Capitalism in a Free Society: Threats to Freedom

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CAPITALISM IN A FREE SOCIETY

INTRODUCTION

Threats to Freedom

Eyler
Friedman suggests two ways by which we can "benefit from the promise of government while avoiding the threat to freedom" that results from the concentration of power in government. The first is that "the scope of government must be limited." By this, he means a limitation on "its major function" which "must be to protect our freedom from the enemies outside our gates and from our fellow-citizens:" and this he further defines as "to preserve law and order, to enforce private contracts, to foster competitive markets."

John
hmm...protection from our fellow citizens? what exactly does that entail? does it extend to include protection from fraud? or questionable business practices? private contracts are all well and good, but they tend to be predicated on the belief in "perfect knowledge"; i.e., the idea that those who sign contracts (i'll call them consumers; producers write up the contract) have explicit knowledge of the producer's practices, including, we should assume, what sort of materials they use, production methods, etc. however--and i don't see how anyone could seriously doubt this--consumers do not have perfect knowledge of any producer. most of our knowledge comes from the producers themselves in the form of advertising, which of course will always focus on the good at the expense of the bad. or producer x may reveal what's wrong with producer y's product, though of course neglect to mention either what is good with y's product or what is bad with their own. one role of government in a modern industrial society is to provide a "neutral" analysis of both x and y's products and inform the consumer of the strengths and weaknesses of each. corporate payoffs eliminate neutrality, though. it's definitely a balancing act.

Eyler
This points up one of the more frightening results of libertarian theory. Not too long ago, when there was some talk of de-regulating the securities industry -- a big libertarian priority latched onto by the Republicans -- my nervous system experienced a chill. Any investor is dependent on some kind of independent governmental oversight of the securities industry in order to protect his assets. No one has access to the kinds of information that would allow him to know when wrongdoing occurs.

John
i think the government should serve as a perennial "third party" to contractual practices. of course they should enforce legally binding contracts, but they should also be in the business of providing a safety net for those signing contracts. signatories (at least the individuals) are generally required to relinquish a great deal of personal information (credit history, financial references, social security number, things like that), but they learn hardly anything from the businesses they get involved with. non-profit organizations are certainly important in this respect, but no npo i can think of has the necessary clout to deal with bad business.

Eyler
None of us have, really. This is a good example of the possibilities of a government organized by and for a free people in a free society that is most promotive of their own happiness. The libertarian that focuses on individual freedom, rather than a free society, and believes that government should be limited to the enforcement of private contracts, will usually feel that government should not be involved in the content of a given contract (unless it requires the performance of an illegal act). But if the criteria is that which promotes the happiness of all members of society, then perhaps it would be promotive of that happiness if there were a kind of "safety net" of minimum standards and requirements. It is not for the interests of society that any individual be free to trick someone -- the elderly, even the stupid -- into an unfair contract, even if it is technically legal. I know in Louisiana, there is something called "Lesion Beyond Moiety," which means "injury beyond one-half," and provides that if a person sells a piece of real property for less than one-half its fair value, that sale can be declared void on that basis alone. I suspect libertarians would be opposed to that kind of law, saying that an individual should be "free" to buy and sell a piece of property for any amount they wish, and that this is an example of governmental paternalism.
But if we think of the whole nation as one big family, we are compelled to say, Why not? Why shouldn't the state look out for that huge portion of its citizens who not capable of adequately managing their affairs properly, just like a real family will look out for grandma who no longer has all her marbles? When paternalism actually harasses and interferes with individual rights, then it has gone too far. But when it protects people from unfairness, that should be no problem. No one should have a right to treat another person unfairly.
The libertarian attitude on such things is often, "Those companies that cheat will lose customers, and so will have an incentive to deal honestly." But we know that is just plain dumb. What happens to the people who become examples of what cheaters those companies are? And will people ever quit thinking they can cheat and get away with it? In fact, ALL cheaters think they can get away with it. Our complex society could never function properly without a high degree of regulation and governmental oversight. Our whole complex society is founded on trust, and it is naive to think such a high level of trust can be maintained without strict government oversight.

John
of course cheaters think they can get away with it; otherwise, there's a big incentive not to cheat! in addition, you also have to figure in that most individuals will feel powerless in the face of a financially endowed business, such as a savings and loan; if they encounter fraud, i suspect most would write off their losses, thinking that any sort of legal action would only cost them more money. providing goverment the means to handle fraudulent business practices ensures that the individuals--i.e., the mass of society--will be protected.

Eyler
Friedman acknowledges that "government may enable us at times to accomplish jointly what we would find it more difficult or expensive to accomplish severally." But he advises that these kinds of government activities should be limited to those things that are clearly more advantageous for government to conduct, and that primary reliance should be "on voluntary co-operation and private enterprise, in both economic and other activities."

John
well, then, what's his problem? it's not as if the government runs farms and major industries. sure, tax breaks, economic incentives, and the like are one thing, but this is different from explicit government control. the few things that government does control explicitly are necessarily collective endeavors: e.g., maintaining highways, emergency services, etc. i suppose a case could be made for privatizing mail services, but i seriously doubt that any private company could handle the amount of mail that the us postal service does and deliver letters in the same amount of time and for the same amount of money. but the overwhelming number of government services are deservedly so. everyone benefits from police, emergency services, well-maintained roads, regional development, parks, etc., so we should all provide our fair share of payment for these services. i think education needs to be overhauled, but i don't want to see it privatized.

Eyler
If private enterprise can really handle certain government services and run them better, then by all means we should let them. But history proves one thing: there are always new kinds of ventures that are of such a scale that no private entrepreneur has either the resources or the inclination to attempt them. In such cases, the government is the only agency that can and will. I understand that TVA power was one of those kinds of things. Certainly, space was another. After the trail was blazed by government, now we see private associations putting up satellites. But it would never have happened if we had waited for all of it to be done privately.

John
certainly. i'm not a communist. i don't think government should control industry and business. i suppose it would be fair to call me a socialist, though, in that i believe the right to self-government of the people supercedes the rights of industry and business (though there of course is no reason why both cannot be secured). again, the government acts as a safety net. industry often requires some sort of safety net as well as individuals. i don't think the telecommunications industry, for one, would be in the state it is now without massive government support. unfortunately, the majority of government support comes in through the military. this is one point upon which i agree with the libertarians. i am opposed to corporate welfare given to military suppliers, primarily because i am a pacifist and don't believe that securing peace is equal to preparing for war. however, i am also aware of the extent to which government financing has established and promoted several industries. nuclear power is another example. the cost of nuclear reactors (as well as all the clean up costs, production costs, and so forth) is far too great for any private company to handle (which means that it is far too great for rate payers to handle); only through government support are nuclear reactors built and maintained. same thing with the internet, which was originally designed for military use. same thing with computers.

Eyler
We cannot dispute the idea that government should do only those things that it alone can do efficiently and well. But we would also stipulate that there is no hard and fast rule to determine that. Many government programs are undertaken because ONLY government will do them. Later on, private enterprise may take them on, and when they do, then it is time for government to turn those over to them.

John
exactly. just like computers and the internet, among many other things. no one company could create a nation-wide computer network.

Eyler
Oftentimes, no private company would attempt such ventures because it is necessary not only to research the needs, accomplish the task, administer the whole project; but it is also necessary to be able to exercise the kinds of sovereign power that only a governmental agency can exercise, in order to make the thing possible. To say that private enterprise would be able to do that if there were no regulations at all, is another dumb fantasy. They would do nothing, rather than take such risks.

John
perhaps a strong conglomeration of private enterprises could pull it off. but this would have to be a major undertaking--for any group of industries to provide the financial and labor support of the government.

Eyler
Private express companies would be more than glad to take over A PART of the government's postal service, but that is the catch. They would take over the lucrative part, and leave the tailings to the government. Which means, if you think of postal service in terms of serving ALL the people, then government will be subsidizing the express companies by taking on those aspects of a COMPLETE service that the express companies don't want to fool with. Nice deal, yes?

John
of course, a very nice deal. no further comment.

Eyler
It should be noted that the Founders never spoke in terms of limited government using the same concepts as Friedman. Jefferson spoke often of the object of government being the happiness of the people, as in:

"The only orthodox object of the institution of government is to secure the greatest degree of happiness possible to the general mass of those associated under it." --Thomas Jefferson to M. van der Kemp, 1812. ME 13:135

John
yeah, but again the problem is that friedman would argue that the happiness of the "general mass" could not take precedence to the happiness of the individual. and this is, as i mentioned before, more a matter of faith than anything. that is the trick. i think i'll stick to my earlier conception; viz., the ability to have faith in others or only in ourselves. there's probably some psycho-historical precedent involved, but i don't want to bother with that angle. once you have established your faith, then you can proceed logically to certain conclusions. the division is between "western" and "eastern" views of the world (for simplification--not necessarily a geographically correct division). the western is traced primarily from christian thinking; it embodies individuality, detachment, nature/human dichotomy, and so forth. the eastern view is expressed in buddhism, taoism, many native american and other indigenous cultural beliefs; this view is primarily communitarian, "attached" (caring, involved, etc.), and repeals the nature/human dichotomy. i don't suppose i really need to go further with this, though.

Eyler
I think that it is possible to establish a reasonable basis for deciding these questions, and not rely only on faith. Because if the latter, it becomes one person's faith against another, and that leaves matters up for grabs.

well, see my other comments on faith in a previous section. of course there is a reasonable basis for deciding such questions, but the logic of libertarians differs from the logic of other ideologies. they don't even see communities. they just don't exist. they embody margaret thatcher's claim that only individuals exist, not societies. well, then, i ask whence thatcher's power as prime minister originated? was it in the fact that she was margaret thatcher? a random individual? of course not! the powers of the prime minister are rooted in a social contract. if "the people" didn't want thatcher to be prime minister, they had the right to remove her (either within the bounds of the social contract, i.e., through voting, or by nullifying the social contract itself, i.e., through revolution). where would her powers have gone to? if the prime minister's powers were truly derived from thatcher as an individual, she would still have the power of tony blair. but society controls that power, and society decided to hand it off to someone else. but does this fact change thatcher's mind? does she now think that perhaps societies do exist? i doubt it. this is simply an example that relates how societies do have powers that individuals don't.

Eyler
My answer to the objection that the happiness of the whole could not take precedence over the happiness of the individual is borrowed from some of their own ideas: that the whole consists of individuals, and such a dichotomy fails to recognize that we are not talking about two opposing camps. As Jefferson wrote:

"What is true of every member of the society, individually, is true of them all collectively; since the rights of the whole can be no more than the sum of the rights of the individuals." --Thomas Jefferson to James Madison, 1789. ME 7:455

John
i agree, fundamentally. i.e., society is made up of individuals, but these are individuals working in concert, not mutually opposed to each other. i think that there are "rights of the whole" that are not derived from our rights as individuals, though. for one, the right to declare war should certainly not be extended to individuals. for another, the community has a right to limit the activities of an individual, if those activities endanger the members of the community in some way. obviously, we have the right to industry, but does this mean we have the right to pollute the air and water and soil that other people depend on? how do we balance such rights? according to marx, there are numerous examples of where two equally valid rights are in opposition; in such cases, marx argues, power decides which right takes precedence. if we define power liberally--i.e., as other than strictly physical force--i would tend to agree. if the people don't want polluted waters, they have the right to force polluting industries to stop.
the libertarian argument falls flat here. yes, farmers have the right to cover their crops in atrazine, a carcinogenic insecticide, but i also have the equally valid right not to drink atrazine and the right to enjoy clean and clear rivers. these are equally valid rights, and both are ultimately rooted in our rights as individuals: the farmer's right to profit, and my right to health (psychological and physical). same argument applies to smokers. in my opinion, a smoker's right to smoke does not supercede my right to breath the cleanest air possible. if a smoker wants to smoke, that's fine, but there is no precedent, based on indivual rights, that allows smokers to usurp the rights of non-smokers in public establishments. i don't think the state should require all public places to be entirely smoke free--i do think that they should require public spaces to have designated smoking and non-smoking areas, and furthermore that public places (i.e., businesses) have the right to determine for themselves whether smoking should be entirely banned or not. for another example, more topical, consider the case against serving peanuts on airplanes. the problem is, people with peanut allergies can be sent into a coma from nothing more than exposure to peanut dust or oil. some people say that limiting the availability of peanuts on flights is just another example of big brotherism, but i say it's a matter of life and health. there is absolutely no way in which your right to eat peanuts can be considered paramount to another's right to health and life. to argue the contrary is just ludicrous! eat almonds instead, for god's sake!

Eyler
Individualists would say that there is no general mass happiness apart from the happiness of the individual components. So, what's the problem? Granted that there is, that still does not diminish the principle reason why people come together en masse to form a society, which is to secure the highest degree of happiness for all of those associated in it, and not just to protect private transactions. It is only the individual who places himself outside that general mass, who foolishly fails to recognize that his destiny is inextricably tied in with the destinies of all his fellow associates, and who is so socially disfunctional that he views his fellow citizens as enemies -- only such a person can envision his happiness as being on an adversarial path with that of everyone else.

John
pretty much what i said above. i agree.

Eyler
"The greatest degree of happiness possible" would imply a lot more than law and order and competitive markets. The Founders agreed that the pursuit of happiness was one of the fundamental rights of all human beings.

John
ah, i can hear them now. "the pursuit of happiness; not the attainment of happiness". pretty cheap argument, but common. but by that same twisted logic, there's nothing to keep governments from taxing the hell out of the rich. all the feds need to say is "hey, we're just interfering with your ability to attain happiness, not to pursue it!"

Eyler
Of course, the pursuit of happiness! The pursuit of happiness, within the guarantees of equal rights and the rule of law, allows every person to seek and acquire, limited only by his own interests and abilities, whatever it takes to make him happy. And that varies with every individual human being. If the criteria were the attainment of happiness, that would imply some standard which was a part of someone's blueprint, which brings us back to forms of tyranny.

John
of course, that was just a silly example meant to demonstrate the absurdity of that particular line of argument. of course, the issue is how well equal rights and the rule of law are maintained when moneyed interests have a stake in government affairs.

Eyler
The legitimate use of government, therefore, includes its cooperate uses where reasonably needed to fulfill the goal. And it is the reasonable use that would embrace the limitations mentioned earlier.

John
no argument here.

Eyler
Voluntary co-operation and private enterprise are fine, but the hard choices happen when those leave out large portions of citizens whose circumstances do not permit them to participate. Voluntary co-operation and private enterprise then become an elitist form of social programming, limited only to those of the moneyed or social aristocracy who are enabled to use them. Alternatively, voluntary co-operation and private enterprise just leave large portions of the poor underclass out of the service area, much like the express company's version of postal service.

John
ooh, i like this! i think it is very much true. there's nothing to keep the moneyed interests from preventing outsiders into their ranks. it parallels the argument that "in a free market, you can't have a monopoly, because monopolies run counter to free market ideology". in a free market, you won't have exclusionary business practices, because then it wouldn't be a free market. great, you've defined what a free market is. now how are you going to keep it free? how, besides just counting on the common decency of moneyed interests, are you going to ensure that everyone (and i mean everyone) is given the opportunity to participate and advance? i think a lot of free marketeers suffer from a certain ideological myopia that prevents them from seeing...reality! there are racists, bigots, sexists, and general assholes who make it their business to disparage and harm those they don't like. they won't go away with the government, to be sure, but at least a socially responsible government provides a means of dealing with such people.

Eyler
Obviously, to have a free market, and to keep it free, it must be regulated. A paradox? Not at all. It would be foolish to expect to have a free society without the rule of law. The rule of law -- regulation -- defines a free society, and punishes those who would tend to make it otherwise. Similarly in a free market. Unless someone thinks that we have been blessed with angels in the form of capitalists, we must assume that many will lie, steal, and cheat, if they think they might gain thereby, and if it might be to their profit. Libertarians recognize this, and thus believe that government must and should assure fairness. Problems arise, because they fail to identify certain exclusionary practices and certain dealings with customers as being unfair. Shall we allow predatory pricing practices? It is in such particulars that the answers to these questions lie. But libertarian rhetoric prefers generalities that suggest that "freedom" is being denied, when, in fact, when we examine the particulars, freedom is being assured.

John
the old chicago school economists, laissez-faire all, argued that monopolies are antithetical to free market capitalism and that government regulation was thus necessary to secure a free market. all you need to do is realize that "government intervention" is equivalent to "social interest", and that it's not really bureaucrats who are intervening to secure their own selfish ends, but the people who are asking the bureaucrats to intervene to secure their basic rights.

Eyler
Most tenuous is Friedman's suggestion that these non-governmental kinds of programs will make the private sector "a check on the powers of the governmental sector and an effective protection of freedom of speech, of religion, and of thought"! Unfortunately, he does not explain this, so perhaps he assumes that it is obvious.

John
ah! this is BS pure and simple! we need only look back at henry ford and his absolutely despotic business practices. how many corporations would tolerate a very vocal dissenter amongst their ranks? how many corporations actively encourage union involvement? how many corporations will not, at some time or another, release full-page (or multi-page), colorful ads, full of logical inaccuracies, that vilify their opponents? case in point: the recent tobacco company ads directed against tobacco legislation. right after all these companies come out and admit that their products are addictive, and that they knew they were addictive, and that they explicitly directed advertising at youth, they put out this ad that equates smoking with freedom, and accuses the government of trying to impinge on the freedom of smokers by adding a cigarette tax. what a joke. this is what i mean when i say there is no superordinate logic to politics. it's all one massive ad campaign.

Eyler
The tricks of the deceivers must be met with exposure and reason. There is no other way that issues can be handled in a free society.

John
sure, there's another way. it's called revolution! but how successful have these been recently? :)

Eyler
All experience indicates that it is government action that compels business to respect basic human rights, not the other way around. Private enterprise is notorious for trying to squelch all criticism, for bringing insubstantial lawsuits against individual critics in an attempt to silence them through intimidation. When the profit motive is primary, any criticism that might eat into that becomes Enemy #1. Of course, businesses do respond to desires for products and services that either exist naturally, or that can be evoked through advertising. But when things become adversarial, business becomes ruthless.
It seems that Friedman is trying to destroy the spiritual foundations of this nation. The absurd suggestion that the private sector, through "voluntary co-operation and private enterprise," will be an effective protection of our basic rights could only arise from a foolish, anti-government mentality. As Jefferson wrote,

"It is to secure our rights that we resort to government at all." --Thomas Jefferson to Francois D'Ivernois, 1795.

This is what government is for, and should be designed for. As Disney's Michael Eisner said, corporations are dictatorships. How can such enterprises protect our basic freedoms? Indeed, it is government's role to protect us from the naturally autocratic actions of corporations. But what Friedman is trying to do is to diminish the power of government to perform that function and make us even more vulnerable to the tender mercies of the corporations.

John
here's another point. without government, who can support scientific research? let's say shell oil co. supports a study of climate change, focusing explicitly on the role of hydrocarbons and oil by-products in that change. i can tell you what that report will say, without ever reading it, or without ever bothering to familiarize myself with theories over the influence of fossil fuels on climate changes. when moneyed interests control science, you know that there's no hope for objectivity. scientists may be honorable people, but they have to make a living, and you can't undertake long-term investigations without sufficient economic support. and to get that support, it's practically guaranteed that you will have to concede to the opinions--in some degree--of your supporters.

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