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Ira Katz has written a piece entitled “An Important Social/Political/Economic Question of Our Time.” In this, he examines some of the many criticisms of a free market, capitalist order. He ends the piece with an important question, and a challenge to the LRC community to answer the question, as follows (emphasis in original):
I believe hierarchy is a natural and necessary development of a functioning economy and society. But it seems to me most people believe in “equality” and that the dangers I have described are the results of capitalism itself. I am ready to defend a true free market and capitalism in every sense but on the surface it seems there can be some truth to this charge today. So I pose this question:
I believe the answer is critical in our efforts to maintain a free society and in determining ways to oppose this power? Mass disobedience is critically needed so people must be convinced that freedom is the basis of our civilization and the free market is one of the pillars that maintain it.
My challenge to the LRC community is to refute this charge against capitalism addressing the historical context, the current dilemma, and future directions.
Consider the following my humble contribution to what I hope is a more robust dialogue around this important question. I suspect that even my meager contribution will take more than one post…. I suspect this, because Ira’s question has brought to focus an issue I have been struggling with, an issue that I wasn’t sure how to succinctly address, one that – when outlined, as I have done – required an extensive list of topics.
My struggle was something along the lines of Ira’s challenge: “…addressing the historical context, the current dilemma, and future directions.” It is an overwhelming idea for me. I have written around this, many times and in many ways. But not succinctly, in a single narrative thread. I guess I should both thank Ira and curse him at the same time…
To begin, I will offer my understanding of some of the terms and concepts in the excerpt from Ira’s post, above.
“I believe hierarchy is a natural and necessary development of a functioning economy and society.”
To clarify, I will use the following definition of hierarchy, which, I believe, is also consistent with Ira’s intent:
…any system of persons or things ranked one above another.
Given this definition, it seems to me that “hierarchy is a natural and necessary development” …full stop. It could be toward a dysfunctional economy and society just as well as a functioning one.
There will always be a system of rankings and ordering. The only question is: what is the value that provides the basis for determining the rank and order?
“But it seems to me most people believe in “equality” …”
Equality (or, I suspect more accurately, egalitarianism) is the value that current society is attempting to use to provide the basis for determining rank and order – hierarchy.
Egalitarianism: belief in the equality of all people, especially in political, social, or economic life.
The contradiction in this is overwhelming, as long as every value inherently establishes a hierarchy (and I defy anyone to demonstrate a functional or dysfunctional example otherwise). Egalitarianism is a value that requires that there is no hierarchy. It is a value that says we are to value nothing over anything else; that we are to value all things and all people equally.
Yet this is the value at which society is aiming today. That this is inherently contradictory – and that it is a contradiction that by definition cannot be overcome is demonstrated in the competition known as the oppression olympics: he who has the most letters attached to his identity wins the hierarchy battle. But then he is no longer “equal” to his peers as there is a hierarchy (and forgive me for using he / him in this; the English language cannot be so twisted to make any sense of our current reality). And this is why society is falling apart.
Which comes back to my initial clarifying point: there will always be a hierarchy, a system of ranking and ordering. The only question is: what is the value used to determined the basis on which things are ranked and ordered?
“…the dangers I have described are the results of capitalism itself.”
I will, for now, merely say “yes…and no.” But I will come to this later.
“…a true free market and capitalism…”
I will offer my understanding of this concept; it may not be Ira’s, but I suspect we are close. I caveat the following: I am no economist. Now, that is good news when considering most economists in the world and their horrendous understating of free markets; but I suspect many economists who will read this post actually understand free markets and capitalism – and, therefore, can do a much better job than I am in the following.
A true free market and capitalism requires respect for private property. As far as I can tell, it requires nothing more. This is both an end and means: it is necessary for price discovery, profit and loss, and accumulation of wealth – with accumulation of wealth being the ultimate measuring stick of success in free market capitalism.
It is on this point of respect for private property that free markets and capitalism align and correspond with libertarianism, therefore much of what I address is applicable to both the economic system of free market capitalism and the political system of libertarianism.
Price discovery is necessary to ensure that resources are being deployed by and to those who most highly value the resources. Price discovery offers a means by which each of us can place an objective value on that which we subjectively desire, thereby determining if the objective value is worth paying given our subjective wish.
Profit and loss ensures that those who believe they are making the best use of the resources are given justice. Those who actually make the best use of resources receive the justice of profit; those who actually make a poor use of resources receive the justice of loss.
The accumulation of wealth is both an outcome of respect of private property and a means to make available the capital goods that allow for a general increase in the standard condition of those in society. Free markets and capitalism best measure success in the accumulation of wealth. Wealth is the measuring stick that determines one’s place in this hierarchy if free market capitalism (hence, respect for private property) is the highest value held in society.
Probably a few thousand more words can be written on this topic – what is meant by free markets and capitalism – expanding on and adding to the points I made. But this will have to do for this post, and I hope it is sufficient.
“…government power.”
In its most basic form, those in position of authority with the responsibility of passing and enforcing laws and otherwise determining the rules of the game.
With all of this out of the way, I return to Ira’s question:
Is it inherent in the nature of free market capitalism for the most wealthy individuals and/or corporations to capture government power?
My answer is yes. Before all of my Austrian and libertarian friends go haywire, let me try to explain. Consider Ira’s question in this way:
Is it inherent in the nature of [the highest value used as the basis by which we determine a hierarchy] for [those who are most successful at demonstrating that value] to capture [the means through which the rules of the game are determined and enforced]?
In other words, is there something unique about free market capitalism in addressing Ira’s question, or is it a valid question for any value used to determine hierarchy? For example:
Is it inherent in the nature of [defending the tribe from physical danger] for [those who are best able to defend the tribe] to [have the most wives and concubines, secure the best housing, arbitrarily alter previously-agreed rules about compulsory service, etc.]?
I imagine anyone who studies animal and human behavior can better offer examples of this reality than I can, and why observations in the non-human animal world also apply to humans (as if human examples are not sufficient). It seems clear and obvious that this is in our nature (a law of nature, not to be confused with natural law). Those who best demonstrate success at the value by which society judges success will alter the rules to their favor. Why would they not?
You will, of course, argue that in this case we are no longer discussing free markets and capitalism. You are correct, and this is Ira’s point. My point is…this idea of changing and enforcing new rules by the ones at the top of the hierarchy is inherent in almost any value system, not only the hierarchy that uses free markets and capitalism as the value through which the hierarchy is determined.
Without getting too precise on dates (as this is a fool’s game in any case), certainly the nineteenth century can be considered as a period of relatively free markets and capitalism; the twentieth century is one where those who were most successful at the nineteenth century game began to significantly change the rules toward their favor.
Conclusion
(Only of part one…there will be more.)
Certainly, building wealth has always been of value, throughout man’s history. But it has only been the highest value in the last centuries, at least in the West – and the best means to achieve this value is through free markets and capitalism…in other words, respect for private property. It need not be the highest value for each individual for it at the same time to be the highest value on which society could agree.
In fact, isn’t this precisely the message by advocates of free markets and capitalism? When we trade, it is irrelevant the other values we do or don’t hold, whether we agree or disagree on these. This is quite true. Few of us need to hold free markets as the highest value for us to have agreed that it should be (at least for a time) the highest common value.
I think it can be argued that this has been the case since the Enlightenment, at least until recent decades, where this hierarchy based on egalitarianism is being attempted. It is on this topic that I will focus next, when I begin to address Ira’s request to address “the historical context, the current dilemma, and future directions.”
I say “begin,” as I don’t think it will happen in one additional post.
My comments are twofold:
ReplyDelete1. This discussion reminds me of the Iron Law of Oligarchy, which basically says that those who are best at something tend to take control over those areas. This is the type of meritorious hierarchy you are talking about.
2. Private property is foundational to free market capitalism. However another brick in the foundation is the sovereignty of the consumer. The market process is one where individuals make choices which direct the supply and distribution of all goods and services in a decentralized manner. For the market to be free means that there is not intervention or distortion in this process from outside entities.
It is no longer "free market" capitalism when oligarchs use government to then change the rules to reduce competition, increase demand, restrict supply, or in any way intervene in the market process.
That doesn't mean the market ceases to exist. But it contorts to fit within the new boundaries set up by the oligarchs. There is a market. There is private property. But it can't be called free anymore. At that point we start to call the economic system something else like mercantilism, corporatism, or cronyism.
Going back to the question. I do think it is inherent for oligarchs in free market capitalism to gain political power. But what they do with it determines whether the capitalism is free market or some other variety.
Agreed. I have this discussion with myself, and with at least one cousin occasionally. The fact is, a "free market" is nearly impossible to bring into existence, and as nearly impossible to maintain as to only ever be an abstraction--a theoretical tool and nothing more. So we benefit as the market moves towards freedom (strict private property protections), and we lose as it moves away from it. The oligarchs will always seek to move markets away from freedom and towards their own control. I find it incredibly difficult to convey this message to anyone unfamiliar with Austrian Economics. I don't think it changes the facts.
DeleteDo "capitalism" or "free markets" inherently beget government capture by the capitalists? No, not inherently, but historically yes. I don't anticipate a change, but it's possible, and essentially dependent on ideology and education far more than anything else.
RMB
Delete“…the sovereignty of the consumer…”
If private property is respected, this is inherent / given. The consumer is sovereign over his private property, therefore the consumer decides what is produced.
“But what they do with it…”
If it is wealth creation that is the highest value (trade, etc., as it has been in the West for some time), they will go the cronyism route. It must be something that society holds in common, and even higher, and that is outside of human control, that complements wealth creation but preserves free markets (and liberty).
P Szar,
Delete“No, not inherently, but historically yes.”
I agree with this. But there must be a value that society holds in common that is higher than free markets / wealth creation, such that the most successful capitalists (turned crony) are culturally precluded from doing so.
I don’t disagree with that. But what value is it? Once identified, the elusiveness of the means for attaining and maintaining this value is likely the major question, no?
DeleteFor me, Austrian economics, re: praxeology, has been far and away the preeminent means towards my own understanding of complex phenomena. Without that I find virtually all discussion or debate details into the weeds of subtle disagreement, because the other has no concept of praxeology, or epistemology in general.
“It must be something that society holds in common, and even higher, and that is outside of human control, that complements wealth creation but preserves free markets (and liberty).” -- Bionic
Delete“But what value is it?” – P Szar
“Love your neighbor as yourself.” – Jesus Christ
This principle is the highest value that I know of and provides answers to all the problems and questions we have as a species, including that of the creation and keeping of wealth. It focuses directly on building relationships between people rather than using others to build a bank account. In such an economy, everyone is better off. Those who have, give freely without compulsion. Those who do not have, receive thankfully without expectation.
It is when society turns this on its head that we run into trouble. When people exchange the love of one’s neighbor in favor of love of oneself, then the neighbor becomes the means of a greedy, self-centered end. What can my neighbor provide for my own comfort, power, and wealth? How can I make him give it to me? Evil governments and powerful oligarchs rise out of this mentality as it becomes pervasive within the general society.
Thou shalt not steal is a simple concept and easy to understand, but not so easy to practice. Thou shalt not steal, except by majority vote, is the law of the land and is practiced across the entire spectrum of politics. It leads to wealth-deprivation, poverty, and tyrannical control.
The only sure answer to thievery, both official and unofficial, is to cease being a thief yourself. You cannot love your neighbor as you love yourself if you try to take what he has. You cannot build wealth and expect to keep it because your neighbor, who does not love you in the same way, is scheming to take it in some fashion.
Taxation is theft. Right? Of course, right, except when I support it to finance the programs and policies which I find favorable and then I am all in
.
Beggar my neighbor? Yes, if I can. Love my neighbor? Hah!
We are all guilty.
P Szar: "But what value is it?"
DeleteMy short answer: I agree with Roger. My longer answer: any generally and broadly accepted cultural tradition is better than none; ideologies, as they are broken or bastardized forms of developed religions, have always failed at this. This applies to free markets if left to stand alone.
The highest value in the West - and since it is through the West that the idea of liberty was born and developed, it is the relevant context for this discussion - is to be found in beatitudo: fulfillment through other-regarding action.
Or, as Roger said (citing Jesus): love.
But consider this comment a shortcut to what I hope to develop by continuing this series. I have written on all of this before, but am hoping to tie it together through this current project.
Could it be that a free market might only last in a non-materialistic society?
ReplyDeleteJeff,
DeleteI have never been able to put it so succinctly.
I say culturally we must accept that there is something above and outside of man’s control; that this something has acted in the universe and permeates the universe; that this something will judge us; that what makes humans different from all non-human animals is that this something breathed (literally, figuratively, whatever) into man.
It certainly helps that this something made all men and women in His image, and that this something sacrificed Himself/His son, such that we don’t have to sacrifice each other (among the many other benefits to be found in this act) – after all, if such a something that did all of these things sacrifices Himself, even the most powerful among us would retain some humility.
I would very much like to understand precisely what is meant by a "non-materialistic society." Thank you. Peg in Oregon
DeleteI mean a society that thoroughly rejects the Sam Harris style explanation of our existence as being nothing but a bunch of atoms crashing around at random.
DeleteI realized after posting that "non-materialistic" might be taken in the "minimalist consumer" type of way.
BM, thanks for the reply. I'm really looking forward to your subsequent posts on this question. And, as always, thanks for all you do here.
DeleteThanks, Jeff.
DeleteJeff,
DeleteFrom Arch-Bishop Fulton Sheen:
"The bold fact the enemies of God must face is that modern civilization has conquered the world, but in doing so has lost its soul. And in losing its soul it will lose the very world it gained. Even our own so-called liberal culture in the United States, which has tried to avoid complete secularization by leaving little zones of individual freedom, is in danger of forgetting that these zones were preserved only because religion was in their soul. And as religion fades so will freedom, for only where the spirit of God is, is there liberty."
It may be that a free market only lasts in a non-covetous society. Covetousness entails more than mere envy: it levels.
ReplyDeleteGary North made the argument some years back. The West grew wealthy, he wrote, because it Christianized. People adopted the Ten Commandments as a moral code: "Thou shalt not covet they neighbor's goods."
It brings to mind a joke an economist shared at a Libertarian Party lecture I attended in the mid-1980s. A Scotsman finds a lamp, rubs it, and a genie appears. She says she'll grant him three wishes. "I'll take a castle in the Scottish Highlands, a lifetime supply of the finest Scotch, and a beautiful redhaired wife," he says.
A Frenchman comes upon the same lamp. The genie extends the same offer. "I want a chateau on the French Riviera, a lifetime supply of the finest French wines, and a beautiful mistress," he says.
Finally, a Russian living under Soviet communism comes upon the lamp. He has only one wish for the genie: "I don't have a goat. My neighbor has a goat. Kill my neighbor's goat."
I think you've made a very important point. Growing up in Mexican-American culture in the Rio Grande Valley, I noticed the same sort of covetous mentality. I often heard it referred to as the 'crab in the bucket' mentality even by my Mexican buddies themselves. I certainly noticed that in public school. Those who achieve are hated on. Those who slack off are accepted. I'm sure it's like that to some degree for any racial or ethnic groups.
DeleteFor anybody who's never been blue crabbing, or hasn't heard the expression before, it is in reference to throwing blue crabs in a bucket after being caught. One in the bucket, and he might climb out, but you throw a few in there, and they will pull each other back in. It's basically the socialist mindset.
Of course, in reality, crabs do escape the bucket, despite the covetousness of their peers. Then you just throw them back in!
I've managed to talk about crustaceans twice now!
Very appropos book to this conversation is both mine and roger scrutons favorite book on how a Christian economy should work.
ReplyDeletehttps://www.amazon.com/Humane-Economy-Social-Framework-Market/dp/1882926242/
Free markets are necessary but not sufficient to create a " Christian economy"
Religion and localism are necessary to prevent the worst of " free market" externalities.
The late Roger Scruton gives a great talk on the book on youtube.
I don't really see how you can have anything close to a free market with central banking also.
And Christianity's 1500 year ban on usury seems germaine as well.
Financialization doesn't create any actual wealth.
I also really think henry george came the closest of the name brand economists to building a stable system.
Rushkoff had a lot interesting to say about this subject in "Life,Inc" with this being a good example.
http://webcache.googleusercontent.com/search?q=cache:SqihWBANr8QJ:https://medium.com/team-human/capitalism-is-the-enemy-of-commerce-581afe2d0726&client=ms-android-tmus-us-revc&hl=en&gl=us&strip=1&vwsrc=0
Capitalism also depends on an individual's right/ability to contract one's labor freely for a negotiated price.
ReplyDeleteMathew 20
"Is it inherent in the nature of free market capitalism for the most wealthy individuals and/or corporations to capture government power?"
ReplyDeleteThis is more or less a tautology, but perhaps a useful one we should all recognize. Will wealthy people (in any 'system') gain control of the power apparatus(es) in society to protect their wealth? They will surely try, and if they fail, the one who does accede the 'throne of bones' will divest them of their wealth and take it for his own (or their own), or at least make a deal with them to become the wealthiest among their ranks.
"Wealth is the measuring stick that determines one’s place in this hierarchy if free market capitalism (hence, respect for private property) is the highest value held in society."
Intelligent Marxists make the point that capitalism was the most revolutionary force in history. They maintain that it is the biggest enemy of traditional culture, and thus conservatives should oppose it. The Antebellum South was more or less of this mindset. Eugene Genovese was the first to point this out to me. As someone who values his Southern identity, traditional Christian culture, and the ethics of free trade, I sometimes wonder if my views are antithetical. There may be a case historically for the Marxists, but not logically. I'm convinced it was not the emergence of capitalism that destroyed the traditional hierarchy, but an abandonment of Christianity from among them. If you take Christianity out of the equation, you end up with wealth as the highest aim. He with the most toys wins, and the ends begin justifying the means. The path of Saruman looks more and more enticing without the Crucible of Christ.
"therefore much of what I address is applicable to both the economic system of free market capitalism and the political system of libertarianism."
I'm glad you made this point, because libertarianism and capitalism are so often lumped together without any explanation. I think Rothbard's term anarcho-capitalism may be the main, but certainly not the only, culprit. But does libertarianism (self ownership and inviolability of private property) mean unrestricted free trade in every case? I think this is one of the biggest misconceptions among our ranks. A highly polycentric system of a vast array of political entities would not necessarily lend itself to free trade among all groups, though a certain amount of it would most likely be necessary. For instance, I can see large Christian communities restricting trade among members, and across member property, in items such as contraceptives, porn, dangerous drugs, items of witchcraft, and even suggestive movies and cartoons. Atheist communities may do the same for Christian movies and books etc. It goes back to the important point you made a few years back that a libertarian community may not look libertarian to outsiders. Perhaps communities would even restrict trade in less contentious things in order to protect the livelihoods of their members.
"Few of us need to hold free markets as the highest value for us to have agreed that it should be (at least for a time) the highest common value."
The NAP is the lowest bar of ethics; if you can't get over this one you deserve to be hit with it. Though it is crucial and foundational to a just society, it should never be the highest aim of such a society. Notice here I'm also grouping libertarianism with free trade!
On a lighter note...
"I imagine anyone who studies animal and human behavior can better offer examples of this reality"
[Well,] is it [, roughly speaking,] inherent in the nature of [lobsters] for [those who are best positioned in the lobster dominance hierarchy, so to speak] to [have the most lobster wives and concubines and secure the best rock crevices and the best hunting fields for clams and crabs]? [Yes! and that's that!] https://www.youtube.com/watch?v=TKEw6kD-3Cs
ATL: "I'm convinced it was not the emergence of capitalism that destroyed the traditional hierarchy, but an abandonment of Christianity from among them."
DeleteI agree.
Positivism may be the culprit here. If quantitative measurement is the requisite for scientific truth, then wealth or property or the results of free market endeavors must be quantified. Then the quantification can be ranked in a hierarchy.
ReplyDeleteMurray Rothbard, among many others, recognized that there are psychic, non-quantifiable benefits from the pursuit of free market rewards. These can include meaning and purpose, and could also include (perceived) honor and virtue.
What if the Forbes 100 Richest were to be the Forbes 100 Most Honorable, the greatest contributors to social well being through job creation, employee compensation, and purchases from small businesses in the supply chain. Those are honorable.