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Limitations of the market system

Our current economic system is based on a system of explicit trade.

The use of trade - and its logical extension money - appears on the face of it to be a useful concept: Two parties engage in a trade, both get something they want, and both are better off than before. This has been the dominant mode of social organisation for at least the last 10,000 years. The effect of the transfer of wealth over time has been described here using a computer model.

Though useful, it has many drawbacks, and in today's society where we value compassion and equality, it no longer serves our best interest. It has also created extensive collateral damage on our natural world. The main drawbacks are:


Just under half the human population (3bn) in the world today live on less than $2.50 a day - many much less than that. Clearly they have insufficient skills or resources to trade with to break from poverty, and/or their geographical location doesn't offer them a fair market value.

If almost 50% of the planet's human population have insufficient means to trade for a good quality of life, then we must infer that that system is inefficient and incapable of meeting the needs of society at large.


Even in the parts of the world where trade appears to create prosperity, it is backed almost entirely by debt. Since we know most money is created by commercial banks (not government), it follows that most money is actually a product of interesting-bearing debt, without which current economies would cease to function. (And notwithstanding the fact that interest on those 'new money' debts still needs to be produced somehow)

If we consider trade as being the best way to operate our society, then the question needs to be asked: why would we have debt? If a trading society and its members thrive on the continual movement of goods and services only, then it follows that debt should be unnecessary. Debt can logically be interpreted as an 'error' of a trading society.

Environmental damage

Since profit and the creation of wealth is the primary driver of economies and behaviour, it follows that other 'externalities' like the environment take a secondary place when there is no economic incentive to protect it.

This inevitably leads to widespread destruction of natural habitat, reckless methods of resource extraction, pollution and biodiversity loss. Where our economic drivers continually demand wealth creation, less care is given to things that do not create wealth. This must be considered as the main reason for our crisis in biodiversity and habitat loss.

Mental health and wellbeing

Currently around 300 million people in the world suffer with depression. Anxiety in America alone affects 40 million people. Now that we know there is a direct correlation between poverty and depression anxiety disorders, it follows that the majority of sufferers have the shortcomings of the trading system high among their possible triggers.

Also, though not backed with hard data, it's not unreasonable to assume that the constant pursuit of financial security is a major contributor to stress in the lives of many low to middle-income earning families.

Wealth vs. Quality of Life

When looked at in its raw context, there is a clear disparity between the transfer of wealth and the transfer of quality of life. Using a computer simulation, it can be shown that, when tracked separately, the transfer of wealth and the transfer of energy (or life quality) give very different results.

Find out more about Free Trade - A Wealth vs. Energy Model.

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limitations_of_the_market_system.txt · Last modified: 2021/08/04 06:11 by