Problems for Libertarians: Economic Capture

As a part of my attempt to step outside of my particular intellectual bubble, I regularly listen to the podcast EconTalk hosted by Russ Roberts.

The task of stepping out of one's bubble is to read things one may not necessarily agree with. I tend to be on the liberal side of things - so the libertarian-themed EconTalk would qualify. Though, in violation of this principle, I sometimes find myself agreeing with what is said, and incorporating some libertarian thoughts into my own writing.

The fact that global trade is responsible for lifting over a billion people out of extreme poverty represents one area where free-market principles and compassion went hand-in-hand for a better world.

However, in looking at both sides of these debates, I do come up with some problems for libertarians.

A few blog posts back, I wrote a post in which I showed how the moral argument in defense of the right to freedom of speech paralleled the moral argument in defense of a right to freedom of trade - a free market. (See Freedom of Speech and Freedom of Markets)

Basically, the argument states that the right to freedom of speech is a right to freedom from violent interference based on what one says, writes, or communicates in other ways such as art or gestures. The reason we need to keep violence out of the forum is because, once it is introduced, those with power are going to determine - through violence - what people may hear or write. Inevitably, those with power are going to make this determination based on what promotes their own interests. Those with power will allow speech that promotes their interests, and condemn through violence speech that would thwart their interests.

The same argument applies to the market.

Basically, the argument states that the right to freedom of trade is a right to freedom from violent interference in the exchange of property. The reason we need to keep violence out of the market is because, once it is introduced, those with power are going to determine - through violence - what people may trade. Inevitably, those with power are going to make this determination based on what promotes their own interests. Those with power will allow trade that promotes their interests, and condemn through violence trade that would thwart their interests.

If one thinks that this is a good reason to allow freedom of speech, it seems to follow that it is also a good reason to allow freedom of trade.

This does not imply unconditional freedom in both cases. The right to freedom of speech does not include the right to lie - or even to make careless claims in some circumstances. False advertising, fraud, libel and slander, are prohibited. And freedom of trade is restricted with respect to nuclear, chemical, and biological weapons, to name a few. However, it does argue for a strong presumption in defense of freedom - that freedom be permitted unless and until compelling reason can be provided in favor of violent interference.

The puzzle for libertarians is this:

We introduced violence into the market long ago. If this argument is sound, then this predicts that we should expect to find a great deal of evidence of cases where powerful people are using violence in the market place to allow trade that promotes their own interests and prohibit trade that conflicts with their interests. Yet, when one searches through the works of libertarian think-tanks such as the CATO Institute, Hoover foundation, and - indeed - listens to the podcast episodes from EconTalk - one discovers very little discussion of programs that transfer wealth upward.

This is not to say that such talk does not exist. It is simply much less common than talk about the transfers of wealth that benefit the poor. We see such organizations complaining more about minimum wages, national health care, public school, and public health care than we see them complaining about tax benefits for corporations, restraints of trade, the capture of regulatory agencies, a multi-hundred-billion dollar defense industry that is, to a large degree, a corporate welfare program, government-funded research where the wealthy take the research and sell it, and foreign wars that are fought for corporate interests.

I would like liberal readers to note - all of the items that I listed above that libertarian think-tanks tend not to talk about are cases where libertarian principles support liberal political objectives. Yes, there such things do exist. One can find them if one does not spend all of one's time in one's own political tribe hating everything having to do with the other political tribe - one can find potential areas of agreement and . . . GASP! . . . even areas of potential cooperation.

But, let us put that aside for the moment.

This seems to have two possible implications: at least if we look at things as they appear from the point of view of libertarian think-tanks.

(1) The premise in which the right to freedom of speech and freedom of markets is false. It is not the case that, if violence is introduced into the forum or the market, that those with power will use violence to permit that speech/trade that benefits them and prohibit that speech/trade that is not in their interest.

(2) Those with power can not only use it to buy legislators, regulators, public-relations companies (and advertising campaigns), media, lobbyists, and lawyers with which to manipulate the powers of government to concentrate economic wealth in their hands. They can use their power (and, in particular, their money) to capture the attention of libertarian think-tanks as well.

Option 2 is not a conspiracy theory. It does not require people consciously deciding to do evil. It is simply the case of a market responding to incentives. Think-tanks need money. The wealthy and powerful have money to spend. Powerful people have reasons to fund those think-tanks that put more emphasis on criticizing programs that transfer money downward and ignore programs that transfer money upward. So, these are the types of think-tanks that survive in the market. This is an example of the market at work.

But, then, that illustrates a part of the problem with inequalities of wealth. Inequalities in wealth not only allow the wealthy to concentrate even more wealth into their hands through their control of the government but also through control of education, research, and the media. They create a culture in which academics focus their attention on issues that benefit those with money and ignore research into that which benefits those who cannot afford to pay for that benefit.

That is a problem for libertarianism.