Positive Liberty

…and why, despite all claims to the contrary, we aren’t going back.

Matt Zeitlin offers a long and vigorous reply to my piece on libertarians and the myth of the nineteenth century (”The Age of Abundance and the Gilded Age,” posted here June 1).

After some delay, here are my responses to Mr. Zeitlin, who writes…

Kuznicki is formally right[;] the ways various railroad tycoons got rich by basically manipulating and playing off the government are hardly what many libertarians imagine as what happens in a capitalist society. What makes the 19th century so unappealing to American liberals is not that it was laissez faire, per se, but that to the extent there was any government intervention, that intervention was on the behalf of the powerful and wealthy. Government was happy to step in for union busting or to subsidize railroads. There was also widespread fraud, as [Kuznicki] mentions, in the financial markets that allowed for even greater concentrations of power.

I think that Kuznicki is underestimating the legal restraints on government power, especially regulatory power, in the 19th and early 20th century. A big part of the libertarian intellectual movement is rolling back anti-trust and regulatory laws if not to their 19th century antecedents, to their pre-New Deal forebears. This movement can be seen as a movement to a more laissez faire set up. I bet if you buy enough drinks at the reason happy hour for any Cato legal scholar, you’d get him to admit that he thinks the Sherman Anti Trust act is unconstitutional and that insider trading is illegitimate government intervention in the financial market.

I agree entirely with the first paragraph. The second is sort of flummoxing. I’m puzzled about the alleged secrecy at the Cato Institute — and also about plying Cato scholars with alcohol to find out what they “really” think.

First, and not speaking in any official capacity, if you’d like to buy me drinks at the next Reason happy hour, I’ll certainly take you up on the offer. But before you do, you should read this, and this, and especially this (pdf), in which Cato scholars recommend repealing every major antitrust law from the Sherman Act to the present. This blog is not a Cato publication, but I think it’s worth at least getting the facts right and not letting baseless insinuations like these stand unchallenged.

Lest there be any doubt, the 2005 Cato Handbook on Policy offers the same recommendation. This, the latest edition, is not yet available on the web, but I glanced at it today, and as far as I can tell this section hasn’t substantially changed. Indeed, the Cato Institute has advocated repealing the antitrust laws for decades; this fact is readily apparent to anyone with a web browser. There just isn’t any secrecy about it. (And yes, I’m completely sober as I write this.)

There is less Cato literature about insider trading, but even here it takes only a few moments with Google to find considerable skepticism about what seems to me mostly a bogus crime.

Setting aside the badly researched ad hominem, here is the crux of Mr. Zeitlin’s argument, which actually deserves more serious attention:

Kuznicki misdiagnoses the public’s apprehension of laissez faire capitalism and the Gilded Age[;] it’s not so much that the post [C]ivil [W]ar period up until the ascendancy of Teddy Roosevelt was “libertopia[.]” [M]ost of the public and lefties who talk about the Gilded Age don’t have that sophisticated an understanding of the history[;] it’s that the government explicitly existed to serve the interests of the powerful. And parts of the libertarian project, like Richard Epstein’s quest to break down the federal regulatory apparatus and Robert Bork’s reinterpretation of some anti trust statutes, though part of a genuinely laissez faire ideal, would, if enacted, move the government back towards that 19th century vision. And that’s why people are scared of the Gilded Age.

The argument, then, is that libertarians are ultimately well-meaning dupes: Whoever is pulling our strings — the Man, I suppose — hopes to see most Americans impoverished and trucked off to the rookeries, there to die of tuberculosis, just like in the good old days. Meanwhile, the corporations will (rather mysteriously) benefit from this state of affairs even more than they do from today’s mass consumerism.

Now I am no doubt being uncharitable here, but I think that even the more moderate versions of this argument are implausible, both as to libertarians and as to their supposed masters.

First, I can’t help but notice that the well-meaning libertarian dupe posited in this paragraph can hardly be the same all-knowing dealer in secret policy initiatives implied just earlier. Either we know what we’re aiming at or we don’t, but it’s hard to imagine having it both ways.

It’s also important to recall that libertarians, not leftists, have made some of the most cogent critiques of the government-corporate nexus, critiques that have been borrowed — but not invented — by authors both left and right. For much of the twentieth century, while left-liberals eagerly set up new regulatory agencies, classical liberals warned that rent seeking, regulatory capture, and rational ignorance would frustrate these agencies’ efforts just as surely as supply meets demand. Indeed, market liberals gave these phenomena their names and identified their effects through rigorous economic study. Far from being the friends of undue corporate power, it is no exaggeration to say that libertarians have been its greatest critics.

Yes, we libertarians sometimes do take the corporations’ side, as we do with antitrust law. But just as often we work to limit corporate power, as we do with eminent domain reform, opposing subsidies to agribusiness, and criticizing the military-industrial complex, to name still more areas where the supposed alliance breaks down.

The principle at work here, in every case, is that no citizen may use the government to live at the expense of other citizens. It makes no difference whether he represents a corporation or not; the state is not to be used as a private piggy bank. Libertarians have always opposed such efforts, even when this stance has made us politically unpopular.

Now let’s look at the corporations, who stand accused of wanting to grab all the power for themselves, almost certainly to the detriment of others. As I’ve just made clear, corporations aren’t always good citizens. Often they do use their money to corrupt our government and to hurt the economically disadvantaged. But on balance they are not the monsters that so many on the left usually assume.

First, it’s doubtful in the extreme that today’s corporation wants to impoverish the typical American, or even the typical foreigner: Corporations benefit when we all have healthy shares of disposable income to spend on their products. They want to see us succeed, because it will mean that we buy their stuff — and then they succeed. Destroying our wealth would instantly destroy their revenues and would, over the next generation, destroy their workforce too. This couldn’t possibly be a good outcome for the corporations.

Consider not the nineteenth century, but the culture of mass affluence that developed following World War II: Industrial production methods have given us vastly longer, healthier, more abundant lives. We are better educated, better housed, and have better cultural and intellectual prospects. We live the most comfortable lives that anyone has ever experienced. If this is a sign of corporate rapaciousness, I guess I’m at a loss to imagine what benevolence might be.

The trouble is, wealth must be created before it can be exchanged, and this process takes time. This, in a sentence, is nearly the whole story of the nineteenth century: Wealth can’t be hoped, wished, or legislated into existence; it can only be created, destroyed, or stolen. As I wrote in one of my all-time favorite posts,

Poverty is not a strange deformation of human life. Sadly, it is the default state of our existence. Poverty is not the result of Something Bad that Some Corporation Must Have Done. No. In a sense, poverty is life itself. It’s what we get to work with. The rest is up to us… [w]ealth, insofar as it exists at all, is ultimately the result of a damn lot of hard work.

Those who tell you otherwise are ultimately either dreamers of thieves.

Throughout the twentieth century, while the left-liberals were restricting corporate power with methods by turns laudable, naive, and contemptible, the great work of the corporations went on. They competed with one another ceaselessly to offer better products and services, higher wages, and better returns on investments. Nearly all of their efforts, then, went toward improving the lot of the average American. Through these efforts — through the efforts of industrial capitalism — I do believe we’ve left the Gilded Age permanently behind.

The regulatory state has had a relatively small role to play, whether for good or ill. To be perfectly clear, the state has had a role, and regulations that disallow fraud, force, and negative externalities are even necessary for the maintenance of the free market. To give just a few examples, truth in labeling and strict, property-based environmental regulations are to my mind both legitimate and welcome. Securities markets must be watched carefully to prevent or at least punish the many kinds of fraud that can arise within them. And so forth.

Many kinds of regulation, however, only work to the advantage of some people, but to the detriment of others, and these are simply acts of favoritism. Not all regulations are actually good, even if they are well-meaning, and not all good intentions deserve to be written into law.

So, while I would certainly reform, privatize, or even abolish many aspects of the modern state, I still don’t think that this will bring us back to the nineteenth century. The only way ever to return to the nineteenth century, with its tiny power elite and its vast margins of dearth, would be to destroy the industries of mass affluence themselves.

This is a step that I can only presume our corporate overlords would oppose, since it would entail doing much harm to themselves. So long as these industries continue to give the American people employment, investments, and products, America will be condemned to something like the wealth it enjoys today. (One way to destroy the free market might be to do away with or to corrupt the bedrock of law upon which it is built, for example by negating private property rights. This, though, is a step no libertarian would take.)

Now it’s possible, I suppose, that we are all equally deluded, corporations and libertarians alike, and that whenever libertarians defend the free market, we are actually working against our interests, against the corporations’ interests, and against the interests of society as a whole. It could just be that we are all dupes. But I don’t think so, and here’s why.

In considering a new policy, it’s reasonable to look at existing measures that have worked well or badly and to pattern our efforts accordingly. Thus I would argue that, for every incremental step we have recently taken toward laissez faire capitalism, the results have looked less and less like the dreaded nineteenth century.

Beginning in the 1970s, a number of significant libertarian-inspired reforms took place. These included abolishing the military draft; deregulating trucking, banking, and the airlines; significantly flattening the marginal tax rates, lowering many taxes, and abolishing still others; and virtually ending inflation. For a time we even managed to balance the budget.

Meanwhile, our living standards improved tremendously, and this was true not only of the rich, but also even of the poorest segments of society. As Brink Lindsey writes in The Age of Abundance,

Among poor households in the mid-nineties, 72 percent had washing machines, compared to 71 percent of all households in 1971; 50 percent had clothes dryers, up from the 45 percent figure for all households in 1971; 98 percent had a refrigerator, while in 1971 only 83 percent of all households did; 93 percent had a color television, more than double the 43 percent figure for all households a generation earlier; 50 percent had an air conditioner, up from 32 percent of all households in 1971…

Similar advances can be seen in all areas of material wealth and on just about every metric of well-being. These are not trivial advances; they give comfort and free time to the poor and to all Americans in a way that would seem a miracle to people in the nineteenth century.

The trend in the last few decades has been twofold, away from economic regulation — and toward prosperity for everyone. If this is the way back to the Gilded Age, the signs are far from apparent, and the progress has been entirely in the opposite direction. I think we should press onward, free our markets even more, and enjoy the growing affluence that separates us from our ancestors.

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