U.S. Capitalism Isn't a 'Free Market'
Centuries of government intervention have distorted society and the economy considerably, and it will take time and patience to fix.
In 1970 country singer Lynn Anderson had a hit recording of a Joe South song that opened with the line: "I beg your pardon. I never promised you a rose garden." I often think of that song in connection with the libertarian philosophy.
You may be asking: for heaven's sake, why? Because it's what I want to say to people who seem annoyed that freedom would neither cure all existing social ills immediately nor prevent new ones from arising. It's a strange demand to make on a political philosophy—that it instantly fix everything that the opposing philosophy has broken. Moreover, I'm concerned that some libertarians, in their justifiable enthusiasm for "the market," inadvertently lead non-libertarians to think that this unrealistic expectation is part of their philosophy. Of course, that is not good because non-libertarians won't believe that the market would make all things right overnight, and so they'll write off all libertarians as dogmatists.
Libertarians of all people should understand that decades—indeed, centuries—of government intervention have distorted society and the economy considerably. It's safe to say that both would look different had that intervention not occurred. To pick one American example, the creation of an integrated continent-wide national market in the United States was in large part consciously planned by government officials (most prominently Abraham Lincoln, who embraced Henry Clay's corporatist American System) and their corporate cronies, especially but hardly exclusively through transportation subsidies. (This is not to say they were able to dictate developments in detail; moreover, zones of entrepreneurial freedom existed, constrained though they were.) This system is American capitalism, which is to be distinguished from the spontaneous, decentralized free market.
Wouldn't the market have tended toward greater integration if left free? I believe so, but the differences would have been substantial. In a freed market, costs are internalized. Expanding trade across a continent would require private risky investment in the means of transportation—canals, roads, railroads, etc. No government land grants or other subsidies would be available. If a firm wanted to ship its products cross-country, it initially would have to bear the shipping costs, which would be reflected in consumer prices. Consumers, choosing in a competitive marketplace, would then be free to decide if the products were worth the price asked compared to those of more-locally produced products, whose manufacturers did not have high transportation costs to recoup. (They may have disadvantages due to their small size, but diseconomies of scale, as well as economies of scale, exist.) Consumers might be happy to pay the higher prices, but it's up to them. "National" firms would not have the advantage that government intervention has afforded them historically. (Today, repairs to the taxpayer-financed interstate highways is disproportionately paid for by private automobile operators. Owners of big rigs don't pay their share of the upkeep.)
The whole point of a government-led effort to create a national market was to impose costs on taxpayers, who had no choice in the matter, rather than have businesses charge consumers, who would have had a choice at the checkout counter. Since national firms' retail prices don't have to reflect the full cost of production, consumption is distorted and smaller firms are harmed. We cannot say exactly how things would look had the government not instituted this corporatist policy, but we can say that things would be different. To claim otherwise is to suggest that government interference with economic activity is inert. Libertarians should know better.
While some people have benefited unjustly from this "nationalization" policy, others have been unjustly harmed, at least relative to what their position would have been in a freed market. There's no way to put things as they would have been had the policy not be adopted—bygones are bygones. Radically freeing the market wouldn't immediately remove the lingering injustice of past policy; it wouldn't repeal what Kevin Carson calls "the subsidy of history."
The upshot is that the cleanup, to the extent that it can take place, would take time. I beg your pardon. I never promised you a rose garden. Libertarians promise freedom and the prospect of improving one's lot in life, but not instant rectification of past injustices.
As I say, some libertarians strangely seem to want to downplay the deep distorting effects of government intervention and act as though the free market would make things right almost instantaneously. So, for example, when they talk about abolishing welfare-state programs, they imply that a seamless transition to a fully voluntary "safety net" would follow. But for decades the welfare state has made people (low- and middle-income) dependent on the government for, say, retirement benefits and medical care, and it has accustomed others to believe that the government will take care of people who can't look after themselves.
While I have no doubt that some voluntary help would kick in quickly were welfare programs canceled abruptly, we can't be confident that it would be enough or soon enough. Transitions take time because they consist in human action, and people don't always respond to other people in trouble immediately. For one thing, the free-rider phenomenon exists; an individual can easily believe that enough others will help and that his or her contribution would be too small to make much difference anyway. (However, the response after a natural disaster is typically quick and impressive. Perhaps the dramatic nature of a natural disaster helps to override the free-rider problem. Would the abolition of the welfare state have the same attention-getting drama?)
We see a similar downplaying of distortions whenever a government shutdown looms during a budget battle. It's one thing to applaud an impending shutdown (except that the worst parts of the state never shut down), but it's quite another to imply that no hardship will result. Since government creates dependency, a libertarian can't consistently claim that no one will be harmed even in the short term when government offices close. For one thing, since everyone knows those offices will reopen before long, we can't reasonably expect a constellation of alternative voluntary organizations to fully take up the slack. Some hardship will occur.
I don't offer this as an argument against abolishing "entitlement" programs or closing down the government. I'm simply cautioning libertarians against suggesting that should this happen, no innocent person would be at a disadvantage.
Similarly, a freed society and freed market don't guarantee that nothing bad would ever occur. Non-libertarians often ask libertarians what would happen with neglected and abused children or mistreated animals—the list of possible abhorrent acts is endless. Our interlocutors are unfazed by the fact that all societies have such problems, even those with the most activist governments. It's always possible for unfortunate people to fall into the cracks, so it is no blemish on the libertarian philosophy that it can't offer an ironclad guarantee against such things. All it can assure is that wrongdoing won't be paid for by taxpayers (because no one will be a taxpayer). We anarchists can also assure that, for obvious reasons, no abuse will be committed by government officials.
Libertarians can be confident that voluntary organizations will exist (as they do to some extent today) to minimize such wrongdoing and to act appropriately when it occurs. Let us not underestimate the ability of free people to respond to problems when left to their own devices. Social cooperation is potent, and a freed society would contain the seeds of the solutions to problems, thanks both to the lure of entrepreneurial profit and to what Adam Smith called "fellow-feeling."
But while we tout the virtues of freedom, let us not overestimate how quickly such an environment of mutual aid and charity would succeed the old order. Things take time.
Unlike other political philosophies, libertarianism does not promise that a New Person will emerge when society is freed. For good and ill, people will still be people. However, we can be comforted that without the state, a major encouragement to the worst in people will be gone.
This piece originally appeared at Sheldon Richman's "Free Association" blog.