“What’s good for General Motors is good for the country.”
This is the most famous quotation never said by Charles Wilson, Dwight Eisenhower’s Secretary of Defense. (He actually said “For years I thought that what was good for our country was good for General Motors, and vice versa.”)
Still, the misquote nicely summarizes the central dogma of libertarianism and right-wing regressivism: “free market absolutism” — the conviction that the “invisible hand” of the unconstrained and unregulated free market will always result in the greatest benefit for the public at large. As Milton and Rose Friedman put it: “A free market [co-ordinates] the activity of millions of people, each seeking his own interest, in such a way as to make everyone better off..” (Free to Choose, pp 13-4). Note the universal quantifier, “everyone.” Good for each, good for all.
The dogma of market absolutism gains some credibility from the fact that it is at least a half-truth. No doubt, the individual’s striving to maximize self-interested gain accounts for numerous improvements in the quality of life in industrial countries. Presumably, the inventors and developers of computers and the internet were more concerned with their own economic prospects than they were of the “social benefits” thereof. (Bill Gates’ benevolence was manifested later as a result of, his economic success, with the establishment of The Gates Foundation). Similarly, many scientific, scholarly, technological and artistic achievements, motivated primarily by self-interest and self-satisfaction, benefit society at large “as if by an invisible hand.”
The dogmatism of free market absolutism resides in the belief that the unregulated market never fails to be beneficial to all; the belief, in other words, that there are no malevolent effects of unconstrained market activity, no “back of the invisible hand.” From this belief follows the insistence that the free market is self-correcting, and that there is thus no need for regulation – that, in Ronald Reagan’s enduring words, “government is not the solution to our problems, government is the problem.”
Market absolutism is a “dogma” in the same sense that creationism and biblical inerrancy are dogmas; it is accepted “on faith” despite clear and compelling evidence that it is false. Moreover, it is a “keystone belief:” refute market absolutism, and the entire structure of libertarianism collapses. Not that this significantly alters the convictions of the libertarian and regressive true-believer, any more than the existence of fossils or the science of molecular biology inclines the religions fundamentalist to accept evolution.
Be that as it may, for those open to evidence and plain common sense, here are a few compelling reasons to reject the dogma of market absolutism – reasons to believe that what is good for an individual corporate stockholder may not be good for the public in general. I focus below on corporate behavior since corporations are far and away the most significant “players” in both national and multi-national economic activity. And after all, didn’t the “conservative” majority in the Supreme Court rule, in Citizens United v. FEC that corporations are “persons”?
Common to all the cases listed below is the corporate imperative to maximize profits and the return on stockholder investment. This imperative is called “fiduciary responsibility” and it is required by law. Accordingly, a failure to meet this responsibility can trigger a stockholder’s law suit against a corporation and its executives.
Private Prisons. Good for the corporations: more prisoners, “three strikes” laws, mandatory sentencing. The cost to society: less rehabilitation and early release, increased government expenditures and taxes. It is noteworthy that the United States has the largest prisoner to population ratio in the industrialized world.
War, Inc. Good for the corporations (i.e., the military-industrial complex and “private contractors” such as Halliburton and Blackwater): more wars, expenditure of rockets, bombs and ammunition (requiring restocking of inventories). Cost to society: avoidance of diplomatic solutions, increased military budget and battlefield casualties, disobedience to international law (e.g., the Geneva and Nuremberg protocols).
The Tobacco Industry. Good for the corporation: More sales and more customers, the younger the better, unregulated advertising of products. Cost to society: half a million premature deaths per year due to smoking, cost of medical treatment of tobacco related diseases.
Fast (“Junk”) Food. Good for the corporation: Increased sales and profits. Cost to society: obesity epidemic, diseases due to malnourishment (e.g., cardiovascular disease)
Privatized Health Insurance. Good for the corporation: denial of benefits (e.g., due to “pre-existing conditions”), inflated executive compensation. Cost to society: lack of affordable and universal health care.
Promotion of fossil fuel consumption. Good for the corporation: profits and return on investment. Cost to society: global warming, devaluation of scientific research, oil spills and contamination of the ocean, loss of fisheries and recreation facilities, devastation of marine ecosystems.
Outsourcing of jobs. Good for the corporation: increased profits and return on investment of stockholders. Cost to society: poverty, loss of educational opportunities, redistribution of wealth “upward,” shrinkage of customer base, economic depression.
Unlimited corporate campaign contributions. Good for the corporations: “legislators for hire” resulting in laws favorable to the corporations, deregulation, public subsidy of corporate activity. Cost to society: deregulation resulting in corporate irresponsibility and increased “externalization” of costs to the public, failure of the “privatized” government to act “with the consent of the governed.”
And so on, with the manufacture, sale and distribution of untested chemicals such as CFCs (causing ozone depletion and ultraviolet radiation) and DDT (devastating ecosystems), etc. The list of socially and ecologically harmful effects (“negative externalities”) of unregulated “free market” activity is virtually endless.
I refer above to “costs to society.” The libertarians neatly dispose of these embarrassments by asserting that “there is no such thing as society” (Margaret Thatcher) and “there is no such entity as ‘the public’” (Ayn Rand). It then follows that if “society” and “the public” do not exist, there is no public interest, no social responsibility, no social injustice.
When we cite such specific cases, free market absolutism collapses in the face of plain common sense. For if, as the absolutists insist, the unregulated free market always results in benefit for “everyone” why not allow a “free market” in child pornography, or extortion (“the protection racket”), or murder for hire?
The absolutist is compelled to reply, “because such activities harm or violate the rights of innocent persons.” With this admission, the absolutist gives away his dogma. For by this admission, the absolutist concedes that in some readily identifiable cases, what Robert Nozick dubs the right to engage in “capitalist acts between consenting adults” can, at times, be trumped by the rights and the welfare of innocent, unconsenting and non-participating third parties.
But if so, if there are legitimate reasons to outlaw extortion, child pornography and murder for hire, why then not also outlaw, or at the very least regulate, the sale of tobacco products and junk food, for-profit health insurance, junk bonds (CDOs) and hedge funds, and why not forbid the privatization of prisons, of warfare, and most fundamentally, the privatization of government through unlimited corporate campaign contributions?
I submit that while there may be a difference in degree between the prohibition of murder for hire on the one hand, and the sale of cigarettes and junk food and the privatization of warfare and government on the other, there is no difference in kind. All these activities harm and violate the rights of innocent and unconsenting victims.
Between, say, the “free market” in such services as auto repair and hair styling (acceptable) and the “free market” in extortion and murder (unacceptable) there is a vast “gray area” of economic activity in which the advantages of market activity may or may not be outweighed by harm to innocent others. Toward the “light gray” end of this continuum, caveat emptor (“let the buyer beware”) may suffice to minimize abuses by sellers and entrepreneurs without the intervention of the law and government. However, in the “dark gray” side of the continuum is found those transactions that cause unacceptable harm to innocent and unconsenting third parties. Also in the “dark gray realm” are those transaction wherein the potential customers are totally incapable of knowing the consequences of their transactions (e.g., the sale of prescription drugs) or whose judgment is overwhelmed by the black arts of public relations and advertising (e.g., junk food sales to children and cigarette sales to teen-agers). According to “free market theory” of neo-classical economics, each participant in an economic transaction possesses “perfect knowledge,” which is one of several reasons why it is compellingly obvious that there is no such thing as a “perfect market” outside of the publications of these economic theorists. And all of us, neo-classical economists included, are compelled to live in the real world.
Once the high-pressure political rhetoric and the high-fallutin scholarly jargon is set aside and undeniable economic and social facts are brought to the fore, the conclusion is inescapable: totally unregulated, laissez-faire capitalism cannot work, and attempts to make it work can only lead to oligarchy: opulent wealth for the very few, poverty for all others, and the disintegration of social order and the just rule of law. In addition to all that, oligarchy leads, paradoxically, to the destruction of the free market for, as history testifies and we are discovering anew in the daily news, oligarchy detests competition and leads to monopolies. Hence “mergers and acquisitions.”
Equally obvious is the remedy for all this: government regulation and the rule of law – law based, not on economic theory, but on historical experience and fundamental moral principles.
Government is essential, for no complex social activity, markets included, can take place without rules, referees to enforce the rules, and sanctions to deter the violations of these rules. Markets, after all, are essentially games: they are cooperative, rule governed, goal oriented, and the success of each “player” is contingent upon the behavior of the other players. Thus a market without rules, referees, and sanctions (i.e., laws and regulations) is unthinkable. And as with games, the referees, rules and sanctions must be supplied by a neutral and unbiased entity. What else could this be, but government? But while government is indispensible, there remains the ever-present danger that it can become oppressive and unresponsive to “the consent of the governed” due to control by self-serving individuals or corporations elites. “Eternal vigilance is the price of liberty.”
In a just society, the welfare and rights of those “innocent, non-participating and unconsenting” third parties to economic activities must be protected. Can they be protected by the benevolent “invisible hand of the free market”? Certainly not, if the above argument has any merit. The only legitimate protector of the interests of those third parties from the “negative externalities” of market activity must be that institution established by the public at large to protect each individual’s rights not to be harmed by “capitalist acts by consenting adults.” And “to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.”
Mr. Reagan, meet Mr. Jefferson!
In the final analysis, the self-described “conservatives” aren’t. Liberals and progressives insist, in the words of the U.S. Constitution, that it is the government’s legitimate role “to establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.” Accordingly, the liberals are the authentic conservatives.
How then have the regressives succeeded in foisting a belief in the dogma of market absolutism upon a sizeable portion of the United States population, including the media and perhaps a majority of the U.S. Congress? They have accomplished this through the expenditure of vast sums of private money in support of “think tanks,” in the purchase of media, and in political campaign contributions.
But what arguments have been presented in support of the dogma? Very few, I suggest. The widespread acceptance has been accomplished through simple repetition, devoid of argument and rich in the rhetoric of “freedom.” About the only supporting argument form of note is “anecdotal evidence” and “false generalization.” Supporters of market absolutism cite examples of the benefits of free markets, and from that conclude that all “free markets” are always benign. However, as noted above, the fact that free market activity is often beneficial is not in dispute. Yes, we are all better off due to innovation, entrepreneurship and competition in the production of goods and the performance of services. This is the aforementioned “half-truth” of market dogmatism. But this half truth does not yield a whole truth. It does not follow from the admitted advantages of free market activity that there are never any harmful consequences thereof. Simple reflection, as noted above, yields abundant examples of what economists call “market failures” and “negative externalities.”
“The Reagan Revolution” of 1981 ushered in the grand experiment in applied market absolutism. Before more and greater harms befall us all, it is past time for the people and the government of the United States to recognize and to proclaim that the experiment has failed. We have learned what we need to know about the attempt to institutionalize this dogma, and it is time now to return to proven modes of governance: the rule of law, the protection of the environment and common resources, just distribution of the fruits of our combined and coordinated labor, and the subordination of economic activity in the service of the public good. It is time, in short, to bring back the rules, the umpires and the sanctions. Time to scrap the ethic of “you are on your own,” and to restore the ethic of community: “we’re all in this together.”
Copyright 2010 by Ernest Partridge