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What would life be like in a libertarian society — a society with a completely unregulated, laissez-faire market? One worry that many critics have is that, without the various government regulations that aim to protect the weak from being exploited by the strong, consumers would be at the mercy of producers, employees would be at the mercy of employers, debtors would be at the mercy of creditors, and tenants would be at the mercy of landlords.
Some libertarians, of a rightward-leaning bent, are unmoved by these criticisms, because they regard the regulations that currently exist as stacking the deck in favor of consumers, employees, debtors, and tenants. The removal of regulations, as they see it, would simply restore equality. Such libertarians reject the leftist notion of business interests as a powerful and potentially dangerous force in modern society; they tend instead to agree with Ayn Rand’s characterization of Big Business as “a persecuted minority.” (Rand also referred to the military-industrial complex as “a myth or worse.”) Leftists find this blindness to the power of business so baffling that they tend to dismiss libertarians as apologists for the ruling class.
But libertarians have not always been so friendly to business interests. Adam Smith fulminated against what he called the “mercantile interest”; more recently, libertarian authors like Karl Hess, Paul Weaver, and Mary Ruwart have denounced the pernicious effects of big business. (And even Ayn Rand was sensitive to the problem in her novels, though for some reason not in her nonfiction.)
I believe we are seeing the beginning of a resurgence, within the libertarian movement, of the egalitarian, compassionate, “bleeding-heart” libertarianism that characterized the libertarian movement through most of its history, from the Levellers of the 17th century to the individualist anarchists of the 19th century. When our opponents today charge us with elitism and lack of compassion, they are mostly wrong (for a discussion of why they are wrong, see my “Who’s the Scrooge? Libertarians and Compassion,” in Formulations, Vol. I, No. 2 (Winter 1993-94) — but there is an uncomfortable kernel of truth. Many libertarians in this century have been, in my view, insufficiently sensitive to the perspective of the poor, of laborers, of women, of minorities. But I view this as a historical aberration, brought about by the fact that a) the triumphant advance of socialism pushed libertarians into a century-long alliance with conservatives, and some aristocratic, patriarchal, un-libertarian attitudes rubbed off; and b) when the libertarians did re-emerge from the conservative movement in the last quarter of this century, they did so under the influence of Ayn Rand’s hard-edged ethic of rugged individualism. But these distorting influences are, I think, starting to fade, and the day of a “kinder, gentler,” green-spectacled libertarianism, truer to its historical roots, is beginning to dawn.
The new libertarianism, then, must take more seriously the left’s concerns, for in many ways they are its own concerns also. But can it answer them?
Consumers and Producers
In a free nation, will consumers be at the mercy of producers? With no government agencies to monitor quality control, prohibit price gouging, and the like, won’t it be easier for businesses to exploit their customers?
On the contrary, I think it will be less easy. The greatest threat to such exploitation is competition. The more businesses there are competing for customers, the more difficult it will be for any one business to get away with mistreating its customers.
Consider: The easier it is to start up a new business, the more new businesses there will be. So what determines how easy or difficult it is to start up a new business? Two factors: inherent transactions costs, and government regulations.
Government regulation has the same effect on the economy that molasses has on an engine: it slows everything down. The more hoops one has to jump through in order to start a new venture — permits, licenses, taxes, fees, mandates, building codes, zoning restrictions, you name it— the fewer new ventures will be started. And the least affluent will be hurt the most. The richest corporations can afford to jump through the hoops — they have money to pay the fees and lawyers to figure out the regulations. Small businesses have a tougher time, and so are at a competitive disadvantage. For the poor, starting a business is close to impossible. So the system favors the rich over the middle class, and the middle class over the poor.
In a free nation, by contrast, new businesses would be sprouting up at a rate we can barely conceive, and would be run primarily by the poor and the middle class. No company could afford to treat its customers like dirt, as so many companies do today, because it would be so much easier to start up a rival company that treated its customers better.
As for the other variable affecting ease of start-up, namely transactions costs, modern electronic communications technology will drastically lower such costs — so long as government refrains (as it would in a free nation) from interfering with networks like the Internet. In addition, the ease of organizing and coordinating a boycott against an obnoxious business is greatly reduced by the capacity for computer networking.
Many on both the left and the right are fearful of free trade because, while they grant that free trade lowers prices and so is beneficial to citizens in their role as domestic consumers, they fear that this benefit may be offset by the loss in income suffered by those same citizens in their role as domestic producers.
For example, suppose big corporations decide to cut costs by increasing their reliance on inexpensive foreign parts and labor. Domestic laborers and producers of parts will suffer an income loss as the price of their goods and services is pushed down by foreign competition. Ah, but that loss in income will be offset by lower prices? Well, that assumes that the corporations will pass their savings on to their customers. Will they?
That depends. If domestic competition is vigorous, then when MegaCorp tries to pocket its savings, another firm will muscle into the market to purchase those same foreign parts and labor and then undersell MegaCorp. And a third will enter to undersell the second. Any savings not passed along to consumers are like a giant magnet for entrepreneurs. Such competition will quickly ensure the transfer of MegaCorp’s savings from its hands to those of its customers.
But what if the domestic economy is highly regulated, and MegaCorp is largely insulated from the threat of competition? Then it can pocket the savings with impunity. Citizens will receive lower incomes in their role as producers, without seeing any compensating drop in prices in their role as consumers. In such a case, the protectionists are quite right to see free trade as a redistribution from small manufacturers to giant corporations. But the fault lies not with free trade (the presence of foreign competition) but with regulation (the absence of domestic competition).
Consumers would also find their privacy more secure in a free nation. In a free society, one might expect that businesses, unable to rely on as high a level of policing by government, but at the same time being freer to police on their own, would demand more from their customers in the way of IDs, credit checks, bonding, and the like. But it seems that the opposite is true: in the days when government’s leash was shorter and private enterprise’s leash was longer, businesses demanded far less security of their customers than they do now. As government has grown snoopier and more intrusive, the snoopiness and intrusiveness of private business has grown, not shrunk. It seems that the growth of government power fosters a kind of authoritarian culture that then infects the entire society. People who are used to being ID’d, stamped, and inspected by the government will not balk at similar treatment from their store or bank — particularly when thanks to governmental strangulation of competition, they have nowhere else to take their business.
Employees and Employers
In a free nation, will employees be at the mercy of employers? The issue of racial and sexual discrimination in hiring I have dealt with elsewhere (“Good and Bad Collective Action,” Formulations, Vol. III, No. 1 (Autumn 1995)), so at present let me focus on the issue of how employees are treated once they are hired. Under current law, employers are often forbidden to pay wages lower than a certain amount; to demand that employees work in hazardous conditions (or sleep with the boss); or to fire without cause or notice. What would be the fate of employees without these protections?
I presumably don’t need to explain to readers of this publication why minimum wage laws hurt the poor. In any case, with more businesses competing for workers (just as they will be competing for consumers), wages will be driven up. More employees will be becoming employers anyway. And employers will be able to pay the new, higher wages because the economy as a whole will be more thriving and prosperous.
Employers will be legally free to demand anything they want of their employees. They will be permitted to sexually harass them, to make them perform hazardous work under risky conditions, to fire them without notice, and so forth. But bargaining power will have shifted to favor the employee. Since prosperous economies generally see an increase in the number of new ventures but a decrease in the birth rate, jobs will be chasing workers rather than vice versa. Employees will not feel coerced into accepting mistreatment because it will be so much easier to find a new job. And workers will have more clout, when initially hired, to demand a contract which rules out certain treatment, mandates reasonable notice for layoffs, stipulates parental leave, or whatever. And the kind of horizontal coordination made possible by telecommunications networking opens up the prospect that unions could become effective at collective bargaining without having to surrender authority to a union boss.
One beneficial result of a competitive economy would be a reduction in the petty tyrannies of the job world. Many workplaces are all too reminiscent of the comic strip “Dilbert,” with bosses micromanaging processes they do not understand. I once knew of a company that deliberately set its photocopier to be slower than average, as well as mandating that workers using the photocopy machine could copy only three pages at a time; the idea was to cut down on unneeded copying. But most of the copying was necessary, so employees had to waste time going through the line again and again.
A family member of mine once worked for a law firm that had clerical workers in two buildings, but lawyers in only one of them. In the building with no lawyers, the clerical workers had very little supervision: they were free to set their own priorities, to share tasks with each other as their schedules demanded, and so forth. As a result, they got much more work done, a lot more efficiently, than in the other building where the clerical staff was micromanaged by the lawyers. Such micromanagement is inefficient, but without a lot of competition managers can afford some inefficiency by indulging their desire for control. I think that, with more worker clout, the structure of the average workplace would change, with workers being given more authority to supervise themselves.
Debtors and Creditors
In a free nation, would debtors be at the mercy of creditors? Government currently offers to protect debtors by limiting the extent to which creditors can harass their debtors (no calls to the debtor’s place of work, no calls in the middle of the night), limiting the extent to which creditors can garnish their debtors’ wages, mandating that bad credit ratings expire after a certain period, and offering those crushed under a heavy burden of debt the chance to escape through bankruptcy. How would debtors fare without these protections?
Well, for one thing there would be fewer debtors in a free nation. With greater prosperity it would be easier for people to pay off their debts. The odds that a given defaulter is defaulting through dishonesty rather than bad luck would be significantly higher than it is in today’s society.
But there would still be some bad-luck debtors in a libertarian economy. How are they to be helped?
For one thing, I think a libertarian justice system would probably recognize some limitations on the right to garnish wages. Even when A has a right to recover some property in B’s possession, there are limits to the harm A can inflict in exercising this right. If you swallow my diamond ring, I do not have the right to cut you open to get it out, possibly killing you or causing serious injury. If you are trespassing on my property, I do not have the right to shove you off my front lawn and onto the street at the precise moment that a truck is coming that would flatten you. I think similar considerations would limit the percentage of a poor person’s wages that a wealthy creditor could legitimately claim. In addition, companies with obnoxious collection methods could be boycotted.
As for debt relief, I suspect that, with the explosion of prosperity that libertarian economic theory teaches us a free nation would see (and if libertarian economic theory is wrong the free nation movement is doomed anyway), the scope of private charity and mutual aid would dramatically increase, so that debtors would soon find their way out of debt in a manner that (unlike bankruptcy) would benefit both debtor and creditor.
Tenants and Landlords
In a free nation, would tenants be at the mercy of landlords? Government currently offers many protections to tenants — sometimes at serious cost to landlords (the movie Pacific Heights offering a chilling example). But what makes these laws seem necessary is the greater bargaining power that landlords typically have vis-à-vis tenants. And this, as in the previous cases, is the product of low competition due to a slow economy. So the government simultaneously “helps” tenants by means of rental laws, and “helps” landlords via regulations that strangle competition in the housing market. It’s the typical government trick: poison you, and then dole out the antidote.
In a libertarian society, landlords would have more freedom, but with landlords competing for tenants they would also face stronger economic incentives to please their tenants. Rental contracts would cease to be as one-sidedly favorable to the landlord as they often are today. Landlords might have the right to evict at will (subject to the ring-swallowing sorts of restrictions), but they might find themselves economically compelled to sign contracts waiving that right.
Beyond the Boss
Throughout our economy, economic relations have been forced into an authoritarian model closely similar to that of the reigning statist paradigm. Corporations pattern themselves along the lines of armies; supermarkets herd shoppers into long waiting lines for the privilege of buying their food; employers and landlords grow increasingly intrusive and controlling. But business acts like this for the same reason government does: lack of competition. The economy of a free nation will, I predict, see a complete restructuring of ordinary business relationships. These relationships will become more like relations among equal partners than like relations between superior and subordinate. Employees will be treated as independent contractors rather than as servants, and so forth. Power structures will become horizontal rather than vertical; communication and influence will be two-way rather than one-way. The concept of the boss will be obsolescent. D