Though I saw it all around
Never thought I could be affected
Thought that we'd be the last to go
It is so strange the way things turn

Friday, August 27, 2010

If it weren't for those meddling kids

Many proponents of Tea Party and the far right Libertarianism are trotting out the concept of laissez faire as an economic idea. You can see this in the current call for "get the Government out of (insert pet industry here)" sentiments and the general "less regulation, dismantle government agencies" arguments.

But, again, we've tried that as we grew as a nation. How did it work out? Not as well as the proponents would have you believe. Of course, they also give the reason that "we didn't try hard enough." Because there was some limited involvement of the government (like a central bank and early trials with income taxes, tariffs and charters) before abuses became so great that all these government agencies were created to help regulate the businesses. You might also see that Unions were created at the same time to protect workers from the most egregious work conditions. The "we didn't do it all the way" is the same as Peter Pan imploring us to "clap harder" so Tink will live.

So, how did laissez faire practices work out? Strident monopolies (rail, oil, textile, steel), labor abuses (child labor, 12 hour work days, factory towns/store/script), the stifling of innovation and entrepreneurship, physical intimidation as a business tactic, environmental degradation, the amassing of wealth in the top 10%, and eventually the Great Depression. That last one was the final nail for what remained of laissez faire attitudes, which we had already begun to move away from by the beginning of the 20th century (yes, there's an argument to be made that early regulation brought about the GD, but most economists will tell you it was also government interfering in the economy that got us out, finally).

What people tend to forget is their government, for the most part, is a reactionary vehicle. All those government programs like Civil Rights, Social Security, and Medicare and the Departments of Labor, Energy, Environment, Education, etc didn't form from a "wouldn't it be nice" philosophy. They came into being, kicking and screaming, because of the need to correct some wrong (or at least perceived wrong) that was happening. You may remember the fuss and consternation over the creation of the Department of Homeland Security. And heck, that only took a dramatic attack, a few thousand dead, and almost two years to enact.

However, people tend to forget that we had this time in America. Or look back on it with some fondness while ignoring all the terrible things that came with it. Again, nice idea, doesn't work in the real world.

Unless you want to go back to the conditions of having everything owned by the company, being paid in script that was useless outside the company store, and working until you dropped dead (literally), which then your family would be thrown out of the company owned house. Oh, and don't forget the price fixing and other monopolistic activities.

History, it's a bitch. And the liberal bias of reality intrudes again.

4 comments:

Eric said...

Great comment, Steve.

It's insane that Americans are so out-of-touch with their history that they can't understand that the economic policies suggested by libertarians have, as you say, been tried, and that the regulatory regimes that have arisen did so after abuses became so egregious that there was bloodshed over it.

Your list of abuses attributable to American laissez-faire economic policies is excellent; in striving for further completeness, let me add three further items to your ample list. First, in their constant quest to maximize profits against costs, businesses cut corners in product safety (to put it mildly), necessitating the creation of oversight agencies like the FDA.

Second (and relatedly--I almost folded it into the first), laissez-faire economics presumes the free flow of information to an impracticable degree, and in the real world there was no effective market penalty for false advertising and fraud; it's no coincidence that the peak of America's experiment with nearly-pure free market capitalism coincided with the golden age of snake-oil salesmen, patent remedies, carnival hucksterism and the invention of the Ponzi scheme.

And thirdly, the free market rewards socially undesirable behavior in government--i.e. from an economic point-of-view it's reasonably obvious that a vote is worth what someone is willing to pay for it, but from a social perspective there's an equally self-evident problem with graft, kickbacks and other forms of political corruption. The unregulated era was also a golden age (pyritic age?) for bought politicians and paid-for law enforcement at every level of governance from the municipality to the halls of Federal power.

We had what the libertarians wanted. We didn't like the taste of it. The society they propose isn't one anyone would want to live in if their last name wasn't Astor or maybe even if it was.

Again, great post.

Anonymous said...

What's that, Scooby?

You are right, as much as it pains me to admit it. Once a company reaches a certain size/value/ISO, values like honesty and integrity seem to get lost.

I've been researching nuclear weapons all week for debates. It's depressing.

Anonymous Cassie

Steve Buchheit said...

Thanks, Eric. I think most people by into "the myths we tell ourselves" and one of those myths is that America was founded on Capitalism. Which is impossible because "Capitalism" has only been around since the mid 19th century. America was founded on Merchantilism and Empire. But that doesn't make as nice a story. Including that the Puritans were not our founding fathers or even the reason America was settled. Most people forget that the Puritans came to the US because they didn't want their kids speaking Dutch, any nobody in England could stand them (and also they meant to settle in NY, which was Dutch at the time).

Steve Buchheit said...

Cassie, it's not always true, but it's always true that companies main focus isn't altruism and fair play. It's maximizing profit (and there are various ways to do that). And that free markets naturally lead to monopoly. Monopoly leads to stagnation and economic distortion. Both of which are exceedingly bad on both a citizen level and a business level.