Capitalism, Utopianism, Democracy, and Historical Inevitability at Law & Society Blog

Capitalism, Utopianism, Democracy, and Historical Inevitability

Published by Hanno Kaiser July 24th, 2006 in Culture, Law and Society

My sketch of a left-libertarian ideal society is based on the belief that markets, as a form of social organization, do more good than harm. For purposes of this argument, I will restrict my definition of “good” to the price, quantity, and the variety of goods and services available to the consumer, and to the rate of technological progress. Note that “goods and services” include not only what’s on the shelf at Wal-Mart (or Dean & DeLuca), but also, for example, education, books, films, newspapers, community networks, internet cafes, tattoo parlors, etc. The “price” of a good is, as always, its opportunity cost, which may or may not be a cash cost. It could also include, for example, the cost of relocation if a local school does not offer the courses that I’m interested in. In any event, a person is better off if he or she has more options practically available to him or her and worse off if that set of options is smaller. Given my naturalistic definition of “good,” the belief that markets do more good than harm is open to empirical testing, and I am willing to defend my claim on those grounds, primarily by way of comparison to other systems of social organization. (This, of course, is a traditional conservative move, but one that I can’t find much fault with).

If markets turn out to produce “good” results in the sense defined above, then a “market-based ethos” is a reasonable normative response to something that works. A “market based ethos” is therefore akin to, say, the “scientific ethos,” as a normative response to an epistemologically privileged way of making claims about reality, compared to, say, intuition or revelation. Therefore, I don’t have a problem with a “market based ethos,” with the caveats outlined in my earlier post (primarily that even in a market based society, a significant number of people will suffer exclusion and failure, and that they have a right to meaningful assistance).

Brian takes my sketch of a left-libertarian society seriously and summarizes it fairly, even charitably, in his response. Yet he questions my starting point (”markets are, on balance, good”), and disagrees with its normative consequence (”a market-based ethos is reasonable and morally unobjectionable”). Here’s Brian’s argument.

[A] market-based society will necessarily have a market-based ethos, and therein, I think, lies the problem. The point of my original post was that so long as a society has a market-based ethos, which necessarily encourages individuals to pursue their economic self-interests, then the sort of corruption that we currently see in our government is inevitable. In a market-based society money=power, or at least the potential to strongly influence those with power. And in a society whose ethos encourages individuals to vigorously pursue their economic interests, those with wealth will use that wealth to influence those in power to adopt policies that will allow them to gain more wealth faster. And that means corporate tax breaks, loopholes that allow companies to incorporate in Bermuda (so that they don’t have to pay taxes at all), cuts in social programs, and in particular the social minimum income (so that companies can hire workers more cheaply), corporate subsidies (really welfare), and so on. Even if the starting point is ideal, the long-term result, in a market-based system, will be massive corporate influence on government policy, and massive harms to the middle and lower classes.

First, I question the inevitability of Brian’s dialectic: self interest leads to inequality in wealth, which leads to unequal access to political power, which leads to the economic, legal, and political exploitation of the middle and lower classes. It’s not that with respect to most issues “corporate America” is on one side and “the middle and lower classes” on the other. In fact, it’s hard to identify what “corporate America” really means. To give just one (highly stylized) example. Every startup company wants to compete. Every successful company wants to forge an oligopoly. And every oligopolist wants to kill the other oligopolists to become a monopolist. Each set of companies (startup, oligopolist, monopolist) would lobby for different and often contradictory government favors, assuming that they choose to lobby at all. My point is obviously not to deny massive corporate influence on government, but merely to question the predictability of the outcomes of that influence. In that context, let me quote one of Brian’s related points:

First, and most obviously, all (or at least nearly all) of [Hanno’s] suggestions are opposed by a significant majority of politicians in our country today, in large part due to the fact that they are in the pockets of large corporate donors. This is not a particularly deep objection, though it is a reason to think that perhaps our own political system is so completely controlled by corporate interests that only a massive public uprising can move things in the right direction.

Again, is that really the case? Is the system really rotten to the core? If “a significant majority of politicians” were so completely in the pockets of corporate interests as Brian suggests, how do we explain four of the top five expenditures from the 2007 federal budget, which totals $2.8 trillion:

$586.1 billion (+7.0%) - Social Security

$466.0 billion (+4.0%) - Defense

$394.5 billion (+12.4%) - Medicare

$367.0 billion (+2.0%) - Unemployment and welfare

$276.4 billion (+2.9%) - Medicaid and other health related

If Brian’s theory was correct, wouldn’t we expect shrinking Social Security, Medicare and welfare budgets? (Of course, one could argue that those budgets should grow faster). And how do we explain the persistence of, say, the Robinson-Patman Act against price discrimination, the Civil Rights Act, the Americans with Disabilities Act? Why are the EPA and the FTC still around? If corporate interests truly dominated politics to the extent that Brian suggests, I would expect us to live in a very different world.

In my view, corporate influence on government is one of the most significant policy problems, but the main effect of that influence, at least so far, has not been a clash between corporations on the one hand and “the middle and lower classes” on the other, but rather governmental waste and inefficiency on a breathtaking scale, contradictory interest-group driven laws and favors to groups with competing interests that make almost everyone worse off. And here’s where I agree (in terms of results, not causes) with Brian: Who’s going to suffer the most as a result of the societal welfare loss from rent seeking? Based on the sources that I have read, there seems to be a strong argument indeed that the real losers, mainly in terms of lost opportunities, have been the lower and the middle classes. Note that I am not complaining about the rich getting richer. I have no problem with wealth. I am, however, strongly objecting to the poor getting poorer or, what’s almost as bad, the poor not getting richer even though they could with better policies in place.

Alright, this post is already way too long, so I will save my second point about Brian’s criticism of “economic self-interest” for a follow-up.

Technorati Tags: political philosophy, corruption, public choice

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2 Responses to “Capitalism, Utopianism, Democracy, and Historical Inevitability”

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1 Benjamin Nelson Jul 24th, 2006 at 5:45 pm

I don’t necessarily agree with Berkey’s final analysis, but there are some problems with your rebuttal.

I don’t think Berkey’s point is that there is a single hegemonic force at play, just that there is a dominant or primary source of power which drives the agenda and gets things done. The Republican leaders did try to dismantle Social Security, first by “privatizing” it, and then “personalizing” it, under the threat of “insolvency”; but people resisted intractably. Ironically, Medicare and Medicaid, which were not discussed in the town hall meets, really are in danger of insolvency last I checked. We can predict that corporate industry interests would care for increased Defence spending; it’s almost axiomatic. Unemployment payments are indeed mysterious to me under the present authority, though of course these programs are gradually being phased out and replaced by workfare programs.

The Bankruptcy Bill is perhaps one of the more striking pieces of evidence that those parties in the system are aimed at fulfilling corporate interests over those of citizens: if we compare it to, say, the SS fiasco, we find that the consequences of the former were less well understood and appreciated by people than the consequences of the latter, which made the former politically impossible and the latter a shoo-in.

From what I understand on the basis of talking to some people who work there, the EPA has been watered down from the inside. The former head of the organization, author of “Worse than Watergate”, has been fairly vocal about that.

As for specific bills, it’s always an uphill fight to repeal something popular that people are used to. Plus, I don’t believe that it’s in any corporate interest to rail against civil rights or the handicapped; and it doesn’t seem to be in the theocratic interest either, since they gain their persuasive power in part by publically renouncing the racist and intolerant tendencies of the Goldwater era. The movement against civil rights emerges out of the theocratic and authoritarian ethos, more or less because it’s not convienient to have civil rights when you have other plans. But the move against civil rights doesn’t seem to be in line with the corporate sensibility; since they at least pay lip service to libertarian ideas (and perhaps even think of themselves as agents of the ideology).

And anyway, the word “deregulation” has become a call to arms for the right-libertarians, and I would be the furthest thing from surprised if I found out that there were attempts to dismantle all kinds of regulatory practices over the past five years.
2 Matt Wood Jul 26th, 2006 at 10:29 am

At least one scholar has posited that the very idea of ‘individual rights’ was an outgrowth of early contractual law. [Jane Jacobs, in her remarkable and underappreciated book ‘Systems of Survival’.]

The argument basically proceeds as follows:
In both Greek and Roman societies, rights were thought of as by-products of duties, which in turn were linked with status and social role. For example, heads of households had duties owed to that status, and consequently enjoyed rights not available to other members of the household. The same phenomenon was tied to military status, membership in the clergy, etc. As members of the human race, people in ancient Greece and Rome had no rights. Apparently the Confucian concept was the same. For example, Roman commercial law (known for some strange reason as the Law of Foreigners) was available only to those whose duties required it.

Fast forward to medieval Europe, where commercial need for contracts was growing but commercial contractual law is missing. The established law courts were shaped by feudal law, the rule of rank, or hierarchical law. Commercial people, on their own for hundreds of years, developed binding courts of arbitration outside official courts, which accreted bodies of precedent and eventually became known as the Custom of Merchants.

This contractual law, which was eventually incorporated into the body of established law (in the case of England, by act of Parliament), contained a radical notion. It applied to all individuals alike, for no other reason than that they were individuals, making binding contracts, no matter who they were or what their social status was.

According to Jacobs, neither rulers nor philosophers invented individual rights. They were a product of the market. This jibes with linguist Charles Fillmore’s claim that all categories are rooted in motivating experiences and social knowledge.

Therefore, excessive government interference in the market not only threatens bare economic well-being, but may also erode the social practices which nourish and sustain the notion of ‘individual rights’, and perhaps even the belief in the possibility of a self-governing people (ie, democracy).

[As an aside, Jacobs’s book posits the existence of two separate norm-sets which govern ‘guardian’ work and ‘commercial’ work. Her analysis (which pools numerous snippets of fascinating history) shows that a healthy society requires not only the segregation of these functions - in accord with Milton Friedman - but their successful symbiosis. She deftly demonstrates how most failed social systems, from the Soviet Union to the Khmer Rouge, from the Mafia to many defense contractors, represent blendings of these normative systems.]

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