MacRaven - Dave Haxton's Weblog

Thu, 12 Oct 2006

Several folks have asked how I, as a "small l" libertarian, could be opposed to and appalled by the current move towards truly global "free trade". After all, aren't all libertarians advocates of the free market? Isn't that the same thing? And didn't David Ricardo and the theory of comparative advantage put to rest once and for all the arguments of the protectionists?

For those who still believe that things are that simple in reality, I offer a link to this essay. Read the whole thing. Perhaps then you'll understand that the market isn't nearly as free as it is made to appear, and that many things are not as they seem.

The American Corporate State and the economic system that dominates the world may be a capitalist system in fact, but it is not now and has only rarely been anything resembling a free market.

Once upon a time there was a man named Adam, who lived with his wife and children in the kingdom of Kleptopia. Adam ran a little shop that made and sold widgets. Of course, you need whatsits to make widgets, but Kleptopia's whatsit supply was sparse. But with some doing, and at no small expense, Adam had a secure supply of whatsits, as did the other widget shops in the town where Adam lived and worked. Adam had workers who assembled the widgets, and Adam paid them the a little more than what the other shops paid their workers. With more contented workers, Adam produced the best widgets in town, and made a decent living.

(link) [The Partial Observer]

via Mutualist Blog

/Politics | 8 writebacks | permanent link

On 10/13/2006 06:40:47
Adam wrote

I'm assuming you've read Hayek's "Road to Serfdom". If you haven't, let me know and I'll get it to ya.

On 10/13/2006 09:01:29
Dave H wrote

Of course

I've read Hayek - and I have a whole shelf full of other "libertarian" economists, too, from Mises and Rothbard to both Friedmans. But with the exception of Rothbard and David Friedman, they have a glaring blind spot regarding State activity in support of business as an interference in the market. Which I thought this little fairy tale highlighted quite nicely. Most libertarians who rail against the "socialism" of the Welfare State assume that the State simply imposed these onerous regulations and controls, taxes and benefits, more or less willy-nilly, or in response to some internal paradigm of power for the State apparatus itself. It didn't. Socialist ideas crept into government in response to real problems - and were viewed as real solutions. FDR didn't push Social Security in a vacuum, he pushed it because hundreds of thousands had lost their retirement savings to the vagaries of the "business cycle", and would be in certainly dire straits come old age were not something done. So rather than correctly identifying and fixing the problem, he applied a band-aid, which caused more problems by interfering in the market, and required more band aids. It's became a vicious cycle, and will remain so until we as a society have the courage and the foresight to correctly identify *all* points of State interference in the market and eliminate them. Of course, since the State itself is, by definition, a monopoly, it is itself an interference in the market, and will have to be eliminated for freedom (and the free market) to reign. And I'm afraid that it's at this point that libertarianism becomes a Utopian vision - I don't think we'll ever be rid of the State. Which is a real shame. Be well, Dave H.

On 10/14/2006 08:34:07
JdJ wrote

As you'd expect, I agree with the libertarianish nature of your first paragraph, Dave: (a) that the modern global market *is* an example of a free market and (b) that Ricardo made a good point with his idea of comparative advantage. But we part ways a the second paragraph because things are never 'that simple in reality'. It's important to bear in mind the caveats to those statements. First, the the global market is still riddled with tarriffs and regulations and is actually a pretty lame example of an ideal Free Market. Second, Ricardo's Comparative Advantage, like any economic 'law', is a statistical statement about benefits to a society - not benefits to individuals. Your neighbor can die young even while average life expectancy is increasing but that's not necessarily anyone's fault. Compartive Advantage can efficiently obviate your business, or your skills, while still making most of the folks around you better off. So I read Mr. Wilson's essay (subtitled 'A tale of government intervention', I noted) - but I don't think it supports the points you say it does. Is it an indictment of Free Trade? I didn't see that. To me, it seemed to be either (1) a lesson in the Law of Unintended Consequences or (2) an example of Why Government Is Bad At Markets. But since you make a comaprison between the American economy (a mixed market - not capitalism, IMO) and Kleptopia's, let me toss these sticks in your spokes. Do you think American libertarians supported the decision in the Kelo case where Pfizer benefited from dispossessing home owners in Connecticut? Let's see what Ron Paul said: http://www.lewrockwell.com/paul/paul259.html. And speaking of road improvements, like me you can probably remember when the Interstate highway system was being built in the early-to-mid 60s. Were any libertarians clamoring for a National Commercial Highway System to ehance Capitialism? Not to my knowledge; that project was justified as the National *Defense* Highway System (since General Ike figured we needed an American autobahn). If I apprehend your point, it's that global markets are bad because they can cause displacements in local markets. My first point is that Wilson's essay doesn't show that: I think it shows that having your king muck with your market is a Bad Idea. (I don't know what Wilson's intent was. Maybe he meant to make your argument; in that case, I don't think he succeeded.) Now, granting that global trade can cause local market displacements, my second point is: Why is that a bad thing? Are we, as a society, to ignore the benefits of Creative Destruction - or those of comparative advantage - for the sake of the widget-makers? Is it serfdom that Adam & Sons have no guarantee that they can sell widgets as long as they choose to? Not the way I use the word; it would only be serfdom if they had no alternative to working at WidgetMart. So long as they were free to change employment, that's a poor description. We both know some folks in Minneapolis who had an interesting system to sell but managed to bungle the marketing completely and go out of business. No doubt they thought they were IT Geniuses and should have been immune to competition - shouldn't they have the same Right To Do Business that Adam & Sons would have? IOW, who's to judge which enterprises should survive, if not the market? The friendly folks responsible for the NEP? Which brings me to my final point. I happened across this article by Mike Munger: http://econlib.org/library/Columns/y2006/Mungercollectivism.html last week. He makes an pretty good case why we don't want no stinkin' NEP. BTW, this guy is Chair of Political Science at Duke University -- a defense of Free Markets from Duke? (Who'd'a thunk it??)

On 10/15/2006 20:45:13
Dave H wrote

Roads

was the point. Or, more specifically, government funded and/or subsidized transportation systems, including shipping and airports. These are *the* interference in the market that has allowed the growth of the vastly expanded global economy. I no longer think the Industrial Revolution would have been practical without the railroad and other infrastructure improvements financed by the government (read: taxpayers) to the vast benefit of large scale businesses. In short, I believe this little fairy tale shows that while Ricardo was absolutely correct in theory, in practice the temptation for governments to interfere is too great, and they will always do so. The problem with libertarianism is in it's implementation - I once considered every rollback of State power a victory for liberty, and, like the Libertarian Party position, IO considered a tax break not to be a subsidy. Respectively, they're not and it is. It wasn't the libertarians clamoring for the National Defense Highway System - it was GM, Ford and Exxon. Business es, which are thought of by most libertarians as allies, friends and supporters of the free market. They're not. Emphatically so. And no, libertarians didn't applaud Kelo - but that sure didn't stop conservative Republicans (and Wal-Mart) from pushing it. Most of the anti-Kelo amendments that passed in a flurry after the decision at the state and local level are toothless - and note that no Federal clarification by Congress was passed at all. Let's look at another area besides roads - education. What's the cost to the student of a computer science degree in India? Zero - all education is financed by taxes. What's the cost of that same degree in a US school? Between $45 and $100k. Who can work for less, the Indian engineer or the American one? There's a comparative advantage there, all right. Or somebody has their thumb on the proverbial scale. This does not qualify in any sense as free trade - and the "equalizer", government funding of all higher education would be opposed viciously by libertarians here (and rightly so, I might add). As would tariffs on imported software and restrictions on H1B visas. While libertarian think tanks issue press releases bemoaning state subsidies of industries in our trading partners, that's about all they can muster. And meanwhile, we who must operate in the local market are getting squished. I'm tired of being flattened. I'm all for Free Trade. And I sincerely wish we had it. We don't and show no progress towards it at all. The real problem is that there is not real solution: keeping on the status quo will reduce most of us to poverty as surely as a replay of Smoot-Hawley. I think Wilson's point was that having governments at all is a Bad Idea. And I'm starting to sincerely believe he's right. Thanks for the comment and Be well, Dave H.

On 10/16/2006 12:27:59
Adam wrote

You: "I think Wilson's point was that having governments at all is a Bad Idea. And I'm starting to sincerely believe he's right." I can't wait to see how your blog / perspective changes if you embrace this Anarchoheathenism (like some of my friends have embraced an Anarchochristianity). Expectant, AT

On 10/16/2006 13:42:17
Kevin Carson wrote

Thanks for the link, Dave. It's interesting, Adam, that you mention Hayek. I've found that Hayek's "distributed, idiosyncratic knowledge" and Mises' "calculational chaos," both critiques of central planning, apply about as well within the giant planned economy of the corporation as to Gosplan. The state's subsidies to economic centralization and concentration of capital, its socialization of corporate cost at the expense of the competitive sector, its cartelizing regulations that protect corporate dinosaurs from full-blown market competition--all these things result in dominant firms far beyond optimal size, with absolutely pathologically inefficient internal cultures. Dave, I disagree that no industrial revolution would have taken place without subsidized infrastructure, but I think the forms it would have taken would have evolved from Lewis Mumford's decentralist "eotechnic" production technologies.

On 10/19/2006 09:06:16
Arwin wrote

Successful small businesses

I am lucky enough to be friends with several successful small business people. I'm not saying they would keep the status quo of our system nor would I say that either, but they have managed to succeed anyway. Please note that both Steve Jobs and Bill Gates started as small businessmen. I don't think you could possibly argue they are unsuccessful. All small businesses aren't run by the easily deterred or possibly incompetent "Adam". There are many reasons why small businesses fail and it isn't all (or even mostly) a result of state interference. Historically there has been a high failure rate of small businesses especially once a big corporation decides to compete in a market or the market matures. I also marvel that corporations appear to be more efficient than small businesses, but it looks like they are. A good example of this is the PC business. The small mom and pop PC stores continue to go out of business because they can't compete with the big box stores like Best Buys or they have to become big corps like Dell or Gateway. Now PCs are becoming throw away items when they fail or are obsolete like TVs and VCRs. No need for the service that comes with a small shop. Those of you near or beyond the 50 year old mark probably remember small TV repair shops back in the late 50's and early 60's. They went out of business at least partly because technology and big corporations made them obsolete. Customized service is one area where big corps do poorly. Hence the success of individually owned restaurants. In my mind chains can't compete with a good local restaurant. When the service is no longer needed the one size fits all and economies of scale kick in. Corporations excell at this. Of course successful big corporations love the status quo, just the same way failing small business people would love to see things change in their favor. There are darn few of us who truly are motivated by altruism and would sacrifice our own well being for the greater good. Now Dave I have a great business idea for you. The only thing keeping PCs from being as throw away as TVs, DVD players and VCRs is the data stored on them. The main point of failure in a PC is the hard drive. If you could come up with a way that automatically and securely backs up the data it could make money. I know methods currently exist to do this, but it takes some level of user involvement beyond the "Backups for Dummies" level. There is also a hassle factor. For example if you have an external drive you have to plug it in prior to each back up or risk a lightening strike frying it along with the PC if you leave it plugged in... even with a surge protector. If you could come up with a method for the average non-geek computer user to back up data that only requires a one time setup you might be the next Steve Jobs. No charge for the idea. I'll settle for the satisfaction that I could say I knew Dave Haxton when he was a simple farmer.

On 10/19/2006 17:29:23
Walter Jeffries wrote

Arwin... Um... Didn't Bill Gates start with $20,000,000 of his daddy's cash? That is not quite the same as bootstrapping or starting as a small businessman. I hear that example often and detest it. I remember quite clearly watching his startup. As to backup, I've read Steve Jobs is building that into the next MacOS. I've been using fully automated backup (daily, weekly, monthly) for decades. It isn't that hard to setup. Soon perhaps it will be built into the OS as that you don't think about it. Personally I like thinking about some things - but then I still drive a car with manual transmission.

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MacRaven
Dave Haxton's Weblog
Musings, Reflections, Rants and Comments from a Hoosier Heathen husband, father, grandfather, farmer and software engineer. There's really only one of me ...

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