Libertarian Self-Marginalization
(posted by Kevin Carson)
Go to the average mainstream libertarian venue on any given day, and you’re likely to see elaborate apologetics for corporate globalization, Wal-Mart, offshoring, Nike’s sweatshops, rising CO2 levels, income inequality and wealth concentration, CEO salaries, Big Pharma’s profits, and Microsoft’s market share, all based on the principles of “the free market”–coupled with strenuous denials of all of the perceived evils of corporate power because (as Henry Hazlitt explained at some place or other in Economics in One Lesson) the principles of the “free market” won’t allow it.
The last item is what I call “vulgar libertarianism.” It refers to the inability of some libertarian commentators to remember, from one moment to the next, whether they’re defending free market principles as such, or simply making a cynical apology for the interests of big business and the plutocracy cloaked in phony “free market” rhetoric. The vulgar libertarian comentator will often tip his hat, in principle, to the existence of corporate-state collusion, and admit that the present economy deviates from a free market in many ways that work to the benefit of big business. But shortly after, he will switch gears and proceed to defend the existing size and wealth of big business on the basis of “how our free market system works.” The vulgar libertarian argument depends on taking an equivocal position as to whether or not the existing corporate economy is a free market, and then shifting ground back and forth in a such a way as to make the argument come out in big business’s favor.
A good example of this appeared recently on Mises Blog: “A Marketplace to Loathe.” I should mention, up front, that the author himself (Christopher Westley) has acknowledged corporate rent-seeking in other posts. He acknowledged in the comment thread that corporations in league with the state could be a menace, and apologized for having possibly not made that clear in his post. He also explained to me, in a very civil email, that the target of his attack was the unquestioned liberal assumption that corporate power is the normal product of a free market, rather than of government intervention in the market. And he reassured me that, unlike many commenters in the discussion thread under the post, he did not regard my objections as nit-picking. So let me be clear that I don’t regard his argument as either malicious or deliberately dishonest (although I have considerable reservations about some of the commenters).
Nevertheless, his original article itself does not include any of the nuances that he stipulated to after the fact. It does not even raise the question of whether or not this is a free market, or treat it as the point at issue between libertarians and liberals. On its face, therefore, his original argument is a vulgar libertarian one.
The subject of his post was a commentary on NPR’s Marketplace program. Here is the bit he quoted:
I have one plea. Could you please do what is necessary to restore our faith in the corporations of business, a faith that has been so damaged in recent years? The tall towers that house our corporations are the new palaces of our day, the places where real power resides, but those towers are full of paradoxes. Made of glass, you can’t see inside. They’re pillars of our democracy, but they are run as totalitarian states. Their names are reduced to a set of initials. Their leaders are unknown to those outside. They are accountable, for the most part, to other institutions that sit in similarly anonymous towers. To the average person, they are foreign entities shrouded in mystery. It is no wonder that we look at them with suspicion, touched with envy.
Westley’s response:
…[E]ven the largest corporation has no power over the individual unless the individual grants it, so… the consumer can thumb his nose at General Motors and GM can do nothing but try harder to please him in the future if it wants his business.
Even though it’s tangential, by the way, I can’t refrain from commenting on Westley’s characterization of Marketplace as a “Marxist business show” and his reference to the commentator–Charles Handy–as “commie-of-the-day.” According to the “Marketplace” homepage, Handy is a “London Business School founder and Claremont Graduate University’s Drucker School of Business Professor…” This leads me to believe that however much Handy may support the interventionist state, he’s not doing so from a Marxist perspective. (Just as the British propertied classes who argued for Enclosure, on the grounds that the laboring classes could only be forced to work harder if they were kicked off their land, probably weren’t Marxists either.) Roy Childs‘ observation that liberal intellectuals have been, historically, the running dogs of Big Business, is probably closer to the mark. I think it’s safe to say that Handy views as normal a society in which large corporations are “the pillars of our democracy,” and simply wants to stabilize that corporate rule. And for all his no doubt sincere belief in his own progressive motivation, most of the “reform” measures he advocates amount in practice to what New Leftist Gabriel Kolko, in The Triumph of Conservatism, called “political capitalism”:
Political capitalism is the utilization of political outlets to attain conditions of stability, predictability, and security–to attain rationalization–in the economy… [By rationalization] I mean… the organization of the economy and the larger political and social spheres in a manner that will allow corporations to function in a predictable and secure environment permitting reasonable profits over the long run.
I’m sure Handy does see the bad aspects of corporate power as resulting from the unregulated marketplace (as opposed to seeing all corporate power, and the state intervention that causes it, as bad in themselves). But the issue didn’t even show up in Westley’s post. He simply quoted a reference to totalitarian corporate power, and then argued that it can’t exist because that’s not how the “free market” works (that’s works, present indicative, not would work). His later clarifications notwithstanding, his original post simply quoted a reference to corporate power and responded with a counter-assertion that corporate power cannot exist–because the “free market” won’t allow it.
At any rate, that was the gist of my comment under the post:
GM and other corporations can (and DO!) also act in collusion with the state, to erect market barriers and limit the range of competition.
So in fact what you should be saying is not that the largest corporation “has no power,” but that the largest corporation “WOULD have no power in a free market.”
And since this isn’t a free market, but rather (as Rothbard said) a corporate state that subsidizes the accumulation of capital and the operating expenses of big business, the radio commentator was entirely correct about the power exercised in those corporate towers.
You should figure out what your actual purpose is: defending free market principles as such, or just defending the profits and power of big business under the guise of “free market” principles.
Several regular Mises Blog commenters immediately reacted to my criticism, in the same way they’d react to a turd in the punchbowl. One of them came up with this gem:
When are you going to get past this same, tired argument? Must the authors qualify every statement? Is this a scholarly journal or a blog article?
Yes, Kevin, we don’t live in a free market.
Yes, Kevin, many (if not all) corporations do lobby for and accept handouts.
Oh wait, whats that? Its a Wal-Mart article you haven’t chastised for its lack of “this isn’t a free-market” qualifications. Go chase it Fido! Bye.
While I think it’s justifiable to credit Westley for his honesty and good intentions, the commenters are a different matter entirely.
I’m utterly amazed that 1) a commentator can make a reference to corporate power; 2) a critic can dismiss him as a “Marxist” on the grounds that corporate power can’t exist in a “free market”; and 3) the critic’s defenders can dismiss the question of whether a free market in fact exists as a quibble and distraction, and accuse the person raising it of marring the symmetry of the critic’s pretty argument with a bunch of nasty old facts. When Party A refers to the existence of corporate power, and Party B makes the counter-assertion that corporations can’t have (not “couldn’t have”) any power in a free market, the question of whether in fact a free market even exists is not a mere quibble. It is the central point at issue in determining whether Party A’s contention is right or wrong, and whether Party B owes him an apology.
But let’s look at all this in broader terms. Although Handy did not–in the passage quoted by Westley–explictly treat corporate power as the natural outcome of the market, or argue for state intervention as the only way to prevent it, he did strongly imply it in the full commentary from which it was excerpted. But Westley did not make the extent of government’s role in corporate power the subject of his post; he simply denied, flat-out, that corporate power existed, based on the way the market operates.
But what if Handy does, as I think likely, implicitly assume (what I regard as the typically vulgar liberal assumption) that the free market results in corporate power unless the state intervenes to prevent it: what, then is the most effective response, if our goal is to promote libertarian ideas in society at large? Not, as Westley did, to reflexively defend the honor of big business and deny that corporate power exists.
The most effective response would be something like this:
I agree with you that corporate power exists, and share your concern with its evil effects, but I believe you’re mistaken about its causes and remedy. The evil effects of corporate power result, not from government’s failure to restrain big business, but from government propping it up in the first place: this government support includes subsidies to the operating costs of big business, and protection of big business from market competition through market entry barriers, regulatory cartels, and special privileges like so-called “intellectual property.”
A libertarian movement that dismisses the public’s concerns about very real problems, apparent to anyone with eyes in their head, with doctrinaire denials that they exist or can exist, is a libertarian movement doomed to irrelevance.
Here’s what Mises wrote, in Epistemological Problems of Economics, about apparent conflicts of theory with experience:
If a contradiction appears between a theory and experience, we must always assume that a condition pre-supposed by the theory was not present, or else there is some error in our observation. Thedisagreement between the theory and the facts of experience frequently forces us to think through the problems of the theory again. But so long as a rethinking of the theory uncovers no errors in our thinking, we are not entitled to doubt its truth.
The vulgar libertarians, however, question neither their application of Mises’ theory nor their understanding of the facts. Instead they challenge us: “Who’re ya gonna believe: Mises or your lying eyes?”
We all know that corporate power exists. Any libertarian movement that hopes for anything more than self-marginalization must directly address the common sense perception that corporate power exists, and the public concerns that stem from the fact, and explain why the market is the good guy and the state the bad guy on the issue.
The approach I see in all too many mainstream libertarian venues is the moral equivalent of saying to someone whose house is burning down, “Your house can’t be burning down because houses can’t burn down without oxygen, you dirty commie!”–and then dismissing as “quibbling” the question of whether there is in fact oxygen in the air.
We live in a society where the evils of the state-corporate nexus, resulting directly from the corporate size and power it promotes, are the central issues of concern to the average person. Far too large a portion of the current libertarian movement dismisses these concerns as motivated by “economic illiteracy” (although their own pro-corporate apologetics are, if anything, more open to that charge), and then passes on to what it regards as the real problems of injustice crying out for solution: uppity union workers, welfare moms wallowing in luxury on their food stamps, and “trial lawyers.”
For too many mainstream libertarians, the evils of corporate-state collusion are something to tip one’s hat to, and corporate welfare is kinda sorta bad, in principle, I guess, and maybe we oughta do something about it someday…. But welfare that helps the poor, instead of the rich, is Flaming Red Ruin on Wheels!
And as historically illiterate and illogical as some of the commenters at Daily Kos can be, when they make their facile “pot-smoking Republicans” dismissals of libertarianism, when you get right down to it mainstream libertarians have only themselves to blame. Rather than addressing the historical illiteracy and illogic with reasoned arguments along the lines I described above–the role the state has played in the creation and preservation of corporate power, and how the market threatens it–mainstream libertarianism simply denies that corporate power exists at all, and backs up that position with equal historical illiteracy and illogic of its own. If I thought “free markets” and “free trade” really meant what neoliberal talking heads mean by them, I’d hate them too.
Indeed, there is a great deal of mirror-imaging between the vulgar libertarian and vulgar liberal interpretation of history. Both the typical denizen of Mises Blog, and the typical Daily Kos commenter, would agree that the giant corporations of the twentieth century emerged from the “laissez-faire” market of the nineteenth, and that the twentieth century mixed economy emerged as an attempt to restrain big business. Their only area of disagreeement is over whether big business or big government is the “good guy.”
March 10th, 2008 at 7:26 am
As usual, you make a lot of good points. I honestly don’t pay much attention to what you call vulgar libertarian arguments largely for the reasons you describe.
Perhaps you or someone else can help me with this–who are libertarians? Most of the ones I bump into are white, relatively well educated middle class men, who are probably underemployed (join the club). Their primary selling point is that they are pro-marijuana legalization, which always gets a shout out from the hippie crowd. But once they start talking about getting rid of the minimum wage and child labor laws–folks lose interest real fast.
It seems like the Ron Paul phenomenon may have expanded the potential base of libertarians among young people–but for odd reasons. Ron Paul seems very patriotic–he is all about the constitution after all–and in a time period where even the “conservative nationalist party” (The Republicans) is doing more damage than good to both causes, Ron Paul comes off looking good.
March 10th, 2008 at 7:57 am
Does it really matter who’s making the argument? Does the identity of the person making the argument affect it’s objective truth/value? I’ll admit that bias etc., are useful shorthand when making decisions on limited time bases, but in this sort of philosophical discussion, which is generally not pressed for time - what purpose does this line of questioning serve? I’ll note that I’ve seen the issue of Kevin’s race raised by Misesoids (making the opposite inference due to his “leftist” outlook) and I was equally dumbfounded then that anyone found such speculation relevant.
As Kevin notes, libertarians by and large deserve the bad reputation that they have gotten - I was a “civil liberties” democrat for a long time and resisted libertarians precisely because every libertarian argument I ran into was a vulgar one. It wasn’t until I read some old Rothbard that I realized that there were actual principles involved.
As for Ron Paul, I’ll note that it was the Rockwellians who managed to convert me to libertarianism based upon their principled opposition to war. I imagine that is where Paul managed to do so well with young voters, and precisely why his campaign crapped the bed - the campaign shifted the focus away from anti-war to anti-immigrant. (not that he ever had a chance of winning).
March 10th, 2008 at 8:32 am
Well put, as usual, Kevin. When will they ever learn?
March 10th, 2008 at 9:04 am
Kevin,
I think everyone can agree that corporations should not get handouts from the government. A question: should corporations have the same rights as persons? Lesser rights? More rights?
March 10th, 2008 at 9:25 am
Quoting quasibill “Does it really matter who’s making the argument? Does the identity of the person making the argument affect it’s objective truth/value?”
You may have missed my point. I am not saying because someone is a white middle class male their opinons should be dismissed–If I thought that, I would shut up, because no one would listen to me.
My question was “Why is that this particular group seems so attracted to libertarianism (however you define it) when other groups are not?” If we are talking about reasons for marginalization, I think it is a valid question.
One way in which groups self-marginalize is throught talking at people rather than with people–playing the role of “high priest” to the sinning masses. I just ruminating if the social position of these folks contributes to that.
March 10th, 2008 at 12:07 pm
goffchile: “One way in which groups self-marginalize is throught talking at people rather than with people–playing the role of ‘high priest’ to the sinning masses. I just ruminating if the social position of these folks contributes to that.”
Possibly. The self-described libertarian who profits from state-supported corporate power is probably more likely to turn a deaf ear to warnings against vulgar libertarianism. But in my view, such a person cannot properly be called a “libertarian,” regardless of his/her own claim to being one. The more proper label for those folks is “conservative.” And regardless of all the “libertarians” who like to wax poetic over Reagan and Goldwater and Thatcher, libertarianism properly understood has no (or should have no) relationship with conservatism.
But I really don’t know if we should be too concerned about any connection between social position and ideology. (For example, Kropotkin, who was of the ruling Russian aristocracy, turned to anarcho-communism.) Like quasibill said, what really matters is the evidence and logic cited to support one’s knowledge claims.
BTW, if you’ve ever seen any libertarians behaving like “high priests” preaching to the “sinning masses,” that was probably inherited from Ayn Rand. She had a really nasty habit of self-righteous, very polemical preaching that often ignored basic facts (like her proclamations that Big Business is “America’s most persecuted minority” or “the military-industrial complex is a myth or worse”). Her work continues to influence many libertarians to this day…In spite of the fact she explicitly denounced libertarianism! (Though her influence has not always necessarily been for the worse - one example of a Rand-influenced libertarian who has managed to articulate the more sane and rational aspects of her writing is Roderick Long, who you most definitely would NOT ever see defending Big Business or the military-industrial complex.)
March 10th, 2008 at 12:28 pm
Thanks for all the kind words.
Goffchile and quasibill, I think mainstream libertarianism probably *is* marginalized largely to relatively educated white males precisely because it treats everyone else’s concerns as imaginary, and only gets indignant when “them pore ole bosses” are getting picked on. Even raising issues of corporate power, or of racial and gender equity, is enough to draw suspicious glares–if not to get you presumptively labelled a statist.
The latter, I suppose, is on the ostensible grounds that complaining about such things tends to be associated with calls for state action. But if life were fair, in a world where big business interests are more closely associated with real state intervention than any other, principled libertarians would automatically dismiss the corporate apologists as statists.
And some Misoids have actually speculated on my race? I shouldn’t be surprised, but I am. No doubt some of them would like to apply the calipers to my skull to see if some “atavistic racial characteristic” is at the root of my irrationality. “Aha! No wonder Carson displays such an inexplicable fixation on big business interests, instead of worrying about welfare moms like normal libertarians.”
For the record, I’m a white male. But it’s such intrusive speculation, and the sorts of personal harassment they’d resort to if given an opening, that’s caused me to keep my picture offline and retain as much anonymity as possible.
Larry K,
IMO the right balance would be to limit corporations to the rights and powers that individuals can establish by voluntary agreement, in any form of contractual association that doesn’t involve a pre-set legal form established by the state. That would rule out limiting third-party liability right off the bat. It might well be that a voluntary business partnership could negotiate entity status and lmited liability with creditors, suppliers, etc., by contract; but they’d have to actually negotiate it, in a process where the other parties had some bargaining power, instead of relying on a standard corporate form already set up by the state with an automatic procedure for setting it up.
March 10th, 2008 at 8:34 pm
*ENABLE FULL RSS FEEDS*
If Kevin Carson wants me to follow his posts here, *ENABLE FULL RSS FEEDS*.
March 10th, 2008 at 8:37 pm
Good article.
This is an annoyance that comes from both sides of the debate, the myth that corporate power is due to the free market (that we don’t even have!) rather than government intervention.
March 10th, 2008 at 8:40 pm
FSK, thanks for pointing that out about the RSS feeds. We did originally enable full feeds. Apparently the RSS posts are being cut short by the same code that limits how much of the article shows up on the front page. Give us a few days and we’ll fix this. If this is not fixed by Friday, please feel free to complain about to me:
doapf@theartofthepossible.net
March 11th, 2008 at 1:12 am
What’s wrong with outsourcing? It’s just trade, only with people an ocean way. They’re generally poorer than the Americans they replace, so an egalitarian should be all for it.
Libertarians generally aren’t like Rand’s heroes near the top of the state-capitalist pyramid. Mieville was accurate. Regarding the demographic traits of libertarianism, they remind me of those Bryan Caplan points out as leading people to “think like an economist“.
March 11th, 2008 at 9:52 am
TGGP: I think it depends on the context of the larger economic system in which the outsourcing is taking place.
If we had a truly free market with absolutely zero state intervention and no state-chartered central bank privileged to legally counterfeit money, then I’d say outsourcing isn’t necessarily something to wring one’s hands about.
The economic system we actually have, however, is rife with gov’t regulations and protective privileges, and is further hampered by a fiat currency that is declining in value. This may very well be creating incentives for businesses to outsource that perhaps otherwise wouldn’t if we had a truly free market, while the regs and privileges simultaneously make starting up new businesses prohibitively costly, thus leaving laborers displaced by the outsourcing with nowhere to go.
Perhaps we can give those businesses that outsource the benefit of the doubt that they’re merely acting defensively in a state-capitalist system rife with coercion (though I’d say that to determine whether or not they’re merely protecting themselves should be examined on a case-by-case basis), but surely we should further examine the present system, which may very well be what’s driving certain businesses to invest abroad instead of at home.
March 11th, 2008 at 10:18 am
Tangentially related:
Over at Unqualified Offerings, I’m blogging my complaints about corporate billing and the way that any mistake (even their mistake) becomes my problem to fix.
http://highclearing.com/index.php/archives/2008/03/11/7994
http://highclearing.com/index.php/archives/2008/03/10/7992
Maybe it’s bad manners to pimp my own blog here, but I think it’s related. It’s hard to be a fan of big business when their every mistake means that I must spend a morning fighting my way through an automated call system to reach a person who wants me to track down some bank records and go to Kinko’s so I can fax them. Especially when my bank has already provided me the transaction numbers to prove that the other company has indeed received my check, their protests to the contrary notwithstanding.
March 11th, 2008 at 11:20 am
Thoreau! Dude! That’s one of MY BIGGEST PET PEEVES!
March 11th, 2008 at 11:23 am
“a fiat currency that is declining in value. This may very well be creating incentives for businesses to outsource”
Wasn’t it the other way around? For a long time? The federal government of the USA used its various diplomatic powers to “keep the dollar strong”? Didn’t that have the effect of making American businesses uncompetitive in international markets, and thus didn’t that encourage outsourcing? I’d think if the dollar declines enough, then the trend toward outsourcing will decline. The weaker the American dollar becomes, the harder it becomes for American companies to buy labor overseas.
March 11th, 2008 at 2:16 pm
jackson: There have been times that the dollar has been “strong,” yes, but this has basically been achieved by US policy makers strong-arming foreign gov’ts in various ways to get them to weaken—that is, inflate the supply of—their own currencies in order to “strengthen” the dollar. But this is a “strength” defined strictly by comparison of currencies “floating” against one another, not in terms of real wealth, or real purchasing power. At other times, such as in the 1980s, the massive US monetary inflation under Reagan-Bush was offset by an influx of capital investment from abroad, buoying the dollar. Historically though, a weak, or highly inflated dollar is usually preferred by US exporters, as it essentially subsidizes them by discouraging imports, which in turn means higher prices for the consumer, many of whom are, of course, wage earners.
Overall, the real purchasing power of the dollar has fallen by about 95% or so since the inception of the inflationary Federal Reserve System in 1913-14. The more weakening of the dollar by inflation, the lower the real purchasing power of workers’ wages, and so the more they have to be paid in order to keep up productivity. So at a certain point, many companies will start looking abroad to other countries that have a massive pool of unemployed, poor laborers who are willing to produce more for much less. And in many instances, those people are willing to accept the employment terms presented to them as a result of myriad government policies and international agreements between governments that effectively keep them in a weakened economic condition.
That’s my short answer to your question, and there’s a lot more involved than what I mentioned. But I believe I’ve covered the basics. I’d be interested in seeing what others have to say about this.
March 11th, 2008 at 2:47 pm
“The more weakening of the dollar by inflation, the lower the real purchasing power of workers’ wages”
It depends how much workers wages goes up, doesn’t it? Real wages, adjusted for inflation, have risen every decade of US history, save for the 70s and 80s (and possibly now).
March 11th, 2008 at 2:51 pm
“a weak, or highly inflated dollar is usually preferred by US exporters, as it essentially subsidizes them by discouraging imports”
I can’t think of any America exporters who aren’t also importers. American car makers buy parts from overseas and then build cars, some of which get exported. American silicon chip makers buy parts from overseas, then make chips, then export some of them. American farmers buy fertilizer, largely made up out of imported oil, to grow food that is then exported.
As exporters they may want a weak dollar, but as importers they want a strong dollar.
Given the size of the US trade deficit, it seems that the interests of importers has outweighed the interests of exporters for a long time.
March 11th, 2008 at 2:52 pm
CORPORATIONS cannot exist without the state granting personhood to the imaginary identity of a group or a piece of paper. Therefore corporate power is an outgrowth of state power.
If “corporate power” exists, it is necessarily because of the state. Therefore it is the state which must be addressed if one is to fight corporate power.
If someone is going to complain about the *influence* of individual businesses or wealthy people on the market, please take comfort in the fact that their influence, however large, is *finite.* Microsoft may be able to exert huge influence in the OS market, maybe forever, but Microsoft will never be free of the increasingly fierce competition from Apple and Open Source. They have survived this long through an ability to adapt.
The State, on the other hand, grants itself infinite reservoirs of capital with which to influence the market, through its powers of counterfeit and confiscation. No matter how big and bad Wal-Mart becomes, in a free market Wal-Mart is denied the option of force. They cannot retain you if you do not want to work for them. They cannot force you to pay a price you are unwilling to pay. They cannot draft you into service.
This is what separates business from organized crime government.
I didn’t even realize this was an issue of confusion. It seems so simple to me.
March 11th, 2008 at 4:34 pm
Jackson: Real wages have overall been on the decline more or less for the past 20-30 years–I would say that’s quite a stretch.
Nominal wages have been on the rise during that same period, but real wages–wages relative to prices of goods and services–have been on the decline as a result of the massive monetary inflation driving up prices. The lower the real wages, the higher American workers’ demands for higher pay, which makes them less competitive compared to poor and unemployed workers in many other countries that are precluded from competing in global markets by misguided WTO policies and regulations, tariffs, and the misguided policies of their own countries’ gov’ts shoved down their throats so that they can be kept in as much of a position of abject poverty as possible, thus making ANY offer of employment by virtually any company from anywhere a comparably better deal than the bare subsistence living they’re currently stuck with.
Now, in regards to your point about the imports and exports. I was merely mentioning the fact that export industries traditionally lobby for a weaker dollar as they believe that would tend to play out in their favor (I probably should have clarified that that’s the thinking behind their desire for a weak dollar.) This was probably more true of years past than it is today. Once upon a time, export industries could count on foreign holders of US dollars having more purchasing power than Americans, as they were the earlier receivers of those dollars, and thus could spend them for greater value than Americans. By the time those inflated dollars made their way into American hands, their purchasing power were greatly diminished, thus acting as a “second tariff” on imports.
Today, as you mention, it’s a bit more complicated than that. Regardless of anyone’s wishes and fantasies, a weaker dollar undermines the purchasing power of those foreigners holding them as much as any American, and so imports in some industries will tend to increase regardless.
The neat little arrangement that the US has been enjoying for quite some time is that the dollar is the world’s preferred reserve currency, with the central banks of other countries buying and holding increasing amounts of US debt and inflated dollars, hence the increasing imports from abroad. How much longer this arrangement will last, however, is anyone’s guess. Sooner or later, it’s going to get to the point where these foreign banks are going to realize it’s becoming increasingly difficult to transform the flood of US debt and dollars into real assets and they’ll start rejecting the dollar. Then, as those dollars come flooding back home, we’ll see massive hyperinflation and crashes.
March 11th, 2008 at 5:33 pm
“export industries traditionally lobby for a weaker dollar”
What is an export industry? Boeing has often been America’s single biggest exporter, yet it is a huge importer of goods.
Maybe, in the past, the US economy had industries that could clearly be identified as exporting industries: steel, agriculture, etc. But nowadays, what would count as an exporting industry? I really can’t think of any industry that exports but that doesn’t also do a lot of importing.
“The lower the real wages, the higher American workers’ demands for higher pay”
Everyone, including myself, at all times, would like more money. The “American workers” would also like more money. Their desire for more real purchasing power doesn’t rise or fall with the inflation rate.
“which makes them less competitive compared to poor and unemployed workers in many other countries that are precluded from competing in global markets”
The competitiveness of American workers is determined by their productivity and by the exchange rate. The nominal wage of an American worker can’t effect their competitiveness. It’s nominal.
March 11th, 2008 at 7:28 pm
Thoreau! Dude! That’s one of MY BIGGEST PET PEEVES!
Pimping my own blog or companies that give you the run-around?
March 12th, 2008 at 8:05 am
Just want to point out that correcting for inflation by using CPI (even the non-fudged version that existed prior to Clinton) is an example of the broken window fallacy. For example, such a correction leaves out the value that cash savers could have gained through deflation. Which, in effect, severely hinders the ability of smaller businesses and individuals to self-capitalize or community capitalize. Rather, they must go, hat in hand, to beg for capital from those who are in control of the printing presses.
March 12th, 2008 at 11:05 am
Thoreau: Companies that give me the run around.
Jackson: My only point addressing your original question was that contrary to the idea that policy makers have always sought to keep UP the value of the dollar was that historically there had been arguments for a weak dollar that had come from people who thought it wise to increase exports and discourage imports. Yes, the steel industry would be one such example. Regardless of their own near-sightedness, there have been certain firms in certain industries who have expressed a desire to increase exports and discourage imports.
Here is one such example:
http://www.tdctrade.com/alert/us0720a.htm
“The National Council of Textile Organizations, the largest U.S. textile industry association, has waged a determined lobbying campaign over the past several years in an effort to persuade the U.S. government to establish a range of restrictions on U.S. textile and apparel imports from China. The industry has suffered a steady decline in production and employment and continues to blame its financial troubles on ‘mercantilist policies’ pursued by Chinese authorities, including illegal subsidies and an undervalued currency. ”
Now in that particular case, the statist tool being preferred is import quotas. For the US to accuse another gov’t of “mercantilist policies” is laughable, but notice that part of the accusation is that the Chinese are deliberately undervaluing its own currency in order to increase their exports, which is also laughabe considering the USA’s own inflationary monetary policy, and the fact that the Chinese currency is pegged to the dollar. But notice the recognition of the concept that devaluing currency–which is primarily done by inflating its supply–is an EFFORT to subsidize exports.
But my point here, jackson, is that yes, for a long time there have been certain domestic industrial interests who have chanted the mantra: “IMPORTS BAD! EXPORTS GOOD!”–regardless of the circumstances. (I really didn’t think this is such groundbreaking news. The rallying cry for less imports and more exports has been heard from certain quarters of domestic industry almost since the very beginning of this country’s independence.)
Now, you can go and tell them, “Well gee guys, don’t you IMPORT certain materials to make your product?” But such is the narrow-mindedness and ignorance of people who want gov’t to force markets a certain way for their own particular interests. And whether or not the schemes of such people has worked out in PRACTICE–whether it be by tariffs, import quotas or inflating the currency–is of course another case entirely. Yes, it has backfired, as such schemes usually do. Now, would you like to ignore everything else I wrote in my previous posts, or would you like to continue to quibble about what constitutes an “export industry?”
You said: “Their desire for more real purchasing power doesn’t rise or fall with the inflation rate.”
Jackson, if I’m a wage-earner, and there are more dollars in existence today than there were yesterday, the prices of certain commodities will rise while my wage will stay the same. Will I not demand, eventually, higher wages in order to compensate for these rising prices? And the Fed with its attendant cartel banking system is CONSTANTLY inflating the supply of money, and wages are such that they don’t automatically keep pace with this inflation. Yes, my productivity will play a central role as to whether or not my employer will offer the wage increase, but nonetheless, with prices generally rising, nearly all workers–including the most productive–are going to expect higher wages to, at a very minimum, maintain current levels of productivity, just so they can buy the same amount of bread tomorrow that they can today.
At some point, then, certain firms will look abroad for cheaper labor, as many have done and do. And where would they find people willing to produce MORE in exchange for less? In countries whose capital, whose wealth, is for the most part unrealized, underdeveloped–in short, PISS POOR. Which itself is often the consequence of the policies of those particular gov’ts, or certain “trade agreements” between gov’ts, or misguided IMF/WTO policies, etc., thus creating for many companies a “buyer’s market” in labor. (And considering the poor exchange rate of the dollar these days, the poorer the country with unemployed labor, the better.)
And that was why, in my orginal reply to TGGP when he asked what was so bad about outsourcing, I replied that one should look at the larger economic context, such as one in which an inflationary monetary policy is driving up the price of labor as much as anything else. Therefore, I would not reflexively dismiss all complaints of outsourcing as the natural function of the market. It begs closer examination to see what is creating the incentive for the outsourcing, which in this case would be Fed monetary policy (among other policies). The US is not a free market, so we should do the best we can to trace an economic phenomenon back to its roots as much as possible.
Quasibill: Excellent point.
March 12th, 2008 at 12:35 pm
TGGP,
What Bob Kaercher said. “Trade” can be either good or bad, depending on whose nickel it’s being done on. More “trade,” as such, is not a positive good if it’s the kind of trade that wouldn’t occur in a free market, and is only possible because the hidden inefficiency costs are being paid by us suckers on April 15.
Both we *and* the Third Worlders would be better off if we were *all* buying stuff produced in small factories close to where we live, instead of them being dependent on foreign capital to hire them to produce for a corporate export market, and us being laid off. The employment opportunities offered by Western capital are just another example of a general phenomenon libertarians like to point out: breaking people’s legs and then giving them a crutch.
March 12th, 2008 at 12:40 pm
Thoreau,
Those posts you linked are totally cool. It reinforces a think piece I recently found elsewhere, on “Gotcha capitalism”:
“If you’re like most Americans, you feel you’re getting screwed all the time. When you open your monthly bills, rent a car or sign up for pay television service, you hear that tiny voice inside saying ‘Watch out!’ You’re not paranoid. You’re merely paying attention. Hidden fees cost the average American consumer nearly $1,000 a year, $5 or $10 at a time, new research shows….
“Fundamentally, “Gotcha Capitalism” is a story about the death of the price tag, about the constant bait-and-switch tactics that layer on fees and surcharges long after we’re in a position to bargain over them. It’s about rampant false advertising, about the explosion of small print and asterisks and about the seeming disappearance of federal authorities working to keep our marketplaces fair.”
http://redtape.msnbc.com/2008/01/how-red-tape-be.html?cid=104437832#comments
March 13th, 2008 at 8:26 pm
Kevin,
I would be interested to know what your opinion is on advertising. Left unchecked, does it not intrinsically favour big incumbent companies? I think it may as much responsible for the overgrown and misbehaving corporations as state subsidy/collusion is.
Personally I would like to see advertising curtailed severely, certainly outlawing brand reenforcement and anything targeting children. This would seem to help your aim of reducing the size of companies. Would this kind of law have any place in a mutualist society? Presumably no, in which case why not?
I don’t know if you have them, but having seen what can only be described as slide shows with elavator music sandwiched between the ultra high production value ads they usually have before films makes one doubt whether unchecked advertising can ever be fair.
The principle problem is of course that we are not coldly critical about what we see. We can’t help but associate what is presented to us and so end up having things jammed into our subconsience by corporations, which is not good. The end result is that advertising, costs a lot, distorts our preferences and delivers more disinformation than information (Granted, internet targeted ads are better). 3rd party product comparisons are a much better discovery mechanism.
Hopefully a non-contraversial example of an outgrown corpration is McDonald’s (i.e. not the modern economies finest achievement! ). Is McDonald’s meaningfully subsidised over the competition? Probably in some aspects, but I would be surprised if all government intervention combined is propping them up more than their own marketing. Ok ok, economies of scale probably play some part too - most of which turn out to be bad for our health, but thats a another issue that anti-corporation libertarians need to address.
You are of course allowed to make a distinction between corporate disinformation/brainwashing and small scale companies putting the word out, but how can the latter not be drowned out by the former?
March 13th, 2008 at 8:54 pm
I’m still unclear on how government distortion is responsible for outsourcing (not that it couldn’t theoretically be the case, I just don’t see how it is). Governments subsidize roads internally, but the ocean belongs to no state. A lot of outsourcing now is the result of technological changes in things like communication, and stateless Somalia had a thriving telecommunication market. Inflation can drive up the nominal cost of labor as well as everything else (though according to Caplan wages are sticky due to the psychological importance of the nominal rate so inflation can temporarily lower the real one), but it is generally believed that it increases exports and decreases imports. Differences in the cost of labor do play a significant role, but poor countries with low labor costs are by no means capital magnets (it is the genuinely modernizing rather than “developing” countries we buy from) and poverty seems far too much the norm to hold Uncle Sam responsible for it around the world. I’m asking the same question I ask elsewhere: what are the concrete actions taken by an agent that lead you to believe it is a major causal factor? To me, the only reason I can think of to view outsourcing and regular trade differently is anti-foreign bias.
March 14th, 2008 at 12:48 am
Mike G,
My overall impression is that mass advertising, as we know it, is pretty much a creation of state capitalism. The state promoted economic centralization, overinvestment and overproduction, and then this overbuilt industry had to turn to a push distribution model to dispose of its excess product. So you had the modern advertising and PR industries created by Bernays et al, the same people who created the modern science of propaganda during WWI. In addition there wouldn’t have been corporations producing on a national scale, or a national consumer media market, if the state hadn’t created a single national market in the 19th century.
Just my guess, of course. But in a society of small-scale local industry and pull distribution, I suspect the Madison Avenue types would be buggy whip salesmen.
March 14th, 2008 at 5:36 pm
My household has virtually eradicated advertising from our tv screen thru watching almost exclusively netflix stuff.
I remember reading Bryan Caplan discuss how, for the price of a subscription to Adbusters, one could pay for audio/visual entertainment alternatives that almost completely block out the big intrusive corporate advertsing - ya know, the most annoying shit.
And yes, state capitalism has contributed greatly to mass advertising through the creation of the FCC.
March 19th, 2008 at 1:03 pm
It is much cheaper and easier to buy legislators than design and fund an effective advertising campaign.
April 11th, 2008 at 10:31 pm
I am not sure that I can completely understand your comments. Would you be so kind as to expand on your reasoning a little more before I comment.