“Privatization” or Corporatism?

On the November 10 episode of the Stossel Show, libertarian commentator John Stossel had an exchange with anarcho-capitalist writer David Friedman on the possibility of “privatizing everything” (i.e. all government functions).

When they got to military functions, their discussion shed considerable light on what “privatization” means to a lot of the libertarian Right. “Much of the military is already privatized,” Stossel pointed out, with Halliburton providing meals and laundry services, building barracks, etc. Not only that, added Friedman, “All of the weapons are privatized.” After all, militaries “don’t actually build their own guns and tanks and things. They buy them from private firms.”

To repeat, this sheds a lot of light on how many libertarians of the Right envision a “free market” economy. What matters, in determining how closely an economy approximates the free market ideal, is the portion of the total revenue stream that passes through nominally “private” hands (as opposed to the hands of those officially on the government payroll), right?

Um, no. A free market is not a society in which all of society’s functions are performed by private, for-profit business corporations. It’s a society where all functions are performed by free, voluntary associations. That means people get whatever services they need by organizing them cooperatively with other willing participants, or persuading someone to voluntarily supply them. And nobody is forced to pay for services they don’t want.

That would be a free market. But it wouldn’t be capitalism — that is, it wouldn’t be a system in which private capitalists act through the state to guarantee themselves profits through coercive intervention in the market. Capitalists don’t get rich by actually making things or providing services. They get rich by controlling — with the help of the state — the circumstances under which people are allowed to make things or provide services. If they do actually make things or provide services, they do so under carefully controlled circumstances where they get their money from involuntary customers who are conscripted into paying by the state, or the state limits the ability of other firms to compete with them. You know, like Halliburton and those military contractors. Or the private health insurance people have to buy under Obamacare. Under capitalism, privileged businesses make money by doing stuff on other people’s nickel. Big business gets its profits by externalizing its operating expenses on the taxpayer.

Halliburton and the military contractors are extreme cases, but that’s really true of pretty much the entire Fortune 500. Their profits come, for the most part, either from government subsidies or from government-enforced monopolies of various kinds (including patents and copyrights) that prohibit others from competing with them.

Don’t believe me? Stop and think — what are the most profitable industries in the world today? There are industries that depend on “intellectual property” to restrict competition: Software, entertainment, pharma, biotech, consumer electronics, manufacturers that use the exchange and pooling of patents to cartelize markets, and companies that use trademarks to control outsourced production in Third World sweatshops and then jack up the retail price many times over. There are extractive industries, like mining and oil drilling, and agribusiness, that operate on stolen land thanks to the legacy of colonialism and the collusion of native landed elites with Western corporations. They include industries directly subsidized by the government, like agribusiness and military contractors. What’s left?

And really, who cares if a corporation like Halliburton is nominally “private” or “public?” If it makes its money through force exercised on its behalf by the state, it’s really just a part of the state. The only difference is, instead of just paying civil service employees on the GS schedule, the taxpayers also have to support the shareholders and all the multi-million dollar piggies in the C-Suite who belly up to the trough. Under those circumstances, where the taxpayer foots the bill and the people performing the function are de facto state functionaries either way, it would actually be more libertarian to just perform the function directly through the state rather than going through the charade of contracting out to a “private” business; at least there would be fewer layers of parasites to feed.

Translations for this article:

Anarchy and Democracy
Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory