William Ruger, writer at The American Conservative, purports to represent the free market in his book review of A Capitalism For The People: Recapturing the Lost Genius of American Prosperity. This tract is written by Luis Zingales. Ruger's review can be found in the December 2012 issue. There are varying brands of free marketeers. I will show that both Ruger and Zingales are not defending a freed market, but a highly regulated and enslaved one. I will cure this appropriation of capitalism by shaking their arguments until only the immovable deductively sound structures are left standing. The voluntary structures.
The good ol' boys at the C4SS think that defenders of market anarchism should do away with the term capitalism. To them it is a tainted vestige of the current system. The statist quo is blamed by an assortment of Marxists and Marxist sympathizers as the source of many modern woes. Rightfully so. The system we have in the U.S. today, and at any point in our history, is far from the unhampered market economy that would rid us of many woes. The statist quo is State run or manipulated environmental protection, schooling, healthcare, law, security et cetera. When there is a kritik run on the condition of the environment, schools, healthcare, law code and security the root of these woes should be sought. The underlying reason for cyclical problems in this regard is lack of systemic change. Wrought by uprooting the current system. Much of policy debate revolves around whether the State should have full control of schools or be able to control private school production. Whether the State should have the, Orwellianly named, Environmental Protection Agency (EPA) increase regulations or increase fines. Whether the State should add 50,000 more laws, or increase theft to increase enforcement of the laws on the book. To uproot the woes of damage to the Earth, miseducation of the populace, and injustice in the courts we need to uproot the State. Moral responsibility does not lie with the State. It lies with us. Those who would exchange voluntarily should be allowed to. Those who do not should be sanctioned. The State cannot exchange voluntarily. Sanction the State.
Now, where was I? Ah! Ruger.
Ruger weaves the tale of Zingales's origin to establish his anticrony-capitalist foundation.
Zingales did not want the United States to turn into his home country- Italy- with its disabling crony capitalism, something he saw taking root in American finance.I shuttered when I read
Zingales wants to reinvent antitrustZingales, and I gather Ruger, want to use the State to stop companies from forming together into Voltron corporations. They want a group of individuals to force another group of individuals not to voluntarily exchange with each other. Backed by the threat of theft, kidnapping, or murder. All this in the name of "competition". Two summers ago I read Ayn Rand's fictional magnum opus, Atlas Shrugged. I was utterly shocked at her ability to satirically refute antitrust laws. Here is an excerpt begining on page 73
The proposal which they passed was known as the "Anti-dog-eat-dog Rule." When they voted for it, the members of the National Alliance of Railroads sat in a large hall in the deepening twilight of a late autumn evening and did not look at one another. The National Alliance of Railroads was an organization formed, it was claimed, to protect the welfare of the railroad industry. This was to be achieved by developing methods of co-operation for a common purpose; this was to be achieved by the pledge of every member to subordinate his own interests to those of a the industry as a whole; the interests of the industry as a whole were to be determined by a majority vote, and every member was committed to abide by any decision the majority chose to make...Rand understands her opponents better than they understand her. They want to use the force of the State to pick their champions in business. She wants competition to be free and voluntary. It is that simple.
It was said that while the public welfare was threatened by shortages of transportation, railroads were destroying one another through vicious competition, on "the brutal policy of dog-eat-dog." While there existed blighted areas where rail service had been discontinued, there existed at the same time large regions where two or more railroads were competing for a traffic barely sufficient for one. It was said that there were great opportunities for younger railroads in the blighted areas. While it was true that such areas offered little economic incentive at present, a public-spirited railroad, it was said, would undertake to provide transportation for the struggling inhabitants, since the prime purpose of a railroad was public service, not profit.
Then it was said that large, established railroad systems were essential to the public welfare; and that the collapse of one of them would be a national catastrophe; and that if one such system had happened to sustain a crushing loss in a public-spirited attempt to contribute to international good will, it was entitled to public support to help it survive the blow...
Anti-dog-eat-dog Rule was described as a measure of "voluntary self-regulation" intended "the better to enforce" the laws long since passed by the country's Legislature. The Rule provided that the members of the National Alliance of Railroads were forbidden to engage in practices defined as "destructive competition"; that in regions declared to be restricted, no more than one railroad would be permitted to operate; that in such regions, seniority belonged to the oldest railroad now operating there, and that the newcomers, who had encroached unfairly upon its territory, would suspend operations within nine months after being so ordered; that the Executive Board of the National Alliance of Railroads was empowered to decide, at its sole discretion, which regions were to be restricted.
Ruger claims that there is a "danger of bigness and monopoly", while overlooking the biggest monopoly known to man. The Westphalian nation-State. Monopolies are theoretically possible in a free market. If a producer were to peacefully persuade people to trade at such an unbeatable price or quality that no other competitors could count themselves as suitors to the service of consumers. This has never happened. Not once. Not to say that it cannot, but that the odds are astronomic. If this positive monopoly were to arise, then this producer would deserve to be celebrated by bards. Every actual monopoly has come about by the State's invasions into the market economy. Either by securing a sector for a specific interest group, or by securing a sector for itself. Antitrust laws pick winners and losers. The winners are the special interest groups that are granted a monopoly backed by the threat of theft, kidnapping, or murder. The losers are the consumers. Everyone.
Ruger's most alarming advocacy comes near the end of his piece
Zingales nicely explains how some policies that are not efficient from a strict economic standpoint may nonetheless be good because of their political consequences. For example, measures reducing the power and concentration of firms, especially in finance, may not make the most economic sense. Yet they may be optimal for non-economic reasons. It is refreshing to see an economist who appreciates that narrow economic efficiency should not be the only or most important criterion of public policy.Economic efficiency is the extent to which the producer is able to meet the demand of the consumer. Antitrust laws reduce the extent to which the producer is able to meet the demand of the consumer. Antitrust laws are economically inefficient. Political consequences are vague in this context, and Ruger does not elaborate further. Chopping down the power of corporations via the State is in fact the means that Franz Oppenheimer spoke of not too kindly, the political means. Robbery. There is however, one firm who's power and concentration I would love to slash until it became less than a quark. A firm who's reduction would lead to an increase in competition. A firm that claims to protect property, but that cannot exist without forcibly taking property from humans. A firm that is the living embodiment of destruction. The nemesis of all humans. History's most wicked war criminal. The State.
Post Sciptum:
slavery is forced labor, the State is funded by stealing the fruits of labor, the State is a slave master, kill the slave master and "set the captives free"
There is a full fledged dialectic response to Ruger's charges of robotic single focus. On top of the economic arguments are the natural rights arguments, scriptural arguments, and music kritiks.
the results of actual anti-dog-eat-dog legislation here, here, here, here, here, and here.
The problem with the Rand quote is that the Sherman Antitrust Act isn't designed explicitly to stifle competition. The concern of the framers of the Act was with corporations crowding out competition because of their ability to make entry into the market too difficult. This in turn would hurt consumers. The Act is designed to preserve a competitive marketplace from those that would seek to use unrestrained markets in a way that defeats the purpose of such markets. In other words, at some point, a free market is no longer a free market.
ReplyDeleteOne may criticize the Act as a potential barrier to innovation. However, one has to posit counterfactuals on the one hand and argue that innovation is more important than competition (or opposed to competition) on the other. Dealing in counterfactuals is difficult because they are, by definition, not reality. Additionally, it is not clear that innovation and competition are incompatible with one another or that one is more important than the other. Either way, arguing that innovation is stifled by antitrust law results in the critic of antitrust law endorsing a system where firms can create monopolies and stifle the free market.
Finally, I dispute your claim that every monopoly that has ever occurred has come about by the state's hand. Standard Oil was not secured by the state but was broken up by the state. Major League Baseball was not created by the government but did receive the tacit approval of the government. This is not the same thing as being secured by the government, though. The problem with your explanation of monopolies is that there are many barriers to entry into a market that have nothing to do with the government. Those are the areas exploited by firms without government assistance.