Lynn Stuart Parramore recently wrote an Alternet article titled “3 Things That Make Libertarian Heads Explode“. She identifies three areas where our heads will supposedly explode. They are inequality, public goods, and regulation. She evidences no awareness of the existence of left-wing market anarchists or any other type of libertarian leftist. In her world, the only libertarians that exist are the Reason Magazine or right-wing variety. In the first part of my series, I will discuss her contention about cronyism:
When forced to deal with inequality, libertarians often talk about cronyism, something they insist would not happen in their free-market utopia. Cronyism, they insist, is all about government favors, forgetting that cronyism is rampant between various market players. What do you call it when corporate CEOs collude with their boards to award themselves outrageous salaries? If you are an English speaker, you call it “cronyism.” When the owner of a bank colludes with other bank owners to do things like interfere with prices or squash competition, that’s also a form of cronyism. For some strange reason, libertarians seem to think cronyism is just something businesses do with governments.
Non-governmentally enforced cartelization has a tendency to be more unstable due to the fact that it’s in the interest of competitors to break agreements. Gabriel Kolko has documented how regulatory measures were backed by big business for the purposes of cartelizing industries. Cronyism can occur without government, but the presence of government allows the use of coercive force to maintain it. The competitive pressure from markets far from a “freed” ideal were decentralizing economic power and wealth. This was occurring before the Progressive Era regulations were introduced. As Gabriel Kolko writes, the trend of the last decades of the 19th century and the first two of the 20th was:
toward growing competition. Competition was unacceptable to many key business and financial leaders, and the merger movement was to a large extent a reflection of voluntary, unsuccessful business efforts to bring irresistible trends under control. … As new competitors sprang up, and as economic power was diffused throughout an expanding nation, it became apparent to many important businessmen that only the national government could [control and stabilize] the economy. … Ironically, contrary to the consensus of historians, it was not the existence of monopoly which caused the federal government to intervene in the economy, but the lack of it.
Regulations contribute to inequality by creating barriers to marketplace entry. The larger corporations can easily afford to meet the costs of regulations while the less capital intensive businesses cannot. This leads to the further concentration of wealth and an economy dominated by corporatist business enterprise. Inequality is also inherent in the relationship between regulator and regulated. All may be formally equal before the law, but there is clearly a relationship of command and control. This kind of inequality is often overlooked by left-wing statists.