Stubborn Me? Three Reasons Why “Markets” Aren’t Simply About Selling & Buying Goods & Services

This week’s blog is about current understanding of what markets are and aren’t in systemic approach, also known as Market Systems Development approach. While I’m no self-appointed guardian of systemic approach, I’m enough of an advocate for critical thinking in understanding and applying the approach. My aim here is to clarify the idea that “markets” aren’t about selling and buying of goods and services — in the economic sense.

While participating in conferences/meetings, reading reports or working with programmes that apply systemic approach, I’ve the feeling that the term market is solely or to a higher extent used to mean private sector engagement and development for producing and selling goods and services.

Markets are about relationships. They’re institutions, and as a set of rules or norms, they imply political, economic and social systems of governance of the relationships. This means that when we talk about markets in systemic approach, it isn’t just about the private sector, but also public agencies and civil society organisations. In short, development is a multi-stakeholder initiative.

It’s beyond selling goods & services

“We used systemic approach to support a confident and publicly positioned social sciences research community in Serbia and Albania that meaningfully contributes to socio-economic and political reform processes,” argued Martin Dietz, Programme Manager of PERFORM (Performing and Responsive Social Sciences).  

It isn’t completely wrong to treat markets as buying and selling of goods and services. The problem is when we see markets as simple economic transactions in a linear process. Using the experience from Myanmar, Mohd Fahad Ifaz wrote that “like a forest, [an] economy consists of an environment and interdependent elements…expectations and interpretations.” Put simply, markets are multi-player, multi-function systems. There’re many functions – be it training, financial services or advocacy. There're a number of players/actors including and beyond the private sector, like the the public sector, civil society or individuals (e.g. community elders, politicians, researchers).  

Also, what we often tend to forget in our understanding of markets is the non-material aspects, both in formal and informal relationships.

In the waste management system in urban areas of Bolivia, maintenance and operation of service were deficient, regularly generated environmental risks like water and soil contamination, raw or contaminated water for irrigation. Yet the problem also lies in behaviour changes from users. The engagement of schools as well as media outlets unties how complex the relationships are.   

One more example: let us take gender. Relationships between women and men can be taken as a system – a market system – in which women’s and men’s roles are defined to dictate responsibilities in households and public life in their communities. Social norms shape and sometimes reinforce gender inequalities of power.

From the examples above, a simple (linear and narrow) understanding of markets as buying and selling of goods and services wouldn’t enable us to see social science and policy making, gender relationships or waste management as markets by themselves.

Why does it matter?

There’re three important reasons why we should care about this topic.

First, as Katie Whitehouse argued well, “an aversion or suspicion of the term ‘market’ is revealing in that it acts as a barometer indicating the readiness of the sector to practice market systems development.” The point is that markets are treated as privatisation and working with big firms by supporting selling and buying of goods and services.

So, before we even start understanding why the education system in a country isn’t functioning better to enable young people have better skills, the use of the term market predetermined our idea of privatising public schools. Simply stated, the discussion becomes ideological.  

Second, a narrow understanding of markets also prevents us from considering relationships, processes, and patterns around simple transactions. Markets also exist, just to mention few examples, in health, education, gender relations, disaster risk management, migration and development, and evidence-informed policy making. These markets are complex with multi-functions and relationships. We cannot just attach prices, in the economic sense as the way we do for agricultural products, to information flow, coordination and adaptation. Different stakeholders or actors have incentives that go beyond financial motives -- fear, empathy to support the poor, power, etc.   

Third, markets are associated with private sector enterprises. We tend to engage private sector enterprises often by subsidising and distorting markets. There’re plenty of examples. Working with the private sector isn’t a given; development practitioners need to consider why in the first place we work with the private sector.

Moreover, as I show below, development isn’t just about the private sector. Coming from the private sector world, I do acknowledge the role of private sector enterprises in stimulating the creation of income and employment. I even go further: there’s compelling reason to argue that businesses have played an enormous part in reducing poverty and unemployment, which isn’t the exclusive field of development organisations, donors and states/governments.    

Development cooperation as a multi-stakeholder initiative

Increasingly, it’s becoming apparent that working in partnerships matters a lot. It involves not only the private sector, but also development organisations, public-sector actors and civil society organisations. Our understanding of the market and private sector enterprises need to be broadened.

Jodie Thorpe, a researcher from the Institute of Development Studies (IDS), argues that inclusive and responsible development requires “having the right expertise, involving the right people, thoroughly understanding the context.” This means that we need to ask ourselves: who’s best fit to do development under what kind of context?

The term “partnership” is not a neutral concept – it disguises complex relationships of power and inequality, often expressed through the control of one “partner” over the other. It must be managed in a systematic way. Hence a better understanding of markets as complex relationships is helpful. This involves measuring a mutually benefiting relationship that can add value(s) to each partner.

The 2030 Sustainable Development Goals (SDGs) agenda on partnership aims at accelerating and scaling up effective partnering across all stakeholders to deliver transformational impact. And this’s possible when (a) we understand market as complex relationships that (b) need to be analysed to find out why the relationships are underperforming or failing to (c) support different stakeholders to perform their functions better.  

Additional Sources

• Am I (Really) a “Market Systems” Thinker? It’s Easier Said Than Done
• On Systemic Approach: What It Is and What It Is Not
• A Three-Day Journey with a Development Practitioner at a “Market Systems Symposium”
• To Work, or Not to Work with the Private Sector, That Isn’t the Question….

Cover picture: Firdaus Roslan