November 7, 2005 Leave a comment
If my last post was too long and involved, I offer you a less serious exploration of Rothbardian ethics from the great white north:
individualism for the masses
November 7, 2005 Leave a comment
For anyone bothering to keep track, I use the term free market in the following way:
If a ‘market’ is a system of exchange, and ‘free’ means that it is voluntary, that is to say, uncoerced, then a ‘free market’ is a system in which all voluntary exchanges are permissible and all involuntary exchanges are impermissible.
See my BlackCrayon definition for more details and variants.
I use ‘free’ as a synonym for voluntary or uncoerced and ‘market’ to mean exchange.
I have yet to update my ‘capitalism’ entry satisfactorily, but here’s a thumbnail of what I now use the term to mean:
a system of divisible and transferable private property titles in the means of production (i.e., capital), whereby ownership, production, and distribution are guided by market prices and profit motives
For me, free market is a principled category, while capitalism is a practical one. The first is ethical and the second is economic.
When the two are combined into free-market capitalism, the result is that (1) the consumers drive the profits of the capitalists and therefore the direction of production, and (2) the costs of production are internalized. Negative externalities such as pollution are violations of free-market capitalism. Subsidized inputs and conditions brought about by military imperialism are violations of free-market capitalism. Tariffs, quotas, corporate welfare, licensure, government monopoly, anti-trust law, coercive regulation and all other forms of political privilege are violations of free-market capitalism.
It is capitalism that creates wealth and capitalism that solves the problem of production and most of the problem of distribution. It is the free market that expresses preferences, maintains rights, and internalizes costs. Semantic skeptics and anti-intellectuals will scoff at the distinction between the two — will see it as a difference that makes no difference — but there is at least one critically important aspect of the free society that depends on free markets minus capitalism: the charitable sector.
Charity is properly part of the realm of the free market (voluntary exchange), but does not involve transferable fractional property titles, does not depend on market prices, and does not steer distribution by the profit motive.
The classical liberal tradition is based in the belief that civil society can manage itself: that liberty produces prosperity, that free-market capitalism improves the condition of the masses, and that the political class has nothing beneficial to offer, no matter what rationalization they come up with. Civil society (despite Hillary Clinton’s attempted language banditry) refers to the voluntary sector. It refers to the free market both in the capitalist sense and in the charitable sense.
Why is this distinction, which seems so obvious to anyone who focuses on the word ‘voluntary’, so hard for so many people to grasp — including the supposed friends of liberty?
Ronald Coase argues (“The Lighthouse in Economics,” Journal of Law & Economics, 17,2, Oct 1974, pp. 357-76; reprinted here) that mainstream theory is demonstrably wrong on public goods because lighthouses (he claims) were historically provided privately and funded by fees rather than taxes. Block offers some explanation for how this is possible, but then he points out that Coase’s historical claim is based on a category mistake: Coase says, “The role of the government was limited to the establishment and enforcement of property rights in the lighthouse.” But what this means is that when a ship came into port, the cops showed up and demanded a lighthouse fee.
However much we might prefer this means of internalizing costs, it is self-evidently not voluntary and therefore not part of the free market. As Block puts it, “Coase couldn’t distinguish a tax … from a voluntary payment. I mean these Chicagoites — the difference between a voluntary payment, which is just, and a coercive levy, which is not, somehow misses them, because the concept of justice doesn’t exist for them …”
(The fact that Coase’s example is wrong, does not mean there aren’t better historical examples of private lighthouses.)
Well, it isn’t just the Chicagoites who can’t distinguish the private sector from the government. On LRC today there’s a Rothbard article called “Libertarian Cover for the Corporate State,” which first appeared in the March 1, 1969, issue of The Libertarian Forum under the title “The Nixon Administration: Creeping Cornuellism.”
The rise to fame and fortune of Richard C. Cornuelle is a peculiarly 20th-century variant of the Alger success story. Twenty years ago, Dick, a bright young libertarian, was a student of the eminent laissez-faire economist Ludwig von Mises at New York University; and with a few other libertarians of that era he soon saw that the consistent libertarian and laissez-faire position is really “right-wing anarchism.”
As the years went on, Dick decided to abandon the world of scholarship for direct action, which he originally saw as bringing us closer to anarchism in practical, realistic terms. On reading De Tocqueville, he claims to have been the first person in over a century to realize that there exists, in addition to government and private business, a third set of institutions ? non-profit organizations. Anyone who had ever heard of a church bazaar also realized this, but Dick brushed such considerations aside; he had found his gimmick, his shtick. He dubbed these non-profit institutions the “independent sector,” and he was off to the races.
[…] Here entered the virus of Cornuellism. For it seems that, as superb as it is, the “Independent Sector didn’t keep pace while the rest of the country was developing.” The Independent Sector, it seems, has “never learned to organize human activity efficiently.” The Examiner adds: To show the Independents how, Cornuelle thinks it may be necessary to add another department to the Federal government, of all things … It would be an agency that would find out what public problems are coming up and decide how to meet them effectively.”
[…] There is no need to keep belaboring the Cornuelle Saga. After all we are not so much interested in the triumph of one man’s career over “dogmatism” as we are in what this portends for the Nixon Administration. For here is what the Washington Post now reports: a “central theme” of the new Administration will be a nationwide drive to stimulate “voluntary action” against social ills. It adds that Secretary George Romney is “in charge of planning the voluntary action effort.” This concept needs to be savored: government, the quintessence of coercion, is going to plan a nationwide “voluntary” effort. George Orwell, where art thou now? War is Peace, Freedom is Slavery, Voluntary Action is Government Planning.
[…] But we must not look at this sordid story as merely the saga of a former anarchist who coined a “new” political philosophy which might well result in his climbing to a high post in government. The situation is far more sinister than that. For this “voluntary” hogwash has a familiar smell: the smell of the Presidency of Herbert Hoover, whose political life-style was one of frenetically promoting “voluntary” programs, with the mailed fist of governmental coercion always resting inside the velvet glove. Hoover’s pseudo-“voluntary” New Deal was the complete forerunner of Franklin Roosevelt’s candidly coercive New Deal. It has another smell: the smell of Mussolini’s fascism, in which coercive government multiplied its power by mobilizing the support of masses of misguided “volunteers” from among the citizenry. And finally, Nixon-Cornuellism has the smell of the burgeoning corporate state — the political economy of fascism — which has increasingly marked the American system. It is the “enlightened” corporate state where nothing is any longer distinctively “private” or “public”; everything is cozily mixed, in an ever-intensifying “partnership” of Big Government and Big Business (with Big Unionism as the happy junior partner). This is the sort of polity and economy that we have in the United States, and Creeping Cornuellism embodies still more of it.
Not only more of it; for Nixon-Cornuellism is, to the libertarian, a peculiarly repulsive variant of American corporatism. For it cloaks and camouflages the viper of statism in the soothing raiment of voluntaristic and pseudolibertarian rhetoric. What political style can be more disgusting than that?
An afterthought: might Richard Cornuelle have been one of the “anarcho-Nixonites” Rothbard referred to in his January 1971 article on Nixonian Socialism?