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Monday, Feb. 7, 2000

Choose: equality or freedom


The third ministerial meeting of the World Trade Organization, held in Seattle Nov. 30 through Dec. 3, ended in unexpected failure. The push for new global trade talks collapsed due to opposition by developing countries, which account for more than 100 of the WTO's 134 member nations. The developing countries were supported by citizens' groups, nongovernmental organizations, labor unions, farmers' organizations and consumer groups, which all joined in large-scale protest activities.

The WTO was established Jan. 1, 1995, to promote development of the world economy through free trade. Aside from whether the WTO is moving toward this goal, the organization, as is, is causing discontent in the developing world and anxiety among environmentally minded NGOs.

Citizens' groups denounced the WTO for allegedly ignoring environmental protection, human rights and democracy. Conflicts between the market economy and a civil society were thus exposed for the first time.

The market mechanism, which facilitates the optimal allocation of resources, in no way helps narrow the income gap, protect the environment and remove social inequities. These problems were called "market failures" in the early 1970s, when governments faced social pressure to solve related problems.

There is little doubt that market failures, if left unattended, would widen the income gap between individuals and between nations. In a pure market economy, economic and social gaps would widen to an unlimited extent.

In the early 1970s, the majority of experts thought market failures were evil. Today, however, the majority of economists believe in market forces, and ignore or belittle market failures.

In a democratic society, the rulers and the ruled must represent the same people, and equality among members must be a goal. But the question is what is equality? Market-economy advocates say it boils down to equal opportunity. They also advocate establishment of safety nets for losers in competition.

Supporters of the market economy take the economic gaps resulting from market competition for granted, since they reflect individual abilities and initiatives. The viability of this proposition depends on answers to the following questions:

* Is opportunity really equal?

* Does everybody have an equal possibility to make a free choice from given opportunities?

* Does the principle of "survival of the fittest" apply to market competition?

Equal opportunity is closely related to meritocracy. Meritocracy under the system of equal opportunity may seem fit for a free society. Once people grab power in a merit-based society, however, they usually prefer to hand it to their children. Many lawmakers and company presidents in Japan prefer to have their children as their successors. As a result, equal opportunity is lost and conflicts develop even in a meritocracy.

Even though Japanese society is said to be largely egalitarian, not everybody enjoys equal opportunity. Many young aspiring politicians face difficulties making their dreams come true because many lawmakers hand their constituencies to their children. Even if equal opportunity is achieved, individuals must take advantage of their opportunities. This ability is both inherited and acquired.

If the serious erosion of quality in Japanese public education is left unattended, the education one receives will become dependent on the income level or the residence of one's parents. This could lead to serious inequality in individual opportunities.

Competition in various fields these days often ends up in victory by one competitor at the expense of all others. The outcome of market competition is often determined by luck or accident. Once a company wins a decisive victory in market competition, its main product becomes a de facto industry standard, as did Microsoft's Windows operating system. It is extremely difficult for a rival company to compete in a market dominated by the winner.

The market economy could erode freedom, equality and participation, the basic tenets of a civil society. Socialism collapsed after it trampled on democratic principles. The question is which should be given precedence, the market economy or democratic principles? It looks like we are at a crossroads and forced to choose between the two.

Takamitsu Sawa, professor of economics at Kyoto University, is also the director of the university's Economics Research Institute.


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