When Adam Smith gets over-simplified into a religious caricature, what you get is “faith in blind markets” - or FIBM - a dogma that proclaims the state should have no role in guiding economic affairs, in picking winners of losers, or interfering in the maneuvers or behavior of capitalists. Like many caricatures, it is based on some core wisdom. As Robb points out, the failure of Leninism shows how state meddling can become addictive, excessive, meddlesome and unwise. There is no way that 100,000 civil servants, no matter how well-educated, trained, experienced, honest and well-intentioned, can have enough information, insight or modeling clarity to replace the market’s hundreds of millions of knowing players. Guided Allocation of Resources (GAR) has at least four millennia of failures to answer for.
But in rejecting one set of knowledge-limited meddlers — 100,000 civil servants — libertarians and conservatives seem bent on ignoring market manipulation by 5,000 or so aristocratic golf buddies, who appoint each other to company boards in order to vote each other titanic “compensation packages” while trading insider information and conspiring together to eliminate competition. Lords who are not subject to inherent limits, like each bureaucrat must face, or rules of disclosure or accountability. Lords who (whether it is legal or not) collude and share the same delusions.
Um… in what way is this kind of market “blind”? True, you have gelded the civil servants who Smith praised as a counter-balancing force against oligarchy. But the 5,000 golf buddies — despite their free market rhetoric — aren’t doing FIBM at all! They reverting to GAR. To guided allocation, only in much smaller numbers, operating according to oligarchic principles of ferocious self-interest that go back at least to Nineveh.
The Libertarian response to this article would be that Corporate aggregation of power on the scale which Liberals/Progressives abhor cannot happen but for the interference and aid of the State. State-granted monopolies, licensing programs, and heavily regulated industries create barriers to entry that mean only well established, large, capitalized firms can afford to operate profitably, since they are the only ones who can afford the cost, in time and money, of compliance.
This objection has merit. One way to demonstrate this is to observe the Telcom industry. It is not uncommon for municipalities to attempt to create a publicly-funded ISP utility which competes with private Telcoms. (Imagine if all of NYC had publicly-funded wi-fi). This is the sort of solution that is often desperately sought by municipalities in which laying “last mile” infrastructure is too expensive to be profitable for the Telcoms, leaving rural residents with limited options for internet access, which is increasingly necessary in today’s commercial climate.
Yet when municipalities attempt to do this, what happens? The Telcoms sue. Or they lobby the state to pass a bill outlawing it. And while Libertarians would certainly be against publicly-run utilities, certainly they can appreciate the irony of a town or city, through democratic means, trying to establish a competing ISP service, only to have it banned by State power, or worse, halted by an injunction from a Telcom with pre-existing contracts giving it a monopoly on the area’s Telcom service.
The difference in service is stunning: municipal networks, since they aren’t run for profit, have no incentive to throttle bandwidth, meaning that customers of municipal Broadband can 100 MPS speeds for 20% less cost than private counterparts. And of course, the Telcoms don’t want this to happen, so they’re running to State legislatures to make laws banning local towns and cities from making municipal networks. Certainly that is Corporatism at its finest, assuming Libertarian critics can find it in their hearts to admit that outlawing local communities from providing publicly-run alternatives to private ISP’s is a means of banning legitimate competition in favor of large corporations.
Yet what I think Libertarians are missing is the proverbial forest through the trees: take, for example, the AT&T/T-mobile merger. It was government action alone that halted this merger. In a purely free market, there would be no mechanism by which to prevent such mergers from occurring. What would prevent, in a healthy market, a series of buyouts and mergers from taking place in a given industry, such that you end up with one extremely large company? Competitors would no doubt see the writing on the wall, and respond in kind, resulting once more in the very thing which Libertarians claim isn’t possible in a truly free market: an oligarchical market in which a small handful of very large companies dominate substantial shares of the market. Private non-compete agreements would undoubtedly be signed (sometimes unspoken), and you end up with the same situation that the Telcom industry is in now: Verizon, Comcast, and Time Warner have essentially divided up the country into spheres of market share, making any company the virtually exclusive option for Broadband Access in their given part of America.
When you consider the Libertarian obsession with property rights in particular, it seems to me that there would be absolutely nothing preventing this phenomenon from happening in a true free market. The incentives all line up: Aggregation ensures marketshare. Greater marketshare ensures profitability. Profitability ensures the availability of capital, which can then be used to bully start-ups who will be unable to compete with large, well established companies (what I would term the “Walmart” effect). Yes, this means lower prices in the short-term. But price isn’t the only consideration. If you are unsatisfied with the service, you have no feasible alternatives. And taking the example of the Telcoms, a strict property rights regime would prevent start-ups from even laying the infrastructure necessary to form a competing network (smart Telcoms would buy up every underground mile they could to prevent competitors from laying wire on it).
So in short, I agree with the thrust of this article: the natural Libertarian objection on Corporatist grounds has merit, but the answer is not to completely excise the State from the market. The answer is smart policy, which means electing officials who have the balls to stand up to Corporate interests. This is obviously easier said than done, and there is plenty of historic examples to suggest that in practice, it doesn’t happen (Dodd-Frank being a good example of good legislation gone bad). On the other hand, the prodigious body of regulatory law in this country suggests that there is no shortage of political will to get the State involved in the activities of Big Business. And at any rate, Libertarians can surely agree: just because the right solution is unpopular or unlikely doesn’t discredit the solution itself.