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The ALLied invasion of Cato

(Via Austro Athenian Empire 2008-11-10 and a bunch of other places.)

Congratulations to Roderick for heading up a round-table discussion in the latest Cato Unbound on corporate power, with a fine introductiory essay on left-libertarianism, and left-libertarian takes on corporatism, the alliance of big government and big business, class, and vulgar libertarian conflation of freed markets with actually-existing capitalism. Our efforts to cover the world with lying, thieving mutualism proceed apace.

Defenders of the free market are often accused of being apologists for big business and shills for the corporate elite. Is this a fair charge?

No and yes. Emphatically no—because corporate power and the free market are actually antithetical; genuine competition is big business's worst nightmare. But also, in all too many cases, yes —because although liberty and plutocracy cannot coexist, simultaneous advocacy of both is all too possible.

First, the no. Corporations tend to fear competition, because competition exerts downward pressure on prices and upward pressure on salaries; moreover, success on the market comes with no guarantee of permanency, depending as it does on outdoing other firms at correctly figuring out how best to satisfy forever-changing consumer preferences, and that kind of vulnerability to loss is no picnic. It is no surprise, then, that throughout U.S. history corporations have been overwhelmingly hostile to the free market. Indeed, most of the existing regulatory apparatus—including those regulations widely misperceived as restraints on corporate power—were vigorously supported, lobbied for, and in some cases even drafted by the corporate elite.[1]

Corporate power depends crucially on government intervention in the marketplace.[2] This is obvious enough in the case of the more overt forms of government favoritism such as subsidies, bailouts,[3] and other forms of corporate welfare; protectionist tariffs; explicit grants of monopoly privilege; and the seizing of private property for corporate use via eminent domain (as in Kelo v. New London). But these direct forms of pro-business intervention are supplemented by a swarm of indirect forms whose impact is arguably greater still.

. . . So where does this idea come from that advocates of free-market libertarianism must be carrying water for big business interests? Whence the pervasive conflation of corporatist plutocracy with libertarian laissez-faire? Who is responsible for promoting this confusion?

There are three different groups that must shoulder their share of the blame. (Note: in speaking of "blame" I am not necessarily saying that the "culprits" have deliberately promulgated what they knew to be a confusion; in most cases the failing is rather one of negligence, of inadequate attention to inconsistencies in their worldview. And as we'll see, these three groups have systematically reinforced one another's confusions.)

Culprit #1: the left. Across the spectrum from the squishiest mainstream liberal to the bomb-throwingest radical leftist, there is widespread (though not, it should be noted, universal)[10] agreement that laissez-faire and corporate plutocracy are virtually synonymous. David Korten, for example, describes advocates of unrestricted markets, private property, and individual rights as corporate libertarians who champion a globalized free market that leaves resource allocation decisions in the hands of giant corporations[11]—as though these giant corporations were creatures of the free market rather than of the state—while Noam Chomsky, though savvy enough to recognize that the corporate elite are terrified of genuine free markets, yet in the same breath will turn around and say that we must at all costs avoid free markets lest we unduly empower the corporate elite.[12]

Culprit #2: the right. If libertarians' left-wing opponents have conflated free markets with pro-business intervention, libertarians' right-wing opponents have done all they can to foster precisely this confusion; for there is a widespread (though again not universal) tendency for conservatives to cloak corporatist policies in free-market rhetoric. This is how conservative politicians in their presumptuous Adam Smith neckties have managed to get themselves perceived—perhaps have even managed to perceive themselves—as proponents of tax cuts, spending cuts, and unhampered competition despite endlessly raising taxes, raising spending, and promoting government-business partnerships.

Consider the conservative virtue-term privatization, which has two distinct, indeed opposed, meanings. On the one hand, it can mean returning some service or industry from the monopolistic government sector to the competitive private sector—getting government out of it; this would be the libertarian meaning. On the other hand, it can mean contracting out, i.e., granting to some private firm a monopoly privilege in the provision some service previously provided by government directly. There is nothing free-market about privatization in this latter sense, since the monopoly power is merely transferred from one set of hands to another; this is corporatism, or pro-business intervention, not laissez-faire. (To be sure, there may be competition in the bidding for such monopoly contracts, but competition to establish a legal monopoly is no more genuine market competition than voting—one last time—to establish a dictator is genuine democracy.)

Of these two meanings, the corporatist meaning may actually be older, dating back to fascist economic policies in Nazi Germany;[13] but it was the libertarian meaning that was primarily intended when the term (coined independently, as the reverse of "nationalization") first achieved widespread usage in recent decades. Yet conservatives have largely co-opted the term, turning it once again toward the corporatist sense.

. . .

Culprit #3: libertarians themselves. Alas, libertarians are not innocent here—which is why the answer to my opening question (as to whether it's fair to charge libertarians with being apologists for big business) was no and yes rather than a simple no. If libertarians are accused of carrying water for corporate interests, that may be at least in part because, well, they so often sound like that's just what they're doing (though here, as above, there are plenty of honorable exceptions to this tendency). Consider libertarian icon Ayn Rand's description of big business as a persecuted minority,[14] or the way libertarians defend our free-market health-care system against the alternative of socialized medicine, as though the health care system that prevails in the United States were the product of free competition rather than of systematic government intervention on behalf of insurance companies and the medical establishment at the expense of ordinary people.[15] Or again, note the alacrity with which so many libertarians rush to defend Wal-Mart and the like as heroic exemplars of the free market. Among such libertarians, criticisms of corporate power are routinely dismissed as anti-market ideology. (Of course such dismissiveness gets reinforced by the fact that many critics of corporate power are in the grip of anti-market ideology.) Thus when left-wing analysts complain about corporate libertarians they are not merely confused; they're responding to a genuine tendency even if they've to some extent misunderstood it.

— Roderick Long, Cato Unbound (2008-11-10): Corporations versus the Market; or, Whip Conflation Now

Read the whole thing. It’s great.

The post has already provoked a lot of discussion. Some of it — for example, from Wirkman 2008-11-10, Peter Klein 2008-11-10, and Will Wilkinson 2008-11-10 — is insightful and raises important issues. I’ll also be interested to see the upcoming promised replies from Steven Horwitz, Dean Baker, and the Danny Bonaduce of the Blogosphere. The commentary is a bit much to cover fully here, and is getting hashed out in comments threads, anyway; but I will say that I’m a bit puzzled about this from Will Wilkinson:

But this hints at a thicket of trickier issues. We want a system in which profit-seeking behavior creates the greatest net positive externalities (like continuously increasing the consumer's share of the cooperative surplus from mundane purchases). But positive spillover maximization within the constraints of a sub-optimal overall system is really desirable, despite the less-than-best incentive structure.

Dude, I just want Sam Walton to get his cold, dead hands out of my pockets. The rest is all details, as far as I’m concerned.

In any case, it seems to me that whether or not Wal-Mart and its business practices ought to be regarded with admiration, contempt, or indifference is really an importantly separate question from the question of whether or not Wal-Mart would have a sustainable business model under freed markets. If Wal-Mart as we know it could not exist but for State privileges, that’s reason enough for libertarians to be wary of reflexively defending Wal-Mart’s bidniz practices as examples of the free market at work, even if it’s not yet clear whether or not libertarians ought to find Wal-Mart objectionable (as a matter of thickness from consequences, and it seems to me that Roderick’s point has to do more or less entirely with the simpler point about sustainability, not the more complicated point about how to feel about the State-dependent business in question.

Meanwhile, Jesse Walker also kindly posted a notice over at Hit and Run, which provoked a discussion in which Hit and Run commenters were fully able to live up to their reputation for fair, insightful, and thought-provoking discussion of issues in libertarianism. For example, here’s the top comment in its entirety:

joshua corning | November 10, 2008, 2:14pm | #

If libertarians are accused of carrying water for corporate interests, that may be at least in part because, well, they so often sound like that’s just what they’re doing

Fuck you Roderick Long.

I mention the Hit and Run thread, though, mainly because it contains the nicest illustration you could possibly hope for of vulgar libertarian reasoning. Roderick wrote:

In a free market, firms would be smaller and less hierarchical, more local and more numerous

To which R. C. Dean replies:

I don’t see why. Just to take one example of a market that is pretty free of overt government intervention of the kind listed above: Bookstores. Most smaller, less hierarchical local bookstores are now history, replaced by Big Box Bookstores and on-line booksellers that have huge inventories and lower prices.

So, you see:

  1. Big box bookstores are more successful than smaller, more localized bookstore in the (unfree, government-regulated, privilege-infused, development machine-driven) actually existing market.

  2. …

  3. Therefore, big box bookstores will be more successful than smaller, more localized bookstores in the free market.

Far be it from me to bag on Borders and Barnes and Noble — I like them each a lot. But this notion that we can just look at their current market success, under the constrained and distorted conditions of the actually-existing unfree capitalist market, in which their business model is fundamentally dependent on the use of government highways to ship huge piles of books, on the use of the government development machine to seize huge tracts of land and lucrative subsidies to artificially encourage big box retail outlets, and, lest we forget, on government copyright laws that forcibly restrict booksellers to a limited number of centralized, monopoly-priced suppliers; without them, any jackass with a printer or a Kinko’s card could start her own local bookstore for little more than the cost of ink and paper — the notion, I say that we can just look at their current success on the unfree market and immediately infer it to be the result of processes that would continue with no noticeable reduction in a freed market, is desperately in need of a substantive argument that has not been given. Economies of scale only seem to matter here because, as usual, the costs of scale (like, the freed-market cost of consensually acquiring big blocks of contiguous land; like, the freed-market cost of competing with hyperlocal, extremely low-cost competitors that current laws force out of business) are being ignored, and while the rest of the (artificially centralized, subsidized, monopoly-protected) corporate market is assumed to remain fixed just as it is, even though the whole supply chain would in fact be radically altered by freed markets.

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