trust and norms of civic cooperation are stronger in countries with formal institutions that effectively protect property and contract rights.” In a large cross-cultural experimental study, a team of anthropologists and economists recently found that “the higher the degree of market integration and the higher the payoffs to cooperation, the greater the level of prosociality found in experimental games.” Markets promote the habits of the heart that create social solidarity and cohesion.

More important, however, is the fact that it is through the system of cooperative market exchange that our interests are most deeply and genuinely intertwined. The web of positive-sum market exchange gives us reason to consider perfect strangers as “virtual friends” whose well-being and productivity positively affects our own, thereby encouraging a social ethos of benevolence and cooperation.

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