Leave it to the Market?


For more than twenty years now, the “free market” has been the rallying cry of American politics. Conservatives sing its praises while occasionally betraying it when it suits their constituency, liberals won’t criticize it but claim that it needs to be fixed, and then you have the libertarians, for which the market is, for all intents and purposes, a stand-in for God. Like many other words often heard in politics such as “liberty” or “democracy,” the “free market” has been used so frequently that it is rarely ever questioned. This concept of a “free market” is accepted as something real; the only disagreements arise when people discuss what constitutes a violation of free market principles, or in other words, what actions fetter the market to the point where it can no longer be called “free?” All the loudest voices in American politics tell us that one way or another the market will solve our problems, either with prudent regulation by the state or by leaving it completely unfettered by government interference. What you will not hear, at least in the mainstream discourse, is that the market itself, or more correctly its dominance of our society and our entire way of life, is the real root of the problem facing human society.

Before tackling the market and its influence over human society, one point should be clarified. This article will deal primarily with the arguments of neo-liberals and libertarians as opposed to modern liberals. Since liberals do not openly preach the virtues and supremacy of the free market, choosing instead to insist that market excesses can be limited, fixed, or altogether prevented by wise government regulation, their arguments fall outside the scope of this article. There are plenty of arguments to explain why the regulation proposed by liberals will either not succeed or will not have a lasting, much less permanent impact, the strongest being the fact that liberals themselves often point to the regulation and government intervention of past decades to support their own arguments. It stands to reason that if past regulations could be repealed over time thanks to successful lobbying on the part of wealthy corporations and businesses, the same thing could happen again five, ten, or maybe twenty years after the passing of new regulatory laws in some hypothetical future. And of course, this also assumes that these regulations would even pass through the political system at all. In any case, the liberal solution of correcting the market via limited government intervention is a topic for another article. This article shall deal specifically with the arguments of those who exalt the market the most, namely, the libertarians.

Libertarianism has a long history in the United States and a few other privileged countries, all of which, incidentally, achieved their economic greatness by doing more or less the exact opposite of what libertarians believe in. While the Libertarian Party has existed since 1971, the ideology seems to have gained widespread mainstream attention with the presidential campaigns of Representative Ron Paul and his “Ron Paul Revolution,” which has effectively utilized the internet to bring his message to a wider audience. It is amusing to note that the internet, which has its roots in government-sponsored research, serves as the basis for the success of Ron Paul’s movement. Ironic though that may be, no objective observer can deny that Paul’s populist message has gained considerable success among many segments of the population who should otherwise be politically opposed to one another. This fact speaks to two fundamental truths about American politics. The first is that populist messages, which are specifically designed to appeal to a broad spectrum of political belief systems, are highly potent. The second is that widespread dissatisfaction with the mainstream political system and the usual politics of our two-party system has left many people wide open to such populist messages, and it would do well for many of them to dig a little deeper into the ideology espoused by Ron Paul and his ilk. While Paul sets himself up as a hero of the so-called “middle class” against the powerful elite represented by the mainstream candidates of both parties, he is in fact nothing more than an agent of the wealthiest segment of the American ruling class. While Ron Paul and his supporters claim that they oppose corporate power over the United States, the ultimate result of his libertarian rhetoric is the preservation of that very same power.

Of course stating this inevitably causes outrage among Paul’s cultist-like supporters. Many Ron Paul supporters, and in particular the disturbingly large amount of confused “leftists,” insist that they oppose large corporations. In fact they insist that our system is not “real capitalism” and hasn’t been for some time; they say it is “crony capitalism” or “corporatism.” In the past the Red Phoenix has dealt with this question of “real capitalism” vs. “crony capitalism,” and suffice to say that asking people who make this claim to clarify just when the American system was “real capitalism” can provoke some really ridiculous answers, if any answer at all. Here, however, we shall look at one aspect of libertarian ideology, namely the claim that libertarianism opposes corporate power. We shall see that the solution to this problem, like the libertarian solution to every problem, is to leave everything to the market to decide. Lastly, we will see why this non-solution, assuming it actually could be implemented, would only lead to literal corporate tyranny with no democratic accountability.

Many of Ron Paul’s supporters, particularly those lured from the left, are unaware of his ideological background. As it turns out, in the political realm what you don’t know can in fact hurt you. Paul’s economic and social theories are inspired primarily by the so-called Austrian School of economics, so named for the nationality of its original founders and adherents such as Karl Menger, Eugene Bohm-Bauwerk, Ludwig von Mises, and Friedrich Hayek. This article is no place to delve into the myriad of problems with Austrian economic theory, so we shall focus rather on the modern arguments advanced by populists such as Ron Paul when it comes to the market and our current system.

The Austrians were not the first to propose that the market reconciles the self-interest of individuals for the better of society; this idea can be traced to Adam Smith’s idea of the “invisible hand” which would promote the general welfare even though individuals in the market would be acting out of self-interest. There are a few key differences between this classical view and that of Austrian Schoolers, however. The first is that adherents to Austrian School economics, and indeed virtually all libertarians in general, express no concern over whether market activity promotes a better society; society does not matter, only individuals. Secondly, Austrian school supporters see the market as the only reliable source of information which can be used by individuals to allocate scarce resources in the most efficient way. In other words, without the market, which labels commodities with prices, it would be impossible for investors to know the best avenues for investing their capital. Hence it is necessary to leave the market alone so as not to cause any distortions which might lead bad investments. It is obvious that this theory contradicts those in favor of a planned economy, and indeed Austrian School theorists such as Bohm-Bauwerk, Hayek, and von Mises all received great praise for their attempts to “refute” Marxist theory. In fact, while the Austrian School is generally rejected even by mainstream neo-liberal economists, they just happen to more or less agree on the idea that socialist planning will always be inherently flawed. Even the most ridiculous ideas will find their proponents if they serve the status quo, and that is the main reason why people like Ron Paul still have a job.

According to libertarians like Ron Paul and his supporters, government regulation and intervention are to blame for “too-big-to-fail” banks and the consolidation of power into the hands of a small group of multi-national companies. The market, left to its own devices, would supposedly prevent the rise of such mega-corporations, which we are told received their power via government aid on their behalf, including stifling regulations which supposedly bar potential competitors from entering the market. In fact, whatever the issue, you can rest assured that to the libertarian, the culprit is always “government,” and the answer is always the free market. If one wants to try to get a handle on what libertarian society would actually look like, it is necessary to dig into these concepts a little deeper.

First, there is no disputing the claim corporations and private companies have benefitted from government largesse, and this certainly does benefit the largest multinational corporations. Businesses lobby the government, back electoral campaigns, and in return they receive deregulation legislation, subsidies, favorable trade deals and other perks. Libertarians tell us they are against this unholy marriage of the private and state sector, but there are a number of flaws with their understanding of this relationship.

According to libertarians, large corporations use their lobbying power to support stifling regulations which will bar potential competitors from entering the market. In other words, if it weren’t for mean old Monsanto and their lobbying efforts, you’d have all kinds of mom and pop chemical producers popping up all over the country to engage in healthy capitalist competition and prevent the rise of monopolies. Now some people might suggest, for example, that one reason it’s difficult to start your own airline is because airplanes are expensive to buy and operate. This would be wrong however; the market decides the price of airplanes, spare parts, and so on, ergo it is fair and just. Government regulation is the problem!

The problems with this claim are so manifold it’s difficult to decide where to begin. Perhaps the most glaring flaw is the idea that corporate lobbyists support regulatory legislation. In almost all cases the opposite is true; corporations lobby to eliminate, not implement, government regulation in their various spheres. The second most obvious error is the implication that if we could somehow roll back our current system to that non-existent form which libertarians insist is “true capitalism,” successful capitalists wouldn’t use their wealth to influence the remnants of the state to their favor. We’re supposed to believe that the new generation of capitalists, without any restriction whatsoever, will all play fair and not try to gain any unfair advantage by lobbying the government for benefits such as tax breaks or subsidies. The very idea is laughable, but it is by no means the most serious logical flaw this ideology has to offer.

We must at some point in the debate ask, “What is the market?” The market, in abstract, is an institution where exchange and distribution take place. In concrete terms, however, the market consists of people, that is to say individual buyers and sellers. This condition, where individuals confront each other in the market for the purpose of exchange, and more importantly the dominance of this institution in the case of capitalist society, forms the basis for the liberal cult of the “individual,” but this is a matter for another article. Here it is enough to say that in theory, buyers and sellers enjoy formal equality. This is where the problem lies, for while buyers and sellers are formally equal, they are unequal according to their possessions, that is to say they differ according to how much and what kind of property they own, what they have to sell, and how much money they have. Since distribution is determined by market transactions, agents must enter and participate in market exchange to get their necessities of life. To engage in exchange, agents need money, and in order to get money they must have a commodity they can sell. The worker’s commodity is labor power, the capacity to perform productive labor. Again, in theory, the worker and capitalist are allegedly on an equal footing when they confront each other in the market. Outside of the realm of economic theory, we can easily see this isn’t the case. Capitalists own capital, that is both money capital and means of production, hence in the market they hold all the cards. Since workers don’t possess necessary property, that is means of production, to produce everything they need to survive, they do not have the choice of withholding their labor power from the capitalists; starvation would be the result.

Once we step out of the realm of ruling-class economic theory and into the real world, we understand that “leaving it to the market” doesn’t mean leaving our fate to some abstract institution but rather putting it in the hands of a few real, live people, and hoping they will somehow arrive at the best, most beneficial results for all of society out of their own self-interest. In other words, it’s not that far removed from the libertarians’ inaccurate description of socialism, only replace government with private capitalists.

Worse still, libertarians exalt the individual and openly declare that they do not care about society, nor the “greater good,” indeed some have routinely and openly insisted that society doesn’t exist. That should give one pause any time a libertarian evangelist insists that their way of thinking would be best for “our nation.” Try as they might, however, libertarians cannot bend material reality. While their worldview divides human civilization into the “state” and “private sector” and holds as sacred the concept of “private property,” in the real world there can be no private property without the state and its organs of violence with which it enforces the existing property relations. If we look back into history we see that the rise of the very first state coincides with the emerging necessity to establish and enforce property rights, and as these rights and relations changed over time, so too has the state.

Ron Paul and his populist goons are selling a chimerical Utopian vision which runs contrary to the historical record. While his supporters will claim that our contemporary system isn’t “real capitalism,” they aren’t so forthcoming when asked to say when this “real capitalism” allegedly existed. When they attempt to do so, it is only a matter of pointing out the atrocious living conditions of the majority of people, crushing restrictions on civil rights, poor quality products, and of course the ever-present government intervention in the economy, if not in the form of regulation but rather protectionism, subsidies, and other handouts. Whenever they insist that we had a truly “free market” at some time in the past, ask for specifics, do a little research, and you’ll find that the market had restrictions on it then. In fact as Ha Joon Chang so eloquently pointed out in his book 23 Things They Don’t Tell You About Capitalism, there is no such thing as a free market, and never has been. More importantly, there has never been a single country in world history which has followed Austrian School economic theories to economic prosperity, if at all; anyone who tells you otherwise is either blatantly lying or simply ignorant. Support for Ron Paul is ultimately support for the ruling class, only by another route. Do not be fooled by populist hucksters who promise to explain the world in bite-sized nuggets of bumper-sticker “common sense.” If Ron Paul truly believed in his principles he wouldn’t work for the federal government, and that goes doubly if he were truly a threat to the working class. Paul may seem a world apart from Obama or Romney, but he exists to lead us to the very same destination.

The Austrian School of economics is a complicated subject. Though it is generally rejected by all mainstream schools of economic thought, the latter more or less agree with the former on some key concepts, such as the concept of marginal utility. With this in mind, the reader is invited to look into the matter further with a number of critiques of Austrian theory from several different perspectives, including Marxist and mainstream.

Further Reading







Published by Victor Vaughn

Anti-revisionist Marxist-Leninist, National Secretary of the American Party of Labor (APL).

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