← Autodidact Archive · Original Dissent · Walter Yannis
Thread ID: 14175 | Posts: 20 | Started: 2004-06-14
2004-06-14 08:43 | User Profile
THE BETRAYAL OF ADAM SMITH Excerpt from [URL=http://www.pcdf.org/corprule/betrayal.htm]When Corporations Rule the World[/URL] 2nd Edition by David C. Korten It is ironic that corporate libertarians regularly pay homage to Adam Smith as their intellectual patron saint, since it is obvious to even the most casual reader of his epic work The Wealth of Nations that Smith would have vigorously opposed most of their claims and policy positions. For example, corporate libertarians fervently oppose any restraint on corporate size or power. Smith, on the other hand, opposed any form of economic concentration on the ground that it distorts the market's natural ability to establish a price that provides a fair return on land, labor, and capital; to produce a satisfactory outcome for both buyers and sellers; and to optimally allocate society's resources.
Through trade agreements, corporate libertarians press governments to provide absolute protection for the intellectual property rights of corporations. Smith was strongly opposed to trade secrets as contrary to market principles and would have vigorously opposed governments enforcing a person or corporation's claim to the right to monopolize a lifesaving drug or device and to charge whatever the market would bear.
Corporate libertarians maintain that the market turns unrestrained greed into socially optimal outcomes. Smith would be outraged by those who attribute this idea to him. He was talking about small farmers and artisans trying to get the best price for their products to provide for themselves and their families. That is self-interest, not greed. Greed is a high-paid corporate executive firing 10,000 employees and then rewarding himself with a multimillion-dollar bonus for having saved the company so much money. Greed is what the economic system being constructed by the corporate libertarians encourages and rewards. [See An Economic System Dangerously Out of Control .]
Smith strongly disliked both governments and corporations. He viewed government primarily as an instrument for extracting taxes to subsidize elites and intervening in the market to protect corporate monopolies. In his words, "Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.'' Smith never suggested that government should not intervene to set and enforce minimum social, health, worker safety, and environmental standards in the common interest or to protect the poor and nature from the rich. Given that most governments of his day were monarchies, the possibility probably never occurred to him.
The theory of market economics, in contrast to free-market ideology, specifies a number of basic conditions needed for a market to set prices efficiently in the public interest. The greater the deviation from these conditions, the less socially efficient the market system becomes. Most basic is the condition that markets must be competitive. I recall the professor in my elementary economics course using the example of small wheat farmers selling to small grain millers to illustrate the idea of perfect market competition. Today, four companies--Conagra, ADM Milling, Cargill, and Pillsbury--mill nearly 60 percent of all flour produced in the United States, and two of them--Conagra and Cargill--control 50 percent of grain exports.
In the real world of unregulated markets, successful players get larger and, in many instances, use the resulting economic power to drive or buy out weaker players to gain control of even larger shares of the market. In other instances, "competitors" collude through cartels or strategic alliances to increase profits by setting market prices above the level of optimal efficiency. The larger and more collusive individual market players become, the more difficult it is for newcomers and small independent firms to survive, the more monopolisitic and less competitive the market becomes, and the more political power the biggest firms can wield to demand concessions from governments that allow them to externalize even more of their costs to the community.
Given this reality, one might expect the neoliberal economists who claim Smith's tradition as their own to be outspoken in arguing for the need to restrict mergers and acquisitions and break up monopolistic firms to restore market competition. More often, they argue exactly the opposite position--that to "compete" in today's global markets, firms must merge into larger combinations. In other words, they use a theory that assumes small firms to advocate policies that favor large firms.
Market theory also specifies that for a market to allocate efficiently, the full costs of each product must be born by the producer and be included in the selling price. Economists call it cost internalization. Externalizing some part of a product's cost to others not a party to the transaction is a form of subsidy that encourages excessive production and use of the product at the expense of others. When, for example, a forest products corporation is allowed to clear-cut government lands at giveaway prices, it lowers the cost of timber products, thus encouraging their wasteful use and discouraging their recycling. While profitable for the company and a bargain for consumers, the public is forced, without its consent, to bear a host of costs relating to water shed destruction, loss of natural habitat and recreational areas, global warming, and diminished future timber production.
The consequences are similar when a chemical corporation dumps wastes without adequate treatment, thus passing the resulting costs of air, water, and soil pollution to the community in the form of health costs, genetic deformities, discomfort, lost working days, a need to buy bottled water, and the cost of cleaning up contamination. If the users of the resulting chemical products were required to pay the full cost of their production and use, there would be a lot less chemical contamination in our environment, our food and water would be cleaner, there would be fewer cancers and genetic deformities, and we would have more frogs and songbirds. If the full cost of producing and driving cars were passed on to the consumer we would all benefit from a dramatic reduction in urban sprawl, traffic congestion, the paving over of productive lands, pollution, global warming, and depletion of finite petroleum reserves.
There is good reason why cost internalization is one of the most basic principles of market theory. Yet in the name of the market, corporate libertarians actively advocate eliminating government regulation and point to the private cost savings for consumers while ignoring the social and environmental consequences for the broader society. Indeed, in the name of being internationally competitive, corporate libertarians urge nations and communities to increase market distorting subsidies--including resource giveaways, low wage labor, lax environmental regulation, and tax breaks--to attract the jobs of footloose corporations. An unregulated market invariably encourages the externalization of costs because the resulting public costs become private gains. In the end it seems that corporate libertarians are more interested in increasing corporate profits than in defending market principles.
The larger the corporation and the "freer" the market, the greater the corporation's ability to force others to bear its costs and thereby subsidize its profits. Some call this theft. Economists call it "economies of scale."
Neva Goodwin, ecological economist, head of the Global Development and Environment Institute at Tufts University, and an advocate of cost internalization, puts it bluntly. "Power is largely what externalities are about. What's the point of having power, if you can't use it to externalize your costs--to make them fall on someone else?"
Corporate libertarians tirelessly inform us of the benefits of trade based on the theories of Adam Smith and David Ricardo. What they don't mention is that the benefits the trade theories predict assume the local or national ownership of capital by persons directly engaged in its management. Indeed, these same conditions are fundamental to Adam Smith's famous assertion in The Wealth of Nations that the invisible hand of the market translates the pursuit of self-interest into a public benefit. Note that the following is the only mention of the famous invisible hand in the entire 1,000 pages of The Wealth of Nations.
By preferring the support of domestic to that of foreign industry, he [the entrepreneur] intends only his own security, and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
Smith assumed a natural preference on the part of the entrepreneur to invest at home where he could keep a close eye on his holdings. Of course, this was long before jet travel, telephones, fax machines, and the Internet. Because local investment provides local employment and produces local goods for local consumption using local resources, the entrepreneur's natural inclination contributes to the vitality of the local economy. And because the owner and the enterprise are both local they are more readily held to local standards. Even on pure business logic, Smith firmly opposed the absentee ownership of companies.
The directors of such companies, however, being the managers rather of other people's money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own .... Negligence and profusion, therefore, must always prevail, more or less in the management of the affairs of such a company?
Smith believed the efficient market is composed of small, owner-managed enterprises located in the communities where the owners reside. Such owners normally share in the community's values and have a personal stake in the future of both the community and the enterprise. In the global corporate economy, footloose money moves across national borders at the speed of light, society's assets are entrusted to massive corporations lacking any local or national allegiance, and management is removed from real owners by layers of investment institutions and holding companies.
It seems a common practice for corporate libertarians to justify their actions based on theories that apply only in the world that by their actions they seek to dismantle. Economist Neva Goodwin suggests that neoclassical economists have invited this distortion and misuse of economic theory by drawing narrow boundaries around their field that exclude most political and institutional reality. She characterizes the neoclassical school of economics as the political economy of Adam Smith minus the political and institutional analysis of Karl Marx:
The classical political economy of Adam Smith was a much broader, more humane subject than the economics that is taught in universities today.... For at least a century it has been virtually taboo to talk about economic power in the capitalist context; that was a communist (Marxist) idea. The concept of class was similarly banned from discussion.
Adam Smith was as acutely aware of issues of power and class as he was of the dynamics of competitive markets. However, the neoclassical economists and the neo-Marxist economists bifurcated his holistic perspective on the political economy, one taking those portions of the analysis that favored the owners of property, and the other taking those that favored the sellers of labor. Thus, the neoclassical economists left out Smith's considerations of the destructive role of power and class, and the neo-Marxists left out the beneficial functions of the market. Both advanced extremist social experiments on a massive scale that embodied a partial vision of society, with disastrous consequences.
If corporate libertarians had a serious allegiance to market principles and human rights, they would be calling for policies aimed at achieving the conditions under which markets function in a democratic fashion in the public interest. They would be calling for an end to corporate welfare, the breakup of corporate monopolies, the equitable distribution of property ownership, the internalization of social and environmental costs, local ownership, a living wage for working people, rooted capital, and a progressive tax system. Corporate libertarianism is not about creating the conditions that market theory argues will optimize the public interest, because its real concern is with private, not public, interests.
2004-06-14 12:38 | User Profile
Excellent article, Walter. A large part of the problem, in my opinion, is that people have no idea that an economic system like this could exist, much less that it has existed before. It comes down to a false choice. People think that if they are not industry-nationalizing, collectivization-forcing, confiscatory-tax-supporting, culture-destroying Marxists, then their only alternative is to accept rule by multinational corporations, environmental degradation, and wage slavery.
Capitalism is NOT the only system in which private property rights are respected. Capitalism is NOT the natural and inevitable progression of private property. Yes, communism is awful, but that does NOT mean that capitalism is the best of all possible worlds, Dr Pangloss.
2004-06-14 14:20 | User Profile
[QUOTE][Quantrill] A large part of the problem, in my opinion, is that people have no idea that an economic system like this could exist, much less that it has existed before. It comes down to a false choice. People think that if they are not industry-nationalizing, collectivization-forcing, confiscatory-tax-supporting, culture-destroying Marxists, then their only alternative is to accept rule by multinational corporations, environmental degradation, and wage slavery.[/QUOTE]
Spot-on, Quantrill. OUr job is to get out the good word of Distributism and Catholic social teaching.
Hey, it's not like the American Catholic hierarchy is going to do it!
Walter
2004-06-14 19:06 | User Profile
[QUOTE]If corporate libertarians had a serious allegiance to market principles and human rights, they would be calling for policies aimed at achieving the conditions under which markets function in a democratic fashion in the public interest. They would be calling for an end to corporate welfare, the breakup of corporate monopolies, the equitable distribution of property ownership, the internalization of social and environmental costs, local ownership, a living wage for working people, rooted capital, and a progressive tax system. Corporate libertarianism is not about creating the conditions that market theory argues will optimize the public interest, because its real concern is with private, not public, interests.[/QUOTE]
David Korten should not just question the seriousness "corporate libertarians" but he should point out that they are not libertarians at all, but big business fascists. Korten should also admit that he is no friend of Adam Smith.
There is nothing libertarian about letting companies freely damage the property of others with pollution, lowering wages by flooding the country with taxpayer-subsidized third-world immigrants, giving welfare to corporations, etc. These are policies of big-business fascists.
Korten should limit himself to objecting to government policies that are designed to undermine the Free Market or otherwise manipulate the market. Immigration policy should have nothing to do with suppressing wages and helping big business, but with protecting the culture and the taxpayers. Businesses should limit their pollution as much as reasonably possible and then pay fees to compensate the community for what pollution they cannot eliminate. Patent protection should only be strong enough to stimulate invention, not a hair more. Corporate welfare should be eliminated. A number of tax loopholes, such as the entertainment deduction, should be eliminated. The tax burden should not be unilaterally eliminated from international trade leaving the tax burden on smaller domestic companies and individuals.
Remove government manipulation, and the market will assure competition. There are natural obstacles to excessive growth of big business, starting with the burden of the overhead of bureaucracy which eventually out paces economy of scale. We don't need Korten's form of socialism to preserve competition.
Korten demands a living wage for workers without saying how he would bring that about. Why should every job pay a living wage? Some aren't worth a living wage (a do-nothing attendant that can spend his time doing his own things). Some jobs have great benefits aside from money (apprenticeships). These jobs can be very desirable, but simply might not exist if the employer were forced to pay a living wage. But, this is all moot to Korten who want the government to stick a gun at people's heads and tell them what to pay their employees. Because of government (and union) incompetence, corruption, and lack of knowledge of individual circumstances, all Korten's ideology would create is a big, costly and oppressive mess.
2004-06-14 19:45 | User Profile
[QUOTE=Happy Hacker] There is nothing libertarian about letting companies freely damage the property of others with pollution, lowering wages by flooding the country with taxpayer-subsidized third-world immigrants, giving welfare to corporations, etc. These are policies of big-business fascists.
In my experience, libertarians virtually always oppose any environmental regulation. As for immigration, the Libertarian Party supports open borders, and even the anarcho-capitalist libertarians over at lewrockwell.com, who oppose open borders, don't want the government to do anything about it; they only want individual property owners to run the illegals off. As for corporate welfare, yes, you are correct; libertarians oppose it.
[QUOTE=Happy Hacker] Korten should limit himself to objecting to government policies that are designed to undermine the Free Market or otherwise manipulate the market. Immigration policy should have nothing to do with suppressing wages and helping big business, but with protecting the culture and the taxpayers.
What is the libertarian argument for protecting the culture? What is the economic value of a culture? Does culture have a price? If not, how can it have value, since libertarians are proponents of the idea that value equals price?
[QUOTE=Happy Hacker]Businesses should limit their pollution as much as reasonably possible and then pay fees to compensate the community for what pollution they cannot eliminate. Patent protection should only be strong enough to stimulate invention, not a hair more. Corporate welfare should be eliminated. A number of tax loopholes, such as the entertainment deduction, should be eliminated. The tax burden should not be unilaterally eliminated from international trade leaving the tax burden on smaller domestic companies and individuals.
I think the author of the article agrees with all those statements. He specifically mentions the elimination of corporate welfare, in fact.
[QUOTE=Happy Hacker]Remove government manipulation, and the market will assure competition.
I used to believe this, but I no longer do. I have lost my faith in the Holy Market to always and infallibly create the best of all possible outcomes. Without protection for the small enterprise, competition leads to either a monoply, or to a handful of firms dominating the market.
[QUOTE=Happy Hacker] Korten demands a living wage for workers without saying how he would bring that about. Why should every job pay a living wage?
I think this is crux of your disagreement with the article, and here, certainly, reasonable people can disagree. I, myself, am undecided on this issue. I think a cessation of mass immigration is absolutely vital, however, as it artificially inflates the labor supply to, effectively, an almost infinite level, which completely throws wages out of whack.
[QUOTE=Happy Hacker]Korten's ideology would create is a big, costly and oppressive mess.[/QUOTE] Which is, I feel I must mention, exactly what we have now.
2004-06-14 20:07 | User Profile
I thought I posted this once before, but I could not find it. The difference between Smith and Friedman is huge. Economics is [B][I]not[/I][/B] value free as Friedman asserts.
The memory of Adam Smith has been tarnished by those who profess to be his greatest followers. Those who wear neckties with his likeness have read very little by him. This man who knew the limits of a market economy would hold most in contempt. His unstinting praise of solid masculine values would be met by very few who are attracted by professed tenets that they perceive as justifying their greed.
Adam Smith has been remembered and enshrined in America as the paragon of Free Trade. The true genius and great virtue of the man has been subordinated to economic dogma that has little bearing on the real world. Smith observed that merchant and master manufacturers incessantly complained of high wages affecting sales at home and abroad. They said nothing of the pernicious effects of their high profits. They complained only of other people.[1] People of the same trade seldom met, even for merriment and amusement, without conspiring to raise prices.[2] A merchant was not necessarily the citizen of any country, but went where profits lie and is indifferent as to where he trades[3] The government of a country by an exclusive group of merchants probably was the worst government of all.[4] Smith referred to colonies.
A thoroughgoing Scot, Smith, declared war the noblest of all arts.[5] The civilization of any country can only be perpetuated, or preserved, for any considerable period of time by a standing army.[6] Defense is much more important than opulence, and Smith regarded the Navigation Act protecting British shipping, as perhaps the wisest of commercial regulations.[7] A coward, a man incapable of either defending or of revenging himself, lacks one of the most essential parts of the character of a man.[8] Smith paused to comment on the gross ignorance and stupidity that in a civilized society seems to benumb the inferior ranks of people. Their lack of intellectual development made them, if possible, even more contemptible than the coward.[9]
His social observations have remained pertinent to this day. The resolution of Quakers in Pennsylvania to free slaves persuaded him that they did not have many.[10] The best looking people in all of Britain were the potato fed of Ireland. Mr. Smith regarded their whores as easily the best looking.[11] The dour oat-eating Scots could not even compare with the common lot of English, then as now not overly attractive. Dancing and music were the pastimes of all barbarous people, most particularly the Negroes of Africa.[12] (What would he say of the America of today?)
The clergy of an established and well-endowed religion frequently became men of learning and elegance possessing the qualities of gentlemen. But they are apt to lose qualities, both good and bad, that gave them authority and influence with inferior ranks and probably were original causes of success and establishment of their religion. Such a clergy, when attacked by popular and bold enthusiasts, though possibly stupid and ignorant, feel themselves as defenseless as the indolent, effeminate and fully fed nation of South Asia when attacked by barbaric Tartars from the North.[13]
In [I][B]The Theory of Moral Sentiments [/B] [/I] Mr. Smith expounded on war being the great school for acquiring and exercising magnanimity. Death has been the king of terrors. A man who has conquered fear of death was not likely to lose his presence of mind at the approach of other natural evils. The habitual contempt of death and fear ennobled the profession of a soldier and bestowed upon it a rank and dignity superior to that of any other profession. Skillful and successful exercise of this profession in service of their country seemed to have constituted the most distinguishing feature in the character of the favorite heroes of all ages.[14] Men who have lived in ease and tranquility never attained the highest degree of self-command. They have not been tested by war.[15] Yet commonly the frivolous accomplishments of an impertinent and foolish man of fashion are more admired than the masculine virtues of a warrior, a statesman, a philosopher or a legislator.[16] Society admired the rich and powerful more than the wise and virtuous.[17] The great mob easily distinguished the former, but has had great difficulty with the latter qualities. Mr. Smith judged the noblest exertion to be death for the sake of others.[18] (German Field Marshall von Manstein expressed the same thought 150 years later.) The greatest evil to a gentleman was the stain of dishonor.[19]
From the American Civil War onward the American wealthy of the North and Jews, both sat out the war to make money, have followed the sentiments of Herbert Spencer, an English apostle of individualistic greed with little or no obligations to society. Spencer affirmed his moral high ground by observing that if men hired themselves out to shoot others on orders without questioning the justness of the cause, Spencer did not care if they got shot.[20] This sentiment, so vile it is in a libertarian anthology, has long represented the most deeply held beliefs of their class.
[1] Adam Smith, [I][B]The Wealth of Nations[/B][/I], p115 (Volumes I and II, Liberty Press, 1976) [2] ibid, p145 [3] ibid, p426 [4] ibid, p570 [5] ibid, p697 [6] ibid, p706 [7] ibid, pp464-5 [8] ibid, p787 [9] ibid, p788 [10] ibid, p388 [11] ibid, p177 [12] ibid, p766 [13] ibid, p789 [14] Adam Smith, [I][B]The Theory of Moral Sentiments[/B][/I], p239 (Liberty Press, 1976) [15] ibid, p152 [16] ibid, p63 [17] ibid, p226 [18] ibid, p236 [19] ibid, p60 [20] Ebeling and Hornberger, editors, [I][B]Failure of America's Foreign Wars[/B][/I], p46 (Future of Freedom Foundation, 1996)
2004-06-14 20:26 | User Profile
Railing against un-named 'corporate libertarians' is might be a fun children's game, but it tells us very little about the desirability of various libertarian positions.
No doubt there are many foolish libertarians out there, such as the people at the CATO institute, or the people who drafted the LP national platform.
Is there, though, any reason one cannot support strict, government-enforced immigration controls, sane environmental policies, and a restructuring of corporate liability laws--but also believe that the government should decriminalize victimless crimes, and end spending not needed for the military, the police, or the courts?
Of course not. Likewise, one can support anarcho-capitalism as a goal, but believe that until all goverment is returned to private ownership, the government should enforce immigration laws. Indeed, this seems to be Hoppe's position.
2004-06-14 20:39 | User Profile
[QUOTE=darkstar]Is there, though, any reason one cannot support strict, government-enforced immigration controls, sane environmental policies, and a restructuring of corporate liability laws--but also believe that the government should decriminalize victimless crimes, and end spending not needed for the military, the police, or the courts?
No, no reason at all. I would question, however, whether one who held those views would be a "libertarian," as it is commonly understood.
[QUOTE=darkstar] Of course not. Likewise, one can support anarcho-capitalism as a goal, but believe that until all goverment is returned to private ownership, the government should enforce immigration laws. Indeed, this seems to be Hoppe's position.[/QUOTE] This is reasonable. I just can't help but find it odd for someone who considers government a positive evil to support government action. Also, what do you mean "until government is returned to private ownership"? I would be surprised if there is one example of a historical anarcho-capitalist society, so the only private government we could return to would be monarchy. Are you a monarchist? You don't strike me as one.
2004-06-14 20:41 | User Profile
[QUOTE=Quantrill]In my experience, libertarians virtually always oppose any environmental regulation. As for immigration, the Libertarian Party supports open borders, and even the anarcho-capitalist libertarians over at lewrockwell.com, who oppose open borders, don't want the government to do anything about it; they only want individual property owners to run the illegals off. As for corporate welfare, yes, you are correct; libertarians oppose it.
I don't consider the liberatarian party to be all that libertarian. Checking with their webpage on immigration, they start off with this irrelevant and untrue statement "America has always been a nation of immigrants. That's quickly followed with name calling "xenophobic immigrant bashing." Such rhetoric in a position statement hardly deserves respect. The Libertarian Party is disaffected neocons and liberals, not libertarians.
I don't see how it's possible for a libertarian to believe in mass immigraiton when the mass immigration is a result of the welfare state, the government imposed preferences of immigrants over natives, and the lack of freedom of association.
It would only be crass libertarianism that wouldn't allow a native people to have some control of the culture they live in. And, we would preserve our culture if the government left us free to do so. Liberal and neocon "libertarians" aren't motived by even crass libertarian ideology. Neocons want cheap labor for big business. Both think its xenophobic to place special value on the land within borders.
I used to believe this, but I no longer do. I have lost my faith in the Holy Market to always and infallibly create the best of all possible outcomes. Without protection for the small enterprise, competition leads to either a monoply, or to a handful of firms dominating the market.
It believe it is government manipulation that results in monopolies and oligopolies. It is true that people care more about things they own, that is one advantage small business (closely controlled by the owners) works better than big business. Small businesses don't have to support salaries of regional managers nor deal with the out-of-touch decisions of those reginal managers. Etc. But, if you have a very big business, chances are you aren't paying signficicant income taxes, and you're getting many tax breaks at the local level, while the small businesses don't have these advantages. The laws of our country are very much designed to favor and promote the grown of business toward monopolies. This is in thanks to the colluison of neocons, big business, and government. Neocons worship big business. Big business has the ear of the lawmakers. And, government is just more comfortable dealing with a few big businesses than a lot of small ones.
We do not have anything close to a Free Market in America.
BTW, good reply.
2004-06-14 21:05 | User Profile
[QUOTE=Happy Hacker] I don't see how it's possible for a libertarian to believe in mass immigraiton when the mass immigration is a result of the welfare state, the government imposed preferences of immigrants over natives, and the lack of freedom of association.
Traditionally, however, libertarians have opposed immigration restrictions. One of the reasons Hoppe drew such praise for Democracy: The God That Failed is because he was able to make a libertarian argument for immigration controls.
[QUOTE=Happy Hacker]It would only be crass libertarianism that wouldn't allow a native people to have some control of the culture they live in. And, we would preserve our culture if the government left us free to do so.
Perhaps, perhaps, though I think the media could do a pretty good job of destroying the culture without government assistance.
[QUOTE=Happy Hacker]It believe it is government manipulation that results in monopolies and oligopolies. ...
The laws of our country are very much designed to favor and promote the grown of business toward monopolies....
We do not have anything close to a Free Market in America.
All true. Government and Big Business are in bed together. I still think monopoly or oligopoly would result even with government interference, however.
[QUOTE=Happy Hacker] BTW, good reply.[/QUOTE] Thank you. Likewise.
2004-06-14 21:14 | User Profile
No one owns the copyright on what 'libertarian' means. There is no authoritative text to turn to. Those who want to be 'purists' in their opposition to the state are just the typical nuts who bedevil every political movement.
By returning government to private hands, I mean that all government property is returned to the private sector. Of course, if the government has returned all but that property necessary to provide court and security services, its immigration policies would be restricted to keeping people off those limited holdings--and perhaps also keeping aliens off private land when they come without consent of the property owner.
[QUOTE=Quantrill]No, no reason at all. I would question, however, whether one who held those views would be a "libertarian," as it is commonly understood.
This is reasonable. I just can't help but find it odd for someone who considers government a positive evil to support government action. Also, what do you mean "until government is returned to private ownership"? I would be surprised if there is one example of a historical anarcho-capitalist society, so the only private government we could return to would be monarchy. Are you a monarchist? You don't strike me as one.[/QUOTE]
2004-06-14 23:23 | User Profile
[QUOTE=darkstar] By returning government to private hands, I mean that all government property is returned to the private sector.[/QUOTE] Well, that is a different thing than a private government. A monarchy is a private government, as it is owned by one person, and the anarcho-capitalists talk of private security forces, private arbitrators, and the like taking the place of a government. Just trying to understand where you are coming from.
2004-06-15 00:21 | User Profile
If all government property were returned to private hands, I think you would have 'private government,' at least insofar what the anarcho-capitalist talk about is 'private government.' However, what counts as 'government' and what counts as 'private government' is a little unclear, I think.
In any case, my position is best termed a libertarian version of classical liberalism. I believe the proper function of government is to secure individual rights, and I think that the government can indeed do this relatively well in many cases.
Thus, in these cases, the government should provide protective services and courts. Beyond this, the government should not tax, borrow, or spend. The government should also refrain from enforcing regulation of individuals and the economy, if such regulation does not protect individual rights. The only exceptions here might be in emergency cases of dire threats to individuals' rights.
[QUOTE=Quantrill]Well, that is a different thing than a private government. A monarchy is a private government, as it is owned by one person, and the anarcho-capitalists talk of private security forces, private arbitrators, and the like taking the place of a government. Just trying to understand where you are coming from.[/QUOTE]
2004-06-19 14:53 | User Profile
[QUOTE]There is good reason why cost internalization is one of the most basic principles of market theory. Yet in the name of the market, corporate libertarians actively advocate eliminating government regulation and point to the private cost savings for consumers while ignoring the social and environmental consequences for the broader society. Indeed, in the name of being internationally competitive, corporate libertarians urge nations and communities to increase market distorting subsidies--including resource giveaways, low wage labor, lax environmental regulation, and tax breaks--to attract the jobs of footloose corporations. An unregulated market invariably encourages the externalization of costs because the resulting public costs become private gains. In the end it seems that corporate libertarians are more interested in increasing corporate profits than in defending market principles.
The larger the corporation and the "freer" the market, the greater the corporation's ability to force others to bear its costs and thereby subsidize its profits. Some call this theft. Economists call it "economies of scale."
Neva Goodwin, ecological economist, head of the Global Development and Environment Institute at Tufts University, and an advocate of cost internalization, puts it bluntly. "Power is largely what externalities are about. What's the point of having power, if you can't use it to externalize your costs--to make them fall on someone else?"[/QUOTE]
I think that this passage is key to understanding our present difficulties.
The whole point of the law merchant is to prevent externalities. The "umpire state's" role is limited to preventing economic actors from getting others to pay the costs.
But as Charlie Munger pointed out in the speech I posted under this rubric, modern economics tends strongly to ignore that which it can't quantify. How can you quanitfy the value of the social capital of most women staying home with their children, or the value of an undisturbed wetland?
Thus we wind up ignoring social capital because we can't bean-count it. This is killing us.
Charlie Munger also mentions Garrett Hardin's [URL=http://dieoff.org/page95.htm]Tragedy of the Commons[/URL], which treats of this problem.
[QUOTE]The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.
As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?" This utility has one negative and one positive component.
The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly + 1.
The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision*making herdsman is only a fraction of - 1.
Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another.... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit -- in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. [B]Freedom in a commons brings ruin to all[/B]. [/QUOTE]
Our Capitalist system (or whatever you want to call what we have now) treats our social capital as a commons. Thus, for example, Calvin Klein can mine out large chunks of our common social capital by running its infamous "kiddie porn" advertisement campaign ten years ago, thereby privatizing the value thereof. That's what all the "shock jocks" and others purveyors of advertising broadcast time do - they're taking from the common stock of social capital, and putting it in their pockets. But since that goes unpunished, rational economic actors can only respond in kind, taking what they can from the common social capital while the getting's good. Thus the "race to the bottom" - just when you thought it couldn't get any worse than Beavis and Butthead, along comes Jackass.
But, again as Munger points out, the reason economics can't seem to get a handle on this is due to the fact that modern economics ignores what it can't quantify. The value of social capital is nigh unto impossible to place a dollar and cents value on, and so it is ignored.
Our big problem, IMHO, is our inability to recognize the existence of social capital, and by extension our failure to recognize its theft by the big corporate advertisers.
We are in a classic "Tragedy of the Commons" situation, and it is indeed leading us to ruin, as Hardin put it.
Distributism recognizes social capital implicitly, since it places economic activity in its rightful place: in direct relation to and tight nexus with a man's labour in the service of himself, his family, his community, and his nation. It corrects the error common to both Capitalism and Socialism in placing economics at the center of man's life. Economic activity is a subsidiary thing, it isn't the center of our existence. Actually, I think it fair to say that both Capitalism and Socialism are idolatrous for precisely that reason, and must therefore be rejected by all Christians.
IMHO, of course.
Walter
2004-06-19 17:31 | User Profile
'Social capital' is an extremely vague concept. For this reason and others, it is not something that can be well-handled by government regulation. If people don't like Calvin Klein, they should work to educate others about it's evil, and boycott it and its partners. The problem is that the time and energy for such endeavours is limited by the confiscatory state, and its promotion of leftist ideology through public education.
2004-06-20 03:45 | User Profile
[QUOTE=darkstar]'Social capital' is an extremely vague concept. For this reason and others, it is not something that can be well-handled by government regulation. If people don't like Calvin Klein, they should work to educate others about it's evil, and boycott it and its partners. The problem is that the time and energy for such endeavours is limited by the confiscatory state, and its promotion of leftist ideology through public education.[/QUOTE]
Your response tends to prove my point. You find it difficult to quantify social capital, and so you choose to ignore it.
Social capital is indeed "vague" - it's very hard to quantify. But that does not imply that we can ignore its existence. It does exist - everybody agrees with that, including Adam Smith. Adam Smith's free market only can exist within the matrix of a (mostly) honest, sober, and religious people. The strength of this web of relations we call civil society is "social capital." Calvin Klien's actions constitute theft from that common field that we're all pasturing our economic sheep on.
An attack on the commons of our social capital is the very worst sort of act against the King's peace. It's like any other crime in that most fundamental regard. But would you advocate educational measures against a bank robber? I think not. Penal sanctions - PUNISHMENT - is the order of the day.
Calvin Klein committed violence on our commonweal. Calvin Klein privatized value from the commons, and destroyed our common social capital in the process. That cannot be allowed, and clearly measures a bit stronger than vague educational measures are warranted.
One plank in the platform usually advanced by Distributists is an end to advertising. I agree with that in the main. We should limit commercial speech to factual statements about price and quantity, with perhaps some allowance made for puffery in regard to quality. But it really must end there. No more big corporations spewing filth into our common air waves. No more study groups identifying psychological "need states" that play on people's weaknesses without their knowledge to induce them to buy a candy bar or a soft drink or an egregiously overpriced pair of jeans. I've SEEN all of that, my friends. You can't imagine the sneering contempt advertisers have for you. To them you are just laboratory rats.
And end to advertising as we know it must be part of our Nationalist program.
Walter
2004-06-20 06:28 | User Profile
I don't just find it difficult to 'quanity'--I find it unlikely that this concept of 'social capital' actually makes much sense. (You want to supply some quotes of Smith on 'social capital'?) You seem to be mixing up metaphor with reality.
Yes, there are such things as 'web of relationships,' but we don't own them. They just are. You can affect them, improve them, damage them, sure. But why one would think the government would do a good job managing them is beyond me.
Anyway, you'll take away my right to advertive over my dead body--or rather, you wont take it away at all, because 'distributism' is never going anywhere.
2004-06-20 06:37 | User Profile
Anyway, I should probably stop posting on the ills of distributism. Although I think there is much to be gained from libertarian-communitarian debates, most distributists just have too many ideas that I consider plainly weird for me to really get much out of debate with them on their pets issues.
2004-06-20 11:31 | User Profile
[QUOTE][darkstar]Yes, there are such things as 'web of relationships,' but we don't own them. [/QUOTE]
This "web of relationships" is coomonly referred to as "social capital."
[QUOTE]They just are. You can affect them, improve them, damage them, sure. But why one would think the government would do a good job managing them is beyond me.[/QUOTE]
But that's the only legitimate function of government.
The job of government is precisely to protect the organic "web of relationships" we call civil society. In economic terms, the classic/liberal state's job is to prevent externalities - to stop individuals from passing along their costs to other individuals (such as preventing robbery and fraud) to society at large (as in the case of increasing television ratings by lewd displays).
Who else but government is supposed to prevent theft, either from individuals or from the community at large?
Should the government not stop, say, Weyerhauser from logging every last tree off a national park? Clearly, the government can and must do precisely that. In the same way, only the government can effectively combat Calvin Klein from mining the social value of generations of Christian education and morality and pocketing the difference.
[QUOTE]Anyway, you'll take away my right to advertive over my dead body--or rather, you wont take it away at all, because 'distributism' is never going anywhere.[/QUOTE]
None of our proposals have much of a chance, but as Yggdrasil points out collapse makes everything possible.
In this regard Distributism is uniquely positioned, because the "collapse" that Ygg and others predict (Charlie Munger alluded to it in the speech I referenced here) is of the virtual economy. Things like the NASDAQ and the Chicago Board of Trade and so forth will collapse according to this theory. But such a collapse good for Distributism, since Distributism is all about economic reality; real people doing real work to produce real goods and services, without the virtual reality constructs of corporations, usury and cheap advertising. If our virtual reality economy ever runs up against reality, people will be hungry for answers, and Distributism is like a big steak dinner compared to the ersatz diet of Capitalism.
Distributism is also good for us European Americans since, as Kevin McDonald and others point out, Jews are very much invested in running the virtual reality economy we call Capitalism. Investment bankers, corporate lawyers, advertising and media executives, stockbrokers, tax accountants, pundits and scribblers of all sorts - Jews dominate all of those environmental niches. In this way virtual reality Capitalism is our enemy's home fortress. Distributism is aimed directly at the foundation of that fortress, and should be supported by all nationalists even if they have problems with this or that aspect of the program, in my very humble opinion.
Walter
2004-08-17 14:14 | User Profile
I found the text copied out on an old [URL=http://www.freerepublic.com/forum/a394a6c9e4986.htm]Free Republic [/URL]. Enjoy. Walter
THE BETRAYAL OF ADAM SMITH
Proponents of corporate libertarianism regularly pay homage to Adam Smith as their intellectual patron saint. His writing remains to this day the intellectual foundation of policies advanced in the name of market freedom that are allowing a few hundred corporations to consolidate their control over markets all over the world.
Ironically, Smith's epic work The Wealth of Nations, which was first published in 1776, presents a radical condemnation of business monopolies sustained and protected by the state. Adam Smith's ideal was a market comprised solely of small buyers and sellers. He showed how the workings of such a market would tend toward a price that provides a fair return to land, labor, and capital, produce a satisfactory outcome for both buyers and sellers, and result in an optimal outcome for society in terms of the allocation of its resources. He made clear, however, that this outcome can result only when no buyer or seller is sufficiently large to influence the market price-a point many who invoke his name prefer not to mention. Such a market implicitly assumes a significant degree of equality in the distribution of economic power-another widely neglected point.
Indeed, Smith was almost fanatical in his opposition to any kind of monopoly power, which he defined as the power of a seller to maintain a price for an indefinite time above its natural price. Indeed, he asserted that trade secrets confer a monopoly advantage and are contrary to the principles of a free market. He would surely have strongly opposed current efforts by market libertarians to strengthen corporate monopoly control of intellectual property rights through the General Agreement on Tariffs and Trade (GATT). The idea that a major corporation might have exclusive control over a lifesaving drug or device and thereby be able to charge whatever the market will bear would have been anathema to him.
Furthermore, Smith did not advocate a market system based on unrestrained greed. He was talking about small farmers and artisans trying to get the best price for their products to provide for themselves and their families. That is self-interest-but it is not greed. Greed is a high paid corporate executive firing 10,000 employees and then rewarding himself with a multimillion dollar bonus for having saved the company so much money. Greed is what the economic system being constructed by the corporate libertarians encourages and rewards.
Smith had a strong dislike for both governments and corporations. He viewed government primarily as instruments for extracting taxes to subsidize elites and for intervening in the market to protect monopoly. In his words, "Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all." Smith made no mention of government intervention to set and enforce minimum social, health, worker safety, and environmental standards in the common interest-to protect the poor against the rich. We can imagine that given the experience of his day the possibility never occurred to him.
The theory of market economics, as contrasted to free market ideology, specifies a number of basic conditions needed for a market to set prices efficiently in the public interest. The greater the violation of these conditions, the less efficient the market system. Most basic is the condition that markets must be competitive. I recall the professor in my elementary economics course using the example of a market comprised of small wheat farmers selling to small grain millers to illustrate the idea of perfect market competition. Today, four companies-Conagra, ADM Milling, Cargill, and Pillsbury-mill nearly 60 percent of all flour produced in the United States, and two of them-Conagra and Cargill-control 50 percent of grain exports.
In the real world of unregulated markets, successful players get larger and in many instances use the resulting economic power to drive or buy out weaker players to gain control of ever larger shares of the market. In other instances "competitors" collude through cartels or strategic alliances to increase profits by setting market prices above the level of optimal efficiency. The larger individual and more collusive market players become, the more difficult it is for newcomers and small independent firms to survive, the more monopolistic and less competitive the market becomes, and the more political power the biggest firms wield behind demands for concessions from governments that allow them to externalize ever more of their costs to the community.
Given this reality, one might expect the economic rationalists to be outspoken in arguing for the need to restrict mergers and acquisitions and break up monopolistic firms to restore the conditions of a competitive market. More often they argue exactly the opposite position-that to "compete" in today's global markets firms must merge into ever larger combinations. In other words, they espouse a theory that assumes small firms and advocate policies that strengthen monopoly.
Another basic condition of efficient market allocation is that the full costs of production must be born by the producer and be included in the producer's selling price. Economists call it cost internalization. This condition is so basic to market theory that it is rarely disputed even by the most doctrinaire of free market ideologues. If some portion of the cost of producing a product are borne by third parties who in no way participate in or benefit from the transaction, then economists say the costs have been externalized and the price of the product is distorted accordingly. Another way of putting it is that every externalized cost involves privatizing a gain and socializing its associated costs onto the community.
Externalized costs don't go away-they are simply ignored by those who benefit from making the decisions that result in others incurring them. For example, when a forest products corporation obtains rights to clear-cut Forest Service land at give away prices and leaves behind a devastated habitat, the company reaps the immediate profit and the society bears the long term cost. When logging companies are contracted by the Mitsubishi Corporation to cut the forests of the Penan tribes people of Sarawak the corporation bears no cost for devastating native culture and ways of life.
Similarly, Dow Chemical externalizes production costs when it dumps wastes without adequate treatment, thus passing the resulting costs of air, water and soil pollution onto the community in the form of additional health costs, discomfort, lost working days, a need to buy bottled water, and the cost of cleaning up what has been contaminated. Walmart externalizes costs when it buys from Chinese contractors who pay their workers too little to maintain their basic physical and mental health or fail to maintain adequate worker safety standards and then dismiss without compensation those workers who are injured.
When the seller retains the benefit of the externalized cost, this represents an unearned profit-an important source of market inefficiency. Passing the benefit to the buyer in the form of a lower price creates still another source of inefficiency by encouraging forms of consumption that use finite resources inefficiently. For example, the more the environmental and social costs of producing and driving an automobile are externalized, the more automobiles people buy and the more they drive them. Urban sprawl increases, more of our productive lands are paved over, more pollutants are released, petroleum reserves are depleted more rapidly, and voters favor highway construction over public transportation, sidewalks, and bicycle paths.
Yet rather than demanding that costs be fully internalized, the corporate libertarians are active advocates of eliminating government regulation, pointing to potential cost savings for consumers and ignoring the social and environmental consequences. Similarly they advise localities in need of employment that they must become more internationally competitive in attracting investors by offering them more favorable conditions, i.e., more opportunities to externalize their costs through various subsidies, low cost labor, lax environmental regulations, and tax breaks.
Market forces create substantial pressure on business to decrease costs and increase profits by increasing efficiency. The corporate rationalists fail to mention that one way firms increase their "efficiency" is to externalize more of their costs. The more powerful the firm, the greater its ability to take this course. As ecological economist Neva Goodwin has observed, ". . . power is largely what externalities are about. What's the point of having power, if you can't use it to externalize your costs-to make them fall on someone else?" When corporate libertarians promote practices that allow corporations and wealthy investors to socialize their costs and privatize their gains, they reveal their fidelity to a political interest rather than to economic principles.
A third condition basic to the market theories of Adam Smith, but rarely noted by corporate libertarians-is that capital is locally or nationally rooted and its owners are directly involved in its management. Adam Smith made quite explicit in The Wealth of Nations his assumption that capital would be rooted in place in the locality where its owner lived. He made it clear that this condition is critical to enabling the invisible hand of the market to translate the pursuit of self-interest into optimal public benefit. Indeed, the following is the only sentence in the entire text in he made reference to the invisible hand.
By preferring the support of domestic to that of foreign industry, he intends only his own security, and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
The circumstance that Adam Smith believed induced the individual to invest locally, was the inability to supervise his capital when employed far from his home. In the current age of instant communications by phone, fax, and computer, and twenty-four hour air travel to anywhere in the world that circumstance no longer endures. However, the advantage to the community and the larger society of productive investment being locally owned remains. Local investment is more likely to remain in place and is more easily held to local standards,
Smith was also quite explicit that optimal market efficiency depends on the owners of capital being directly involved in its management-the owner managed enterprise. One could also argue that implicitly he favored worker owned enterprises, as in his ideal small firm owner, manager, and worker were one and the same person.
Thus Smith's vision of an efficient market was one comprised of small, owner-managed enterprises located in the communities in which the owners reside, share in the community's values, and have a personal stake in its future. It is a market that bears little in common with a globalized economy dominated by massive corporations without local or national allegiance managed by transient professionals who are removed from real owners by layers of investment institutions and holding companies.
Economist Neva Goodwin, who heads the Global Development and Environment Institute at Tufts University suggests that the neoclassical school of economics, with which many of most vocal proponents of corporate libertarianism are identified, may be roughly characterized as the political economy of Adam Smith minus the political analysis of Karl Marx.
The classical political economy of Adam Smith was a much broader, more humane subject than the economics that is taught in universities today. . . . For at least a century it has been virtually taboo to talk about economic power in the capitalist context; that was a communist (Marxist) idea. The concept of class was similarly banned from discussion.
Adam Smith was as acutely aware of issues of power and class as he was of the dynamics of competitive markets. However, the neoclassical economists and the neomarxist economists bifurcated his holistic perspective on the political economy, one taking those portions of the analysis that favored the owners of property and the other those that favored those who sell their labor. Thus, the neoclassical economists left out Smith's considerations of the destructive role of power and class. And the neomarxists left out the beneficial functions of the market. Both advanced social experiments embodying a partial vision of society on a massive scale and with disastrous consequence.
IN PRAISE OF COMPETITIVE MARKETS When the necessary conditions are met the market is a powerful and efficient mechanisms for allocating resources. What we now have is not a market economy. It is increasingly a command economy centrally planned and managed by the world's largest corporations to maximize financial returns to top managers and the wealthiest shareholders at the expense of the rest of society. If the corporate libertarians were to bear serious allegiance to market principles and human rights, they would be calling for policies aimed at achieving the conditions in which markets function in a democratic fashion in the public interest. They would be calling for measures to end subsidies and preferential treatment for large corporations, to break up corporate monopolies, encourage the distribution of property ownership, internalize social and environmental costs, root capital in place, secure the rights of workers to the just fruits of their labor, and limit opportunities to obtain extravagant individual incomes far greater than their productive contribution.
Corporate libertarianism is not about creating the market conditions that market theory argues will result in optimizing the public interest. It is not about the public interest at all. It is about defending and institutionalizing the right of the economically powerful to do best serves their immediate interests without public accountability for the consequences. It places power in institutions that are blind to issues of equity and environmental balance.