Calling all ALLies in the vicinity of New Jersey and the greater megalopolis: there’ll be an ALL picnic meeting in Passaic, New Jersey this Saturday, May 15, from 1-3pm. From NJ ALLy Darian Worden:

There's also going to be an Alliance of the Libertarian Left picnic meeting in Passaic, NJ at 1-3pm on May 15. Anyone reading this who would like to come should email darianworden@gmail.com for directions. It's easy to get to using public transit or driving.

— Darian, comment on GT 2010-05-09: Shameless Self-promotion Sunday

See also:

• New Jersey Alliance of the Libertarian Left

theoriginofthe<blink>tag (www) www.montulli.org (2010-05-11).

A brief history of the most hated tag in the history of the Web.

I’ve spent a fair amount of time in these remarks discussing the general outlines of the thesis that the cash-nexus is artificially expanded, and forcibly deformed, into the patterns of actually-existing capitalism, by means of government privilege to big players; and discussing the many monopolies (once the Big Four; now the Big Nine, at least) that provide some of the most pervasive and intense points of force that dispossess working people, favor big, centralized forms of business, and coercively favor capitalistic, formalized, commercialized uses of resources over non-commercialized alternatives.^[1] One of the objections which may have occurred to you by now is that government intervention in the economy goes in more than one direction. It may be true that the monopolies Tucker and I have named tend to benefit entrenched players and conventionally capitalistic arrangements. But what about government regulations that benefit poor people (such as government welfare schemes) small players (such as, say, Small Business Administration loans), or which are supposed to regulate and control large-scale, concentrated forms of enterprise (such as antitrust legislation)?

I would respond, first, that this kind of response seems to suggest an unusual faith in the efficacy of government regulation and welfare state programs to achieve their stated ends. In fact, as I’ve already suggested, much of the "progressive" regulatory structure, supposedly aimed at curbing big business, has largely served to cartelize big business, and to create large fixed costs which tend to drive out potential competitors from the rigged markets in which they have entrenched themselves. Historical work by Gabriel Kolko (in The Triumph of Conservatism) and Butler Shaffer (In Restraint of Trade) has, I think, convincingly shown that these regulatory measures mainly served to rigidify the positions of existing market incumbents and to bail out failing cartelists so as to prevent freedom from disrupting a well-regulated market. And there are good a priori reasons – from the public choice analysis of the incentives faced by politically-appointed regulators — to believe that such regulatory efforts will always be highly prone to capture by the concentrated interests of market incumbents, to be wielded against the dispersed interests of consumers, workers, and would-be start-up competitors.

Second, it is important to keep in mind questions of priority and scale. While I object to SBA loans, antitrust legislation, social welfare programs, and other government interventions as much as any other free marketeer, I think that in this age of trillion-dollar bank bailouts it ought to be clear that, even if government is putting its finger on both sides of the scale, one finger is pushing down a lot harder than the other.

You may also be concerned that I have had so little to say, so far, about some of the conventional explanations that free market economists have offered for the efficiency and scalability of capitalistic arrangements – arguments based, for example, on the division of labor, or on economies of scale, or the gains from trade. But I am not denying the value of either the division of labor, or gains from trade; I am suggesting that labor and trade might be organized along different lines than they are currently organized, in alternative forms of specialization and trade such as co-ops, worker-managed firms, or independent contracting, with comparatively less centralization of decision-making, less hierarchy, less management, and, in many cases, more trade and entrepreneurial independence among the workers involved. Centralized, capitalistic forms of organization are only one sort of cash nexus among many others. And the cash nexus itself is only one way of facilitating a division of labor and a mutually-beneficial exchange can take place; returning to the broader sense of markets as a space of social experimentation, there are all kinds of other social experiments, not necessarily based on quid pro quo exchanges or on cash media, that provide places for people to meet, work and swap.

It is also common for pro-capitalist libertarians to point to economies of scale as an economic reason for believing that large, centralized corporations, industrial agribusiness, et cetera would survive even without the government subsidies and monopolies they currently enjoy. But while I’d hardly deny the importance of economies of scale, I think it is important to remember that economies of scale represent a trade-off between gains and losses. There are diseconomies of scale, just as there are economies of scale – as scale increases, so do the costs of communication and management within the larger workforce, the costs of maintaining heavier equipment, the difficulty of accounting and efficiently allocating resources as more transactions are internalized within the firm, and the difficulty of regearing such a large mechanism to respond to new challenges from new competitors and changing market conditions.^[2] The question is not whether or not there are economies of scale; there are, and there is also a point at which the economies of scale are outweighed by the diseconomies. The question is where that point is; and whether, in a free market, the equilibrium point would tend to shift towards smaller scales, or towards larger scales. When government monopolies and rigged markets artificially encourage large, consolidated, bureaucratic forms of organization — organizations which can better afford the high fixed costs imposed by regulatory requirements, can better lobby for subsidies, can better capture regulatory bodies and use them to advance their own interests, etc. — that shifts the balance by forcing up the rewards of scale. When the same measures punish small competitors in favor of market incumbents, and especially when it punishes informal, small-scale community or personal uses of scarce resources, in favor of formalized commercial uses, government forcibly pushes the diseconomies of scale down, by suppressing competitors who might eat the eggs of the political-economic dinosaurs. In both cases, the most pervasive and far-reaching forms of government economic intervention tend to deform economic life towards formalization, commercialization, consolidation, hyperthyroidal scale and the complex hierarchy that’s needed to manage it. Not because these things are naturally demanded by economies of scale, but rather because they grow out of control when the costs of scale are socialized and the competitive pressures and alternatives burned out by government monopoly.

1. ^[1]For more on the last point, see Three notes for the critics of the critics of apologists for Wal-Mart.↩
2. ^[2]For a detailed discussion of the diseconomies of scale, see Kevin Carson (2007), Economic Calculation in the Corporate Commonwealth.↩

• Everybody Run, Uncle Grady Has a Gun. Roderick, Austro-Athenian Empire (2010-05-10). The following letter appeared in today's Opelika-Auburn News. (I've restored my original paragraphing, which was altered seemingly at random.) To the Editor: Bob Sanders wonders (May 8th) why we would fear Uncle Grady the tax assessor. Surely the answer is: because Uncle Grady's edicts are ultimately backed up by threats… (Linked Monday 2010-05-10.)

• Reviewing Like It's 2007. rechelon, Human Iterations » Non-Aggression And The Goddamn Primmies (2010-05-10). Communism Reconstituted as Psychotherapy: The Coming Insurrection Everyone knows.  It's really nothing new.  Their attack on Green Capitalism is delicious, while their advocacy of "communes" is without substance, tacked on and arguably specious.  There's a lot of language in it specific to the European intellectual scene.  Honestly, it's a bit… (Linked Monday 2010-05-10.)

I concluded my earlier remarks on rigged markets and captive markets by offering this quick gloss on the free-market anti-capitalist thesis: that the recognizable patterns of capitalist economics result from the fact that certain key markets – importantly, the labor market, housing rental market, and other key markets are rigged markets – and in particular, indirectly-created captive markets, in which working-class folks in need of houses or jobs are driven into a market where they are systematically stripped of resources and alternatives, faced by artificially high costs, and generally constrained to negotiate with incumbent market players who have been placed in an artificially advantageous position over them through repeated government interventions in their favor.

Claims like this – that big government tends to disproportionately benefit big business at the expense of ordinary workers, by creating rigged markets and concentrating access to resources – may be controversial in libertarian circles now; but they are hardly unusual in the long view of libertarian history. Before the 20^th century coalitions against the New Deal and Soviet Communism, libertarian writers, from Smith to Bastiat to Spencer, had little interest in tailoring their politics to conservative or pro-business measurements. They frequently identified capitalists, and their protectionist policies, as among the most dangerous enemies of free exchange and property rights. The individualist Anarchist Benjamin Tucker, writing in 1888,^[1] called for Absolute Free Trade ... laissez faire the universal rule, while describing this doctrine of complete laissez faire and free competition a form of Anarchistic socialism. Let’s bracket discussion of that semantic decision for the moment; the important contribution is Tucker’s identification and analysis of four great areas where government intervention artificially created or encouraged class monopolies – concentrating wealth and access to factors of production into the hands of a politically-select class insulated from competition, and prohibiting workers from organizing mutualistic alternatives. The Big Four monopolies Tucker identified as central to the Gilded Age economy were:

1. The Land Monopoly – government concentration of ownership of land and natural resources through the enforcement of legally-fabricated land titles (such as preferential land grants to politically-connected speculators, or literally feudal land claims in Europe). Since Tucker, the land monopoly, already key to the Gilded Age economy, has radically expanded – with the frequent nationalization of mineral and fossil fuel resources throughout, and the emergence of local zoning codes, complex housing construction codes, land-use restrictions, "Urban Renewal," municipal "development" rackets and Kelo-style eminent domain seizures, and a host of local policies intended to keep real estate prices high and permanently rising. In a freed market, land ownership would be based entirely on labor-based homesteading and consensual transfer, rather than on military conquest, titles of nobility, sweetheart "development" deals, or eminent domain seizures, and land would tend (ceteris paribus) to be more widely distributed, with more small individual ownership, dramatically less expensive, with more ownership free and clear, and could as easily be based on sweat equity and homesteading of unused land, without the need for any commercial cash exchange.

2. The Money Monopoly – government control over the money supply, artificially limiting the issue of money and credit to a government-approved banking cartel. Tucker saw this as the source of both monopoly profits for the incumbent banks, and the artificial restriction of access to capital to those large, established businesses which the large, established banks preferred to deal with, while suppressing competition from mutual credit associations and other means by which workers might be able to pool their own resources and access credit on more advantageous terms than those offered by commercial banks. Tucker, in 1888, was writing about the Money Monopoly before the Federal Reserve or the conversion to a pure fiat currency, before the SEC, FDIC, TARP, banking holidays, bailouts, or the myriad other means by which government has insulated big bankers and financiers from market consequences, or erected regulatory barriers to entry which insulate politically-approved business models from market competition.

3. The Patent Monopoly – government grants of monopoly privileges to patent-holders and copyright holders. Tucker argued that patents and copyrights did not represent a legitimate private property claim for their holders, since it did not protect any tangible property that the patent-holder could be deprived of, but rather prohibited other market actors from peacefully using their own tangible property to offer a good or service that imitated or duplicated the product being offered by the holder of the so-called Intellectual Property. These prohibitions, enforced with the explicit purpose of suppressing market competition and ratcheting up prices, in order to secure a long period of monopoly profits for the IP-holder, now constitute more or less the entire business model of Fortune 500 companies like General Electric, Pfizer, Microsoft, or Disney, and have only gotten longer and harsher in their legal sanctions, as IP monopolists have insisted on the need for more and more insulation from free market competition.

4. The Protective Tariff – Tucker identified the tariff as a monopoly in the sense that it artificially protected politically-favored domestic producers from foreign competition. While the tariff has declined noticeably in political and economic importance since the 1880s, tariffs remain a distorting force within limited domains (for example, agriculture), and the specific mechanism of import tariffs is much less important, for Tucker’s purposes, than the overarching aim of protecting connected incumbents – whether through tariffs on incoming foreign goods, export subsidies to outgoing domestic goods, through political manipulation of fiat currency exchange rates, or through other means.

As I’ve tried to indicate, Tucker’s Big Four remain pervasive, and at least three of those four have in fact dramatically expanded their scope and invasiveness since Tucker’s original description of them. If we were to try to make a similar list of all the major ways in which local, state, federal and foreign governments now intervene to protect incumbent interests and place barriers to entry against potential competitors, there’s no knowing how many monopolies we’d be dealing in; but I think that there are at least four new major monopolies, in addition to Tucker’s original four, which are worthy of special notice for their pervasiveness and importance to the overall structure of the state-regulated economy.

First, the agribusiness monopoly: since the New Deal, an extensive system of government cartels, subsidies to ratchet up prices for sale in American markets, more subsidies to artifically lower prices for export, surplus buy-up programs,^[2] irrigation projects, and the like have tended to ratchet up food prices for local consumers, to make importing and exporting produce over tremendous distances artificially attractive, to distort agricultural production towards the vegetable and animal products that can most successfully attract subsidies and government support projects, to favor large-scale monocrop cultivation over smaller-scale farming, and generally to concentrate agriculture into factory farming and industrialized agribusiness.

Second, the security monopoly: because of government’s massive expansion of standing military forces, and paramilitary police forces, the past century has seen the creation of a gigantic industry full of monopsonistic, government-driven rigged markets, with nominally private companies subsisting largely or entirely on tax-funded government contracts – companies like Lockheed-Martin, General Dynamics, Raytheon, the rest of the military-industrial complex, and the growing number of companies (such as Taser) who cater primarily to government police forces or other Homeland Security agencies.

Third, the infrastructure monopoly: that is, federal, state, or local government monopolization, tax subsidies, and allocation of access to transportation and communications infrastructure. So, for example, the monopoly offers a benefit to big-box retailers like Wal-Mart, whose business models are enabled by, and dependent on, government subsidies to road-building and maintenance, and the resulting artificially low costs of long-haul trucking. Similarly, incumbent media companies have built empires in part because access to broadcast bandwidth has been restricted and politically allocated through the FCC, while access to cable, telephone, and fiber-optic bandwidth has been tightly controlled and restricted through local governments’ monopoly concessions to incumbent cable and telecommunications companies.

Fourth, we might add regulatory protectionism: the proliferation of commercial regulations, government bureaucracy and red tape, business license fees, byzantine tax codes, government-enforced professional licensure cartels and fees (for everything from taxi-driving to hair braiding to interior design) – all of which, cumulatively, tend to benefit established businesses at the expense of new upstarts, to protect those who can afford the fees and lawyers and accountants necessary to meet the requirements from competition by those who cannot, and generally to the poor out of enterpreneurial opportunities, independent professions and more autonomous alternatives to conventional wage labor.

In addition, we should also mention the structural effects of mass criminalization, incarceration, and deportation of socially or economically marginalized people. Activist libertarians have often condemned, on a moral level* the government’s War on Drugs, or Border Apartheid, or other government efforts to criminalize the poor and subject them to imprisonment for victimless crimes. As well they should — these government wars are nothing more than massive violence and cruelty directed against innocent people. But there has not yet been enough recognition of the structural, economic by-products of government policies which, for example, lock 1 out of every 3 African-American men in a cage, potentially for years at a time, taking away years of their working life and permanently stigmatizing them as they try to reenter the labor market and civil society, or which constantly threaten undocumented immigrants with the threat of arrest, imprisonment, and exile from their homes and livelihoods. Such massive government violence, dispossession, and constraint on livelihoods is sure to have massive impacts on the conditions under which many poor and legally-vulnerable people enter into labor markets, housing markets, and all other areas of economic life.

This is, of course, only the beginning. You could easily subdivide some of these monopolies into smaller monopolies; and there are no doubt many more broad classes of monopoly which could be mentioned. But I think that Tucker’s Big Four, which are still present and have mostly grown in their size and importance since Tucker’s day, and these new Big Five, alongside them, get us a lot closer to understanding why so many markets work the way they work. They are, in any case, enough to make the point, and also to raise some likely objections from conventionally pro-capitalist libertarians, which we had better deal with before we spend too much time elaborating on the subject.

I’ll be turning to some of those objections in the next instalment.

1. ^[1]State Socialism and Anarchism: how far they agree and wherein they differ↩
2. ^[2]In particular, the USDA’s massive buy-up programs for school lunches and the military.↩