Unintended Corporatism

I think Matt may have misread the argument in my last post, at least on one point. I most definitely was not arguing that the left was the source of the occupational licensure laws that are so problematic for poor Americans. I agree with Matt that this is a classic concentrated benefits and dispersed costs story where rent-seeking by incumbents (along with support from some paternalists in classic Baptists and Bootleggers fashion) spreads the costs by denying entry to potential suppliers and raising prices to demanders. My point was not to blame the left. My point was to suggest, and Matt seems to agree, that this is an issue where the left and libertarians can work together to remove barriers to upward mobility. Asking the state for protection against competition is not limited to the corporate world; it also comes from small entrepreneurs trying to block new entrants as well as other sources such as unions, who often support such licensure laws so as to prevent competition from lower-wage labor, both domestic and foreign. If we’re going to oppose corporatism, we should probably oppose it no matter the size of the “firm” involved.

My point about Wal-Mart wasn’t so much that Wal-Mart is a substitute for government programs, but rather that when people, both on the left and right, set up barriers to entry to Wal-Mart, they are in fact causing harm to the poor, both as buyers of Wal-Mart’s cheap goods and as potential employees. That is, of course, an empirical claim that might be wrong. However, because I think it’s true, I also think that Wal-Mart’s critics on the left are engaging in behavior that prevents them from achieving their own stated ends of improving the lives of the poor. We should indeed evaluate government welfare programs on their own merits, but we shouldn’t unnecessarily increase the perceived need for them by preventing companies like Wal-Mart from providing cheap necessities and jobs for working class Americans.

It’s also worth noting that Wal-Mart’s competition is, I’m sure, all too happy to sit on the sidelines roasting marshmallows around the fires others have lit in places where Wal-Mart is facing political barriers to entry. Preventing Wal-Mart from entering a market only works to serve the interests of its competition. Call it “unintended corporatism,” but it doesn’t change the fact that putting political barriers in the way of one firm is not substantively different from giving a subsidy to its competition. Opponents of corporatism who also wish to use the state to put barriers in the way of the market behavior of firms they don’t like are really feeding the very beast they claim to want to starve.

Moving away from Wal-Mart specfically, I would argue that a consistent anti-corporatist perspective means that no producer (including labor) gets to use the state to concentrate benefits on itself while spreading the costs to its competition and consumers. Whether we like the firm or not, whether the firm is large or not, or even whether we’re talking about labor rather than capital, is not the issue. Using the state to benefit oneself at the expense of others is.

Also from this issue

Lead Essay

  • In this month’s lead essay, philosopher and libertarian theorist Roderick T. Long draws a sharp contrast between corporatism and libertarianism properly understood. He argues that liberals, conservatives, and even libertarians have all been guilty to some degree of obscuring this difference, and that the quality of our political discourse has suffered accordingly. He suggests that libertarians should guard themselves against falling into the trap of “vulgar libertarianism,” in which all things good spring from business, and particularly from business as usual. Corporations, he argues, should be no more free from scrutiny than any other institution in society, and often businesses have done more than their share to hamper free economic relations in the industrialized world.

    One implication of all of this is that the truly free market is farther away than we imagine. Long suggests several ways in which a freed market would be different from what we see around us today. Notably, nearly all of these differences are to the benefit of the consumer and the small or start-up business. These likely outcomes of laissez faire suggest new grounds for left-liberals and libertarians to revise their thinking on economic issues and on politics more generally.

Response Essays

  • In his response to Long, Matthew Yglesias argues that although corporations naturally seek to win special privileges from the state, libertarianism is far from the obvious solution to the problem. Instead, he reiterates the charge that libertarians often act as corporate apologists and suggests that the net effect of any “free market” advocacy will tend strongly toward corporate power. Liberals may have much to learn from libertarians on certain issues and in some policy areas, but the laissez-faire solution to corporate political influence is unworkable.

  • Steven Horwitz offers several examples of so-called “de-regulation” that only served to benefit corporations, while leaving the government, and therefore the taxpayers, to shoulder the risks of the market. He argues that market competition is a form of regulation, albeit a kind worth wanting, as it forces corporations to respond to consumer demand and punishes them when they fail to meet it. He takes issue with Long’s lead essay by arguing that “playing defense,” that is, defending today’s corporations when they act consonantly with a fully freed market, is a valuable part of libertarian advocacy. One must nonetheless take issue with these same corporations when they violate the principles of laissez faire and distinguish carefully between these cases.

  • In his response essay, Dean Baker declines to tally up a “score” of how well libertarians, or other groups, have defended a truly impartial, laissez faire economy. Instead, he suggests intellectual property as an obvious area where libertarians must challenge corporate power to distort the market. Patents that make health care more expensive and copyrights that artificially restrict whole areas of our culture are obviously concessions to corporatism, and the “extraordinary abuses” undertaken to enforce these privileges should be vigorously challenged. Although libertarianism has been skeptical of both patents and copyrights, Baker suggests that this is an area deserving still further attention, and one in which liberals could perhaps become solid allies.

  • The discussion this month has focused to a greater than usual degree on the activities of certain Cato Institute policy scholars. The editors thought it appropriate to solicit responses, and we present them here in their entirety.