Sunday, April 23, 2006


Regular commenter Julius Blumfeld has an intriguing post on his blog asking whether or not left-libertarianism is right. He wrote,

The central thesis of the Left Libs seems to be that the State is the instrument of Big Business and that State activism is largely driven by and for the benefit of Big Business. They therefore see Big Business as the enemy as much as the State itself.

Are they right? Or was Rand right when she characterised Big Business as an oppressed minority?

And his conclusion is that "as a whole the left lib thesis strikes me as exagerrated."

And I think he has a point. The reason for this is that I think left libertarians may have misconstrued similarities between Marxist theory and the classical liberal position the left libertarians claim to have adopted from Rothbard, Nock, and Oppenheimer, and others. The danger is that it tries to make the whole nature of the class struggle to be one of business-men versus workers after all. But this is certainly not what Rothbard had in mind, so far as I can tell. For instance, Kevin Carson writes,

The chief act of coercion by which the state exploits labor, as our free market socialist school has understood it, is by restricting, on behalf of a ruling class, the laboring classes' access to the means of production. By setting up such barriers, the ruling class is able to charge tribute in the form of unpaid labor, for allowing access on its own terms.

Now, various aspects of this may be true. However, I will point out what is misleading: The claim that the state acts on behalf of a ruling class.

The first problem with this is that it leads us to ask, "well, who is the ruling class." All business people? This would seem to be the implication, and yet it cannot be, for many, indeed most of the historic forms of state intervention Carson himself crtiticises benefit some business people at the expense, not just of workers, but of other business people. So who is this ruling class, and how did they get to be ruling?

The second, and perhaps most glaring problem is that this description casts the state in the light of an instrument. This was one of the Marxists greatest errors: The criticised the state as an instrument of class rule. This makes the state essentially a neutral party with no interests of its own, but only to be directed in the interests of whomever happens to be the ruling class (the capitalists in today's society, the worker's in the socialist stage, according to Marx). And, of course, this error is, as anarchist socialists such as Bakunin and Proudhon predicted it would be, what lead to the abject failure of state socialist experiments: The state socialists neglected the fact that the state is not, and cannot be a neutral party, but is either part of the ruling class, or is the ruling class in its entirity.

The "state-as-instrument-of-class-rule" view is definitely not what Rothbard had in mind, when he developed his view of class that left libertarians praise so highly. Rothbard wrote,

If the State is a group of plunderers, who then constitutes the State? Clearly, the ruling elite consists at any time of (a) the full-time apparatus—the kings, politicians, and bureaucrats who man and operate the State; and (b) the groups who have maneuvered to gain privileges, subsidies, and benefices from the State. The remainder of society constitutes the ruled.

Here, contrary to Carson, there is no ruling class for the state to act on behalf of. There is simply the state itself, and then those whom it benefits. And, of course, whilst the latter may vary dramatically, the former has more (though obviously not total) rigidity.

The fact that the state cannot possibly a mere instrument, without interests of its own, is primarily due to two distinct features. Firstly, its monopoly over the legal apparatus, and secondly, the fact that it raises revenue by taxation.

On the former, for instance, see Joe Sobran's point:

no constitution could restrain the state. Once its monopoly of force was granted legitimacy, constitutional limits became mere fictions it could disregard; nobody could have the legal standing to enforce those limits. The state itself would decide, by force, what the constitution “meant,” steadily ruling in its own favor and increasing its own power. This was true a priori, and American history bore it out.

What if the Federal Government grossly violated the Constitution? Could states withdraw from the Union? Lincoln said no. The Union was “indissoluble” unless all the states agreed to dissolve it. As a practical matter, the Civil War settled that. The United States, plural, were really a single enormous state, as witness the new habit of speaking of “it” rather than “them.”

So the people are bound to obey the government even when the rulers betray their oath to uphold the Constitution. The door to escape is barred. Lincoln in effect claimed that it is not our rights but the state that is “unalienable.” And he made it stick by force of arms. No transgression of the Constitution can impair the Union’s inherited legitimacy. Once established on specific and limited terms, the U.S. Government is forever, even if it refuses to abide by those terms.

As Hoppe argues, this is the flaw in thinking the state can be controlled by a constitution. Once granted, state power naturally becomes absolute. Obedience is a one-way street. Notionally, “We the People” create a government and specify the powers it is allowed to exercise over us; our rulers swear before God that they will respect the limits we impose on them; but when they trample down those limits, our duty to obey them remains.

And on the latter, Rothbard frequently quoted John C Calhoun:

Few, comparatively, as they are, the agents and employees of the government constitute that portion of the community who are the exclusive recipients of the proceeds of the taxes. Whatever amount is taken from the community in the form of taxes, if not lost, goes to them in the shape of expenditures or disbursements. The two—disbursement and taxation—constitute the fiscal action of the government. They are correlatives. What the one takes from the commu­nity under the name of taxes is transferred to the portion of the community who are the recipients under that of disbursements. But as the recipients consti­tute only a portion of the community, it follows, taking the two parts of the fiscal process together, that its action must be unequal between the payers of the taxes and the recipients of their proceeds. Nor can it be otherwise; unless what is collected from each individual in the shape of taxes shall be returned to him in that of disbursements, which would make the process nugatory and absurd….

The necessary result, then, of the unequal fiscal action of the government is to divide the community into two great classes: one consisting of those who, in reality, pay the taxes and, of course, bear exclusively the burden of supporting the government; and the other, of those who are the recipients of their proceeds through disbursements, and who are, in fact, supported by the government; or, in fewer words, to divide it into tax-payers and tax-consumers.

But the effect of this is to place them in antagonistic relations in reference to the fiscal action of the government—and the entire course of policy therewith connected. For the greater the taxes and disbursements, the greater the gain of the one and the loss of the other, and vice versa…. The effect, then, of every increase is to enrich and strengthen the one, and impoverish and weaken the other.

First, the state is the absolute arbiter of all disagreements, including those which involve itself, and secondly the state, however, minimal, lives at the expense of taxpayers. This implies it cannot possibly be a neutral, since it undermines the basic principle of neutrality central to a rule of law in the first case, and since, no matter how big, it exists by exploiting the productive efforts of others in the latter.

Again, Left-Libertarians approvingly cite Franz Oopenheimer, who wrote,

There are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one's own labor and the forcible appropriation of the labor of others. Robbery! Forcible appropriation!... I propose i. the following discussion to call one's own labor and the equivalent exchange of one's own labor for the labor of others, the “economic means" for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the "political means."... The state is an organization of the political means. No state, therefore, can come into being until the economic means has created a definite number of objects for the satisfaction of needs, which objects may be taken away or appropriated by warlike robbery.

This, again, places the state at the centre of an exploitative relationship.

Now, it could be noted that Rothbard's definition of the ruling classes, cited above, includes certain beneficiaries. Could this be where big business comes in?

Actually, if the answer is to construe big business as a class, then the answer is no. Sure, there are numerous beneficiaries of state intervention who are big business people, or, rather, many instances of state intervention were/are promoted or defended by people in big business. No left libertarian would balk at this passage from Rothbard's For a New Liberty

Conservatives have often placed their central hopes in big business­men. This view of big business was most starkly expressed in Ayn Rand's dictum that "Big Business is America's most persecuted minority." Perse­cuted? With a few honorable exceptions, big business jostles one another eagerly to line up at the public trough. Does Lockheed, or General Dynamics, or AT&T, or Nelson Rockefeller feel persecuted?

Big business support for the Corporate Welfare-Warfare State is so blatant and so far-ranging, on all levels from the local to the federal, that even many conservatives have had to acknowledge it, at least to some extent. How then explain such fervent support from "America's most persecuted minority?" The only way out for conservatives is to assume (a) that these businessmen are dumb, and don't understand their own economic interests, and/or (b) that they have been brainwashed by left-liberal intellectuals, who have poisoned their souls with guilt and misguided altruism. Neither of these explanations will wash, how­ever, as only a glance at AT&T or Lockheed will amply show. Big businessmen tend to be admirers of statism, to be "corporate liberals," not because their souls have been poisoned by intellectuals, but because a good thing has thereby been coming their way. Ever since the accelera­tion of statism at the turn of the twentieth century, big businessmen have been using the great powers of State contracts, subsidies and carteli­zation to carve out privileges for themselves at the expense of the rest of the society. It is not too farfetched to assume that Nelson Rockefeller is guided far more by self-interest than he is by woolly-headed altruism. It is generally admitted even by liberals, for example, that the vast network of government regulatory agencies is being used to cartelize each industry on behalf of the large firms and at the expense of the public. But to salvage their New Deal world-view, liberals have to console them­selves with the thought that these agencies and similar "reforms," en­acted during the Progressive, Wilson, or Rooseveltian periods, were launched in good faith, with the "public weal" grandly in view. The idea and genesis of the agencies and other liberal reforms were therefore "good"; it was only in practice that the agencies somehow slipped into sin and into subservience to private, corporate interests. But what Kolko, Weinstein, Domhoff and other revisionist historians have shown, clearly and thoroughly, is that this is a piece of liberal mythology. In reality, all of these reforms, on the national and local levels alike, were conceived, written, and lobbied for by these very privileged groups themselves. The work of these historians reveals conclusively that there was no Gol­den Age of Reform before sin crept in; sin was there from the beginning, from the moment of conception. The liberal reforms of the Progressive-New Deal-Welfare State were designed to create what they did in fact create: a world of centralized statism, of "partnership" between govern­ment and industry, a world which subsists in granting subsidies and monopoly privileges to business and other favored groups.

No doubt much of these are true. In fact, I would recommend the work of Kevin Carson as of great importance in understanding this fact, especially, here, and and here. However, we should take note of the fact that Rothbard follows this passage up with a further:

Expecting the Rockefellers or the legion of other favored big business­men to convert to a libertarian or even a laissez-faire view is a vain and empty hope. But this is not to say that all big businessmen, or businessmen in general, must be written off. Contrary to the Marxists, not all businessmen, or even big businessmen, constitute a homogeneous economic class with identical class interests. On the contrary, when the CAB confers monopoly privileges on a few large airlines, or when the FCC confers a monopoly on AT&T, there are numerous other firms and businessmen, small and large, who are injured and excluded from the privileges. The conferring of a monopoly of communications on AT&T by the FCC, for example, for a long while kept the now rapidly growing data communications industry stagnating in infancy; it was only an FCC decision to allow competition that enabled the industry to grow by leaps and bounds. Privilege implies exclusion, so there will always be a host of businesses and businessmen, large and small, who will have a solid economic interest in ending State control over their industry. There are therefore a host of businessmen, especially those remote from the privileged "Eastern Establishment," who are potentially receptive to free-market and libertarian ideas.

This pretty much explicitly denies that big business can be seen as acting as a class, and so have a class interest in perpetuating state intervention. It is some big business people benefiing, often at the expense of, amongst others, other business people, large or small.

Indeed, suppose a local small corner shop mom and pop store would be put out of business were a large super market chain to open a branch nearby, because the super market could sell at much lower prices than the mom and pop store. So mom and pop, and their friends, lobby local government and get planning permission for the super market refused. In this case it would be the small business that is the monopolist.

Or take taxi cabs. It is well known that licensing taxis and their drivers restricts competition and so grants a monopolistic privilege to taxi cab owners or drivers. Sure, this makes it easier for them to cartelise, but even if they didn't, it means that the exploitative monopolists are, in fact, numerous small businesses in this case. The same goes for hairdressers, who (famously in several cases in New York) have used the fact that they are licensed to shut out competitors (New York hairdressers have shut out girls from racial minorities who charge for hair braiding on the grounds that the girls are not licensed hairdressers or barbers). These are numerous small business beneficiaries of monopolistic privileges.

Another glaring problem is the role of the welfare state. This is one area Julius Blumfeld wondered what state intervention had to do with big business. well, of course, nationalised health care provides an alternative to employer based insurances and medical schemes, and so releives them of that cost were that a cost they would be likely to face in a free market. Likewise, state education may mean that employers get an educated workforce at the public expense - but this is only a subsidy if the normal course of events otherwise would be big business paying for education, which I doubt it would be.

Indeed, more plausible scenarios occur in the recent history of the welfare state, especially in Private Finance Initiatives, and contracting out: Management, janitorial roles, production of pharmeteuticals, etc, are undertaken by private companies selling goods and services to the state. As contractors they have a vested interest in the welfare state. Likewise, the shock-horror stories of companies like Coca-cola or Pepsi getting kids to wear corporate sponsered clothes, or only to drink their produce, etc, actually benefit from having a captive audience for their adverts as well as captive markets for their goods due to the local school monopolies and compulsory education.

However, we should certainly not forget the fact that direct employees of the welfare state have a vested interest in its continuance simulateously. Welfare and public health campaigns have created veritable industries, all dependent, largely, on state action for their incomes. The source of the welfare state was largely not pressure for some sort of social security from the working classes, sure. Much of it may have been to do with some business people, big or small, and some of its perpetuation may have to do with that. But the principle reasons for its growth and strength are surely, 1) feather-bedding by those that working in the welfare state as a whole, and 2)indoctrination as to its necessity and effectiveness on behalf of those vested interests.

Left Libertarians often draw on the great work of people such as Joseph Stronberg, but Stronberg implicitly denied that the class struggle in today's society was one of business people vs. workers or consumers. He wrote that, "A considerable body of literature now exists which points towards an analysis of the American political economy as a system of liberal (as opposed to fascist) corporatism dominated by a tripartite syndicalist oligarchy: Big Business, Big Labor and Big Government." Yes, big labour. So workers may, indeed, be a part of the problem. Corporatism, after all, unions and trade organisations are a basic feature of a corporate state. As the Wikipedia entry on Corporatism goes,

Historically, corporatism or corporativism (Italian corporativismo) is a political system in which legislative power is given to civic assemblies that represent economic, industrial, agrarian, and professional groups. Unlike pluralism, in which many groups must compete for control of the state, in corporatism, certain unelected bodies take a critical role in the decision-making process...

In the recent literature of political science and sociology, corporatism (or neo-corporatism) lacks negative connotation. In the writings of Philippe Schmitter, Gerhard Lehmbruch and their followers, "neo-corporatism" refers to social arrangements dominated by tri-partite bargaining between unions, the private sector (capital), and government. Such bargaining is oriented toward (a) dividing the productivity gains created in the economy "fairly" among the social partners and (b) gaining wage restraint in recessionary or inflationary periods.

Most political economists believe that such neo-corporatist arrangements are only possible in societies in which labor is highly organized and various labor unions are hierarchically organized in a single labor federation. Such "encompassing" unions bargain on behalf of all workers, and have a strong incentive to balance the employment cost of high wages against the real income consequences of small wage gains. Many of the small, open European economies, such as Sweden, Austria, Norway, Ireland, and the Netherlands fit this classification. In the work of some scholars, such as Peter J. Katzenstein, neo-corporatist arrangements enable small open economies to effectively manage their relationship with the global economy. The adjustment to trade shocks occurs through a bargaining process in which the costs of adjustment are distributed evenly ("fairly") among the social partners.

Examples of modern neocorporatism include the ILO Conference or in the Economic and Social Committee of the European Union, the collective agreement arrangements of the Scandinavian countries, the Dutch Poldermodel system of consensus, or the Republic of Ireland's system of Social Partnership. In Australia, the Labor Party governments of 1983-96 fostered a set of policies known as The Accord, under which the Australian Council of Trade Unions agreed to hold back demands for pay increases, the compensation being increased expenditure on the "social wage", Prime Minister Paul Keating's name for broad-based welfare programs. In Singapore, the National Wages Council and other state-created entities form a tripartite arrangement between the major trade unions (NTUC), employers and the Government that co-ordinates the national economy. In Italy, the Carlo Azeglio Ciampi administration inaugurated in July 23, 1993 a concertation (italian: concertazione) policy of peaceful agreement on salary rates between government, the three main trade unions and the Confindustria employers' federation. Before that, salary augmentations always were conquered by strike actions. In 2001 the Silvio Berlusconi administration put an end to concertation.

Most theorists agree that traditional neo-corporatism is undergoing a crisis. In many classically corporatist countries, traditional bargaining is on the retreat. This crisis is often attributed to globalization, with increasing labour mobility and competition from developing countries (see outsourcing). However, this claim is not undisputed with nations like Singapore still strongly following neo-corporatist models.

So Stronberg wrote,

A central figure in the postwar development of liberal corporatism was Herbert Hoover. In "The Hoover Myth," Murray Rothbard underscores the great extent to which Hoover actually laid the foundations of the corporatism of the New Deal—though he was smeared by New Dealers as a die-hard "laissezfaireist." Thus, in the 1920's, Hoover as Secretary of Commerce, worked busily to promote rationalization and cartellization through development of trade associations and the integration of organized labor with them. Thus, for example, in 1922, Hoover and Franklin Roosevelt formed the American Construction Council, a trade association that they hoped could impose a "fair practices" code on the industry and cartellize it. As President, Hoover continued the promotion of liberal corporatism, encouraging the states to pass proration laws restricting the production of oil, and establishing, in 1932, a tariff on oil imports (whence there arose a virtual cartel in the oil industry). Throughout his career he "sought to transform the American economy into one of collaborating, self-regulating monopoly groups, all under the benevolent aegis . . . of the federal government—a program essentially like "the corporate economy of fascism." (Out of fairness to Hoover, it should be admitted that of all recent Presidents he was perhaps the least willing to go to war to defend the corollary of domestic corporatism—Open Door Empire.)
(My emphasis)

Likewise, unions played an especially strong role in the post-war consensus in Britain, especially through the Trades Unions Congress. This period was characterised by partnership between business interests, unions, and government, with nationalisation, central planning via price and wage controls, and Keynsian fiscal policy.

So unions form a basic part of the corporate state. But they don't do so simply for the good of workers versus capitalists. No, often it is for some workers against others. For instance, the idea of a minimum wage is lobbied for especially by trades unions. However, all libertarian writers know that whilst the minimum wage causes unemployment, it does so more amongst unskilled workers and poor immigrant workers. Unskilled workers tend not to be unionised, and immigrant workers represent competitors against unionised jobs. Hence, by disadvantaging especially the unskilled workers, unions favouring minimum wages ensure themselves a larger share of a nevertheless smaller market for labour. The minimum wgae, therefore, acts as a monopolistic privilege for the benefit of certain workers against others, as well as against employers.

So, in conclusion, the ruling class isn't simply big business, using state power against workers and consumers. It is, a) the state itself, and b) myriads of seperate interests, including some businessmen, some workers, etc. etc. against the productive members of society, including businessmen, workers, etc., in short, members of the same groups as also use state power.


Anonymous Anonymous said...

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6:11 AM  
Anonymous Anonymous said...

Good post. Broadly I agree. The crucial division in society is that identified by Oppenheimer and it is simply false for the Left Libs to contend that the political means is the exclusive preserve of an identifiable and stable class of "business" interests. To the contrary, at least in monetary terms the prime beneficiaries of State activism are surely those who draw the most money from the state? - i.e. the myriad armies of State employees.

12:51 PM  
Blogger Richard said...

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9:19 PM  
Blogger Richard said...


True, even if one accepts that the growth of big government is, as Roy Childs said, largely the result of pressure from business leaders, this doesn't mean that it is a) solely due to them, or b) for the benefit of all business as a "class". Indeed, in The Tyranny of the Status Quo, Milton and Rose Friedman suggest that the welfare state is the largest area of growth in terms of the government budget.

9:19 PM  
Blogger Richard said...

This comment has been removed by a blog administrator.

9:19 PM  
Anonymous Anonymous said...

"even if one accepts that the growth of big government is, as Roy Childs said, largely the result of pressure from business leaders,"

In increasing order of importance (and at the risk of ludicously oversimplifying) I would say the causes of the growth of big government are:

1. Agitation by interests groups seeking to use the State to further their own interests (unions, corporations etc)

2. War

3. Statist ideology (collectivism, democratic, green, religious, nationalistic etc)

I don't understimate the importance of 1; and war historically has played a big role. But ultimately I think it is ideology that is the real driver and preserver of the State. Almost every example of significant State action and growth was and is ideologically driven in some shape or form - even if particular elements can be traced to agitation by interests groups seeking to feather their own nests.


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7:32 PM  
Blogger Unknown said...

There are some good points made here.
I'd actually see the class division (such as it is) as:
The State vs
Everyone Else

Which is a bit closer to Oppenheimer and Rothbard.

However, by the State, I don't just mean the Government. I'd say actually that the State consists of:
1. The Government. The Enforcement arm.
2. The Intellectuals/Media. The Con-men.
3. The Favored Producers. Not necessarily only Big Business, however Big Business tends to take a high marginal share of the intake. In fact the Banks take more actually (and it's plausible at least, that they are the real power behind the state).

Now one has to consider also the filter effect. Those firms which are big are most likely the ones who partake of State benefits, if only out of competitive necessity. At some point as their interests and those of the rest of the state integrate, they become part and parcel with it. There may be some billionaires who regret "having to" go along with the whole scheme, but for the most part, they probably don't care. Because if they did, they might get their throats cut by someone who didn't.

As for ideology, I think it mostly plays an important role as a tool for mobilizing the common people in a democracy. The major players in this game aren't sentimentalists. They really don't care as long as they get more power.
They'll drum up whatever ideology works for them. It will be statist mostly because they're the state. Though they're not above pretending (ala Reagan) to be interested in free markets or liberty.

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