Capitalism in a Free Society

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CAPITALISM IN A FREE SOCIETY

Chapter 1. ECONOMIC AND POLITICAL FREEDOM

Power: Economic and Political

Eyler
Friedman begins his discussion of "The Relation between Economic Freedom and Political Freedom" (Chapter 1 of Capitalism and Freedom), by creating a strange dichotomy. First, he rejects the view "that politics and economics are separate and largely unconnected; that individual freedom is a political problem and material welfare an economic problem; and that any kind of political arrangements can be combined with any kind of economic arrangements." (p. 7) Instead, he assures us "that there is an intimate connection between economics and politics." (p. 8)

John
this is a non-discovery. it has been around for as long as people could conceive of politics and economics. it was most forcefully argued, i think, by karl marx, who demonstrated the degree to which all social institutions reflect the economic conditions of that society.

Eyler
But then, he states that "the kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other." (p. 9, emphasis added) But as if that is not sufficiently contradictory, he then adds, it is "clearly possible to have economic arrangements that are fundamentally capitalist and political arrangements that are not free." (p. 10) In other words, economics and politics are NOT separate, but economic power and political power ARE separate, and this separation promotes political freedom, although it is still possible to have this separation and still not have political freedom.

John
this is pure foolishness. i read an interview with noam chomsky not so long ago, where he was asked about milton friedman. chomsky replied to the effect that he thinks friedman is smart enough to realize that what he argues for can't come about, that there has never been anything really remotely resembling free market capitalism, etc. economics and politics are connected precisely because economic power and political power, if not equivalent, are intimately connected. he who has the gold makes the rules, after all. that's the sense you get from some of our enlightened, libertarian founding fathers. those who own the country ought to rule it, says jay. hamilton says the republic must be organized to keep the great beast (i.e., the general public) from actually obtaining real power.
with the accumulation of capital (an inevitability, a contradictory and somewhat ironic one at that, in the free market) into monopoly forms comes an accumulation of political power. you can see this in action, in history and in current events. cities are willing to bend over backwards, jacking up property taxes for residents, to give corporations lovely tax breaks to encourage them to build in the city. quite often, corporations get additional bonuses like infrastructure development without any (substantial) cost. it should be the other way around. corporations should pay communities for the privilege of locating there. but it doesn't happen. corporations (and monopolies and trusts in the past--just look at how they manipulated land laws for agricultural and rail road development throughout the west) have the money that communities need (unfortunately), but in at least the short term the communities don't see any of that money. and in the case of corporations that build out in the suburbs, close to their executives, but hire predominantly interurban labor at relatively low wages, it's the same for the long term as well. of course there's an influx of capital into the region, but who does it go to? not the people, but an elite that maintains its status through political channels.

Eyler
His purpose in all these contradictory statements is to show that capitalism, i.e., economic freedom, is "an indispensable means toward the achievement of political freedom" (p. 8), even though political freedom does NOT follow necessarily from capitalism. What we will attempt to show is, political freedom of individuals and of the society as a whole naturally results in a regulated form of capitalism that allows a high measure of freedom for individual enterprise, but does this within the governance exercised by the citizens of a free society, and this, AND ONLY THIS, produces both economic and political freedom that is conducive to the safety and happiness of a whole nation of people. It is our belief that the idea is patently absurd that a society of free people who govern themselves, should be excluded from any control over such a fundamental aspect of their society as the economy. That would mean that they, as a people, were free in everything EXCEPT the control of that which is absolutely essential to their happiness.

John
this should be obvious even to children. a free society is free by the very fact that it is not, from the outset, bound to any given (eternal, immutable) conditions. a society need not have heavily armed police marching through the streets to be totalitarian; all it must do is limit (or eliminate) alternatives. a free society should be free (and is not legitimately free unless this is the case) to choose its own course of action. this course cannot be determined by force or despotic law, but only by popular (not unanimous) consent and rational argument. yes, it is important to guarantee the liberties of individuals, but this does not mean that an individual should be free to accumulate power (economic or political) at the expense of a greater part of society--without the society having a concomitant right to wrest any excess power from individuals in that situation.

Eyler
Moreover, there is little doubt that the reason why it is possible to have "free enterprise" in a politically despotic society is NOT because capitalism is "not sufficient" to guarantee political freedom, but because economic power and political power are indeed intimately connected, and because there can be no meaningful freedom unless both exist simultaneously. We might add, also, that there can be no sustainable prosperity unless both exist simultaneously as well.

John
an example of capitalism combined with political despotism is nazi germany. hitler left the industrialists and property owners alone so long as they accepted his political views (which was quite often, because it was a handy way of dealing with competitors).

Eyler
Evidently, Friedman's idea of capitalism and economic freedom is "laissez-faire capitalism," where each individual is economically free from any restraints except those forbidding violations of the natural rights of other citizens. But he is only able to overlook the contradictory nature of his statements as presented above, by completely ignoring the concept of a Free Society. His citizens are individually free, but they are not free to join together and to regulate their capitalist economy for their mutual benefit. Thus, we are presented with the contradiction of a self-governing people who are free, who are the ultimate sovereign, yet there is some higher authority, some sovereign power, that says to them that they are NOT free to regulate the economic aspects of their lives. In truth, it is this higher authority than the people themselves that enables free enterprise and political despotism to exist together. The higher authority -- the dictator, or controlling despot -- simply decrees that it shall be so. The further truth is, Friedman's formulations are not a prescription for Freedom at all, but are in fact the foundation for despotic control, and are contrary to the only thing that can guarantee political freedom on this earth: a free people exercising their inherent and inalienable right to self-governance. This deserves more detailed examination.

John
and again, a despotic rule doesn't require police brutality and a military state, but only a limit on alternatives. any time a ruling elite (be it an individual dictator or an economic oligarchy in a democratic country) says "it must be thus and no other way" you have a despotism. i don't care if society is organized perfectly to everyone's benefit; it's not worth it if there are no alternatives.

Eyler
Friedman's concepts of economics and politics sees both as related in their outcomes, but not in their inception. In other words, economics he sees as resulting in political freedom, except that "clearly it is not a sufficient condition," because he recognizes that certain fascist and despotic states each had "private enterprise" as the "dominant form of economic organization," yet they "cannot conceivably be described as politically free." (p. 10) But why is this so? If capitalism is such a powerful engine, leading to political freedom, how could it be that it just doesn't happen in those fascist states?

John
simply, because freedom is not inherent in capitalism. capitalists are largely free to do as they please, but those without property (i.e., land) or capital are not free, and are dependent on the capitalists for their well being. free market capitalism, capitalism without restrictions, leads to monopolies, which are the antithesis of economic freedom. of course, the standard line is that in a free market, monopolies don't exist. but that excludes monopoly formation only in definition, and not in actuality. fine, then, in free markets monopolies do not exist, but free markets tend towards the development of monopolies, and thus the elimination of free markets. the only way to prevent the formation of monopolies is to limit the concentration of capital (economic power), or, alternatively, to separate political and economic power. this latter course is not tenable, however, so it leaves us only the former option. this means, as you have argued, that a free people must have the right to alter their economic system for their collective benefit.

Eyler
Perhaps Friedman's position might not be so confused if he did not try to connect economics and politics, and at the same time separate economic power and political power. The reason why he does this, of course, is in order to elevate the individual as an economic actor, and vitiate the society itself as an economic and political force. But this is why his economic freedom fails to be "sufficient" in producing political freedom: because economic power and political power are an intrinsic part of governance, and because those powers are indeed both related in a fundamental way in a free society. It is because the fascist and despotic societies extract the element of power from both economics and politics and place that power in despotic hands that they are able to be despotic and eliminate political freedom, while at the same time having a capitalistic society. It is not just the economic and political ideas that result in a free society; rather, it is where the controlling POWER of those two elements is placed that decides whether there is political freedom or not.

John
bingo. right on the head. i should modify my position somewhat by saying that there are not economic and political "powers", but only power itself, which is revealed through many different channels (including the political and economic, but also the cultural, sexual, scientific, media, etc.). power is a universal force. it's not good or bad in itself (as i said some time ago), it's just there, part of reality. you can channel it to good of bad ends, of course (these being relatively subjective in many cases), but it's simply impossible to eliminate power in all its forms. you just have to learn how to manipulate it in a positive, constructive fashion.
now, with this conception of power in mind, and the realization that politics and economics are inextricably intertwined, it becomes readily apparent that you cannot distinguish economic and political power simply because there is no distinction to be made! the only decision, as you point to, is where the power in a society is centered. you have two choices: the people; or an elite.

Eyler
Friedman's distortion of economic and political freedom is further perverted by his very concept of freedom. The Founders seldom spoke of "freedom," but more often used the term "liberty." To them, freedom usually meant to free from some specific oppressive force. But liberty was that state enjoyed by free men, and was described by Jefferson in these terms:

"Of liberty I would say that, in the whole plenitude of its extent, it is unobstructed action according to our will. But rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others." --Thomas Jefferson to Isaac H. Tiffany, 1819.

Liberty always exists within the relationships of a society of people with equal rights. Freedom, when it replaces the term "liberty," drops the social context. Economic freedom becomes unhampered by any restrictions and regulations, and this is the kind of freedom envisioned by laissez faire economics, and also by the separation of economic power and political power. Thus Friedman can say, "freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself." (p. 8) He separates these elements from the concept of a Free Society, he removes the interconnectedness of the lives of individuals considered separately and conjunctly, and then, after destroying any conception of the whole, identifies economic freedom as something existing apart from everything else -- as something with a separate existence that should be cherished for itself alone.

John
i would add to this as follows: equal rights are only maintained where you have a relatively equitably distribution of power. this does not mean that everyone is economically equal, but that economic inequity does not interfere with the political and legal systems (which it does in this country)--and this means that power is spread as broadly as possibly, that it is centered in the great mass of people. some will of course have more money than others, but this money should not be allowed to buy them influence or liberty (i.e., through bribery of legal enforcement officials). i get pretty sick of people who pay lip service to the ideal of "equality before the law", but make no connection between legal/political equality and the distribution of power. without a broad-based distribution of power (i.e., where power is concentrated in the hands of an elite), equality before the law is a farce, empty rhetoric meant to cajole the subaltern.

Eyler
What this does ultimately is, it breaks down the control that the people of a nation have over their own lives. In separating economic power from political power, it makes possible the placing of all power in the hands of the capitalists, with the people controlling whatever is left (if they can find it). Under Friedman's arrangement, Capitalism is liberated to control itself. It is freed from any other political power, and becomes a power to itself. And since Capitalism controls the financial resources of a society, it ends up controlling the political process also through its manipulation of the purse strings. So that the ultimate end of Friedman's doctrine of the separation of economic and political power, with laissez-faire (ungoverned) Capitalism is, Freedom for the Capitalists, and subjugation for everyone else. The very title of his book, "Capitalism and Freedom," is a farce, if capitalism also means laissez-faire, unregulated capitalism.

John
exactly! i can add nothing to this, save that adam smith warned of this sort of freedom (allowing the "vile masters of mankind" to pursue their creed of maximum appropriation at the expense of the rest of us).

Eyler
In all these concepts, we see Friedman isolating the individual from society, and shaping an economic freedom that is divorced from any social responsibility expressed through political power. Economic power and political power, for him, exist in two separate worlds, and a "free" society no longer has the power to control the economic forces within its own borders. And this, in turn, undermines the right of self-government, because it removes from the power of the governors (the people) a major aspect of the very society in which they live. Who, then, regulates and governs? Laissez-faire Capitalism pretends that nobody governs, but no one should be fooled by such a ruse. Laissez-faire Capitalism puts unfettered power in the hands of the rich and powerful, who are forever seeking such power. Nothing could suit them better than to be able to exercise their power without being hampered by the will or wishes of the masses of the people.

John
precisely. as camus wrote, absolute liberty is the right of the strongest to dominate. when an elite body controls financial and political decisions, the mass of society is at their mercy. unfortunately, though, it is all too easy for the elite to assuage the masses somewhat (which is what welfare essentially boils down to--it's a good way to keep people from poking their noses into radical politics).

Eyler
The Founders, however, did not view self-government in this fashion. As Jefferson wrote,

"Every man, and every body of men on earth, possesses the right of self-government... This, like all other natural rights, may be abridged or modified in its exercise by their own consent..." --Thomas Jefferson: Opinion on Residence Bill, 1790. ME 3:60

A man has the natural right to govern himself, in matters that concern only himself. And a people have the natural right to govern the society in which they live, in matters that concern themselves as a collective body. The individual shapes and modifies his self-governance according to his own will. A whole people does the same, expressing their will as the will of the majority. Their is no area of the life of a society that is excluded from their governance, unless designated by their own consent. They may choose to place something like Religion outside the realm of national self-government. And, of course, they may choose to place Capitalism outside that realm, if they wish. But would that be a wise decision? We think not. Economics and politics are indeed intimately related. And the powers resting in them are related also. In a free society, the people regulate both for their own good. In order to make a convincing argument for unregulated Capitalism, it must be shown that it would be for the greater good of the whole society. To claim that unregulated Capitalism is a natural right is nonsense; rather, the right to regulate Capitalism is a society's natural right.

John
i agree. for my conclusion: the capitalist mode of production is in no way a process involving only individuals. production, distribution, exchange, and consumption are all social acts. it's simple, really. the producer is dependent on both laborers and consumers (who often, but not always, overlap) for their success. yet for some reason, thanks to our cult of individuality no doubt, those who make money through the exploitation of others are regarded as self-sufficient entrepreneurs. it's as if the great mass of people necessary for any individual person's economic success are nonexistent, or if not that then easily replaceable (e.g., moving a manufacturing plant to southeast asia where the labor is cheap and the laws lax). of course, now it's reached the point where even needs are being produced (whither advertising) to maintain or increase the rate of profit. this production of needs goes beyond advertising, however, to influence social and cultural forms. for example, no one really needs a car, but the fact that so many people live in the suburbs, some distance from retail outlets and workplaces, makes the auto industry extremely profitable (which is probably why you don't see much in the way of mass transit anymore--that cuts into the auto manufacturers' profits). the same is true for all manner of products. television, computers, telephones, and on and on. sure, many of these devices make life easier (at least superficially), but how much more time must an individual spend in labor to satisfy all these needs? society, culture, infrastructure, politicals, the legal system, economics--it's all tied together. i don't think i could call any one of them primary, but owing to my philosophical biases i think the economic is especially predominant. this is for a simple reason: the economic conditions of life require the expression of the basic unit of power, i.e., an individual's labor, for their continual (re)production. a person must work to stay alive. this can mean laboring in the fields for a subsistence economy or laboring for an employer in a capitalist economy. the difference is that in the first instance the laborer reaps what they sow--i.e., they receive the product of their labor in its entirety--while in the latter they are working not only for themselves, but for their employer. this means that of the labor expended on the job, only a portion goes directly to the laborer (in the form of wages needed for subsistence), the rest going to the employer (not simply for profit, but into raw materials, research and development, etc.).
my solution: i don't know. i don't think there is a solution to that particular problem, at least not one that would be easily applied. however, we can deal with other problems by ensuring an equitable distribution of power (which means the right of people to collective self-determination, a right which extends from a person's natural right over their labor power).

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