Sheldon Richman recently published a TGIF column A Free Market in Banking? Not Even Close in which he points out that when folks like John Quiggin claim that free-market economic ideas have been tried and found wanting in the late economic crisis, they are attacking a Ridiculous Strawman of free-market ideas. There has been, to be sure, an economic crisis, which had something to do with bankers acting recklessly and exploitatively. But not because they were unregulated: there is no such thing as unregulated banking or a free market in money, and never has been at any time in the history of the United States (the Fed is a problem, but it’s far from the first problem). In comments on this story, Shyla asks the musical question:
This article raises a critical question about how to structure our economic policies in light of the recession, spiraling debt, and financial collapse.
Let's say I buy the argument these catastrophes were precipitated by crazy distortions in market forces. Richman suggests these crazy distortions are the result of corporatist influence and unintended consequences.
How do libertarians propose to counter "the competition-inhibiting partnership between influential businesses and government officials?"
Well, one possibility is to get rid of the government officials.
When positions of power are held in place, I think it's a fool's errand to try to devise strategies for keeping the wealthy and well-connected from corrupting and exploiting the power of these offices to their own ends. Political processes tend to benefit the politically-connected, and every federal regulatory agency, from the FTC down to TARP, has a long and sorry history of being captured and exploited by the trusts, cartelists, monopolists, robber-barons and financial sharks that they were supposedly concocted to restrain. So rather than worrying about how to stop influential businesses from capturing the regulatory apparatus for their own ends, better to abolish the regulatory apparatus, and refocus on economic, rather than political, means of responding to economic crises.
Of course, you may want to ask the question one step back: how, then, do you get rid of the government officials? (I.e., how do you stop admittedly influential players from exerting their influence over the legislative process, in order to assure that the offices they want created and sustained are created and sustained, in spite of popular indifference or popular objections?) Well, that is admittedly a hard problem. My answer is that in order to get rid of the government officials, you ought to get rid of the government.
I don't doubt that as long as a legislative process is monopolized by a single, professional political apparatus, that apparatus will be an attractive prize and a willing tool for the influential and wealthy. Concentrated power will always be vulnerable to co-optation, corruption, and exploitation by those who are well-placed to take advantage of it. Attempts to vest all political authority in a single, professionalized, territorial monopoly, but then to turn around and strictly limit that government (for example, by means of a written constitution, or regular elections of officials) have always and everywhere failed. If initially limited, it will grow; legislation will multiply officials, establish bureaucracies, and ratchet up the level of political control, in response to pressure from the concentrated interests (chief among them influential businesses) that benefit from all that. Not because power cannot possibly be limited, but because concentrated power cannot be counted on to limit itself in the absence of any ultimate accountability or threat of competition. The solution, then, is not to find ways to insulate concentrated power from outside influence (which, even if achieved, would make an even worse problem: an absolutely unaccountable absolute state). It's to diffuse power throughout civil society, rather than concentrating it all in a single, professionalized, territorial monopoly government.
Of course, you may now want to ask the question one further step back: if the solution to business-regulatory collusion is to get rid of the regulatory offices, and the way to get rid of regulatory offices (in spite of business pressure to create them) is to get rid of government, then what's the way to get rid of government? Well, that is a hard problem, and I don't have an easy answer. Perhaps it is impossible under present social and economic conditions. I'm inclined to doubt that, but if it is, then surely the answer is to work towards changing present social and economic conditions, around the edges and where possible, by means that avoid the corporate-political nexus, and in ways that undermine the corporate-political nexus's control over our thoughts and everyday lives: spreading libertarian ideas, educating people about the ways in which bankers and other influential businesses have never been subject to free market conditions, how influential businesses have used the state for their own ends, helping people become more self-sufficient, materially secure and culturally respected while working "outside the system," encouraging forms of protest, social activism and community organization that operate outside of conventional electoral politics or legislative lobbying, etc. Some of my fellow Anarchists call this "building the new society within the shell of the old"; if anarchy is not now possible, that's no reason to imagine that even more fanciful utopian schemes (such as "progressive regulation," "good government," or "limited government") are any more plausible or likely to succeed. And if anarchy is not now possible, there is no reason why we should give up on working anarchistically to make it possible in the future.
- Rad Geek People’s Daily (2008-06-09): 10,000 ways to lose your freedom
- Rad Geek People’s Daily (2010-08-23): The only Good Government is No Government
- Rad Geek People’s Daily (2008-02-25): I am shocked!–shocked!!–to find out that politics is going on in here!
- Rad Geek People’s Daily: Dr. Anarchy Answers Your Mail
- Rad Geek People’s Daily (May 2010): Bits & Pieces on Free Market Anti-Capitalism
- The Freeman (December 2007): Scratching By: How Government Creates Poverty as We Know It
- Richman discusses efforts at national banking cartels dating back to Alexander Hamilton, restrictions on branch banking, and regulations of interest rates and currency. The only thing I’d want to do at this point is to add: to discuss how legal tender laws, government tax policies, and government-enforced economic dependency and state capitalism conspire to create an artificial demand for liquidity in general, and balances in government-approved cash in particular; how 19th century banking regulations specifically taxed or prohibited co-operative forms of credit and money backed by goods other than government-approved precious metals; how government war bonds, the coercive extraction of tax revenues, and the promise of government bail-outs have been undergirding and coercively securing American banking bidniz models since the Revolutionary War; and the rest of the usual mutualist song and dance about the Money Monopoly.↩