Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“It only stands to reason that where there's sacrifice, there's someone collecting the sacrificial offerings. Where there's service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.”     Ayn Rand

February 28, 2006

Thoughts Along The Same Lines

by Eric

Sean Lynch has an interesting discussion at Catallarchy in a post called Connecting The Political Circle. He puts quite a few words into discussing the differences, and similarities, between libertarians (aka anarcho-capitalists) and anarchists (aka anarcho-syndicalists) and socialists.

It’s occurred to me that the main difference between libertarians or anarcho capitalists and socialists or communists is beliefs about what is likely/possible rather than what is desirable. I think the main reason anarchists say anarcho-capitalists are “not anarchists” is that they think anarcho-capitalists just want to eliminate government and want/expect the existing corporations to stay as they are, with the end result being that the corporations become the new government (hence calling us not-anarchists).

I think the last sentence is clearly how Libertarians are perceived. It is, in fact, one of my primary issues, as has been evident in the discussion between Doug Mataconis and I here on The Liberty Papers (see this, this and this for examples). Yes, I believe in individual rights and liberties and the power of markets, I detest the idea of “positive freedoms”, and agree with much else that libertarians believe in. But, I’m not a libertarian, and rarely describe myself as being one. Then it is usually because I’m closer to that position than anything else. The thing I think that libertarians and anarcho-capitalists basically lose sight of is that all concentrations of power are destructive to individual liberty, whether they are formal governments, or not.

Speaking of collusion, this brings up another issue that keeps people on the socialist side of the fence: monopolies. We’re all taught in school that artificial monopolies (i.e. those that are created intentionally by monopolists) can be created and sustained, that they harm the consumer, and that they must be broken up or controlled by government. In school, these were simply called “monopolies” and natural or state monopolies simply weren’t addressed. In actuality, it’s not hard to show that historical monopolies have always failed except when the state has intervened to support them, and that even where natural monopolies persist, they do not harm the consumer (at least not more than a state monopoly) and advances in technology eventually make them competitive anyway.

I think there’s some important thoughts in here, one of which Sean sort of glosses over. First, I agree that artificial, legal and natural monopolies are not permanent things. Second, I agree that government intervention does much more harm than good. In my opinion, the anti-trust lawsuit against Microsoft actually helped to sustain the monopoly they currently have over consumer operating systems and the desktop office suite markets, rather than breaking it up. If nothing else, it convinced people that they had to buy Microsoft products because they were the only viable product. It also convinced competitors to come to terms with Microsoft in a way that favored MS when the government failed to do anything meaningful (from their perspective). Probably the most important thought is downplayed, in a deprecatory sort of fashion. And that is that non-government monopolies hurt consumers. Of course they aren’t worse for consumers than legal monopolies, but that doesn’t mean that Microsoft being able to artificially control scarcity in the office suite market is good for consumers.

So, what does all this make me? I’m clearly neither a socialist nor an anarcho-syndicalist. But, my perspective on corporations, monopolies and concentrations of power seems incompatible with libertarians, conservatives and anarcho-capitalists. I usually describe myself as a rational anarchist. I believe in the sovereignty and responsibility of the individual, and oppose the concentration of power aimed at coercing the individual. I think that is, ultimately, the disconnect between libertarians and I.

Update: A thought struck me, and I think it’s one worth exploring, on this whole issue of libertarians, corporations and monopolies. I think that what is happening is that libertarians are stepping over a line that they should reconsider. They go from defending the market against government intrusion to defending the actual entities within the market that are the proximate cause of the desired intrusion. While government intervention and/or intrusion into the market is something we don’t desire and should actively work against, that doesn’t mean that the target of the intrusion, Microsoft for example, is something good that needs to be defended. In fact, neither Microsoft nor Wal-Mart are shining examples free market practices to hold up to the world. We have a tendency to defend the target of the government intervention, which is a mistake.

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8 Comments

  1. Interesting thoughts, Eric. While I will agree with you that a less competitive business environment is worse for the consumer than a more competitive one, artificial monopolies in the past have been far from catastrophic for consumers. I’m aware of no initiative for “encouraging competition” that has been more successful than the simple profit incentive created by prices that are higher than the market clearing price.

    As for concentrations of power being harmful, I completely agree with you. However, I think that the “natural” size of firms that don’t have to deal with governments will tend to be small in most instances, and technology will always tend to make that natural size smaller.

    On the other hand, there’s the tendency of groups of people who are jealous of what other people have or who are convinced by arguments that people must be forced to be charitable to band together in a region to try to use force against others. The only good idea I’ve had so far about how to prevent this is one that will probably make most people think I’m crazy: if guns were the great equalizer in the 17th-19th centuries, the great equalizer of the 21st century may well be nuclear weapons. When people with nothing to lose can blow up multiple city blocks (I’m not of the opinion that city busters could be common, and ground bursts just aren’t that destructive all things considered), anyone thinking of concentrating power, at least geographically, will have to take that into account.

    The major thing preventing this situation from already existing is that it’s easy to extract plutonium but hard to make a plutonium bomb, and it’s easy to make a U-235 bomb but very hard to enrich uranium. I have heard that a U-233 bomb would be easy to make while U-233 is made from thorium and therefore should be chemically extractable, but I haven’t done any research into this. U-233 or computer designs of plutonium implosion devices may well be the enablers of this situation. For governments this would be horrible. It would be like guns were really expensive and you were the only gang in town and you had the market for guns cornered, and suddenly a bunch of other people figured out how to make guns cheaply. This will also be very bad for anyone living in any cities that get bombed along the way, and I don’t wish it on anyone; I just think it may well be inevitable and may in the long run result in a less coercive situation for everyone.

    To any government people reading this: I promise not to try to “help it along.” In fact, if you want my thoughts on how to prevent it and want to pay me a decent salary, let me know.

    Actually, some thoughts for free: the powerful countries of the world really need to stop making the nuclear club look so darned attractive. Get Israel to abandon their nukes and declare the middle east a “nuclear free zone.” Get India and Pakistan to do the same. Continue to reduce the US and Russian arsenals. Show the world that you believe that nukes are barbaric relics. If you can’t do that, you will be the ones responsible for creating the situation I described above, not people like me who say maybe it wouldn’t be so bad *in the long run*.

    Comment by Sean Lynch — March 1, 2006 @ 9:10 am
  2. Sean, thanks for stopping by. I fully agree that the more freedom in the market, the less likely that large firms capable of creating artificial monopoly are to emerge. The simple fact of having to know what all the regulations are, and comply with them, is a staggering barrier to small businesses and entrepreneurs. And, naturally, large corporations will work hard to make sure those barriers stay in place. That, by itself, is one reason to view large corporations with suspicion. Since I currently work for a Fortune 100 (at a level where I interact with corporate counsel and government affairs), I have a fairly good view of this. While it may appear that we are pushing prices down, we never bring them down to a level where a truly competitive market would bring them. The competitive market has a glass floor, and the corporations work hard to keep it in place.

    Current technology is driving us towards small. After two centuries of big, mass production is better during the industrial revolution we are finally beginning to see the fruits of the information revolution.

    Interesting thoughts on nukes, I’m going to have to think about that for a while. My gut instinct is that it can only work on the frontier, much like the equalizer of guns didn’t have work out so well within Old Europe, but worked out quite well in America.

    Comment by Eric — March 1, 2006 @ 9:24 am
  3. Eric, I completely agree with you that blindly defending Wal Mart and Microsoft without pointing out the places where they really are doing bad things is Not a Good Idea. This is one of my biggest problems with the Mises Institute. As far as they seem to be concerned the Waltons are heroes. Instead we should probably just be looking at everyone at human beings and thinking about ways the system encourages or discourages certain behaviors.

    Comment by Sean Lynch — March 2, 2006 @ 4:10 pm
  4. Sean, you’re coming dangerously close to thinking like a rational anarchist, look out! :-)

    Comment by Eric — March 2, 2006 @ 8:51 pm
  5. Eric’s absolutely right about the regulatory environment. Large firms are better able to absorb the fixed costs of compliance than small businesses, and some use regulation as a barrier to entry.

    Eric also makes an interesting point about the returns to scale, and how they just might be beginning to diminish. Davidson and Rees-Mogg made the argument in The Sovereign Individual back in ’97.

    I have my problems with Davidson and Rees-Mogg, mainly because their prescriptions kind of recall the ’70s “if you ain’t wealthy you’re screwed” brand of survivalism. For those who aren’t wealthy, they suggest hiring out as a retainer to a Sovereign Individual. Secure the blessings of liberty, I don’t think so.

    I am too skeptical of human nature (the Fall and all–I know not everyone subscribes so I won’t go on about it), alas, to be an anarcho-capitalist or a rational anarchist. If those are the synonyms for libertarian, I guess I have to call myself a small-r republican.

    Comment by Ken — March 7, 2006 @ 7:06 am
  6. Ken, rational anarchist is not a code word for libertarian. Check out this link for an idea of what rational anarchy is. It is NOT a political ideology in the sense that being Liberal, Conservative or Socialist is. You could, actually, be any of those things and be a rational anarchist, although it is hard to see how you could be a Socialist and agree with the principles behind it. Rational Anarchy, in fact, accepts human nature as flawed.

    I’m not a big fan of Davidson and Rees-Mogg myself. They use “Sovereign Individual” in a way that I would never use it. I think they get it right on small systems that are as efficient as large systems and the return of the cottage industry. This process will only continue to accelerate as we move further into the information age. Especially with the dawn of nano-technology.

    Comment by Eric — March 7, 2006 @ 10:30 pm
  7. Thanks, Eric. Based on the information you linked, I see that rational anarchy is not “classical” (lacking a better term) anarchy. It’s easy–too easy–just to see the term “anarchy” and pounce. I’m quite fond of The Moon Is a Harsh Mistress myself.

    To change the subject just a tick, I’d like to chime in on the Wal-Mart/Monsanto part of the discussion, if I may, with all due respect to you and Sean Lynch.

    Wal-Mart started with one measly store in Benton, Arkansas. They didn’t spring fully-formed from the forehead of mighty Zeus, able to exploit scale from the beginning and exercise artificial monopoly power (I feel as though I should put some scare quotes there somewhere, but I won’t).

    That said, there’s one thing that I would take Wal-Mart to task for (and not just Wal-Mart: GM and Whirlpool do it too, that I know of), and that’s this: The practice of looking at suppliers’ books, deciding their contribution margins are too high, and ordering them to cut price.

    But you know what? The suppliers who acquiesce are every bit as much to blame as Wally World, perhaps more so. I tell my students (I teach a graduate business class part-time) that the proper response is, “If you want to vertically integrate and determine my variable costs, then buy my business and take on my fixed costs too. Otherwise, get yourself a ten-pound hammer and a nice big pile of sand.” The point is that the supplier must be answerable for the decision, instead of asking the government to let him off the hook.

    I prefer to shop small and independent where I can, but there has to be a payoff. I sympathize with the mom & pop businesses driven to the wall, but only to a point. Scale isn’t the only business advantage there is, and too often “support small business” becomes code for “subsidize my inefficient and otherwise undifferentiated business” (the old PNW timber industry has refined this particular hymn to a fare-thee-well).

    For example, I’ll happily pay twice as much for .22LR ammunition at my local gun store & range as I would at Wally World, because at the gun store I don’t have to stand at a counter for 20 minutes while blue vests skulk by, industriously avoiding eye contact. I figure my time and the level of service I get at the gun store make the price premium a bargain. And the gun store is in no danger from Wally World otherwise, because they’re not trying to compete by selling Savage .22 bolties for 97 bucks. Wally World doesn’t sell handguns, gun leather, reloading gear, or CCW training. The gun store does.

    If you’re a small business competing with Wally World, do what they don’t, won’t or can’t do. Don’t try to sell commodity products at their price with no service, and then whine about the big bullies when they drive you (the editorial you) to the wall.

    Most consumers won’t build an entire life around going to a dirty store with surly/indifferent help and cheap PRC plasticrap. They might do it for a while, and for certain products, but Wal-Mart is not an omnipotent behemoth.

    Comment by Ken — March 8, 2006 @ 11:40 am
  8. Don’t get me wrong on Wal-Mart, I happen to be massively impressed by much of what they have done. There are, however, some things that are unsavory and need to be seen as such. The area you called out with their vertical supply chain is one such. The other big area is the way that they do business with developers and local government. Having just witnessed it recently in my own town, I’m not really happy with it. But, that doesn’t mean I advocate the state or feds stepping in, because I don’t.

    Comment by Eric — March 8, 2006 @ 11:49 pm

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