St Paul's Institute

Who Sets a 'Fair' Price?

by The Rt Revd Dr Peter Selby

Posted: 23 Oct 2013

"There were some really good ideas. They didn't work, of course, but they were really good ideas." I was in conversation with the Bishop of the Evangelical Church in Saxony, a part of Germany that had before the end of the Iron Curtain been ruled by a Communist government. I had asked him if there were things that he missed from those days, now that he was part of a united Germany. He was not romantic about life under the Communist regime, quite clear about the things that were hard; and he was a person of integrity who had, for instance, refused to take advantages of some of the perks he might have got in virtue of his position - such as an ability at least occasionally to travel to the west. But that didn't make him starry-eyed about how things were under the new dispensation.

What did he miss? Well, the jokes were one thing: the 'black humour' that enable people to preserve their inner freedom when some external freedoms were taken away. But more seriously he missed some 'good ideas' - even if he was clear they didn't work. I remember one example in particular: there was a policy - a 'good idea' - that food prices should be set (such was the nature of the command economy) sufficiently low so that buying food was not a problem. But as well as setting food prices low so that people could afford to feed themselves, there was another policy, another 'good idea', and that was that people should be encouraged to grow their own vegetables. So the price you got for your vegetables if you took them to the greengrocer was set so that it was financially to your advantage to grow more food than you needed. But there was the problem, the reason why these good ideas didn't 'work': if you made it financially advantageous to people to grow their own produce and set the prices people had to pay for their food deliberately low you created a situation where what people could do - and did - was to grow produce they needed for themselves but instead could take to the greengrocer and sell - only to go back later and buy the produce back cheaper, clearly an 'unintended consequence'.

And that's what we've all been conditioned to think; and stories like that just confirm our prejudices about command economies where thousands of civil servants sit at desks fixing the price of everything from tomatoes to televisions. But my East German friend wasn't speaking of these 'good ideas that didn't work' to mock them; nor was he asking to return to such a system. What he was noticing - and we would do well to notice - is that the society he had been part of - and in this case the market in which he had participated - had for all its shortcomings some 'good ideas', that is, ideas which expressed some kind of moral vision. That they hadn't 'worked' was a problem, but didn't make them without value.

We are used to hearing that our system 'works': but I doubt that we shall look back on a period when elderly people holding on to cups of tea to keep warm for fear of the increasing energy bills were told by ministers to wear another jumper as a time when there were 'good ideas', which just happened not to work. We have created for ourselves - conveniently for those who profit from the myth - a bipolar world in which there is either the command economy of totalitarian states or the 'free market' in which efficiency and liberty walk confidently hand in hand. In that world Ed Milliband's proposed energy price freeze is easily mocked as a nostalgic return to 'socialist statism', while the only system that 'works' is accepted as one in which the price of energy is fixed by the 'free' operation of the market. On that basis we know that the 'fair' price of anything is - well, just what the price happens to be. As my East German bishop friend was increasingly feeling, the choice seemed to be one between 'good ideas', which (he observed more in sorrow than in anger) didn't 'work', and ideas which are declared to work even when they don't, and which in any case are devoid of moral vision.

We all know, in any case, that the only sensible response to the question whether, compared with a command economy, you prefer a 'free market' would be the one Gandhi gave when he was asked what he thought of British civilisation: 'It would be a good idea'. What we are observing at the moment in the case of energy prices - but would apply much more widely - is anything but the operation of a 'free market': prices are fixed by small groups responsible to the owners of their companies, or else, in the case of nuclear power, by secret negotiation between ministers and companies engaged in a thinly disguised game of chicken.

And those price fixings and secret negotiations are not only not, in any recognisable sense of the word, 'free'; they are conducted totally without moral vision because there is nobody in the discussions charged with expressing such a vision with authority. What makes the increasing interest of the churches in a moral economics so important is that our future - not to exaggerate - lies in finding a way to bring some notion of 'fairness' into the market process and into the consciences of those with power in it. To do that requires that we stop frightening ourselves with the totalitarian experience of the last century and instead challenge ourselves with the increasing experience of poverty and inequality which blight our very well resourced society.

The shortcomings of the markets within which we live are not just things for good people to think about: they require resistance in the name of the common good, for the sake of our fellow citizens and future generations. And it's clear we don't have unlimited time. If those with power in the market persist in exercising their 'freedom' to pursue their own gain, and in resisting the claims of the common good, 2008 won't be the last or worst disaster to hit us.

About this author

The Rt Revd Dr Peter Selby is the former Bishop of Worcester. Following his role as part of the Interim Directing Team from 2012-2014, he continues as an adviser to St Paul's Institute.

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The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.