Markets are in turmoil and culprits and cures are being avidly sought. Crooks destroy markets and when the freedom of markets is destroyed, other freedoms inevitably follow. The enemies of market relations are crowing over the constrictions now being imposed, with a certain inevitability, on the free operations of the market, little realising that increasing state management of economic relations among individuals must mean greater state management of the rest of our lives.

When the complexities and convolutions of macro-economics are stripped away, the market is nothing more than the mechanism which allows the free and fair exchange of goods and services among individuals. Sellers naturally seek to maximise their returns and buyers naturally seek to minimise their expenditure to obtain the goods and services which they need. Fair price is the price which allows a product or service to clear the market, matching seller's supply to buyer's demand.

Distorted market relations

These simple, matter-of-fact market relations among individuals are distorted by deception on the part of market players and by interference by third parties. If transactions are not free and fair, the market and the players in it suffer. Since humans, as sinful beings, are naturally prone to deception in order to maximise their advantage, the regulation of the market for freedom and fairness is a proper function of a central authority. When the central authority itself becomes a major player in the market, with the natural tendency of the individual human to use deception and force to maximise its interest, and not a mere disinterested regulator, then the market suffers from distortion. Free exchange with the hope of self-betterment is the wellspring of human innovation.

For maximum efficiency, the market requires a reliable means of exchange and symbolic store of value. This is money. It is just too clumsy to lug actual goods around for barter exchange. Barter places severe limits on the growth and efficiency of the market. Money has been every conceivable thing - from salt and shark's teeth to bits of specially printed paper and electronic records lodged in the bowels of computers. One of the primary functions of the central authority is to provide a sound currency.

The present economic crisis had its genesis in a prior financial crisis. It is fashionable to blame the greed of business players in the market for the failures of the financial system, But President Barack Obama noted in his inaugural address that "our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age". The last phrase is a study in circumlocution.

The central authority is extremely adept at masking and deflecting its culpability in market distortions, financial crises and economic crises through the debasement of the currency, inflation from too much state-supplied paper money chasing too few goods, and excessive interference through bad policies and direct engagement in market activities.

The science of economics

Thieves, the grudgeful and badminded people who want something for nothing, and those who want to prosper at their neighbours' expense, left unchecked, cannot run a free market. And now I have to fall back on a trusty old source, Warren T. Brookes' essay, "Goodness and the GNP". Brookes was an American syndicated economic columnist. "At its roots," he noted, "economics is a metaphysical, rather than a mathematical science, in which intangible spiritual values and attitudes are at least as important as physical assets and morale more fundamental than the money supply."

Adam Smith, arguably the greatest writer on political economy, wrote not only The Wealth of Nations, which advocated free markets and free trade, but also The Theory of Moral Sentiments, which positioned ethics as a critical factor of sound political economy. There is now a growing body of literature on morals and markets, including the 1998 Friedrich Hayek Memorial Lecture, "Markets and Morals", by British Chief Rabbi Professor Jonathan Sacks.

But we return to Warren Brookes: "A national economy, like an individual business or a specific product," he writes, "is the sum of the spiritual and mental qualities of its people, and its output of value will be only as strong as the values of society ... . Without the civilising force of universal moral standards, particularly honesty, trust, self-respect, integrity, and loyalty, the marketplace quickly degenerates ... . A nation whose values are declining should not be surprised at a declining economy. As Ralph Waldo Emerson postulates, 'a dollar is not value, but representative of value, and, at last, of moral values.'"

Breakdown of the family

Reacting to the progressive breakdown of the family, Brookes sees the family not only as the basic social unit but as the most fundamental economic force in society, the key to work, consumption, savings and investments, but the most vulnerable to deteriorating moral and spiritual values.

There is a moral explanation to the crisis of the American supereconomy and with it the global economy. Side by side with his economic stimulus package, which will inevitably leave the state as an even bigger player - and distorter - in the market, President Obama is on the verge of a fundamental restructuring of the American family, and is under pressure to introduce more protectionist measures. The Associated Press news agency has posted a story which says, "President Obama faces a dilemma over protectionist provisions in a massive economic stimulus bill: backing the measure could set off a trade war; opposing them could trigger a backlash from his supporters."

Morals

Speaking against the backdrop of the biggest one-day fall in the value of shares in the United Kingdom Prime Minister Gordon Brown, last October, urged the market to abide by a system of morals, including responsible risk-taking and a work ethic resting on "shared values". How to achieve this in a society progressively sledge-hammering moral values, the leader was unable to say.

It really is naïvely foolish, as the mass of humankind now does, to believe that governments of men are wiser and better than individual men and are better able to look after their interests than people themselves. Growing control of economic relations by the central authority must be followed by growing interference with and control of all other relations among individuals: social, political, religious, and so on. We have, historically, observed the closest of relationships between political freedom and democracy and the operations of a market economy with both resting on moral foundations. And everywhere, those moral foundations are under severe stress with more government intervention widely regarded as the antidote.

Martin Henry is a communications consultant who may be reached at medhen@gmail.com or columns@gleanerjm.com.