"What's good for General Motors is good for the country."
This is the most famous quotation never said by Charles
Wilson, Dwight Eisenhower's Secretary of Defense. (He actually said "For
years I thought that what was good for our country was good for General
Motors, and vice versa.")
Still, the misquote nicely summarizes the central dogma
of libertarianism and right-wing regressivism: "free market
the conviction that the "invisible hand" of the unconstrained and
unregulated free market will always result in the greatest benefit
for the public at large. As Milton and Rose Friedman put it: "A free
market [co-ordinates] the activity of millions of people, each seeking his
own interest, in such a way as to make everyone better off.." (Free to
Choose, pp 13-4). Note the universal quantifier, "everyone."
Good for each,
good for all.
The dogma of market fundamentalism gains some credibility
from the fact that it is at least a half-truth. No doubt, the individual’s
striving to maximize self-interested gain accounts for numerous improvements
in the quality of life in industrial countries. Presumably, the inventors
and developers of computers and the internet were more concerned with their
own economic prospects than they were of the "social benefits" thereof.
(Bill Gates’ benevolence was manifested later as a result of, his economic
success, with the establishment of The Gates Foundation). Similarly, many
scientific, scholarly, technological and artistic achievements, motivated
primarily by self-interest and self-satisfaction, benefit society at large
"as if by an invisible hand."
The dogmatism of free market fundamentalism resides in the
belief that the unregulated market never fails to be beneficial to
all; the belief, in other words, that there are no malevolent effects of
unconstrained market activity, no
"back of the invisible
hand." From this belief follows the insistence that the free
market is self-correcting, and that there is thus no need for regulation –
that, in Ronald Reagan’s enduring words, "government is not the solution to
our problems, government is the problem."
Market fundamentalism is a "dogma" in the same sense that
creationism and biblical inerrancy are dogmas; it is accepted "on faith"
despite clear and compelling evidence that it is false. Moreover, it is a
"keystone belief:" refute market fundamentalism, and the entire structure of
libertarianism collapses. Not that this significantly alters the convictions
of the libertarian and regressive true-believer, any more than the existence
of fossils or the science of molecular biology inclines the religions
fundamentalist to accept evolution.
Be that as it may, for those open to evidence and plain
common sense, here are a few compelling reasons to reject the dogma of
market fundamentalism – reasons to believe that what is good for an individual
corporate stockholder may not be good for the public in general. I focus
below on corporate behavior since corporations are far and away the most
significant "players" in both national and multi-national economic activity.
And after all, didn’t the "conservative" majority in the Supreme Court rule,
in Citizens United v. FEC that corporations are "persons"?
Common to all the cases listed below is the corporate
imperative to maximize profits and the return on stockholder investment.
This imperative is called
"fiduciary responsibility" and it is required by law. Accordingly, a
failure to meet this responsibility can trigger a stockholder’s law suit
against a corporation and its executives.
Private Prisons. Good for the
corporations: more prisoners, "three strikes" laws, mandatory sentencing.
The cost to society: less rehabilitation and early release, increased
government expenditures and taxes. It is noteworthy that the United States
has the largest prisoner to population ratio in the industrialized world.
War, Inc. Good for the corporations (i.e., the
military-industrial complex and "private contractors" such as Halliburton
and Blackwater): more wars, expenditure of rockets, bombs and ammunition
(requiring restocking of inventories). Cost to society: avoidance of
diplomatic solutions, increased military budget and battlefield casualties,
disobedience to international law (e.g., the Geneva and Nuremberg
The Tobacco Industry. Good for the
corporation: More sales and more customers, the younger the better,
unregulated advertising of products. Cost to society: half a million
premature deaths per year due to smoking, cost of medical treatment of
tobacco related diseases.
Fast ("Junk") Food. Good for the corporation:
Increased sales and profits. Cost to society: obesity epidemic, diseases due
to malnourishment (e.g., cardiovascular disease)
Privatized Health Insurance. Good for the
corporation: denial of benefits (e.g., due to "pre-existing conditions"),
inflated executive compensation. Cost to society: lack of affordable and
universal health care.
Promotion of fossil fuel consumption.
Good for the corporation: profits and return on investment. Cost to society:
global warming, devaluation of scientific research, oil spills and
contamination of the ocean, loss of fisheries and recreation facilities,
devastation of marine ecosystems.
Outsourcing of jobs. Good for the corporation:
increased profits and return on investment of stockholders. Cost to society:
poverty, loss of educational opportunities, redistribution of wealth
"upward," shrinkage of customer base, economic depression.
Unlimited corporate campaign contributions.
Good for the corporations: "legislators for hire" resulting in laws
favorable to the corporations, deregulation, public subsidy of corporate
activity. Cost to society: deregulation resulting in corporate
irresponsibility and increased "externalization" of costs to the public,
failure of the "privatized" government to act "with the consent of the
And so on, with the manufacture, sale and distribution of
untested chemicals such as CFCs (causing ozone depletion and ultraviolet
radiation) and DDT (devastating ecosystems), etc. The list of socially and
ecologically harmful effects ("negative
externalities") of unregulated "free market" activity is virtually
I refer above to "costs to society." The libertarians
neatly dispose of these embarrassments by asserting that "there is no such
thing as society" (Margaret Thatcher) and "there is no such entity as ‘the
public’" (Ayn Rand). It then follows that if "society" and "the public" do
there is no public interest, no social responsibility, no social injustice.
When we cite such specific cases, free market
collapses in the face of plain common sense. For if, as the absolutists
insist, the unregulated free market always results in benefit for
"everyone" why not allow a "free market" in child pornography, or extortion
("the protection racket"), or murder for hire?
The absolutist is compelled to reply, "because such
activities harm or violate the rights of innocent persons." With this
admission, the absolutist gives away his dogma. For by this admission, the
absolutist concedes that in some readily identifiable cases, what Robert
Nozick dubs the right to engage in "capitalist acts between consenting
adults" can, at times, be trumped by the rights and the welfare of innocent,
unconsenting and non-participating third parties.
But if so, if there are legitimate reasons to outlaw
extortion, child pornography and murder for hire, why then not also outlaw,
or at the very least regulate, the sale of tobacco products and junk food,
for-profit health insurance, junk bonds (CDOs) and hedge funds, and why not
forbid the privatization of prisons, of warfare, and most fundamentally, the
privatization of government through unlimited corporate campaign
I submit that while there may be a difference in degree
between the prohibition of murder for hire on the one hand, and the sale of
cigarettes and junk food and the privatization of warfare and government on
the other, there is no difference in kind. All these activities harm and
violate the rights of innocent and unconsenting victims.
Between, say, the "free market" in such services as auto
repair and hair styling (acceptable) and the "free market" in extortion and
murder (unacceptable) there is a vast "gray area" of economic activity in
which the advantages of market activity may or may not be outweighed by harm
to innocent others. Toward the "light gray" end of this continuum, caveat
emptor ("let the buyer beware") may suffice to minimize abuses by
sellers and entrepreneurs without the intervention of the law and
government. However, in the "dark gray" side of the continuum is found those
transactions that cause unacceptable harm to innocent and unconsenting third
parties. Also in the "dark gray realm" are those transaction wherein the
potential customers are totally incapable of knowing the consequences of
their transactions (e.g., the sale of prescription drugs) or whose judgment
is overwhelmed by the black arts of public relations and advertising (e.g.,
junk food sales to children and cigarette sales to teen-agers). According to
"free market theory" of neo-classical economics, each participant in an
economic transaction possesses "perfect knowledge," which is one of several
reasons why it is compellingly obvious that
there is no
such thing as a "perfect market" outside of the publications of these
economic theorists. And all of us, neo-classical economists included, are
compelled to live in the real world.
Once the high-pressure political rhetoric and the high-fallutin'
scholarly jargon is set aside and undeniable economic and social facts are
brought to the fore, the conclusion is inescapable: totally unregulated,
laissez-faire capitalism cannot work, and attempts to make it work can
only lead to oligarchy: opulent wealth for the very few, poverty for all
others, and the disintegration of social order and the just rule of law. In
addition to all that, oligarchy leads, paradoxically, to the destruction of
the free market for, as history testifies and we are discovering anew in the
daily news, oligarchy detests competition and leads to monopolies. Hence
"mergers and acquisitions."
Equally obvious is the remedy for all this: government
regulation and the rule of law – law based, not on economic theory, but on
historical experience and fundamental moral principles.
Government is essential, for no complex social activity,
markets included, can take place without rules, referees to enforce the
rules, and sanctions to deter the violations of these rules.
Markets, after all,
are essentially games: they are cooperative, rule governed, goal
oriented, and the success of each "player" is contingent upon the behavior
of the other players. Thus a market without rules, referees, and
sanctions (i.e., laws and regulations) is unthinkable. And as with games,
the referees, rules and sanctions must be supplied by a neutral and unbiased
entity. What else could this be, but government? But while government is
indispensible, there remains the ever-present danger that it can become
oppressive and unresponsive to "the consent of the governed" due to control
by self-serving individuals or corporations elites. "Eternal vigilance is
the price of liberty."
In a just society, the welfare and rights of those
"innocent, non-participating and unconsenting" third parties to economic
activities must be protected. Can they be protected by the benevolent
"invisible hand of the free market"? Certainly not, if the above argument
has any merit. The only legitimate protector of the interests of those third
parties from the "negative externalities" of market activity must be that
institution established by the public at large to protect each individual’s
rights not to be harmed by "capitalist acts by consenting adults." And "to
secure these rights, governments are instituted among men, deriving their
just powers from the consent of the governed."
Mr. Reagan, meet Mr. Jefferson!
In the final analysis, the self-described "conservatives"
aren’t. Liberals and progressives insist, in the words of the U.S.
Constitution, that it is the government’s legitimate role "to establish
justice, insure domestic tranquility, provide for the common defence,
promote the general welfare, and secure the blessings of liberty to
ourselves and our posterity." Accordingly, the liberals are the authentic
How then have the regressives succeeded in
belief in the dogma of market fundamentalism upon a sizeable portion of the
United States population, including the media and perhaps a majority of the
U.S. Congress? They have accomplished this through the expenditure of vast
sums of private money in support of "think tanks," in the purchase of media,
and in political campaign contributions.
But what arguments have been presented in support of the
dogma? Very few, I suggest. The widespread acceptance has been accomplished
through simple repetition, devoid of argument and rich in the rhetoric of
"freedom." About the only supporting argument form of note is "anecdotal
evidence" and "false generalization." Supporters of market
examples of the benefits of free markets, and from that conclude that all
"free markets" are always benign. However, as noted above, the fact
that free market activity is often beneficial is not in dispute. Yes, we are
all better off due to innovation, entrepreneurship and competition in the
production of goods and the performance of services. This is the
aforementioned "half-truth" of market dogmatism. But this half truth does
not yield a whole truth. It does not follow from the admitted advantages of
free market activity that there are never any harmful consequences thereof.
Simple reflection, as noted above, yields abundant examples of what
economists call "market failures" and "negative externalities."
"The Reagan Revolution" of 1981 ushered in the grand
experiment in applied market fundamentalism. Before more and greater harms
befall us all, it is past time for the people and the government of the
United States to recognize and to proclaim that
the experiment has failed..
We have learned what we need to know about the attempt to institutionalize
this dogma, and it is time now to return to proven modes of governance: the
rule of law, the protection of the environment and common resources, just
distribution of the fruits of our combined and coordinated labor, and the
subordination of economic activity in the service of the public good. It is
time, in short, to bring back the rules, the umpires and the sanctions. Time
to scrap the ethic of "you are on your own," and to restore the ethic of
community: "we’re all in this together."
Copyright 2010 by Ernest Partridge