Take a Left at the Market

Liberal praise of capitalism doesn’t have to ring hollow

The final question at Tuesday night’s debate asked each candidate to debunk what he considers “biggest misperception that the American people have about you”. Predictably, Governor Romney used the time to distance himself from his 47% quote, saying “I care about a hundred percent of the American people.”

I couldn’t guess which slander President Obama would try to refute. There have been so many, pushed with so much energy by the right-most fringe of the media: His birth certificate is a fake, so he isn’t really an American citizen or legally president at all. He’s secretly a Muslim. Taxes have gone up, and government is growing. His wedding ring bears an Islamic inscription. He began his term with an apology tour. He instituted death panels. He’s a Communist. He’s gay. He’s the Antichrist.

I’m sure I missed a few. Which would he pick out as the “biggest misperception”? This one:

I think a lot of this campaign, maybe over the last four years, has been devoted to this notion that I think government creates jobs, that that somehow is the answer. That’s not what I believe. I believe that the free enterprise system is the greatest engine of prosperity the world’s ever known. I believe in self-reliance and individual initiative and risk-takers being rewarded.

I have two reactions.

  • I totally empathize. I consider myself a liberal — left of Obama on most issues — but that doesn’t mean I consider the Soviet Union a model worth emulating. I think competitive markets usually allocate scarce resources much better than centralized bureaucracies. I think people should be free to take economic risks and profit when they win. Capitalism vs. Communism? I’m glad capitalism won.
  • I don’t think it will work. Like Romney’s compassion for the 100%, Obama’s love of capitalism (and mine) just sounds false. “Sure, you say the words,” I imagine viewers responding, “but you don’t really mean them.”

Yeah, I do mean them, and I think the President does too. (Romney and the 100% I’m not so sure about.) But I think Barack and I both need to take this question seriously: Why don’t we sound convincing? Why do conservatives — who I see as a bigger threat to capitalism than liberals — seem to own markets and free enterprise?

The answer, I believe, is that their pro-capitalism story hangs together better than ours. I don’t think it’s more true, but it is simpler and has more internal structure. Let’s look at it.

The conservative capitalism story. Conservatives can boil their story down to one word: freedom. Capitalism, Milton Friedman told us, was all about being “free to choose“. Consumers choose what to buy. Retailers choose what to sell. Manufacturers choose what to make and who to hire. Workers choose what jobs they’ll apply for. Borrowers choose to borrow, lenders choose to lend, and the magic of the marketplace makes it all work out.

You don’t have to understand some complicated economic theory to value such freedom. We all want to make our own choices.

It’s just as obvious that regulations and taxes restrict freedom. Regulations keep you from doing things you want to do. (There’d be no point in regulating against something nobody wants to do.) Government collects taxes so that it can buy things in your name that you wouldn’t buy on your own. (Again, there’s no point in taxing and spending if people would buy the same things on their own.) We can all see that in our own lives.

So the conservative capitalism story is: Get rid of regulations and taxes so that we can all be free together. You make your choices, I’ll make mine, and the market will sort it out in a way that makes us all prosper.

Before you start arguing with that vision — I’ll argue with it myself later on — take a moment to appreciate how well it works: It’s easy to hold in your head. It’s rooted in everyday experiences. And by now (thanks to billionaire-funded think tanks and news networks and political campaigns) we have heard it so many times that they don’t even have to spell it out any more. Just say “free market” or “free enterprise” and the rest comes to mind automatically.

The inauthentic liberal. So when a liberal or moderate like Obama says, “I believe that the free enterprise system is the greatest engine of prosperity the world’s ever known” he’s walking into a conversation already in progress, and his words get forced into the frames that are active in that conversation.

“Oh? So you believe in freedom too?” the skeptics ask. And when the conversation gets down to details, the answer is “Not exactly. Or at least not in the same way.”

Liberals, for example, don’t think businesses should be free to hire only men, or sell their products only to whites. (Rand Paul disagrees.) Businesses also shouldn’t be free to merge into monopolies or create bottlenecks in the supply chain. (Ayn Rand disagrees.) Food packers shouldn’t be free to sell botulism or salmonella, or to lie about or not disclose what’s in their products. Coal companies shouldn’t be free to send workers into unsafe mines. Sweatshops shouldn’t be free to pay less than the minimum wage, even if workers are desperate enough to volunteer for those jobs. If you want to take a chance on a cheap ticket on an uninspected airplane, or go without health insurance and hope you don’t get sick — sorry, I don’t want to let you.

So no, I don’t believe in the same kind of freedom a conservative does. If capitalism means freedom, and freedom refers only a very special type of economic freedom, then my advocacy of capitalism rings hollow, because I do want government inspections and regulations.

Liberal freedom. What’s more, I want taxes, because I also want freedoms that the market doesn’t offer.

I want to be free to drive from coast to coast without hitting a red light, which I can do because the government built the interstate highway system. I want to be free to plan a picnic Saturday, because the government put up weather satellites and runs a National Weather Service that can assure me it won’t rain. I want my wife (or your daughter) to be free to tell her boss to go to hell if he wants sexual favors, because if he fires her the government will provide unemployment benefits and let her keep her health insurance.

I could go on, but you get the idea: Conservative freedom is not the only kind. Some other kinds of freedom demand government intervention, because often in our history the market has failed to provide them.

Access. But even that reframing misses the point: Freedom is not a one-word description of my highest economic value, and it’s not what I value about markets. So if the contest is just my favorite freedoms against theirs, I’m still eventually going to sound inauthentic and lose.

While I totally sympathize with the people who claim the boil-it-down-to-a-word requirement is bogus and unfair, I don’t want to abandon that battlefield to the conservatives. If a conservative says “freedom” and a liberal says “read my treatise on political economy,”the liberal loses, deservedly or not.

I don’t want to lose, so this is my one-word summary of my highest economic value: access.

A short history of access in America. Given that I don’t have my own cable news network or a multi-billion-dollar web of think tanks to prepare the way for my one-word answer, grant me a little space to unpack what access means.

When Thomas Paine looked at the Native Americans, he saw a society that lacked a lot of good things. Already in the 1700s, when the Industrial Revolution was just taking off, there was a profound technological gap between hunter-gatherer cultures and the emerging Western powers. But the Indians also lacked some things Paine wished the West didn’t have, like poverty and unemployment. Any able-bodied Indian who wanted to turn his effort into food or other desirable goods just had to apply himself: There’s the forest, the lake, the prairie. Go hunt, fish, or gather whatever the Earth has to offer. No owner can stop you or make you pay a fee.

Paine, who often had to scrounge for a job, envied that. That’s why (in Agrarian Justice) he called for some rudimentary social engineering “to preserve the benefits of what is called civilized life, and to remedy at the same time the evil which it has produced.” His solution was a one-time grant of capital to each new adult, which he or she could use to get training or buy tools or open a shop. (It was funded by a modest tax on inherited land, which he justified by arguing that ownership of land was artificial. After all, you didn’t build that.)

But Paine’s America would soon be the envy of Europe due to a different government program: Without directly addressing class issues at all, the Homestead Act effectively limited the extent to which the rich could push the poor around. A young family that felt too oppressed could head west and turn its sweat into tillable land. From there, land plus further sweat could produce an acceptable living.

Eventually Karl Marx gave us some terminology to express what the Native Americans, Paine’s vision, and the Homestead Act had in common: easy access to the means of production. If you wanted to consume and were willing to work, you had a way in to the economy. You didn’t need anyone’s permission or approval.

By Marx’s time, though, industrialization had severely restricted access to the means of production in America and Europe alike. If you lived in Factoryville, you couldn’t turn your effort into consumable goods unless the factory owner hired you. The owner was effectively a gatekeeper who controlled access to the means of production. (That’s one reason why he could get so rich: not just his entrepreneurial ability, but because he could effectively charge the workers for access by paying them less than their effort was worth.)

The Communist solution — getting the gatekeeper out of the way through public ownership of the means of production — didn’t work out so well in practice. The Soviet Union may not have been exactly what Marx had in mind, but even so, the Soviet experiment should discourage anyone who envisions a government-centered economy.

Again, you have to wait for a later era before the right explanatory terminology turns up: Running a modern economy requires processing a vast amount of information. Markets that link many privately owned enterprises are a distributed processing system that can bring much more brain-power to bear on the problem than any central bureau can.

But something gets lost in the simple Communism-failed argument: Public ownership was just a means. The end — public access to the means of production — is as valid a goal as ever. But what if capitalism could do a better job of providing access?

Happy Days. In the 1950s, the real “worker’s paradise” wasn’t the Soviet Union, it was the United States. Even if you didn’t own any part of the industrial system, it wasn’t hard to get access (at least if you were white and male). Unskilled men who entered the workforce in the 50s could get secure long-term jobs that paid enough to buy a house and raise a family. Men who aimed higher could fairly easily work their way through college and enter the professional or managerial ranks. It wasn’t even all that hard to accumulate enough capital to open a small business and become an owner yourself.

One source of this bounty was competition within the owning class. A 1950s worker still needed an owner’s permission to access the means of production — someone had to hire him, in other words — but there were lots of owners around and they needed workers. So workers, especially unionized workers, were in a position to get a good deal.

It’s easy to forget how much government intervention was necessary to maintain this high-access situation: High taxes (especially inheritance taxes) kept the rich from getting too entrenched. Anti-trust laws and other regulations preserved competition. Government defended the workers’ right to unionize. Government-funded research created whole new industries. And the government subsidized skill-acquisition: The free K-12 public education system was the best in the world, state universities were inexpensive, and the Cold War military would teach you any number of skills.

The problem with freedom. Since the Reagan Revolution, we’ve been systematically dismantling the programs that created the great American middle class of the 50s, 60s, and 70s — all in the name of freedom. As a result, we’re losing that middle class.

The main problem is that “freedom” has come to mean primarily freedom for owners. And owners left to their own devices will combine into cartels and monopolies that restrict access to the means of production. They’ll insist on low taxes that starve education and other government efforts to keep access open. What regulations they allow will favor big WalMart-style enterprises that leave little space for new shops or small manufacturers.

So today, if you’re a young person who doesn’t have a family fortune behind you or a family business to inherit, you have a lot to worry about. Conservatives will tell you to worry about your freedom: Obama and his minions will force you into a social contract that takes care of the sick and the old, and educates the children of the poor. Your drive to wealth will be slowed by the contributions to the general well-being that liberals will force out of you.

But I think you have a bigger, more immediate worry: How are you going to get access to the means of production? No matter how able or ambitious you may be, how can you be sure that you’ll be able to transform your effort into the goods and services you’ll need to thrive? The pre-Columbian Native American had access to the land. What do you have?

Conservatives like to pretend the access problem doesn’t exist. Competition happens by itself, without any government intervention. Unemployment occurs because people are too lazy to take available jobs, or too short-sighted to get the training they need. It’s government — not big business — that strangles small businesses. And big corporate bureaucracies are more efficient than the Soviet Politburo because … well, they just are, that’s why. All we have to do is cut even more regulations and more taxes, and Americans will have all the access we need.

Health-care and banking. Consider the conservative response to ObamaCare: Let health insurance plans compete across state lines — remove state regulations on insurance, in other words — and competition will produce better care at lower costs. Regulation (to force coverage of contraception, say, or to insure your 20-something children) will be unnecessary, because rival insurers will compete to offer every conceivable kind of policy.

Ignore for a minute the fact that competition between insurers has nothing to do with better care at lower costs. (Actually, they compete to insure healthy people and thrust sick people off on someone else. That’s how a real-world insurance company makes its money.) Can anyone doubt what will happen if the government doesn’t carefully guard that competition? The same thing that happened when government allowed interstate banking: Instead of two or three plans in each state, we’ll have a merger boom that results in two or three national plans — or even just one plan, if the government allows it.

Underneath all the many labels and wrappers, how many credit-card choices do you have now, really? Four: Capital One, Chase, Citi, and Bank of America control 2/3rds of the market. And do they really compete, or do they just jostle within a friendly cartel like Coke and Pepsi? That’s the kind of health-insurance competition you can expect if conservatives have their way.

Financial consolidation after interstate banking.

Liberal capitalism. The liberal vision of capitalism is public access to the means of production through genuine competition among many private enterprises in a transparent marketplace. The government is the ultimate guarantor of access, but not through public ownership or direct government employment.

Instead, government enforces antitrust laws and other regulations that maintain competition among private owners. It helps workers organize unions and consumers organize co-ops so that the owners’ power does not go unchallenged. It protects market transparency by inspecting production, and gathering and publicizing information about products, so that consumers’ decisions are not blind, but add their distributed brain-power to the management of the economy. It underwrites the infrastructure that is too big for a single company to build and too important to allow a single company to own. It sponsors the basic scientific research that, again, could not be sponsored and should not be owned by any private entity. It makes high-quality education available to everyone. It provides a safety net for those who lose access, so that their loss does not become permanent.

In these and many similar ways, government acts to fulfill the promise of the free enterprise system: a modern market-driven economy that nonetheless provides widespread access to the means of production. The goal is simple: With ability and effort, you should be able to produce what you need to thrive, no matter where you were born or who your parents are.

But you can’t achieve that goal without limiting the freedom and privileges of owners.  They remain on top — with more choices and luxuries than anyone else — but they don’t get to do whatever they want. It’s a small price to pay for a high-access society.

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  • Mike Ignatowski  On October 22, 2012 at 9:41 am

    Perhaps the word you’re looking for is “opportunity”. It covers so many things, from access to affordable education, to available health care that enables people to start their own small businesses, to good infrastructure and a healthy banking system that caters to the needs of Main street, etc.

  • Mike Ignatowski  On October 22, 2012 at 10:22 am

    Two other comments on simple themes that tie back into “opportunity”:

    Nature abhors a vacuum – “smaller government” necessarily implies “more powerful big business”. What we really need is to find a god balance. Government balances the excesses of business interests, and visa versa.

    The other simple idea is that for all its benefits, one of the flaws with a free market economy is that it naturally leads to an extreme concentration of wealth and power over time when simply left alone. There needs to be a counter argument to “people should be able to keep whatever they earn”. Perhaps there’s something along the line of arguing that extreme concentration of wealth and power destroys the opportunity for everyone else.

  • Stephanie  On October 23, 2012 at 11:07 am

    This is a brilliant essay and I hope people who see the link on my Facebook page will all read it.

    I will nitpick about inheritance taxes because those of us who sacrifice our careers to be caregivers need anything we inherit to make up for the years of earnings we may have lost to caregiving. That doesn’t mean no inheritance tax but it should be taken into account.

  • D.M.  On October 25, 2012 at 2:28 pm

    very good essay! agreed!

  • Kim Cooper  On October 27, 2012 at 10:36 pm

    The next step, which you left out, is worker-owned co-operative democratically run businesses. That ensures that the owners do not exploit the workers because they are the same people.
    The reason that step is absolutely necessary, is that as long as we let a few people rise to great wealth and power, those powerful people will manipulate the government to reduce the regulations and taxes that keep them in check. We will just go around this merry-go-round again and again and again, as we have been. the workers owning the means of production through owning the factories and stores and other places of business, short circuits the process of a few powerful people manipulating the system to get rid of the regulations that make it work. It would even things out, stop a lot of the cyclical nature of cutthroat capitalism.
    @Stephanie — that is already being done to some extent, in that inheritance taxes don’t really kick in until the inheritance is pretty big. I don’t know what it is now, but in 1988 when my father died, it was at $600,000. Anyway, that is the obvious way to deal with families who need to inherit because they are poor, whereas no one really needs to inherit millions without it being taxed.

  • Eric  On November 1, 2012 at 11:03 am

    “Instead, government enforces antitrust laws and other regulations that maintain competition”

    For the record regulations create monopolies. For example historically Vanderbilt was given threw government and currently power plants”.

    “It helps workers organize unions….”

    Politicians bribe unions with the promise of higher wages at the expense of the American people i.e. consumers. If you want to get elected promise unions the world and pay them off with higher prices for consumers. This creates a vacuum of power. Promise teachers unions tenure for a shitty school system. Promise automotive unions garmented pensions for life despite such obligations are impossible to maintain.

    and consumers organize co-ops so that the owners’ power does not go unchallenged.”

    We would actually see more co-ops in a much more free market system then we do a highly government controlled on in which you envision. It gives the business a competitive advantage to include the employees in profit and liability.

    “It protects market transparency by inspecting production, and gathering and publicizing information about products, ”

    Like some countries in Europe ban on Genetically modified foods simply because of miss information. If a Politicians wants to get elected all one has to do is cater to the majority no matter how irrational that maybe.

    “It underwrites the infrastructure that is too big for a single company to build and too important to allow a single company to own. ”

    Monopolies are impossible to maintain or even get a in a open market.

    “It makes high-quality education available to everyone.”

    If you compare private education to public education you will notice some glaring differences. The amount of money spent on private education is far lower with 90 percent chance of going to college there after.

    • weeklysift  On November 2, 2012 at 10:36 am

      I can’t let “monopolies are impossible to maintain or even get in a[n] open market” go. Quite the opposite. The history of American business prior to the anti-trust laws is a long series of mergers leading to monopolies and oligopolies. Standard Oil was the one everyone remembers, but it was typical, not exceptional.

      Adam Smith expressed it like this: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.”

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