Corporate spokespersons – of whom the main ones are Republicans, traditional conservatives, and network and print journalists – describe many of the aims of the classical liberal agenda as sacrifices that interfere with the efficient working of a true, free enterprise economy.
Sadly, liberals understand their own beliefs so poorly that they often agree.
Thus, the corporate/Republican assault on the accomplishments of the New Deal and the Great Society achieve an unquestioned aura of intellectual validity that they do not deserve.
If we look more closely at these claims, however, we should be able to realize that regulatory structures, income and wealth transfers, public services, and a protection of individual rights are not sacrifices in the name of justice, but examples of justice that benefit everyone.
Economists have achieved an understanding of this that is every bit as mystifying as classical economics, but is not given the deference that classical laissez faire economics receives. It is called the study of externalities, or the network effect, or increasing returns. Though it has far more empirical support than does laissez faire, it is not accepted due to the implication that there are short-term restrictions on the ability of currently powerful corporations to extract maximum profit in the short term. Which seem to be all these entities are capable of caring about.
What does this mean? Here are some examples:
- Regulations.
Classical economic dogma holds that regulations impose a cost on doing business and reduce efficiency, so the economy would be stronger and more productive, and everyone would be better off, were regulations to be removed and businesses allowed to pursue their own interests without hindrance.
While this criticism can apply to single, individual transactions, there is a phenomenon common to many complex systems – even economies – called emergence. In simplistic terms, emergence is the quality that the whole is more than the sum of its parts. Things happen, and qualities emerge, in complex systems that do not apply to the parts that make up the system, and cannot be accounted for by a study of the parts.
In the case of an economy, in strictly game theory terms, we can say that it is an absolutely necessary component of an economy that it transact in an environment conducive to trust. If I do not trust the person I am dealing with, or the product he/she offers, or my ability to obtain redress in I am not satisfied, then I will not do business. As the Pareto effect says, if both parties to a transaction obtain something they want from a transaction, then both gain through the exchange. And this happening millions of times a day translates into a growing economy, an increase in wealth. Magic.
But that can’t happen without trust. We can, in fact, have trust without government regulation. There are many examples of certifications, insurance, and guarantees that lubricate markets and generate the necessary degree of trust for businesses to operate. But this is not always true. There are also examples of cases, such as drugs and medicine, where trust is a far more delicate flower, and purely private guarantees are or can easily be perceived as inadequate.
Of course, this does not mean that all parts of the economy, and all interpersonal relationships, must be controlled by the state. There is a great deal of disagreement over what, in fact, should and should not be government regulated. (While I would regulate food safety, and conservatives or libertarians would not, exactly the same two people can have the opposite opinions over whether the institution of marriage should or should not be defined by the state.)
Thus, though there may or may not be inefficiencies introduced into individual transactions by the presence of regulations, it is also the case that the overall health of the economy – not just people – in enhanced, not restricted, by those same regulations. Such regimes should always be subject to review and skeptical criticism. They should not, however, be abandoned entirely.
- Social justice.
Under the current regime in the executive branch of the federal government, and its servants in the other two branches, corporate profits and the disproportionate accumulation of wealth by those already at the top of the economy have grown alarmingly.
Again, the classical economic argument is that this is simply the natural working of business. Any interference by the government in the distribution of wealth to those making this argument is therefore done at the cost of, again, efficiency and growth of the economy.
Both theory and empirical evidence prove this argument wrong. A large middle class with a healthy share of disposable income is not only good for the people in that economy, it is necessary to providing the market for the goods that corporations and businesses sell. America’s economic growth since World War II has not been stimulated or motivated by the spending or investments of the wealthy, but by the spending, investment, and debt of the middle class.
This is, in fact, a friendly warning to the country’s corporate leaders: Destroy the middle class by reducing their wages and shipping their jobs overseas and your profits will benefit this quarter. You will also destroy the American economy, and harm yourselves.
- Social Security.
This is the subject on which liberals are most unnecessarily apologetic. One can argue, however, that much as the tremendous growth in wealth and prosperity in the U.S. in the later half of the twentieth century was due to many factors – universal public education, the G.I. Bill, technology, the Interstate Highway System, guaranteed home loans leading to widespread home ownership, workers rights, and much else besides – one important factor was the elimination of a large underclass of poor elderly. Senior citizens mired in poverty were a drag on their families, and on the economy, and having a large population of healthy, active, spending retirees has been good for the economy, not a sacrifice. The proof of this proposal will take place when Social Security is abolished by the Republican ideologues, and we all suffer for it.
Let us hope that social experiment does not take place.
- Universal Health Care.
Here is another example of the network effect and the efficiency of investment in universal systems. My chief example is safe drinking water. Were we to lose our system of providing safe, clean drinking water to every home and office in America, not only would the poor be deprived of something they need, but cannot pay for, but also the rich would in fact have to pay more for this necessity by having to install water purification systems for their houses on an individual basis.
The same goes for all public health systems, including emergency rescue services, and simply the provision of affordable health care. The reason the health care system in America is broken is not that some people are granted a free ride. It is because no one – no one – is currently or will face the prospect of paying for the services they consume. We expect government programs, or private insurance to pick up the tab, without our incurring any penalties. The real question is, which program of welfare services is the most economical.
The result is that we are now paying ten to fifteen percent of total health care costs for the administration (and profits) of private health care providers, HMO’s, and insurance companies, while single payer systems in Canada and Europe pay around two percent. A system that some would call socialist and inefficient is in fact more economically sound than the so-called free market we have now.
- Universal Public Education.
This has become a truism: if a developing country wants to invest in its future in the most productive manner possible, build schools.
Yet, people who would agree with the above will then in the next breath say that America’s system of universal public education should be abolished.
Why?
Sadly, one suspects that this is because there are people in positions of power whose greed is greater than their common sense. They do not have children of their own in schools, so they do not want to pay for the education of other’s children. To them, everything, even this, is a competitive, winner-take-all arena, and if others get the benefit of an education – leading to a good job and a productive role in society – then somehow they lose something in the process.
Of course, put this way, this sounds ridiculous. Which is why I put it that way. It is ridiculous. When everyone gets an education, everyone wins. Even those who pay more than their "fair" share.
- Civil Rights.
Somehow, conservative Republicans have been allowed to get away with making the amazing claim that the rights and guarantees written into our Constitution must be interpreted in the most narrow, restricted sense possible for living human beings, and in the most broad and generous sense for corporations.
How this has been allowed to continue as long as it has amazes me. Even the idea that the rights of the first ten amendments need not be granted by our government to people who are not citizens of the U.S., or on the territory of the U.S., flies in the face of everything that every high school student learns about the history and the language of the documents left us by our Founding Fathers. It even contradicts their own self-serving words about freedom and democracy being "gifts of a loving God." Yet it goes unquestioned, as so much of their hypocrisy has done for so long.
Finally, there is this: the basis of our constitutional system is the prevention of the concentration of power in one or a few hands. Those hands do not always belong to government. Many government regulations and laws are aimed at the proven inevitable concentration of financial or other power in large corporations or cartels. There are other institutions that have developed to provide balance to the power of corporations: unions, news organs, and civic organizations. All have today been maligned, defamed, or co-opted by corporate interests and conservative politicians. Over-concentration of power in the private hands of businesses and corporations is much a threat to our democracy and our economy as is the concentration of power in the hands of a "unitary executive."
We need to make this crystal clear: Free enterprise is a good thing. A free market, with free individuals making free choices of what to buy and how to buy it, is an absolutely necessary engine of prosperity and innovation. But just as the greatest enemy of democracy is too much democracy, the greatest enemy of free enterprise is too much freedom. Left to itself, the market tends toward concentration, and too much concentration of unrestrained power in the hands of private corporations or individuals is just as dangerous as too much concentration of power in the hands of an unrestrained, unaccountable government. No one single method of organization – no matter how well it works in any one instance – is the ideal method of organization for everything, everywhere.
These are the ideas and arguments that should be getting repeated every time a corporate shill on Fox or CNN trots out the standard arguments from the usual suspects. These are the ideas that we should be beating our politicians over the head with, every single day. Nothing above is either original or startling, but it is missing from the debate in every talk show, news article, political debate, and backyard discussion I have heard in the past fifty years.