Posted by Brad @ 12:00 pm on November 25th 2008

New Conservative Principle Six: Free Market, not Big Business

This is a big one.

One of the most obnoxious side-effects of Randian economic thinking is its conflation of corporatism with free markets. I find it very noble to defend oil companies (who do, all told, a pretty phenomenal job in America), or Wal Mart, or business and entrepreneurship generally. That’s all well and good. But I find one of the most corrosive and intellectually lazy aspects of libertarian Republicanism in recent decades (really, since the early 80s) to be the notion that “what’s good for Ford is what’s good for America”.

As I mentioned below, one of the pitfalls Republicans fall into is their conflation of the status quo as being one and the same with free markets, when in fact that is far from the case. We have managed care in health care, we have a blended economy as far as our financial, real estate, and even our manufacturing economies are concerned, and for anyone to argue that our tax codes as it pertains to corporations is already suffering from too much progressivity, you’ve got blinders on.

The fact of the matter is our government puts their thumb on the scale in favor of corporations and big business—either explicitly or (just as often) implicitly—far more often than it does to their detriment. And yet, to hear Republicans speak of it, free market advocacy amounts to nothing more than critiquing all liberal policies, in favor of the status quo. Americans at large, quite rightly, smell a rat.

The best comprehensive smackdown of this way of thinking is up at CATO, called “Corporations vs. the Market; or, Whip Conflation Now.” The whole thing is worth a read. As it pertains to this, a few excerpts:

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.)

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.

There is an obvious tendency for vulgar libertarianism and vulgar liberalism to reinforce each other, as each takes at face value the conflation of plutocracy with free markets assumed by the other. This conflation in turn tends to bolster the power of the political establishment by rendering genuine libertarianism invisible: Those who are attracted to free markets are lured into supporting plutocracy, thus helping to prop up statism’s right or corporatist wing; those who are repelled by plutocracy are lured into opposing free markets, thus helping to prop up statism’s left or social-democratic wing. But as these two wings have more in common than not, the political establishment wins either way.[19] The perception that libertarians are shills for big business thus has two bad effects: First, it tends to make it harder to attract converts to libertarianism, and so hinders its success; second, those converts its does attract may end up reinforcing corporate power through their advocacy of a muddled version of the doctrine.

Much more at CATO. Read it. Incorporate it.

7 Comments »

  1. Yep.

    Comment by Rojas — 11/25/2008 @ 1:05 pm

  2. This is a fantastic principle. Once upon a time I went to a libertarianish gathering and one of the people in the meeting brought up an excellent point. He noted how as he was listening to some leftist talk radio there was a connection between free markets and multinational corporatism. It was his point that it is extremely difficult to separate those concepts in the minds of many of the left. It’s a devilish conundrum that we free marketers find ourselves in. The discussion in the linked CATO article about the meaning of capitalism versus free markets is a worthy concept to note.

    In addition, many libertarians are beginning to rethink the way they present their views, and in particular their use of terminology. Take, for example, the word “capitalism,” which libertarians during the past century have tended to apply to the system they favor. As I’ve argued elsewhere, this term is somewhat problematic; some use it to mean free markets, others to mean corporate privilege, and still others (perhaps the majority) to mean some confused amalgamation of the two:

    By “capitalism” most people mean neither the free market simpliciter nor the prevailing neomercantilist system simpliciter. Rather, what most people mean by “capitalism” is this free-market system that currently prevails in the western world. In short, the term “capitalism” as generally used conceals an assumption that the prevailing system is a free market. And since the prevailing system is in fact one of government favoritism toward business, the ordinary use of the term carries with it the assumption that the free market is government favoritism toward business.[23]

    Hence clinging to the term “capitalism” may be one of the factors reinforcing the conflation of libertarianism with corporatist advocacy.[24] In any case, if libertarianism advocacy is not to be misperceived—or worse yet, correctly perceived! —as pro-corporate apologetics, the antithetical relationship between free markets and corporate power must be continually highlighted.

    I find myself avoiding the word capitalism for those exact reasons. It is often, and not wrongly, associated with big business and corporate welfare. Those government-private partnerships are deeply antithetical to a true free market.

    Comment by Cameron — 11/25/2008 @ 6:07 pm

  3. My litmus test for this is the cable companies.

    When some ‘libertarian’ tells me that the cable companies should not be regulated I know I am dealing with a) and idiot or b) a shill for big corporations (read: wsj editorial page).

    Cable companies are some of the most government protected monopolies out there. Try to start your own cable company and negotiate a deal with new subscribers. Won’t happen. There are many laws on many levels (local, state and federal) that will get in your way.

    The results is he bad service and high prices we get today.

    TV over IP may save us, but the cable companies will do everything in their power to stop it or impinge on it and today’s Republcan, in general, will try to assist them.

    Comment by daveg — 11/25/2008 @ 9:07 pm

  4. Why regulate the cable companies? Why not just end the government protection?

    Comment by Redland Jack — 11/25/2008 @ 9:43 pm

  5. What I got from daveg there was that if you don’t argue ending the protections at the same time as arguing deregulation, you’re no friend of the free market, and I don’t think he’s wrong.

    Comment by Mortexai — 11/25/2008 @ 11:10 pm

  6. Well, then I’m okay with it.. :)

    In general, I agree with the thread… that is, favoring business and favoring the market are not at all the same thing.

    Comment by Redland Jack — 11/26/2008 @ 12:02 am

  7. Another great example of this was deregulation of the savings and loans.

    They removed regulations about what they could invest in but kept the FDIC guarantee of the funds. It led to the S&L crisis that the government had to bail out.

    That’s not free market reform, despite what the business press called it at the time.

    Comment by daveg — 11/26/2008 @ 12:59 am

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