Posts Tagged ‘Hayek’
The term “libertarian” was first used by Joseph Déjacque in 1857 to describe a particular brand of anarchism. I have discussed elsewhere the extent to which modern libertarianism represents a perversion of classical anarchist thought. The extent to which this modern, impoverished view represents a clear and present danger to law and order deserves added emphasis.
Modern libertarians, in their criticism of the possibility that government action might distort market factors, consistently neglect to consider the extent to which industrial corporations distort market factors through the formation of monopolies and oligopolies. Former Federal Reserve Chairman Alan Greenspan even went so far as to criticize anti-trust legislation on the grounds that “No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible.” Greenspan later acknowledged that his views contained a “flaw,” and expressed “shocked disbelief” that the banking sector failed to self-regulate.
For many industries, monopoly and oligopoly are the default market arrangements: consider Monsanto in the US soy market, Intel in the computer chip market, or the typical cable tv market, for example. These are not isolated cases, but represent a pervasive form of corporate organization at the industrial scale. Wherever producers are able to dictate prices, rather than rely on the signals sent by consumer purchasing decisions, producers exert coercive pressure on consumers, and market forces do not operate properly.
Given that industrial scale corporations control far more wealth and resources than the government, industrial scale corporations would seem to pose a more significant threat to individual liberty than government. And, given the libertarian opposition to growth in government as a source of coercive influences, a self-consistent libertarian position should hold the growth of monopoly or oligopoly to be a considerable threat as well. Given that modern industry is largely characterized by monopoly and oligopoly, a self-consistent libertarian position, therefore, would hold economic growth itself to be highly suspect. In railing against regulation, however, modern libertarians neglect the threat posed by industry, and in effect, facilitate the growth of oligopoly.
This myopic character of modern libertarianism can be seen operating behind conservative opposition to “Obamacare,” which conservatives believe represents a government over-reach into the health care market.
The government’s intervention in health care isn’t an intervention in the free market, however, because the US health care industry isn’t governed by market forces. Take prescription drugs, for example. Each pharmacy pays a different price to the pharmaceutical company. Depending on the insurer, each consumer pays a different copay to the pharmacy. The consumer often doesn’t know the retail price of the drugs, and the prescribing doctor doesn’t know what the patient’s copay is. The price system only works when consumers — not producers — set the price. If consumers don’t know the price, their purchasing decisions don’t serve as signals to producers.
The health insurance industry in the US is best characterized as an extortion racket. Government mandated health insurance is a problem, but not for the reasons conservatives identify. The problem is not government interference in the market because there is no market. Because conservatives have the wrong diagnosis, their prescription for a cure is also wrong.
Free market thinker Friedrich Hayek, in the Road to Serfdom, saw monopoly as the proximate cause of modern totalitarianism. On page 194, he observes, “This movement is, of course, deliberately planned by the capitalist organizers of monopolies, and they are thus one of the main sources of this danger. Their responsibility is not altered by the fact that their aim is not a totalitarian system but rather a sort of corporative society in which the organized industries would appear as semi-independent and self-governing ‘estates.’ … A state which allows such enormous aggregations of power to grow up cannot afford to let this power rest entirely in private control.”