It is difficult to take a political work seriously with the word “nanny” in the title, but Dean Baker’s 2006 book the “Conservative Nanny State” is a serious book and a decent introduction to some often overlooked market distortions that benefit the rich at the expense of everyone else. It also has the advantage of being freely available at the author’s website in a variety of digital formats as well as being a fairly short read (coming in at 119 pages, including the bibliography).
Though Dean Baker is not a free market advocate, left wing or otherwise, and definitely not an anarchist, the Conservative Nanny State finds common ground with market anarchist on many issues. Despite being a progressive or a liberal in the contemporary sense of the word, Baker uses this book to shine a light on hidden cronyist practices that enrich economic elites and big business at the expense of everyone else. His targets include intellectual property laws, tort law, immigration restrictions, and the Federal Reserve’s manipulation of employment levels.
Unfortunately Baker keeps his analysis within a statist framework of assumptions, and often smuggles in suggestions for additional interventions that will leave pro-market readers disappointed. Still the book has potential to be a conversation starter between market anarchists and liberals who would be unwilling to read anything as anarchistic as Markets Not Capitalism or The Conscience of an Anarchist.
Baker frames his analysis as a rejection of the conventional assumption that political conservatives favor limited government and free markets while liberals while progressives favor big government and market interventions. Baker states that this framework of assumptions is not only wrong but harmful to both his side of the argument in US politics. Left-leaning market advocates will have a hard time disagreeing that the narrative that uses runaway militarism, border fascism and unabashed corporatism promoted by self-proclaimed conservatives as examples of the “free market” or “small government” have done considerable damage.
Baker argues that both conservatives and liberals favor big interventionist governments, conservatives just favor interventionist policies that “distribute incomes upward to higher paid workers, business owners and investors” rather than the general population. He states that conservatives are generally dishonest about this and that liberals too often accept the conservative markets vs. government framework. To his credit Baker notes that there are “nanny state conservatives” in both major US parties and that many of the policies he discusses are supported by both the Democratic and Republican establishments.
Baker begins his analysis by looking at ways in which immigration and licensing restrictions keep doctors, lawyers and other high paid professionals scarce and therefore expensive. He notes that in 1997 congress tightened restrictions on foreign doctors at the request of the AMA, cutting the total number of Foreign medical residents in the US by half. He observes that state specific licensing requirements shelter professionals from competition. He neglects to point out that this also plays a role in increasing the price of insurance. He contrasts this with NAFTA-style trade agreements that maximize the importation of foreign consumer goods, arguing that we could do the same with foreign professionals, by removing licensing restrictions. Such restrictions are more about creating scarcity than insuring quality. He argues that if free trade could bring the cost of doctors down to European levels it would save $100,000 per doctor or $80 billion per year. That is 10 times the estimated gains from NAFTA.
In two of his strongest chapters he attacks the Federal Reserves manipulation of interest rates as a means of combating inflation by putting people out of work and the monopolistic nature of patents and copyrights. He notes that the Fed is largely controlled by bankers who have a strong interest in fighting inflation. Bankers loan at fixed interest rates and inflation causes money they lend to be worth less when it is paid back. It is the least educated and least skilled workers who have to deal with job loss and insecurity when the Fed raises interest rates.
In his chapter on “intellectual property” humorously titled “Bill Gates-Welfare Mom,” Baker observes that patents are government granted monopolies that overcharge the consumer. Unlike other critical pieces on the subject, Baker takes an empirical approach sighting numerous statistics. He notes that patented drugs are on average 200 percent and as much as 5000 percent more expensive than generic drugs. Tariffs, in contrast, only result in a 15 to 20 percent price difference, making patents the more damaging form of protectionism. He goes on to estimate that the savings from eliminating patent protections on software could be $70 to $100 billion per year.
He also discusses the phenomenon of companies directing their research and development efforts towards making “copy cat” drugs that find new ways to duplicate the effects of already commercially successful drugs. This is a form of waste, as no one needs multiple drugs with identical effects. Baker points out that the FDA claims two thirds of new drugs are copy-cats, accounting for some 60 percent of research expenditure.
In a chapter on corporations, Baker acknowledges that corporations are an invention of government, but states they are a “a great invention of government.” He clarifies stating, “[corporations are] a legal entity that exists independently of it owners. This requires a government.” This is not to mention liability limits. Baker argues that the year 2005’s $278 billion in corporate income tax revenue demonstrates the benefit of the corporate form. As such he sees this as a voluntary tax, as no one is forced to start a corporation. He argues that it is an appropriate fee for the benefits the state bestows on corporations. Baker goes on to blame the issue of sky-rocketing CEO pay on corporate governance laws which consider non-votes in corporate matters as votes in support of management, as well as laws that make it difficult for shareholders to sue corporate managers.
He expresses similar concern about tort reforms that put caps on how much a lawyer can receive from a jury award. He argues that this should be between the lawyer and the plaintiff, and that such restrictions exist only to make it harder to sue corporations. Baker greatly disputes the notion that the legal system is run amok with opportunistic lawsuits against corporations. Instead he says that successfully suing a big corporation is a lengthy and expensive affair and that gains are often lost in settlements and appeals.
The reader has to note that as the book progresses Baker’s cases become less clear cut. In his fifth chapter Baker notes that 2005’s Bankruptcy laws require the state to monitor people who have declared bankruptcy, seize their assets and garnishing wages for debts that are decades old. He makes a good comparison between this policy and the international debt collection work of the International Monetary Fund. Baker laments that in the past debts were generally tied to specific assets which the courts could take in a one time transactions, rather than subjecting debtors to life-long government harassment. He echoes a strong anarchist tradition, articulated by Lysander Spooner, that assets could be seized by courts at the time of bankruptcy, but ongoing promises to pay could not be enforced afterwards. Baker notes that the last several decades have seen a growth in credit card debts that are not secured by specific assets and, therefore, have high interest rates to cover the risks. Baker finds it unfair to further penalize debtors after they have paid high interest rates for this reason. He also acknowledges that the state’s on going role as a life-long debt collector provides perverse incentives for creditors to lend to high risk individuals.
He also goes into an interesting discussion on “takings” which are situations where government action lowers property values. Conservatives advocate compensating these property owners. Baker concludes with the hilariously misguided statement:
The idea of involving the courts every time that a government action lowers or increases the value of property is antithetical to the idea of leaving things to the markets.
It seems to be lost on Baker that allowing government action which lower or increase the value of property is even more antithetical to the idea of leaving things to the markets.
Baker’s underlying statism takes center stage in his chapter on taxes. He claims that in 2001 the Federal Government lost approximately 20 times what the it spends on Temporary Assistance to Needy Families (TANF) each year in tax evasion. While it is true that conservatives and liberals both favor a state funded by taxes, market anarchists favor the opposite — so we are happy to see the state lose money this way. Sadly it is often those who benefit the most from state intervention that are best able to avoid taxes. In this chapter and his chapter on the various benefits granted to small businesses Baker equates tax-breaks with subsidies. While it is true taxing some firms but not their competitors creates unfair advantages, allowing someone to keep their money is not the same thing has handing them more.
As mentioned above Baker frequently suggest different government interventions as alternatives to the interventions he rails against throughout the book. He suggests using a government granted award system as well as “creative works” vouchers to replace patents and copyrights. Additionally he favors imposing a tax on foreign doctors and lawyers working in the US to compensate their country of birth. He also advocates national or international standards for such professionals, similar to those imposed on merchandise under government trade agreements. He also favors a voluntary government pension system and public option for health care. It does not occur to him that a purely voluntary approach would be a preferable solution in all these cases.
While there is much to agree and disagree with in this book, it does have potential to be a conversation starter between market advocates and liberals. Liberals and libertarians should work together more often opposing state action that unambiguously benefits the rich at the expense of everyone else. While Baker is clearly writing for the politically unsophisticated, he presents much of his case well. Even the areas where he falls short or takes problematic stances are presented in a thought provoking way. It should be noted that nine years have passed since this book’s release and nearly all of the statistics, which he makes heavy use of, are out of date.
Unfortunately much of what Baker attacks is just the tip of a larger iceberg. He hardly touches on the issues of massive military spending and military intervention. He also neglects to mention agricultural subsidies or the way infrastructure and land use policies distort the economy in favor of the wealthy. This is not to mention the of the way policies generally supported by liberals or progressives benefit big business and established elites. For example, regulations that increase overhead tend to favor larger more established firms, by keeping market entry expensive. Even state funded education and the welfare state, serve the interest of elites by providing them with a docile workforce that is just well fed enough to work when needed. For more expansive and voluntaryist critiques of how government intervention pushes income up-ward, I highly recommend the above mentioned Markets not Capitalism or Gary Chartier’s The Conscience of an Anarchist.
