Libertarian capitalism
Saturday, June 27, 2009 at 05:38PM Since capitalism is most often defined and discussed by different people according to an individual's ideology, it's helpful to remember from time to time that capitalism, especially understood through the ideas of libertarianism, has a specific, rather limited, definition --
Main Entry: cap·i·tal·ism Pronunciation: \ˈka-pə-tə-ˌliz-əm, ˈkap-tə-, British also kə-ˈpi-tə-\ Function: noun Date: 1877 : an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market
This is pretty straightforward, yet to read some discussions of capitalism, you'd think it's the most nefarious system known to humankind. Contrary to some beliefs, capitalism is not a conspiracy of rich, old, white men to oppress the poor, rape the earth and deny assistance to the needy. Capitalism wasn't designed to provide a means for corporations to work in concert with the state to create an ogliarchy. If a country has allowed its government to work with corporations to control the economy, then that country doesn't have an economic system which can be called capitalism. Anytime businesses and government can collude to limit competition, then the economic system is something other than capitalism. Some say that in reality this is what naturally happens when a country starts with capitalism -- I say this is what happens when government is not limited and prevented from interfering in the economy. There's a big difference between the two propositions.
Is it possibile for a country to maintain a government which does not interfere in the economy? If a constitution is written which forbids government intervention in the economy, and abides by the constitution, then the answer is -- yes. The US Consitution had loopholes regarding interstate trade and the welfare of the nation which allowed government to crawl through like a bunch of termites which eventually destroyed the foundation.
Now, certainly, most people will have a conniption fit at the suggestion government should be prevented from intervening in the economy, and when you ask -- why? -- they will begin describing the horrible results when government and businesses collude to control the wealth. But, these critics of capitalism don't seem to realize they are making the argument for a limited government. They automatically assume a government/corporation relationship, but this is the reason to prevent the government from intervening. When they see the error, they immediately begin claiming capitalism would do this anyway if unregulated -- but they never explain why it's inevitable, although they will likely explain how capitalism creates commercialism, and how it ignores the needy in society -- capitalism doesn't do these things, people do. A libertarian-minded society would envision the diverse possibilities.
Capitalism is a system and there is nothing in the system which prevents a spiritual, artistic-minded society or a society where there is voluntary benevolence -- charity -- or a society concerned with protecting the environment, for that matter. Capitalism is merely a system which prevents the government from interfering with private ownership, prices, investments, production or distribution of goods -- or interfering with competiton. Ownership is protected from theft, forceful taking or damage, the private decisions are contractual and protected from violation or fraud, and competition is unhampered in the market. Outside that system, private citizizens should be free to make any arrangement they want to make as long as there are no violation of basic rights. If some people want to give money to others, then capitalism doesn't prevent this. If people decide they'd rather live less commercial lives and form communes in the country, capitalism doesn't prevent this.
What gets tricky is when some say that a capitalistic system prevents the government from stopping harm done to the environment by unregulated production. But in order for private ownership to have any meaning it must be protected from theft, forceful taking or damage. If a company was putting toxic chemicals in the air, it would be violating the rights of all those it affects, and it would even be affecting the people who work in or own the business. What makes us think we can't voluntarily work out environment standards -- especially, now, knowing what we know? It amazes me to think how so many people view businesspeople as heartless, ignorant and myopic. It's true that businesspeople will do what is best for business, but I'm not sure everyone understands what's best for busines and how these decisions are made. Knowing what we know today, how many companies would poison the environment -- the environment they live in, the communities they live in -- risking backlash, condemnation, sickness, etc?
Even if some company led by a madman or madwoman willy-nilly poisoned the environment around them, there are ways to set up accreditation processes that industry voluntarily submits itself to upfront to instill confidence in the processes -- and there would also be courts to take up the issues of violation and harm. There's no reason to think that government regulation will do any better than a voluntary process -- plus, with government regulation, there's the danger of political motivations using regulation to engineer industry according to ideology or special interest pressure. Standards can be voluntarily developed which govern environmental concerns -- any company bent on violating the standards and harming the environment would never survive the societal pressure to adhere to the standards -- the company would adhere or go out of business.
It's in a company's best interest to maintain good public relations and for the brand to represent excellence. It's not in any company's interest to knowingly destroy the environment and risk the health of the public, of which the company's employees are a part.
I don't think many people have thought through the issues of capitalism, limited government and free markets -- it appears most people have merely accepted the state version which always places government in the position of public protector and the capitalist system as the violator. What an interventionist government does, in part, is attract dishonest, politically-motivated businesspeople who lobby the government for favor so that competition is limited and the favored companies have unfair advantage -- which substitutes the system of capitalism with a system of cronyism and corruption.
So, the choice is between trusting voluntary agreements in a free market or trusting government to regulate business and, thus, the economy. A political system which is a constitutionally limited republic fits well with the economic system of capitalism. Very few people trust such a combination in the 21st century and they have myriad reasons for why it's naive, utopian, doomed to failure, selfish, consumeristic, downright evil, simplistic, etc., yet it's never really been tried in earnest. From the beginning of our nation there has been government intervention and collusion of government and business. In the 21st century, however, the situation is ripe for the re-assessment of these systems. We have evolved to a point where we can better understand our problems because we now have better information and much more knowledge of how the world works and of the collective problems we face. The atomistic idividual has been shown as myth -- cooperation is understood as an inherent part of capitalism. Perhaps a new social imaginary will emerge, one based on honest assessment. The idea that we've abided by capitalism and free markets, only to fail, is one of the greatest con jobs in history. Libertarianism defines the conflict.
Reader Comments (4)
"Anytime businesses and government can collude to limit competition, then the economic system is something other than capitalism." Indeed. Your point here is that business and government collude to limit economic competition. But what do we call it when business and government collude to limit political competition, as in our own case, to two ruling parties? Bipoligarchy.
Sounds like a good name to me. It is all part of the power game, it seems. I no longer believe that a two party system is inevitable in America. I envision the rise of at least a third party.
The arrangement of which the first commenter spoke is usually called crony capitalism. It's been observed in many Latin American countries, and in the Philippines under Ferdinand Marcos, among other places. Favored companies protect the political elite, while the political elite shelter the favored companies from upstart competition. The resemblances to Mussolini's and Hitler's fascisms are pervasive and strong.
Interestingly, the political affiliation we call conservatism has no equivalent in such countries. The principal aim of the elite in such a system is to keep a healthful distance between themselves and the peasants -- what Charles Murray and Richard Herrnstein characterized as "the walled hacienda on the hill." That wall is typically manned by armed guards, permanently authorized to shoot to kill -- for the lord of the manor is fully confident that there need be no unpleasantnesses with the federales over a corpse or two.
Thanks, Francis -- hopefully we can get a handle on it before it gets too out of hand.