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April 22, 2008
Capitalism Day
Don Boudreaux
On this Earth Day, I celebrate capitalism -- the institution that, far more than any other, has made human lives clean, safe, dignified, and culturally rich. Capitalism is also responsible for giving people the wealth and leisure to permit them to mis-perceive nature as loving and bountiful, and to enjoy nature in a way that few of our pre-industrial ancestors could ever have enjoyed it.
So, on this Earth Day, I offer you here my essay, inspired by the work of Julian Simon, entitled "Cleaned by Capitalism." Here are the central paragraphs:
Before refrigeration, people ran enormous risks of ingesting deadly bacteria whenever they ate meat or dairy products. Refrigeration has dramatically reduced the bacteria pollution that constantly haunted our pre-twentieth-century forebears.
We wear clean clothes; our ancestors wore foul clothes. Pre-industrial humans had no washers, dryers, or sanitary laundry detergent. Clothes were worn day after day without being washed. And when they were washed, the detergent was often made of urine.
Our bodies today are much cleaner. Sanitary soap is dirt cheap (so to speak), as is clean water from household taps. The result is that, unlike our ancestors, we moderns bathe frequently. Not only was soap a luxury until just a few generations ago, but because nearly all of our pre-industrial ancestors could afford nothing larger than minuscule cottages, there were no bathrooms (and certainly no running water). Baths, when taken, were taken in nearby streams, rivers, or ponds, often the same bodies of water used by the farm animals. Forget about shampoo, clean towels, toothpaste, mouthwash, and toilet tissue.
The interiors of our homes are immaculate compared to the squalid interiors of almost all pre-industrial dwellings. These dwellings’ floors were typically just dirt, which made the farm animals feel right at home when they wintered in the house with humans. Of course, there was no indoor plumbing. Nor were there household disinfectants, save sunlight. Unfortunately, because pre-industrial window panes were too expensive for ordinary families and because screens are an invention of the industrial age, sunlight and fresh air could be let into these cottages only by letting in insects too. Also, bizarre as it sounds to us today, the roofs of these dwellings were polluted with all manner of filthy or dangerous things. Here’s the description by historians Frances and Joseph Gies, in Life in a Medieval Village, of the roofs of pre-industrial cottages:
Roofs were thatched, as from ancient times, with straw, broom or heather, or in marsh country reeds or rushes. . . . Thatched roofs had formidable drawbacks; they rotted from alternations of wet and dry, and harbored a menagerie of mice, rats, hornets, wasps, spiders, and birds; and above all they caught fire. Yet even in London they prevailed.
Peace and free trade.
Posted by Don Boudreaux in Environment, Everyday Life, History, Myths and Fallacies, Risk and Safety, Seen and Unseen, Standard of Living | Permalink
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Comments
I realize this isn't meant to be a scholarly essay, but you've gotta be kidding me! Confusing "capitalism" (as in free markets) with all the benefits of industrialization is a stretch at best. As Ha-Joon Chang points out in his "Bad Samaratans" free markets were the exception, not the rule, among countries that industrialized. Massive government spending (think Pentagon) as well as market distortions (why didn't Doha work?) continue to be the rule for development. Since 1919, corporations have been legally bound to maximize profit, treating social and environmental concerns as externalities. The very serious environmental dangers that we face are the result of a certain kind of state-sponsored corporatism that is mistakenly called capitalism. To give that system thanks on Earth Day is kind of like asking Jews to thank Hitler on Israel's independence day.
Posted by: Sameer Dossani | Apr 22, 2008 11:18:56 AM
"Peace and free trade."
Amen.
Posted by: Slocum | Apr 22, 2008 11:54:27 AM
"To give that system thanks on Earth Day is kind of like asking Jews to thank Hitler on Israel's independence day."
Wow, Godwin's Law in just one post! http://tinyurl.com/572l4
Posted by: Derailled | Apr 22, 2008 12:14:10 PM
Sameer Dossani offers proof that inter-galactic travel has become a reality. Who knew?
The realism of the John Adams series on HBO was startling, showing the rotten teeth of the founders. That was just one of many hardships they endured that has since been alleviated by free market capitalism.
Sameer, one thing you will have to get used to is that on this planet almost all progress has come from free people pursuing their dreams and aspirations in free markets. Considering the field of candidates in the next election we can safely say that will continue to be the case.
The government on the planet you came here from may be different, but you are here now.
Posted by: Flash Gordon | Apr 22, 2008 12:19:34 PM
Well-stated!
Posted by: Speedmaster | Apr 22, 2008 12:59:58 PM
Quote from Sameer Dossani: "Confusing "capitalism" (as in free markets) with all the benefits of industrialization is a stretch at best."
Since industrialization was invented while the corruption of government held power seems a weak argument to condem how it evolved. Governments and corporations predate industialization by some significant time.
I also think you're comparing past practices to the standards of today. We might consider the air pollution from open burning of coal in the millions of houses of an early industrialized city as abominal today, but I doubt the people of that time who were more worried about freezing to death saw it as such a terrible thing.
Posted by: Keith | Apr 22, 2008 1:23:40 PM
Sameer:
To show your true "Green-ness" you should unplug yourself from the internet immediately, and go live in a cave. Set an example for all of us Sameer, be a SHINING light!
Posted by: FreedomLover | Apr 22, 2008 2:10:53 PM
Communism can work, if heavily subsidized.
Posted by: Sam Grove | Apr 22, 2008 2:33:34 PM
Sameer the fecies from your shoe to the doormat. Capitalism is a system of voluntary exchange and individual property rights; it is freedom and it is liberty. Those that abhor this system, predacated on the virtues it contains, and that wish to extinguish it, are, themselves, more like Hitler than they dare admit.
Posted by: Lowcountryjoe | Apr 22, 2008 2:49:27 PM
I can't really say what Sameer actually believes, but I think the basic point that a free market and the system we actually have in place (and have always had) are not the same is one too often overlooked.
There is no question that our standard of living and level of cleanliness are entirely due to the energies of free people making individual decisions for mutual benefit so far as they were allowed to. Look at how far we've progressed in spite of government interference in the market and think about how much better off we could be.
In other words, if you define capitalism as a system of voluntary exchange and individual property rights, ie the free market, we've never actually had that. Perhaps I'm wrong, but I thought Sameer's point was not that capitalism is bad, but that it's incorrect to give full credit to a system that doesn't actually exist.
Of course, even given that we've never had a truly free market, the reason our standard of living has skyrocketed is simply because our system is relatively more free. In fact, I would say that noting the difference between our semi-corporatist system and a free market is a huge plus in favor of capitalism.
Posted by: Stretch | Apr 22, 2008 3:27:39 PM
the truth that I've come to understand is that our progress is due to the degree of freedom in mind and markets that we have had.
Yes, man has never had the absolute ideal free market but that is not the point. Freedom in enterprise, in the exchange of ideas and in the voluntary exchange of goods and services are the catalysts.
Insofar as govt. or the collective force as any positive role, it is in the facilitating or protecting of the integrity of the fundamentals. Everything else it does is another matter.
Posted by: John V | Apr 22, 2008 4:22:59 PM
On Earth Day I generally to give the "when to cut the trees" lecture. The answer, of course, depends upon the interest rate (or rate of human impatience as it were). In Haiti, the rate of human impatience for resources is so high (because of the de facto absence of the rule of law) that it is 95% deforested; yet in the Dominican Republic (on the other side of the isle shared with Haiti) there are dense forests. Efficient capital markets and private property lead to interest rates that allocate resources to their highest valued uses in an expected sense, whether these uses are now or in the distant future. These interconnections are largely unseen by many, but the workings of the "invisible hand" have always been largely so.
Posted by: indiana jim | Apr 22, 2008 4:24:01 PM
I should know better than to continue this discussion (since it's clear that only free-marketeers read this blog and it's also clear that no one bothered to read the articles I linked to), but I'm a glutton for punishment ;-)
1) If one bothers to read the economic history (as documented by Ha-Joon Chang and others) one will see that both the UK and the USA were highly interventionist in their highest growth phases. They followed an infant industry approach. In the case of the U.S., this was argued for by Alexander Hamilton, who claimed that the free market policies advocated by Thomas Jefferson would be a disaster. Hamilton won that argument. In the period between 1820-1960, U.S. average tariffs only fell below 35% after WW2, when the U.S. was the only industrialized economy left standing and therefore free trade was in its best interest. The UK has a similar story, though it dropped its tariffs nearly completely around 1875, when it was undoubtedly the world leader in manufacturing (it reimposed them when Germany started to get competitive around the turn of the century). All this and more is in Ha-Joon Chang's Kicking Away the Ladder. Also see Paul Baroch's Economics and World History.
2) On the somewhat philosophical point of "everything good that's happened is because of personal freedoms, including freedom of the market", again this is an ahistorical view. If we look at the major technological breakthroughs, there may have been some entrepreneur looking to sell his/her product to a market that was demanding it, but in many cases there were not. Government patronage (or the public university) and especially crises including wars played major parts in the development of technology.
3) I would also question the degree to which the factory worker or the coal miner or the assembly line worker is "free" in your system here. I'm an ardent believer in Adam Smith's view that the best system is that which maximizes freedom, but I think the 20th century incarnation of corporate capitalism has more to do with fascism than with freedom (strict chain of command, decisions made by a few at the top, etc.) If we were to democratize workplaces and take away the damage of Dodge v. Ford (which made profit maximization the standard for all corporations to bear), and turn corporations back to what they were in the 17th century (a loose coming together of individuals for a specific and time-bound venture, which would thereafter be abolished) I might be a proponent of the system.
4) Though I may disagree with a lot of your views, I very much admire the premise that a lot of you start from which I understand as "human freedom leads to human development". I think at this point in human history, working for human freedom means limiting the power of the corporation, which has far more control over our daily lives than governments do. As John Dewey said, "Govenment is the shadow cast by business over society".
Posted by: Sameer Dossani | Apr 22, 2008 6:02:38 PM
All right, I will take a shot, as an amateur, at defining Hayek growth.
As I understand (correct me) the Austrian school (Is that us?) defines the economic agent as ranking choices that he/she faces everyday. Mainly good choices, ranking the possible utility of products we have on a regular basis, select the ones that best fit our needs.
So, aggregate growth, according to the discussion and according to what seems to be accepted on this blo9g, is that aggregate growth is the increase in the number of overall rankings the economy can make per unit time.
We can delegate the choices to a division of labor. Example: Rather than I choose between watering the lawn, fertilizing it, or seeding it; I just delegate the process to a specialist. Alternatively, as a producer or supplier of specialized labor, I will try to combine choices into one by technology. Rather than choosing between phone and dial up, I just get DSL and do both.
Posted by: Matt | Apr 22, 2008 6:32:49 PM
Sameer,
Unfortunately, the guild model of the 17th century is no longer viable. This model does not allow for leveraging of productivity or economies of scale nor is this model flexible enough to evolve new processes, adapt to new technologies, develop new business models, etc. in order to meet changing customer needs and successfully compete in today's globalized world.
With regard to "profit maximization as the standard for all corporations to bear", financial performance is not optional and never has been. A business must perform in order to attract and retain capital investment as well as to invest in what the business will be 10 years from now. This is true whether a business is a small company with 2 shareholders or a large corporation. Any business must offer a return on investment or investors (whether a small business owner or a shareholder) will seek a better return elsewhere.
With regard to the freedom of the "coal miner", not many of us know any coal miners. The majority of the workforce in Canada & the US are employed in service jobs rather than manufacturing and primary industries. Thankfully, many of the most dangerous jobs have been automated. Some trades have a great deal of difficulty attracting workers for example, the average age of a welder in the US is 55 years old.
The late Peter Drucker helped to delineate many of the concept of business management over the course of 60 years of writing and teaching management studies at Columbia University.
Posted by: Cassandra | Apr 22, 2008 6:43:38 PM
No one will get much traction with me quoting John Dewey.
The notion that a business has more power over me than the government is nonsense, pure.
Compare the power of Wal Mart, that must build a store on every street corner because they are so scared of losing my business to the courthouse, that can call me at a whim.
Posted by: dave smith | Apr 22, 2008 7:00:43 PM
Mr. Dossani: if you have the alternatives to the modern-day conundrum civic responsiblity [if any] of the corporation as an efficient model, then by all means, take off your bunny-slippers and go run yourself a business the way you see fit. Or, continue complaining loudly on a blog where you find yourself having philosophical differences with its other members and see how far that gets you.
Also, you recently talk as though you respect liberty/freedom but I'm willing to bet that the longer you troll around these parts, the less we will discover just how genuine you are. So, let's see what you've got and see if I'm wrong about your paternalistic nanny-state embrace, big guy.
Posted by: LowcountryJoe | Apr 22, 2008 7:07:21 PM
Yo, free-trade dude!
Posted by: Unit | Apr 22, 2008 7:41:41 PM
Cassandra - thanks for your thoughts. I think the most helpful insight is the "we don't know many coal miners around here". Philosophical systems - like anything else - tend to serve the class interests of those who promote them. For those of us who do know our share of coal miners, domestic workers, farm workers and other working communities that are under attack, a lot of what's expressed here as truisms seem dubious at best.
One of those truisms "fiscal performance is not optional" is a misunderstanding of what I was saying and of the 1919 Dodge v Ford case. In that case, Henry Ford wanted to pay his Model T assembly line workers more than the market rate. His logic was that he needed more customers, and if Ford tried to lift these workers to middle class status, they would be doing the best thing for the long term profitability of the company. His shareholders disagreed and argued that he had a duty to maximize short term profit above all else. The judge agreed, setting a precedent that is still on the books.
For folks complaining about me trolling, I'll leave you in your complacent bubbles now. It's part of my job to see what mainstream economists are doing and explain their analysis (and what's wrong with it) to laypeople. Most of the time I can keep quiet. On the line "capitalism is good for the earth", I just can't. We can agree to disagree on all kinds of things, but silly statements like that should at least be backed up by more evidence than "things are better than they ever have been".
Posted by: Sameer Dossani | Apr 22, 2008 8:21:16 PM
which has far more control over our daily lives than governments do
Heh, governments are always oligarchical, particularly if they do anything beyond enforcing prohibitions against force and fraud.
If corporations exert undue 'control' over us, it is via their influence over politics...witness the many wealthy people who participate in the political process...and government.
So, let's minimize government, dissolve corporate charters (they can reorganize any way they wish), and see how much 'control' they can exert over us without the mechanism of control.
I smell progressive.
Posted by: Sam Grove | Apr 22, 2008 8:55:42 PM
It's part of my job to see what mainstream economists are doing and explain their analysis (and what's wrong with it) to laypeople.
And you get paid for that? Maybe I'll have to rethink my consumer soveriegnty paradigm; apparently there must be some arm-twisting of the readership going on in that journalistic venue.
For folks complaining about me trolling, I'll leave you in your complacent bubbles now.
Okay, muirgeo. Until later then? Well, under a different pseudonym, of course.
Posted by: LowcountryJoe | Apr 22, 2008 9:18:56 PM
You see, we only have two choices available to us: corporate rule or progressive rule.
In another universe where progressives rule (again):
"I think at this point in human history, working for human freedom means limiting the power of the progressive elites, which have far more control over our daily lives than governments do."
Posted by: Sam Grove | Apr 22, 2008 9:56:17 PM
LcJ, check the link.
Posted by: Sam Grove | Apr 22, 2008 9:57:23 PM
Peace and Free Trade to you sir as well. Actually, I think that would be a wonderful new thing to start saying to one another. Peace and Free Trade, what a wonderful thing.
Posted by: Ryan | Apr 22, 2008 10:01:19 PM
Sameer labors under the belief that none of us here are familiar with the history of mercantilism, in the old world and the new, and that we've illusions about some extant free market and pure capitalism vs the real world.
History is available to all, it's the interpretation that matters. I know that corporations and, in particular old wealth, have undue influence in the capitals, it is the nature of the beast, after all. My question is: why do progressives skip over a valuable lesson from the communist experiments?
Do they wish not to see how the total elimination of corporations was not a great boon to the workers.
No, they say, the problem there was a lack of democracy. But they had elections in the USSR.
Sure they were rigged, but as long as government is the key to power, it will never fall into the hands of the masses.
Posted by: Sam Grove | Apr 22, 2008 10:57:55 PM
Sam, why is one either in favour of the status quo or a defender of the soviet union? My views on stalinism and the failure of the bolsheviks may be harsher than yours. I say "may be" as I try not to jump to conclusions about your views, as you have about mine.
If folks think that this system is the best we can do, that's a cynical condemnation of humanity. Just because I hold that opinion does not make me a defender of state coercion and it certainly doesn't make me a defender of the soviet union. I just happen to think corporate coercion as it stands right now is worse than state coercion. If I had lived in the 19th century I would be writing about nation states; if I had lived in the 17th, I'd be writing about religious coercion. All forms of coercion are bad, or at least need to be justified. Corporate control over resources is the most potent form of coercion IMHO today.
And if everyone understands the history (and the present) why are we talking about capitalism at all? The U.S. economy is significantly driven by two state-owned entities, the Pentagon and (to a much lesser extent) the National Institutes of Health. Those entities take taxpayer money and hand it over (in sometimes the most corrupt, no-bid contract ways) to private sector entities, who are often not held accountable when they don't do the job they've been paid to do. U.S. farm subsidies given to huge companies like ADM, Monsanto, and Cargill have all but derailed the latest round of WTO negotiations. Is this a free market system or a peculiar kind of corrupt socialism?
Posted by: Sameer Dossani | Apr 22, 2008 11:27:30 PM
Sameer,
I haven't read Bad Samaritans but I've read quite a bit on it and have watched the author interviewed about it.
He makes some interesting points. He's big on nurturing protecting infant industries in developing countries and points out, as you say, that most of western society, came into prosperity via this route. I get it. It's interesting and I've been mulling it over. However, that's not the whole story.
He also can't show that a more open economy would NOT have prospered just the same and I remain unconvinced that they would not have.
I find Rodrik's points in his book, One Economics, Many Recipes about needing to prod and bolster basic institutions in developing nations on a case by case basis more convincing...though he doesn't and cannot really explain how to do that.
Either way, little of "Bad Samaritans", as far as I can see, really applies much to us today. We have the fundamentals in place to prosper even more greatly under freer conditions. Whether we would be at this point without an interventionist history in the 19th century is another story.
Posted by: John V | Apr 22, 2008 11:45:29 PM
Sameer Dossani,
The only problem with what you have written is the following sentence.
I just happen to think corporate coercion as it stands right now is worse than state coercion.
There is no corporate coercion. There is only state coercion, at least for now. There are no corporations amassing armies to enforce their own laws or consficate wealth, and why would they bother? The state has granted itself those powers and politicians are pliable creatures, always ready to flip and flop any which way they think might help them achieve fame, wealth and power.
The greatest public good which a government can provide for a polity is a battery of tight controls and constraits on its own power, and this is the one public good which politicians have the least incentive to provide, since the less power which they can exert the weaker position they are in to broker deals with voting blocs, corporate lobbies, special interests, etc.
If the state did not have such power, then corporations would have no such cheap and easy avenue by which to enforce favourable legislation, or to consficate wealth from the polity. The only option available to be successful, would be to provide consumers with products or services at a compromise of price and quality which is preferred to competitors. If that is corporate coercion, then corporate coercion is something I can live with.
Posted by: Lee Kelly | Apr 22, 2008 11:55:51 PM
I hadn't heard of Dodge v. Ford before, but a quick search seems to show that it was merely an issue of maintaining special dividends to minority shareholders while Ford wanted to expand market share. If you believe it is about corporations being "socially responsible", you bought into 90 year old spin.
Any organization can be a charity -- simply don't go public and sell the business to investors because almost all the shareholders are going to expect a profit. To issue shares and then turn around and squander their profits is possibly fraud and certainly a failure of fiduciary responsibility.
As LowcountryJoe wrote, is that old case stopping you or anyone from starting a charity? Does it prevent you from supporting your pet causes? If there was a new case that said corporations had to donate their profits "back to the community," I and probably everyone else would liquidate their holdings in those companies.
Posted by: Jason | Apr 23, 2008 12:01:14 AM
Sameer,
Clearly, we have a mixed economy, with some sectors more driven by government control and agenda and some sectors driven by entrepreneurs. I'm fortunate enough to work in the latter type of sector. Your biggest confusion seems to be "capitalism" with "corporatism". They are no more the same than "capitalism" and "industrialization". It is strange to me that liberal minded people fear the corporation, as it's the most directly controllable tool for whatever social change agenda is in vogue. Government can push off the costs of immigration control, health care, the war on drugs, reserve armed forces, racial integration, tax collection, you name it -- all on corporations. Shareholders can demand "green" behavior, or women on the BOD, labor standards in foreign markets, you name it. And corporations typically just cave in on both fronts rather than fight for underlying principles of flexibility.
But before a US corporation gets terribly big, it's very free within the confines of the capital it can raise and revenue it can ramp up to try radical new ideas and develop radical new products, to find a niche of business that nobody else is doing or doing well. It can do so outside the purview of national industrial policy, state agencies, and local planners so long as it's not doing anything too dangerous or potentially harmful. Look at Tesla Motors, bringing an electric hot rod to market (belatedly) or Google, providing valuable web applications, or SunPower, whose chairman is all business, zero ecology. Or look at the business I'm involved with (see my link), promoting literacy by selling a software product and web service to schools. Even with "No Child Left Behind", we're very free to take the product and pricing wherever we've wanted, to really understand our market and really make a difference. That's capitalism, my friend... Not to be confused with ADM pushing bogus biofuels mandate that jacks up the price of food for everyone and ensure profits for its shareholders. The latter is corporate politics of the worst kind.
Posted by: Brad Hutchings | Apr 23, 2008 12:47:53 AM
Sam, why is one either in favour of the status quo or a defender of the soviet union?
Did I suggest that?
Was not my intent.
If folks think that this system is the best we can do,...
I certainly don't.
Just because I hold that opinion does not make me a defender of state coercion
Remains to be seen.
and it certainly doesn't make me a defender of the soviet union.
Didn't mean to imply that you did. I just get the idea from my experience with progressives that they don't apprehend the nature of political power as I do. I attempted to illustrate that by citing the communist experiments in eliminating private corporate power.
So, questions.
How do corporations exert this control?
What is the lynch pin of corporate power?
If the government is to be used to eliminate this corporate power, how much power must the government retain to accomplish it?
How are 'the people' to keep political power from getting out of control...assuming that they are able to get it under control?
Who are 'the people'?
Posted by: Sam Grove | Apr 23, 2008 12:52:23 AM
"I should know better than to continue this discussion"
You've made for a great discussion. This is really good stuff. Thanks for the contribution.
Posted by: Raker Tooth | Apr 23, 2008 2:05:17 AM
I can't help but likewise ask 'what is the magical power of the corporation that separates it from ordinary businesses and make some people want to disband the corporation structure'? There aren't that any benefits I can think of that would make an unprofitable business 'profitable' just because the owner(s) incorporated it.
But still what is it called when a private person hires an assassin to bump off someone they don't like in a world devoid of government? (And don't use the lamo argument of the private person loses business and goes broke because if that were true then violence would be a rare random occurence due to quick reciprocal negative feedback, but it isn't.)
Posted by: Gil | Apr 23, 2008 2:58:44 AM
Some people here are pointing to government-funded or sponsored research as support of the claim that government can do useful things with its money. I think it sometimes can, but I don't believe the examples they point to often show the results they are after. I think academics in universities rarely contribute very much in the way of critical advances. They may come up with "big ideas" (since they are paid to sit around and think of "big ideas" all day), but so do other people. The problem is that "big ideas" are rarely the bottleneck of progress; that title generally falls to small details which can be seemingly trivial to the layman.
For example, people often credit DARPA for inventing the Internet. Its true that DARPA employees were intelligent, and we certainly owe them some gratitude. However, the technology they invented (packet-switched networks) was utterly trivial to implement in comparison to the other, supporting technology which the Internet needs to function at a useful level of performance. It needs fast, small transistors (CPUs, memory, etc), and advanced software languages and libraries. Transistors are private goods, and not financed by government at all. Comparing the development of TCP/IP to the development of the hardware needing to power the Internet is like comparing a tribal burial mound to an Egyptian pyramid.
The funny thing is that the R&D which largely drives progress in software on the Internet is generally all free, and not directly financed by government at all. An even funnier thing is that much of the progress in hardware is driven by games and porn.
IMO, the primary drive of innovation is not monetary incentives, but the incentives scientists and engineers have to do groundbreaking work and receive credit for it. Politicians have extremely weak incentives to fund any sort of useful R&D; fortunately the informal institution that is science and engineering produces better results.
Posted by: Grant | Apr 23, 2008 3:21:31 AM
"The way economies go from being underdeveloped, anemic, and uncompetitive to becoming developed, strong, and aggressively competitive is simple and straightforward: government steps in." - from 'Bad Samaritans'
Government steps in; yep, it sure does...
Ask the people of Zimbabwe about government intervention.
These types of assertions, with all their implicit pollyanna, are nothing more than shades of 'Gigantisism'.
You know, that rush to modernity at any cost. Ask yourself what the cost is.
This also reminds me of the implementation of the Five Year Plan series by none other than Josef Stalin.
Industrialization ('Gigantisism') at any cost. We now know the cost in terms of lives and the ecosystem.
The free exchange of ideas must be able to flow globally in order to nurture young economies and help them mature into strong and stable economies.
Yes, markets must evolve; there is a maturation process.
Posted by: babinich | Apr 23, 2008 5:55:56 AM
I just happen to think corporate coercion as it stands right now is worse than state coercion. If I had lived in the 19th century I would be writing about nation states; if I had lived in the 17th, I'd be writing about religious coercion. All forms of coercion are bad, or at least need to be justified. Corporate control over resources is the most potent form of coercion IMHO today.
- The people here are trying to inform you that some large corporations use the state to maintain or increase their profits by currying favor from congress (via political contributions for favorable laws to the corporation).
- Was there a definitive separation between church and state during the time you would have written about it? My guess is that you would have missed the boat back then as well.
- All businesses have to persuade, not coerce, their customers to remain customers. Some busineses may have more leverage in persuasion because of the nature of their business (a natural monopoly) or because it operates under favorable legislation -- legislation it may have paid for (a state problem).
- A corporation has to purchase the resources that it converts into goods/services. The state just takes through imminent domain and/or agencies designed to seize one's earnings.
Still think that the state is the least dangerous?
Also, 19th century = 1801 through 1900; 17th century = 1601 through 1700. These are the time periods you were refeing to?
Posted by: LowcountryJoe | Apr 23, 2008 7:23:01 AM
I am a tad surprised that no one has pointed out the highly questionable statement that the economy is significantly driven by "the Pentagon and (to a much lesser extent) the National Institutes of Health."
Really? Let's think about this for a second. If both these entities are wholly government funded, it means they are only funded by taxes. As taxes are aquired by taking a percentage of the wealth generated by the economy, and both the Pentagon and the NIoH get but a percentage of those, is it not odd to say they "drive" the economy?
Even under the very optimisic (well, pessimistic from where I am standing) assumption that the NIoH gets 50% of all tax revenue, and taxes account for 50% of all economic wealth created, that still puts the NIoH at merely 25% of the economy's total wealth. I know for a fact that the Pentagon gets far less than 50% of tax revenue, so that isn't even worth considering.
So perhaps you can explain why you think the government is such a large driver, particularly those two organizations.
Posted by: Hammer | Apr 23, 2008 9:11:34 AM
Sameer wrote:
"On the line "capitalism is good for the earth", I just can't. We can agree to disagree on all kinds of things, but silly statements like that should at least be backed up by more evidence. . . "
There is certainly "more evidence" about the earth-friendliness of capitalistic vs. less capitalistic governance. Just consider the environmental mess the former USSR created (What did the waterways in East Germany look like compared to those in West Germany when Reagan challenged "Mr. Gorbachev, tear down this wall"? Or as I posted above consider the contrast between the deforestation of Haiti in comparison to the dense forests of the Dominican Republic. One of the points you are missing here is that earth-friendliness (a relatively clean environment) is what economists call a "normal good." So one of the by-products of the increase in wealth that accompanies free-market capitalism (and yes the existence of corporations, yes large ones that accomplish economies of scale and scope) is a rising demand for a cleaner environment. Corporate sensitivity to this is palpable; after all, As John Stossel so effectively keeps explaining to the masses: they have to PERSUADE us to buy their products.
Posted by: indiana jim | Apr 23, 2008 10:14:40 AM
Hmm, there are far too many points here for me to give meaningful replies. I'll try to touch on a couple:
1) Babinich - The point is not "look at Zim" or "look at Stalin" but "look at the U.S." "look at Japan", etc. Yes bad examples of state interventions in development abound, but there are some good (or better) examples as well. The story of Japan nearly giving up its auto manufacturing in the 1960s is telling. When their first experiments failed miserably, the Central Bank argued for abandoning the stupid experiment and focus on Japan's comparative advantage, but the Finance ministry persisted with its subsidies and tariffs until the sector was competitive. Now Japan and cars is like France and wines, right? State intervention. There's no example of development without it.
2) A number of posts seem to be challenging me to actually list means of corporate control, so here goes. a) Corporations are hierarchical coercive organizations internally. This is almost so much of a truism as to not need evidence. Plans are set by CEOs and boards and implemented by everyone else. The further down to the ladder you are, the less say you have in any decision. This runs counter to many definitions of democracy.
b) Throughout the 20th century (and now 21st century), corporations have been able to exert undo influence over political decisions. I don't think many of you disagree with this, you just cite the blame slightly differently. Your counter-argument might be "if government's didn't have the mechanisms of coercion in the first place, corporations couldn't exert that influence". Maybe. It would depend what a society without government coercion would look like. As it stands right now, United Fruit ordered the U.S. invasion of Guatemala in the 1950s, and the oil and defense industrialists in the Bush administration ordered the invasion of Iraq (and they're about the only constituency that has benefitted from it). A handful of corporations underwrite the campaigns for candidates of both major U.S. parties, ensuring that representatives are as accountable (if not more so) to their interests (that's where the money's coming from) than that of their constituents. I suspect you share these critiques, so I'll stop here.
c) Despite their faults, accountability measures for governments at least have some hope of success. Though the democratic systems we have in place are far from perfect (I agree with many of your arguments about state control, though I suspect we mean different things by the term) even the worst of them allows for some accountability by the people. Rousseau and Hume may have overstated their case when they elaborated their theories of "consent of the governed" but I think there's still a basic logic there. What that implies in our particular example is that the votes every few years and the other democratic measures we have count for something. Maybe not much, but something. Corporations are accountable to nothing but their own profit, and explicitly so. Again, in a world without these dysfunctional entities, where free association was the norm, not the exception, and where workplace democracy was taken seriously, I would be the first to say dismantle the state and all its coercive mechanisms. As things stand now, state regulations are about the only thing that stands in the way of the annihilation of the human species, so I'd say we need them.
Posted by: Sameer Dossani | Apr 23, 2008 11:08:54 AM
Sameer seems to have missed every word I just posted. Inconvenient ideas (too inconvenient) for him/her I suppose?
Posted by: indiana jim | Apr 23, 2008 11:28:59 AM
a) Corporations are hierarchical coercive organizations internally. This is almost so much of a truism as to not need evidence. Plans are set by CEOs and boards and implemented by everyone else. The further down to the ladder you are, the less say you have in any decision. This runs counter to many definitions of democracy.
That may be (and note that corporate structure is defined by corporate law), but this may be a problem for you if you work for a corporation.
That's what you agree to put up with for compensation.
If you don't like it there, then find another job.
If you don't like working for corporate structures, then find a small business that has a different structure.
And if that doesn't satisfy you, then start your own business.
If that doesn't work for you, go stake a claim in some remote wilderness and live off the land.
The thing about corporations is that if you don't work for one, then their power over you (except in the case of 2-b) is what?
Posted by: Sam Grove | Apr 23, 2008 11:39:48 AM
Corporations are accountable to nothing but their own profit, and explicitly so.
Except in the case of 2-b, they do have to account to their customers.
For example, I tried graphics tablets from Aiptek but was not satisfied. I am now happy with my Wacom tablet.
When we bought a new car, we did not buy another Saturn but bought a Toyota instead.
Please tell me what control Saturn corp. or Toyota corp. exert over us other than producing what we wanted.
Posted by: Sam Grove | Apr 23, 2008 11:58:47 AM
Same here Indiana Jim... I provided specific examples of how corporations are influenced and controlled and directed for what many would see as "public good". Here's another: yesterday, my inbox was filled with what many of the major corporations I do business with were doing in the name of environmental responsibility. Apparently, I'm the one person who doesn't care, but they are falling all over themselves to reduce waste, eliminate their carbon footprints, recycle, and not club baby seals. I also pointed out that capitalism is not the same as corporatism, and there's lots of capitalism going on outside of giant corporations. Grant pointed out that the Internet we know today is a result of fast and cheap computers, plentiful bandwidth, etc. All things that DARPA and Al Gore didn't give us from a central perch. But hey, Sameer doesn't like corporations. OK, we get the point already.
Posted by: Brad Hutchings | Apr 23, 2008 12:17:01 PM
The thing about science nerds is that they invent things to prove they can, wherever they happen to be working.
So to claim government produced the internet falls short. The internet, and its origins, was created by people for their own purposes and not to fulfill some government mission.
It was the opportunity for profit making that brought computing and the internet to the rest of us.
Posted by: Sam Grove | Apr 23, 2008 12:38:08 PM
Sameer,
In that case, Henry Ford wanted to pay his Model T assembly line workers more than the market rate. His logic was that he needed more customers, and if Ford tried to lift these workers to middle class status, they would be doing the best thing for the long term profitability of the company. His shareholders disagreed and argued that he had a duty to maximize short term profit above all else. The judge agreed, setting a precedent that is still on the books.
Sounds like a property rights case to me. You fail to recognize that when he incorporated, Henry Ford no longer owned the company -- the shareholders owned the company. As the owners, should they not be able to decide how the company sets its priorities?
Posted by: Brad Warbiany | Apr 23, 2008 12:45:39 PM
But hey, Sameer doesn't like corporations.
Corporations, like people can be good or bad. Being managed by actual people, their behaviors spring from the same urges.
Obviously would should not trust corporations with political power for the same reason we should not trust people with political power.
I'm wondering if 'progressives' are a manifestation of having had to give up on communism and now are focussed on social democracy. (Well, corporations are useful, but we have to keep them on a tight leash. By god, we can find some optimum balance between 'unfettered' capitalism and outright communism.)
We can keep up the illusion that capitalism = mercantilism, we'll just never discuss the latter and use the former to cover both. In fact, there's no such thing as capitalism, but the word sure is a handy straw man.
Posted by: Sam Grove | Apr 23, 2008 12:47:50 PM
Sameer,
and where workplace democracy was taken seriously
What's with the democracy worship? Democracy is a means, not an end. How are you sure that democracy would be the proper means to your desired end?
Posted by: Brad Warbiany | Apr 23, 2008 12:50:00 PM
What is/are the desired end(s)?
Posted by: Sam Grove | Apr 23, 2008 12:56:19 PM
What's with the democracy worship?
It seems that for progressives, democracy is the desired end.
As I said on another thread:
"Part of the problem is the belief, promulgated by government and progressives that democracy = freedom.
This leads to the assumption that the slightest fraction of input represented by one's vote is an expression of substantial power over the form of one's serfdom and that THIS is freedom."
Posted by: Sam Grove | Apr 23, 2008 1:00:10 PM
Pure democracy is just tyranny of the majority, as opposed to some other arbitrary number of people.
Freedom is measured as the absence of coercivce force. That's it. I don't know why so many progressives have issues with that, but it seems almost universally true that they do. For what it is worth, we could have a king and be more free if his only powers were to direct a volunteer army in war and enforce a very small number of laws. Compare to early Athens, where a fellow could be sentanced to death for no real crime, just because the majority voted for it.
Posted by: Hammer | Apr 23, 2008 1:26:21 PM
It seems that for progressives, democracy is the desired end.
Well, not quite. Because while the consequences of democracy seem nifty until they're actually realized, it is very hard to escape from the democracy. Because by then, from the massive state growth from the 'people's will', the newly leanred people cannot reverse the trend as easily. The state has aqcuired too much power and will silence all dissenters who wish to reverse course. The only people who benefit are those that have kept their seats at the table of power.
Getting lectures from the progessive idiots who enjoy demonstrating their so-called knowledge of History, I am miffed as to see just how much of the history for the struggle of liberty they throw under the bus. I also here them discuss of corrupting powers yet do not see such corruption by the political asshats that they seemigly worship. Sure the asshats give them cover to cause themselves to feel altruistic but the arrangement does not make it so. Theft, for the purpose of societal engineering or 'altruistic' purposes, is not atruistic nor does it make society any better.
Bottom line, progressives' desired ends are either to seek (more) power or to be held in high esteem by those they profess to help; both of which bring the advocate maximum satisfaction while the cost is passed onto others (i.e. theft). The vehicle they choose to get there is titled democracy.
Posted by: LowcountryJoe | Apr 23, 2008 1:52:28 PM
IOW, for a progressive, democracy = we want power over you.
Funny, that's the same equation all the power seeking elites have in common.
Posted by: Sam Grove | Apr 23, 2008 2:14:07 PM
Hey there, I seem to have gotten under people's skin. In case you haven't noticed, there's one of me at least 10 of you. I can't respond to everything, at least not if I'm trying to get some real work done (though I admit this is a tempting distraction).
1) Indiana, the DR and Haiti is an interesting contrast on many many levels. How you attribute this to markets is beyond me, though. Haiti has been under attack by the French, the British and the Americans since it had the gall to declare an independent Black republic in 1804. When folks are threatened with starvation they tear up everything they can in an effort to survive, and then they eat mud as they're doing right now. The DR's "success" (and it's only a success compared with Haiti, if you look at the World Development Indicators) is less due to markets than to a more orderly transition away from colonial rule. Your market story may be part of the history, but it's certainly not the only part.
As for East Germany and Russia, yes, they were bad and sure statism was the driving factor behind environmental pollution. But you can't drink the water in Chile (pesticide runoff from farming grapes and other fruits for U.S. consumption), half of Bangladesh has arsenic poisoning (pesticide runoff and over mining of water for industrial use), and the Brazilian amazon is disappearing (soy/cattle production for McDonalds). You can't say "capitalism" is any more associated with saving the ecosystem than any other economic system; indeed you can probably say it's less so simply because "capitalism" is so pervasive.
2) It's interesting to see that criticism of my positions (and sometimes of me personally) has devolved into criticism of democracy. If that's your view, fine. You have a right to it. For those of us who believe in the principles of Thomas Jefferson, Adam Smith and other ideological founders of the United States, the right of people to have a say in their own lives is one that we live and die by.
3) On the early days of computers and the internet, other folks have mentioned the DoD's involvement while arguing that it's the hardware innovations that are truly important and market inspired. I would encourage you to put the words "vacuum tube computer" into google and do your your own research. We would not have modern computers without massive government spending in the early phases of research and development.
4) On corporations doing things other than through the profit motive, yesterday was a good example, and I think your "am i the only one who doesn't care" line hits the nail on the head. For years (since 1974), earth day has pretty much been ignored by the private sector. This year, we seem to have reached a tipping point. Why? I have been receiving propaganda from Shell since 2002 (when I was a spokesperson for a campaign to stop oil drilling in the Sunderbans Mangrove forest) about their latest green technology investments. Why? Starbucks started offering fair trade coffee, McDonalds agreed to the demands of Florida tomato workers for a few more pennies per pound for their work. Why?
In each of these cases, public perception was degrading the image of the company. For years Starbucks resisted our campaigns; for years Shell was deriding our calls to diversify their investments. They only capitulated when our campaigns began to pose the threat of affecting their bottom line (i.e. it was too much bad publicity).
If a CEO had come up with one of these ideas by his or herself without outside pressure, their board would not have been willing to implement it. Cause it's all about the bottom line.
Posted by: Sameer Dossani | Apr 23, 2008 3:13:17 PM
Look we get 2 choices. Either a few thousand mega-corporations and a lot of smaller companies or 1 gigantic corporation known as THE STATE.
Posted by: FreedomLover | Apr 23, 2008 3:51:14 PM
Sameer Dossani:
The American founding fathers founding a REPUBLIC not a DEMOCRACY. look it up.
Posted by: FreedomLover | Apr 23, 2008 3:53:57 PM
Sameer:
Also its FREE citizens right to petition any company to change its practices. I don't see how we're in disagreement there. However, it seems to me you are agitating against the private ownership of capital.
Posted by: FreedomLover | Apr 23, 2008 3:55:01 PM
As the owner of a small business, I would not consider democracy as having an appropriate place in our corporation. It is our company's reputation (our most valuable asset) and my (and my partner's) money that is on the line if a bad decision is made. Our employees have neither the experience or incentives to make sound decisions about risk and reward...especially when the penalties for bad decisions affect my assets, not theirs.
More on point however, I would agree with Don that Earth day and all environmental portections spring from the wealth created by capitalism. It is from that wealth that people don't have to worry about where their next meal is coming from and can ponder the benefits of clean air and water. And that wealth creates funding for orginizations that can devote their entire existence to those pursuits.
Sameer is right that Shell responds to negative publicity that affects their bottom line, and rightly so (assuming the negative publicity has merit). Perhaps they have choosen to divert a portion of profits to protect a drop in sales that comes with the negative publicity. Or perhaps they have considered that they can increase sales by "selling" their stewardship, thereby funding research into new technologies. Either way it is a proper response to the incentive.
Posted by: Kevin S. | Apr 23, 2008 4:04:39 PM
That's one way consumers pressure corporations to be better stewards, by withholding their money and choosing competitors.
We do not advise implicit trust in corporations, in fact, that's a fair part of the reason we want to minimize government, to eliminate the incentives for corporations to buy into the political process.
Remember when Coca Cola tried to sell us the New Coke?
Posted by: Sam Grove | Apr 23, 2008 5:15:40 PM
Hey there, I seem to have gotten under people's skin.
If your embrace of the collective and statism were not enough, your opening salvo using the analogy between (paraphrasing) "capitalism is to Earth Day as Hitler was to Jews" were surely enough to get under my skin. And, since I am judgemental, I drew some conclusions about your character...none of them were positive conclusions.
2) It's interesting to see that criticism of my positions (and sometimes of me personally) has devolved into criticism of democracy. If that's your view, fine. You have a right to it. For those of us who believe in the principles of Thomas Jefferson, Adam Smith and other ideological founders of the United States, the right of people to have a say in their own lives is one that we live and die by.
These wise and enlightened people that you wrote of above sought [even though they were not always consistent] liberty and a means to limit government's intrusions onto those rights that were granted to each individual by our creator. Do you, Sameer, think that governments -- even those of which that are voted on by a majority of voters -- should be constituionally limited and constrained to not intrude apon our God-given liberties even if the majority wishes the intrusions? I ask because it appears that you subscribe to an ideology that wants to run roughshod over liberties, supposedly for the good of society.
If I am wrong about my characterization of you then perhaps you could defend yourself against it. If I am not wrong, then perhaps you should not write of great men and mistakenly tell us just how ideologically in-tune with them that you seem to think that you are; it causes you to come across even more foolishly than you already have.
Posted by: LowcountryJoe | Apr 23, 2008 5:17:13 PM
In case you haven't noticed, there's one of me at least 10 of you.
We haven't established a system to regulate responses here. Of course the same applies when we, as individuals, venture into other blogs.
It's not like there's a deadline for your response.
Anyhow, the question about was how corporations exert control over us.
Also, how does that control compare to political power?
Posted by: Sam Grove | Apr 23, 2008 5:19:21 PM
LcJ, have I ever said anything in these posts about "the collective"? Have I ever said anything flattering about "statism"? There's a lot of assumptions about who I am and the philosophical systems I adhere to, all of which are way off base here. I can't defend myself against accusations that have nothing to do with me. Cite something I've actually said if you want me to respond.
Adam Smith on minority rights: "What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable." - Wealth of Nations, Book I ch. 8. If we take the world as a whole, is there any doubt that the greater part are poor and miserable? Smith on greed (referring to relationships between master and servant, but I think equally applicable to corporations): "All for ourselves and nothing for other people seems, in every age of the world, to have been the vile maxim of the masters of mankind." Wealth of Nations, book III, ch. 8 . BTW, I really recommend you folks actually read Wealth of Nations, if you haven't already done so. If I had to name one thinker whose views echoed my own, it may be Smith.
I think we're all in danger of repeating ourselves here. I've answered the questions Sam Grove asks in an earlier post. Internally, corporations control through fascism (i.e. what Mussolini also called corporatism), externally they control by buying politicians and staffing political offices. The Bush oiligarchy is the obvious example, but every presidential administration since WW2 has been guilty of this.
I believe that people ought to have a say in decisions to the extent that they're effected by them. If you feel that you have the greater stake in your company's decisions (cause it's your money), then I think you have a case for having more of a say than your employees. I don't think that that means they should have no say at all though, and especially decisions that directly effect the workers should involve them in some way. (BTW, that's what they teach you in some management schools as well.) I will say that I run one non-profit company, am in the process of founding another, and have been part of various enterprises that try to function along these lines. It's difficult, but rewarding. If everyone has a stake in the company's success, the more likely it is that everyone will use their own brainpower (and other kinds of power) to see that success happen.
Posted by: Sameer Dossani | Apr 23, 2008 6:29:58 PM
Sameer,
An incentive system that allows non-profit corporation to survive IS, as you say, giving workers a "stake." In academia it is called tenure. A colleague of mine, Philip Coelho has written about this at some length. If you go to the Ball State University website, you will be able to find a link there to his paper on "non-profit" organizations.
But the incentive that allow for-profit corporations to survive are, not surprisingly, not the same. So tenure, for example, is not observed in the same way that it is in non-profits.
Posted by: indiana jim | Apr 23, 2008 7:31:08 PM
externally they control by buying politicians and staffing political offices.
Implicitly making the point that corporations effect external control via the political state which is the lynchpin of that 'control'.
Yes, it is grievous that the big three (business, labor and government) conspired to lock employees into wage slavery. This was acceptable for those seeking security above an opportunity for wealth. A few corporations have managed to enable employee ownership and participation in decision making. It would be good if this model were more common.
corporations control through fascism
Employee participation in a corporation is voluntary, so that point is rather weak.
I've enumerated alternatives. All are available to those willing to take the risk and make the effort.
The current common model is was produced by historical progressivism, that is, the idea of managing society for the benefit of the, um, non-elites.
Posted by: Sam Grove | Apr 23, 2008 8:06:53 PM
I've worked for corporations. I got pissed one day at being treated like a school kid (they had bells) and the next day I was gone from there. They only had whatever control over me that I had agreed to.
Posted by: Sam Grove | Apr 23, 2008 8:11:23 PM
"The American founding fathers founding a REPUBLIC not a DEMOCRACY"
I've pointed this out before - a Republic is a society that doesn't have a Monarch. Therefore Republics and Democracies AREN'T antonyms despite the fact that the this style of argument must make many people warm and fuzzy because lefties and righties both use it. Perhaps the Founding Fathers could be blamed for creating a Constitution that allowed for Amendments and the such-like whereby the Federal Government could be legally given greater power and scope.
Posted by: Gil | Apr 24, 2008 6:52:48 AM
"Our employees have neither the experience or incentives to make sound decisions about risk and reward...especially when the penalties for bad decisions affect my assets, not theirs." - Keven S.
A big telling point between Libertarian and non-Libertarians perhaps? You see taxpayers as 'coerced employees' of the Guvmint? Technically one facet of a Corporation is that shareholders are the owners while directors run the business. The shareholders are supposed to be able to vote on matter do to with the hiring and firing of directors. How is this much different from a Democracy? This may come as a shock and horror to Libertarians but this is how most people such as myself see a Representative Democracy! Elections are basically shareholder meetings and the poorly performing directors are in spot where they'll get replaced by another board of directors.
Still I like to see some sort of mystical magical elaboration on the Guvmint being a supposed monopoly. Since 'love it or leave it' would be part and parcel of a Libertarian society Guvmints don't have a real monopoly. How do we know when land is held in private ownership that these private owners would be any less forgiving than Guvmints? Or if people who find a private landowner unforgiving in his rule how is private emigration any different from emigration from society run by a Guvmint?
Posted by: Gil | Apr 24, 2008 7:11:00 AM
I do believe that the examples of Sweden, Finland and other Northern Europe countries prove that state regulation and prosperity are not mutually exclusive.
The problem with the Feral Capitalists and their reasoning is that they deliberately ignore some facts that stain the bright painting of capitalism.
Todays capitalists boast that free market made the United States of America the bigest economic and military world power. Wrong. Strong protectionism and state intervention made that possible. Of course that the fact that Europe had two wars in the previous century and by 1945 was utterly and completely destroyed has nothing to do with US's success.
Anyway, US being the Plutocracy that is, has pseudo-scholars talking about deregulation and lesser and lesser state, but that same state protects the interests of american corporations and those even dictate foreign policy. Corporations backed by armies, yes, free market at it's best.
I do believe that the only ones that defend that "free market" are either insane or on the payroll.
But hey, in America what goes is: "take care of yourself, then your family and screw the rest."
Posted by: Sérgio | Apr 24, 2008 7:49:22 AM
Wow Gil, way to completely miss the point.
"a Republic is a society that doesn't have a Monarch. Therefore Republics and Democracies AREN'T antonyms"
And...?
Of course they aren't antonyms (do you know what an antonym is?), but not being antonyms doesn't make them synonyms either. Seriously, do you not understand the difference between the Rule of Law and the Rule of Man?
As for the second post, what does that mindless rant have to do with the quote you pulled from Kevin?
Posted by: mnm | Apr 24, 2008 7:58:18 AM
Geez what then are you referring too then? Stock and standard Libertarian sites are the ones with Democracy = Mob rule and Republic = Libertarian society. Is this like the notion of 'natural rights' that only a handful of Libertarians get that no one does?
Well M&M at least have a read of this:
http://www.huppi.com/kangaroo/L-democracy.htm
Oh and I'm sure you be saying 'if land was held in private hands the owner would wonderfully compete with each other or risk losing patronage' or something?
Posted by: Gil | Apr 24, 2008 8:25:33 AM
"A big telling point between Libertarian and non-Libertarians perhaps? You see taxpayers as 'coerced employees' of the Guvmint? Technically one facet of a Corporation is that shareholders are the owners while directors run the business. The shareholders are supposed to be able to vote on matter do to with the hiring and firing of directors. How is this much different from a Democracy?"-Gil
I own a small corporation, and I am both a shareholder and a director. I am also a shareholder in many other publicly held corporations which I am not an employee. A big difference between government and coprporations is that I was born in this country with inalienable rights guaranteed by our constitution. Employees are only granted the rights that I offer and they choose to accept at the time of employment. Since our employees are not shareholders, as is the case with most companies, I fail to see their right to have a representative vote in company decisions.
That said, and to adress Sameer's point that employees should have a voice in decisions that affect their job. Some decisions, yes, but only if the employee is more qualified than me to make that decision. For instance, our IT manager makes decisions about who gets what type of computer and the configuration and hardware components of our server, but other employees don't have that kind of input. Field technicians have input on what type of vehicle and equipment is best suited for their work. But I don't consider those as a democratic process, I see it as using the knowledge and experience I have purchased to best serve our clients and to maximize profits, which serves the employee's interest as well as mine.
Other descisions that directly affect employees, such as what jobs to take, is the provenance of the shareholders, because it is our job to manage risk/reward. The repsonsibility of making decisions that affect 20 or so families is large and taken very seriously, but is nonetheless the shareholders job, and we are appropriately compensated for that level of responsibility.
Posted by: Kevin S. | Apr 24, 2008 8:29:58 AM
Kevin,
Yes as you say "The repsonsibility of making decisions that affect 20 or so families is large and taken very seriously, but is nonetheless the shareholders job, and we are appropriately compensated for that level of responsibility."
What Sameer seems not to grasp is this point and that the structuring of incentive and responsibilities is different at a for-profit venture in comparison to a not-for-profit one.
Posted by: indiana jim | Apr 24, 2008 9:09:44 AM
Jim,
True there are differences in the for-profit vs. non-profit organizations. But it seems that even at non-profits, there has to be somebody making the decisions about which projects to pursue, and where to best spend your labor seeking funding. I think the principal difference is that risk/reward manager at non-profits has very little at risk, only his job and perhaps his reputation. He is risking other people's money. And therin lies the problem with state-sponsored endeavours. The entrepreneur is not only risking his job and reputation, but several hundred thousand dollars perhaps, and more importantly the opportunuty to turn several hundred thousand dollars into hundreds of thousands more. Contrary to the beliefs of many on the left, this is accomplished every day morally, ethically, and without harm to others (actually, while benefiting others) through hard work, proper incentives, and acceptance of personal responsibility for your actions.
Posted by: Kevin S. | Apr 24, 2008 10:05:09 AM
Kevin,
Below is a link to my colleagues article on the survival of non-profits; I think you might find it interesting:
http://00prcoelho.iweb.bsu.edu/TENURE%20AND%20NON-PROFIT%20FIRMS.pdf
Posted by: indiana jim | Apr 24, 2008 10:24:15 AM
Kevin,
The above link got truncated and won't work. Just Google the title below:
"Rules, Authorities and the Design of Not-for-Profit Firms,"
And go to Coelho's listing and scroll down if you are interested.
Posted by: indiana jim | Apr 24, 2008 10:28:56 AM
Kevin,
Yes as you say "The repsonsibility of making decisions that affect 20 or so families is large and taken very seriously, but is nonetheless the shareholders job, and we are appropriately compensated for that level of responsibility."
What Sameer seems not to grasp is this point and that the structuring of incentive and responsibilities is different at a for-profit venture in comparison to a not-for-profit one.
On the contrary, that kind of paternalism is exactly what I'm critiquing. The idea that not only will you tell those under you what to do, but you should get compensated for the responsibility is one that Mussolini would have been proud of. Adam Smith again:
"The interest of the dealers in any particular branch and trade or manufactures, is always in some respects different from and even opposite to, that of the public.... [They] have generally an interest to deceive and even to oppress the public...We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labor above their actual rate... It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily... [while] [t]he man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible to become for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life." Wealth of Nations, book 5, ch.1
Posted by: Sameer Dossani | Apr 24, 2008 11:10:40 AM
Sameer,
Yes, Smith wrote "[t]he man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible to become for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life."
This is a good reason NOT to CHOOSE to do this kind of work for one's entire life. When I was younger I had a job on an assembly line that was the kind that done for a life-time would tend to make one DULL; but so what? That job was a means to another end for me. Those wages facilitated my ability to go to college and graduate school. That is, I choose to do dulling work in the short-run to avoid it in the long-run.
In your narrative, people are this or that; your narrative is a static one that is unreflective of the evolving choice sets available to people over time.
Posted by: indiana jim | Apr 24, 2008 12:13:14 PM
Again, one agrees to work for a corporation. It is a voluntary association.
Gee, did Smith get everything right?
We've already addressed the issue of corporations, political power, the differences, the distinction between capitalism and mercantilism, etc.
What, exactly is the dispute?
A celebration of capitalism isn't a celebration of the many mercantilist aspects of our country. We do deplore those aspects and we do exercise our ability to perceive the distinction, at least as well as progressives who seem to condemn just about everything that isn't under the purview of government, or is profit related.
Posted by: Sam Grove | Apr 24, 2008 12:17:22 PM
Your Adam Smith quote is an interesting observation and boosts an argument for getting an education or learning a marketable skill. But it doen't make the argument that a business owner should allow his investment to be turned over to the decisions of those who have very little at stake and even less skill at making those decisions.
What you don't seem to grasp is that my interest in my company is my property and I am free to increase the value of my investment or lose it by the decisions that I make. I am unfamiliar with any principle that would allow those with nothing at stake to to direct my investment. I suppose the government could decree that I must turn over control of my property to my employees, but I can't think of anything that could be more paternalistic (think home owner restrictions, trans-fat bans, etc.). I see nothing paternalistic about securing work and compensating somebody to do that work on a voluntary basis. You do work I value, I pay you a fair wage to do that work. Simple. If you don't consider the wage fair, you can: a) convince me that you should be paid more, or b) convince somebody else to pay you more. Where is the paternalism?
Posted by: Kevin S. | Apr 24, 2008 12:31:50 PM
Sam and Jim,
Thanks for making my points. I type slowly.
Posted by: Kevin S. | Apr 24, 2008 12:36:37 PM
There are many valid points made in this thread but I really liked Lee Kelly's comment:
"The greatest public good which a government can provide for a polity is a battery of tight controls and constraits on its own power, and this is the one public good which politicians have the least incentive to provide, since the less power which they can exert the weaker position they are in to broker deals with voting blocs, corporate lobbies, special interests, etc."
Posted by: James R. Ament | Apr 24, 2008 12:40:27 PM
I challenge promoters of alternatives to hierarchical corporate structures to create a competitive model in accordance with their vision.
It is easy to criticize, not so easy to produce an working alternative.
Posted by: Sam Grove | Apr 24, 2008 12:44:33 PM
Wow... just... wow.
So Sameer, you don't see the difference at all between "I will pay you some money to do X for me" and "I will shoot you if you don't do X for me"?
You really don't?
That is the difference between a corporation and government: government is allowed to use force.
A corporation might say "I won't give you something nice if you don't do what we say, and I can sue you for things I already paid for that you didn't provide."
A government can say "I will take from you whatever I please if you don't do what I want you to."
Gil: The line between a Republic and Democracy can be fuzzy depending on who does the defining, but both are limited to how people interact with their government, not private interaction. Generally the definition I have seen is that democracy generally features the citizens voting directly for laws, where as a republic votes on delegates to vote for them. The former is also called "Unlimited Democracy" if whatever the mob says goes.
Democracy without limits is very bad for the obvious reason that any group of people can be swayed in moments of high emotion, resulting in some really bad decisions. Think of how many people buy Britay Spears records, and consider what happens when they can pass any law they want.
That is why democracy is not really a goal, but rather a pretty good solution to dealing with government when there are strict limits on its power put in place. Applying it to different aspects of life is, however, folly.
As to corporations and being democratic, that's just silly. Imagine if I want to start a small business cutting lawns and hire 3 people. Am I really going to have them vote on what kind of mower I get, or what sort of price to charge? I might ask for input, but obviously it would be silly for me to risk my company on their whims if they all voted for 5000$ lawn tractors or something. The same logic applies to corporations.
Posted by: Hammer | Apr 24, 2008 1:27:13 PM
Sameer conveniently ignores the hundreds of billions of dollars dropped down the nuclear fusion R&D sinkhole by the government. If they'd just had the foresight to spend like 1/1,000,000 of that on buying the patent for the 100mpg carburetor from GM in the late 1960s, they could have avoided three energy crises. (Haha!)
I think even Sameer would have to agree that it takes capital to do all the wonderful things that have been done and that we'd like to do. The argument is over how the capital gets lines up. Sameer and other progressives would like it directed centrally, where a few really smart people that we all vote for decide how to allocate it. On the Cafe Hayek side, we'd prefer that capital is allocated in the most messy, obfuscated, unreconstructable way imaginable (i.e. by the market) because that process will ensure that more people with real stakes in the process will have their concerns evaluated and perhaps even satisfied by the process.
Perhaps Sameer might understand that the example I gave of companies falling all over themselves to look green on Earth Day is an example of the latter dynamic rather than the former.
Posted by: Brad Hutchings | Apr 24, 2008 1:27:31 PM
Sameer makes no mention of consumers.
Posted by: Sam Grove | Apr 24, 2008 3:04:44 PM
Sameer and other progressives would like it directed centrally, where a few really smart people that we all vote for decide how to allocate it.
I'm actually kinda getting sick of people's clueless assumptions about what i believe. For the record I believe in federated, decentralized, democratically run economic and political institutions, formed on the basis of free association. If you want to know what that means exactly, give me a call or attend one of my classes. It does not have anything to do with a state or a government.
On the differences between democracy and mob rule, there are many, and your Britney Spears example is a really good argument against consumerist capitalism, I think. On a micro level, you can look to the Israeli Kibbutzim, which were, prior to 1948, a good example of democratic decision making in the workplace. Was their functioning in any way akin to that of a mob? I don't think so, but if you want to argue that, go ahead.
On the power of corporations, some people seem to be forgetting that we're talking about institutions that control some 90% of the economy globally. There may not be a gun to one's head, but in many cases there may as well be. The choice between starvation and working in deplorable conditions is no choice at all. For many of the communities I work with in slums and impoverished rural areas, they would love to be exploited by a good old 19th century Dickensian capitalist. They should be so lucky. Doesn't make it right.
On the concern that it's my money and I'll do what I like with it, the point of Smith's view is not that workers are so dumb that obviously they can't be part of the decisions. Rather it is a fundamental question about the relationship between people and the economy. Do people exist so that they can benefit the economy or does the economy exist to benefit people? Smith was against what was then known as "wage slavery" not because workers were opposed to it, but because he saw it as hindering the ultimate goal, which was "rough equality" between all people. Remember that his views in favor of a free market are precisely because he saw the free market system as the best for leading to that kind of equality.
In other words, economies should serve human development, not the other way around.
Posted by: Sameer Dossani | Apr 24, 2008 6:40:05 PM
Gil, there are two points that you made that need some tidy counter-points.
1) the sharholders vote for the BOD in the same proportion that they own shares of the stock.
2) a company, and not a representative government, is a long-term profit maximizing seeker. Government seeks only to expand, exert more coercion by limiting liberty, and ultimately levies more taxes to pay for these 'priviledges'.
You must have had the same things written to you multiple times by now and it still has not sunk in.
Posted by: LowcountryJoe | Apr 24, 2008 7:42:13 PM
Those living in a kibbutz viewed it as a collective enterprise withing a free-market...not an alternative to it. Personally, I see little difference between the kibbutz and other socialist experiments.
Those living there did not earn an income. Any profit made went into a communal treasury. Of course this means the incentives are out of wack. As a result, kibbutzim were heavily dependent on subsidies from the state of Israel.
"On the power of corporations, some people seem to be forgetting that we're talking about institutions that control some 90% of the economy globally."
Markets aren't controlled. They just exist.
"Rather it is a fundamental question about the relationship between people and the economy. Do people exist so that they can benefit the economy or does the economy exist to benefit people?"
This misses the point that Kevin is making. His argument is not about the relationship between the people and the economy, but rather the relationship that he has with his capital. His investment is his to do with as he pleases. Were you to dictate to him in what manner he choose to use that investment, you would be a tyrannt; were his employees to dictate to him in what manner he uses his property, he would be under the tyranny of an oligarchy.
As long as we're quoting Smith, "The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it."
Posted by: mnm | Apr 24, 2008 8:12:44 PM
wow, I should have done some proof reading. My grammar was atrocious. My apologies.
Posted by: mnm | Apr 24, 2008 8:16:47 PM
Sameer,
The question is whether to pursue equality of outcome, or equality of opportunity. For example, in a society with the rule of law, all have equality before the law; so those who murder will be imprisoned, or worse, and those who eschew crime are free. Outcomes are unequal, but opportunities, in this case to be imprisoned, are unequal (they depend upon people's CHOICES).
If all people are free to choose, they will not all make the same decisions. Some like red and others blue; some are Amish, eschewing cell phones, and others embrace text-messaging.
Do you want us all to live at the standard of living of the Amish because the Amish choose to do so? Do you want to make it illegal for the Amish to be Amish? Either way, you cannot have equality of results without coercion. In a free society, there will be diversity in the outcomes.
Are you opposed to people being free to make their own choices? If so, who will choose? Who is better to choose than people themselves? I know of no person with a decent amount of intelligence AND humility who does not ultimately become persuaded that in general, as Milton said, "no one spends someone else's money as carefully as he spends his own." As the Austrians correctly point out, information's availabilty is the key. You have no idea what my situation is, nor I yours. I do not presume to choose for you, because the likelihood of my making a choice better for you than you yourself make is trivially small.
Posted by: indiana jim | Apr 24, 2008 9:06:20 PM
LcJ, it's hard to respond to accusations that have nothing to do with me. I'm as libertarian (with a small "l") as any of you, I just come from the left libertarian tradition (and the enlightenment principles on which it is founded) and y'all seem to come from the right libertarian tradition. All these questions about states have nothing to do with me.
1) Shareholders are not the only interested parties, and if this is an argument that corporations are democratic, it's a particularly weak one. When I last looked at the numbers (which admittedly was a few years ago), 50% of stocks were owned by 1% of the population. Share holders represent certain class interests. Also there's a sense of entitlement here that I don't really understand. A lot of the wealth generated has come through corrupt processes of one kind or another, often involving the state. The idea that one's personal wealth allows one the right to pursue more personal wealth is a rephrasing of Adam Smith's "vile maxim", "all for ourselves and nothing for other people". There was a motto of the New England "factory girls" in the early 1900s - those who run the factories ought to own them. How I wish the left in this country (and especially the trade union movement) could approach the intellectual sophistication of the average 13 year old girl in 1902 Boston... alas...
2) Again, governments have nothing to do with what I'm arguing for here. But again, governments can sometimes be accountable to people; corporations are accountable only to profit. I think it was Bertrand Russel who said that governments are the cages in which we find ourselves trapped. As lovers of liberty we should want to break down the bars, but at the moment, we find a ferocious tiger on the other side. It may be a good idea to keep the bars in place until we get rid of the tiger, and then get rid of the cage.
3) mnm, I couldn't agree with this Smith quote more. But freedom is not just the freedom to spend money; Smith had a much broader conception of the term. Government coercion has put in place a system that has given corporations the rights of people (on very shady legal grounds) and the duty to maximize their individual profit (so they're dysfunctional people). If we undid some of that damage, revoked some corporate charters (as was common place even 100 years ago), that might be a first step towards establishing an economy based on human dignity and with the goal of human development. That's precisely the kind of economy that Smith argued so well for in 1776 and that we have all made a mockery of.
On the kibbutz, I won't deny that there are problems today, but i think studying its early history (prior to 1948) offers some interesting insights in the ability of workers to control their own economic systems while maintaining financial viability.
4) On the idea that markets are somehow natural phenomena, i can't help but giggle. Markets are social constructs and they are certainly regulated by all kinds of entities. In today's world, massive government spending ($2 trillion on the Iraq war alone), ongoing subsidies and tariffs are some of the market distortions. The point of one of my posts some ways up is that these market distortions are the rule, not the exception for developed countries.
Posted by: Sameer Dossani | Apr 24, 2008 9:42:48 PM
So what on earth prevents workers from forming such productive collectives? Well, other than if it were a viable organizational model for a firm, some left leaning rich guy would surely invest, no?
One organizational model I know a lot about it startups, particular in the software industry. In practice, the successful ones tend to operate like a well oiled dictatorship or like a small studio of near equals, kind of like what you propose. I prefer the latter model, but that model can break down really quickly when you add someone to the group who has blatantly stupid ideas. For such a venture to thrive, everyone has to have skin in the game and have a shared perception of the firm's purpose and path. I tend to think that more people are able to fit into top-down control models than are able to fit into shared responsibility models. Rare is the worker who even wants to take true ownership of the product he's been tasked to. And corporate hierarchical models are what make products possible in such a climate.
Posted by: Brad Hutchings | Apr 24, 2008 11:01:14 PM
Sameer,
Do people exist so that they can benefit the economy or does the economy exist to benefit people? Smith was against what was then known as "wage slavery" not because workers were opposed to it, but because he saw it as hindering the ultimate goal, which was "rough equality" between all people. Remember that his views in favor of a free market are precisely because he saw the free market system as the best for leading to that kind of equality.In other words, economies should serve human development, not the other way around.
Humans don't exist to serve "the economy". "The economy" doesn't exist. It's not some collective being who we all prostrate ourselves before. The economy is not an entity, it is a fictional construct made up as the aggregate of a whole bunch of real transactions.
I don't ask "the economy" to serve me, either. I engage in transactions that I believe will benefit my interests, not wait for some fictional collective to act on my behalf.
"Serving the economy" is a nonsensical concept. Each of us only has the power to engage in economic transactions that we believe benefit us personally. By creating a false collective you may make people believe that they're doing good or ill for certain interests, but whether you admit it or not, it is purely a method for controlling others. If I don't believe I'm responsible for serving the economy, and if I don't believe the economy is responsible for serving me, the rulers (i.e. the government) has no leverage to get me to support their statist policies.
You know what I do? I negotiate with my employer for proper compensation. I cooperate with my colleagues in order to win business for my employer, knowing that my success then gives me a bigger bargaining chip in my negotiations for proper compensation. And I work my butt off to satisfy my employer's customers, because I know that by satisfying those customers, I will win more business which then gives me more bargaining power for my compensation.
These are all voluntary transactions, upon which I'm engaging for my own selfish ends. At no time do I worry about whether my actions are good for "the economy", but rather I worry about how I can do the best job I am able to do and ensure that I get proper compensation for that.
All during this time, my actions serve to create economic growth, and benefit "the economy" by improving the reliability of products that you and other consumers purchase. All during this time, other economic actors do the same, working for themselves but as a byproduct creating economic growth.
None of us are "serving the economy", but yet all of us collectively improve the economic well-being of everyone. You know, that whole "invisible hand" thing that Smith talked about?
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