More Anti-Statism: Economic Interpretations of Politics
The following essay by Joseph Stromberg is one of three published in pamphlet form by the Center for Libertarian Studies in 1977 on the subject of state capitalism. As did the others, this one attempts to show how anti-competitive combines depend upon government intervention for their continued existence and how this proves to be pathological.
The Political Economy of Liberal Corporatism
by Joseph R. Stromberg
A considerable body of literature now exists which points towards an analysis of the American political economy as a system of liberal (as opposed to fascist) corporatism dominated by a tripartite syndicalist oligarchy: Big Business, Big Labor and Big Government. In this system, the State functions to balance the interests of large economic power blocs while maintaining their common ascendancy in the face of potential threats from below. In the radical and libertarian analyses of this phenomenon, the American policy, seen by the Left as a "warfare State" and by the Right as a "creeping socialist welfare State," is shown to be a composite of both, resting on the foundation of an artificially cartellized economy.
Since the Austrian economists have demonstrated that monopoly is impossible in a free market, the cartellized and monopolistic character of broad sectors of our economy can only be explained on the ground of large-scale State intervention, intervention demanded by and benefiting powerful Big Business interests. This explanation, happily enough, is well documented and has been set forth in the historical writings of a group of New Left radical revisionists, including Gabriel Kolko, William Appleman Williams, James Weinstein, Lloyd C. Gardner, Martin Sklar, Ronald Radosh, and David Eakins, none of whom can be accused of great partiality towards Austrian economic theory. The work of these men, taken as a whole and minus some Marxian mysticism, demonstrates how, beginning in the last decades of the nineteenth century, the "class conscious" corporate liberals of Big Business sought and achieved "progressive," neo-mercantilist regulation of the economy by the federal government in the interest of restriction of competition and cartellization of the domestic market. Simultaneously, some of
the same corporate leaders (in and out of government service) for and gained government support of overseas economic expansion.
Pioneered by "class conscious" corporate and political leaders like Theodore Roosevelt, William McKinley, Mark Hanna, and Herbert Croly, foreshadowed in the corporatist "war socialism" of 1917-1918, and pursued unerringly throughout the interwar period by Herbert Hoover, Gerard Swope, Henry Harriman, and others, the essentially corporatist and liberal imperialist policies outlined above reached their culmination in the New Deal. The power of the corporate syndicalist oligarchy was consolidated and greatly extended during World War II and the Cold War through the militarization of much of the economy and the expansion of federal policing of the lives of the citizenry under the rubric of "national security." The resultant structure has been described as liberal corporatism, neo-mercantilism, interest-group liberalism, neo-fascism, corporate liberalism, political capitalism, military State capitalism, State monopoly capitalism, and corporate syndicalism. What these terms seek to evoke is the specter of a system of large economic blocs and syndicates integrated into and coordinated by the State as in the Italian fascist theory of the corporative State. Before discussing the historical aspects of our topic, let us briefly review the Austrian theory of monopoly.
THE AUSTRIANS ON MONOPOLY
It is the contention of the Austrian economists that there is in the unhampered market no tendency for the formation of monopolies. Ludwig van Mises, the doyen of this school, states that there are two preconditions of a monopoly price: (1) a monopoly of a factor of production, and, (2) a demand curve such that restriction of production will result in a monopoly gain. Aside from the cases of a few minerals (e.g., diamonds), says Mises, monopoly prices cannot arise in an unhampered market.1 In Mises's words: "It is a distortion of fact to speak of monopoly capitalism. It would be more appropriate to speak of monopoly interventionism or of monopoly statism." 2
Murray Rothbard has taken the Austrian analysis even further. In his chapter "Monopoly and Competition" in Man, Economy and State, Rothbard examines the literature on monopoly and concludes that most of it goes astray by starting from the illusory theory of "pure competition" rather than from the idea of free entry.3 This error leads many economists to regard all large enterprise as somehow monopolistic. After dissecting these errors, Rothbard adopts Lord Coke's definition of monopoly as most viable. He writes: "(M)onopoly is a grant of special privilege by the State, reserving a certain area of production to one particular individual or group."4 In a free market, One Big Cartel (i.e., a monopoly) can never be formed since efficient firms will see
opportunities to profit by ignoring assigned quotas and withdrawing in order to expand production and cut prices. On the other hand, when, with the aid of the State, "firms are cartellized, in many cases the lesser range of substitution by consumers would render the demand curve as presented to the cartel, inelastic."5 Economic statism, then, makes monopoly prices possible.
In a recent work, Power and Market, Rothbard analyzes in great detail the results of economic statism.6 Under the heading "Product Control: Grants of Monopolistic Privilege" we read that "(a)lthough a monopolistic grant may openly and directly confer a privilege and exclude rivals, in the present day it is far more likely to be hidden or indirect, cloaked as a type of penalty on competitors, and represented as favorable to the 'general welfare.' "7 Now, all monopoly gains must be imputed to a factor of production; in the cases below this factor is the right to enter the field, a right which has been restricted by the State. Rothbard discusses a wide range of such restrictions, including: (1) cartels (e.g., the compulsory codes of the New Deal NRA); (2) virtual cartels (e.g., U.S. agricultural quotas); (3) licenses (which limit the number of competitors by heavy fees and complicated regulations); (4) certificates of convenience and necessity (as in the trucking industry, which has been cartellized by the Interstate Commerce Commission); (5) quality standards (which limit entrants and discourage improvement) (6) safety codes (which perpetuate existing methods of construction and benefit producers of currently used materials); (7) tariffs and quotas (which confer monopoly gains within certain geographic areas); (8) immigration laws and (9) conscription (which reduce competition for productive jobs); (10) minimum wage laws (which create involuntary mass unemployment); (11) conservation laws (which restrict production and bestow a restrictionist price on land available); (12) franchises (dire grants of monopolistic privilege); (13) eminent domain (by which the State and favored clients can steal); and (14) bribery of State officials (an informal kind of licensing).
Rothbard concludes that "(a)ll forms of government regulation of business, in fact, penalize efficient competitors and grant monopolistic privileges to the inefficient."8 Why such regulation is, nonetheless, so widespread and popular is perhaps explained by some remarks of Jane Jacobs. In The Economy of Cities she writes:
The primary economic conflict, I think, is between people whose interests are with already established economic activities, and those whose interests are with the emergence of new economic activities.... In this conflict, other things being equal, the well-established activities and those whose interests are attached to them, must win. They are, by definition, the stronger. 9
Since "governments come to derive their power from those already well-established interests," they are used to restrict innovation and limit competition by the more efficient, the result that the economy "lapses into stagnation for the benefit of people who have already become powerful."10 With this in mind, we may now summarize the development of American corporatism and its systemization of attempts to limit the deeply subversive effects of free economic development upon the status quo.
THE REVISIONISTS ON LIBERAL CORPORATISM
Let us begin by remarking that the period 1865-1900 was by no means the era of run-away laissez fare capitalism of the old stereotype. Indeed, Marxist economist Paul Baran has justly written that the State has always played a role in the capitalist society.11 With subsidies, high tariffs, and free land to the railroads, the government was actively intervening for special interests, and the tariffs had already given impetus to an unnatural concentration of industry.* What Gabriel Kolko shows in The Triumph of Conservatism and Railroads and Regulation is that, contrary to popular belief, most of the Progressive legislation regulating business activity was promoted by Big Businessmen themselves in order: (1) to avoid local, populistic regulation; and, (2) to "rationalize" (i.e., cartellize) the economy at the expense of smaller competitors and the consumers. By examining the steel, telephone, oil, and other industries, Kolko shows that at the turn of the century decentralization and vigorous competition were the main trends in the American economy and that the attempts by would-be monopolists to gain a chokehold on the marketplace failed in the abortive Merger Movement of 18971901.12 As competition persistently undercut such private efforts to achieve stability and predictability (and long-term profits), corporate "liberals" of Big Business sought industry by industry federal laws to limit the subversive effects of open competition.
Such an interpretation goes against the grain of much American historiography, but Kolko points out that "(o)nly if we mechanistically assume that government intervention in the economy, and a departure from orthodox laissez-faire, automatically benefits the general welfare can we say that government economic regulation by its very nature is also progressive in the common meaning of that term.''13 Only by investigating the intent and consequences of regulatory laws can the his
*And even before the interventionist measures discussed by Kolko (with which we shall deal), demands had come from agrarian leaders for State assistance in finding foreign markets for surplus crops. See William A. Williams, The Roots of the Modern American Empire (New York, 1969). While State support for economic expansionism is intertwined with domestic corporatism, we shall concentrate on the latter for the present.
torian assess the inner nature of Progressivism and modern Liberalism. In these two respects, Kolko writes that "the regulatory movements were usually initiated by the dominant businesses to be regulated" and that the regulatory commissions and bureaus were controlled by "leaders of the regulated industries.''14 Thus, to take one example, the Meat Inspection Act of 1906 turns out to have been initiated by large meat packers who favored it because "it primarily affected their innumerable small competitors."15 The result of such measures was an economic "triumph of conservatism" by means of what Kolko calls "political capitalism": the conscious use of the State to favor established interests against the "irrationality" and "cutthroat competition" of the unhampered marketplace.16
A development favorable to the progress of political, or State, capitalism was the spread of essentially syndicalist notions which became the common currency of political discussion. In the words of William Appleman Williams, "a kind of syndicalism based on organizing, balancing, and coordinating different functional groups" became, by 1918, the dominant outlook, as Americans increasingly defined themselves as members of blocs within the political economy.17 Indeed, the chief political struggles before World War II were concerned with defining "who gets what" and integrating a docile and unradical labor movement into a business-dominated corporatism. In The Corporate Ideal in the Liberal State, 1900-1918, James Weinstein emphasizes the central importance of the National Civic Federation in developing and applying the ideology of liberal corporatism. He writes:
By 1918 the leaders of the large corporations and banks emerged secure in their loose hegemony over the political structure. They did so by accepting, and unobtrusively leading, a new politics which we will call corporate liberalism, but that was known then by such names as the New Nationalism and the New Freedom.18
In pursuing the goals of corporate liberalism, the NCF and its allies had to fight on two fronts. First, they had to subordinate those "cutthroat" competitors and "irresponsible" businessmen who failed to see the necessity of "cooperation" in industry and commerce, and who failed to distinguish between a conservative program of social welfare legislation (which would strengthen the system) and socialism. Second, they had to obviate the rise of a broadly based socialist movement and radical trade unionism by cooperating with conservative unionists like Samuel Gompers of the American Federation of Labor who did not question the ultimate foundations of the economic system and who only wanted a larger share of the corporate pie. The need to cooperate with "safe"
unionists was a major theme of the NCF and was a reason why the NCF pioneered much of the welfare-state concept. An example is NCF's sponsorship of workmen's compensation laws. 19
Always favorable to the "right kind" of regulation, NCF leaders went so far as to advocate federal setting of prices (i.e., price raising) and wrote the bill which became the Federal Trade Commission Act of 1914, and which would be used to promote closer State-corporate partnership. Most important, though, was the World War I experience when Big Business, Big Labor, and Government cooperated in true corporatist fashion under the War Industries Board in setting prices, quotas, etc. Professor M. Browning Carrott writes of this period:
Charged with mobilizing the economy, the War Industries Board worked through trade associations in allocating raw materials and fixing prices and production. Since many businessmen worked together in the WIB and other wartime agencies, they came further to realize the value of teamwork and the wastefulness of competition. In fact, as Robert Himmelberg has shown, in the months following the Armistice, business unsuccessfully tried to secure governmental assistance in revising the antitrust laws in return for submitting to greater regulations
In the postwar years, many corporate liberals who had been associated with WIB (e.g., Bernard Baruch, Gerard Swope, George Peek, and Hugh S. Johnson) agitated for the establishment of such a corporatist system in peacetime.21 This line of thought bore fruit, finally, in the Swope Plan which was the basis of the New Deal's short-lived NRA system of "codes."
A central figure in the postwar development of liberal corporatism was Herbert Hoover. In "The Hoover Myth," Murray Rothbard underscores the great extent to which Hoover actually laid the foundations of the corporatism of the New Dealthough he was smeared by New Dealers as a die-hard "laissezfaireist." Thus, in the 1920's, Hoover as Secretary of Commerce, worked busily to promote rationalization and cartellization through development of trade associations and the integration of organized labor with them. Thus, for example, in 1922, Hoover and Franklin Roosevelt formed the American Construction Council, a trade association that they hoped could impose a "fair practices" code on the industry and cartellize it.22 As President, Hoover continued the promotion of liberal corporatism, encouraging the states to pass proration laws restricting the production of oil, and establishing, in 1932, a tariff on oil imports (whence there arose a virtual cartel in the oil industry).23 Throughout his career he "sought to transform the American economy into one of collaborating, self-regulating monopoly groups, all under the benevolent aegis . . . of the federal govern
menta program essentially like "the corporate economy of fascism."24 (Out of fairness to Hoover, it should be admitted that of all recent Presidents he was perhaps the least willing to go to war to defend the corollary of domestic corporatismOpen Door Empire.)
In the crisis of the Great Depression, with Big Business leaders advocating a more openly Mussolinian corporatism, Hoover was left behind and "refused to go all the way to a highly centralized state capitalism."25 In the election of 1932 important Big Business liberals shifted their support to Franklin Roosevelt, whose Administration proceeded to have enacted such corporatist measures as the National Industrial Recovery Act and the Agricultural Adjustment Act. Williams writes that "instead of providing recovery, the New Deal promoted the rationalization of the existing syndicalist political economy based on the large corporation."26 The Wagner Labor Act of 1935, perhaps the most original of the New Deal measuresmost of which had been anticipated by Hooverfinally defined the position of labor within the syndicalist or corporatist system. After this the unions settled down to fit in the corporatist mold and enjoy their share of the economic pie.27 And although the formal corporatism of the NRA was overturned by the Supreme Court, nonetheless, the New Deal, by imposing less systematic controls and virtual cartels, "ultimately brought the main functional and syndicalist elements of the political economy into a rough kind of legal and practical balance."28
Beginning in April, 1937, the Supreme Court, "following the election returns" as Mr. Dooley once said, came to uphold such measures as the Wagner Labor Act which made up the framework of New Deal corporatism. Describing the decisions as arrived at within the essentially syndicalist or corporatist assumptions of the Progressive Movement, Williams writes:
Granted those assumptions, what the Court had done was to legalize a system created by the large corporations and the Progressive Movement. In that system, the citizen was almost wholly dependent upon the definition of public welfare that emerged inside the national government as a consensus among the leaders of the various functional-syndicalist elements of the political economy.29
Thus the citizen had little real influence in politics unless he was an important member of a major syndicalist bloc. With the coming of World War II, the corporatist oligarchy was even more firmly in the saddle, and the quasi-radical thrust of the reformers within the New Deal coalition was blunted. Thereafter, all problems were treated within corporate liberal assumptions about the need for foreign markets.
Williams sums up this outlook: "Further overseas expansion. . . would enlarge the pie and thereby enable each functional-syndicalist element to enjoy a larger piece even though the relative sizes of the pieces remained the same." 30
A NOTE ON THE WORKINGS OF CORPORATISM
For the actual working of liberal corporatism we can refer, for example, to the data of the lengthy report on the Interstate Commerce Commission by a Nader study group, entitled The Interstate Commerce Omission. Robert Fellmeth, author of the report, finds that "(s)ince rates are maintained by a combination of ICC protection and motor carrier concerted action, there is no significant rate competition in the motor carrier industry."31 Further, because of ICC regulatory policies "the number of trucking firms has decreased."32 Having shown the cartellizing effects of ICC regulation, Fellmeth calls the agency "a forum at which transportation interests divide up the national transportation market." 33 He ends his chapter on rate regulation ("The Protection Racket") with a call for free entry: "The four objectives of regulation could be achieved in a competitive nonrestricted transportation situation, which would avoid the negative effects of regulation."34 Such free entry, he submits, would result in better service and lower prices for the consumer. 35
In a similar vein, economist Yale Brozen, in his article "Is Government the Source of Monopoly?", adds up the cost of ICC cartellization; he concludes: "This is the cost of only one set of monopolies fostered by the government. If we were to add the costs of monopolies by license and franchise such as taxi, utility, barber, electrician, plumber, medical, and others, the total cost would come to over $50 billion per year."36 One cannot help recalling Murray Rothbard's contention that all government regulation of business benefits the inefficient and penalizes efficient competitors" Let us now turn to the foreign policy of liberal corporatism.
IMPERIALISM AND ATTENDANT MILITARIZATION
We have stated that agitation began at an early date for government assistance in capturing foreign markets. We have already alluded to William's treatment of the remote origins of these demands. He has also analyzed and described the development of the foreign policy of economic expansion and Open Door Empire from the 1890's to the Cuban crisis of 1962, and we shall not discuss its historical aspects at length. Suffice it to say that while vigorous State support for expansion
began in earnest under President McKinley, the policy of government loans to export firms began under Wilson. Williams writes:
Tax monies collected from individual citizens come to be used to provide private corporations with loans and other subsidies for overseas expansion, to create the power to protect those activities, and even to create reserve funds with which to make cash guarantees against losses. 37
According to Martin Sklar, Wilson himself strongly supported what became the Webb-Pomerene Act of 1918 "permitting cartels in the export trade." 38 (We shall return to a recently invented subsidy, foreign aid, later.)
We have remarked that all State regulation of business promotes inefficiency and discourages innovation. That the further development of State interventionism reinforces these trends and leads to an intensified search for foreign markets we shall now see. Jane Jacobs writes:
When most of the cities in a country neglect their development of new kinds of work, especially by those low in the social hierarchies (whose numbers must either grow in such a situation, or be drained off by emigration to countries with expanding economies), there is nowhere to export the embarassing superfluity of capital except abroad. The immense exports of capital by the United States during the past quarter century are, in large part, money that was not spent in the expensive business of economic trial, error and development by blacksand others tooin American cities; money that was not spent on development of new goods and services to solve accuse practical problems.... The embarrassment of riches in an economy that is economizing on development work is temporary. It is a prelude to stagnation. 39
(Williams has documented the almost amusing repetition by American leaders, in the final stage of World War II and at the beginning of the Cold War, of the theme that America had to expand its foreign markets in order to avoid another depression.40 In other words, the monopoly structure of the economy by preventing innovation also limits the amount of money that can be invested profitably at home. In addition, corporatism with its monopoly prices and monopoly gains for cartels tends to generate its own artificial surpluses and, hence further demands for markets abroad. Thus the constriction and stagnation of the domestic economy under corporatism leads to an intensified search for foreign outlets for investment capital and surplus products. In fine, domestic economic interventionism leads to military interventionism abroad and Empire. And Indo-China. Since there is always a danger that small countries may adopt autarchy (national systems of statism)
or may fall under the sway of a great power and be integrated into a closed system of trade (e.g., those of the Axis powers or Soviet Russia), to keep the foreign markets may involve wars for the "Open Door" with an attendant rise in the dimensions of the military sphere.41 Thus the New Left, including its neo-Marxists, turns out to be right about U.S. imperialism, but fails utterly to understand that it is precisely the absence of genuine free-market capitalism, not capitalism, that underlies Empire. While no doubt startling to some, this formulation would not have been surprising to such anti-imperialist libertarians as William Graham Sumner, Edward Atkinson, and Gustave de Molinari, the French economist, all of whom actively opposed Empire at the turn of the century.
In typical corporatist fashion, the necessity for a large military machine to defend the Empire has been turned into another boon for the monopolists. Aside from defense contracts which act as "guaranteed annual income" subsidies to Lockheed and other corporate giants paid for by the broad middle class of taxpayers, military Research and Development contracts solve part of the problem of innovation under corporatism. New products developed as by-products of military R & D funds provide a major outlet for investment and expansion in our dynamically stagnating semi-market economy.
In "The Militarization of the American Economy," Charles E. Nathanson requires several pages to list new products derived from military R & D contracts. He concludes: "The evidence clearly suggests that militarization has substantially eliminated the major risk area of capitalism: the development of and experimentation with new processes of production and new products."42 Nathanson introduces interesting statistics (which we shall not repeat) which indicate the immensity of the militarization of America's economy. Thus, for example, "the military share of the electronics market is probably well over 60 percent today."43 Noting that many firms are now in effect "locked into" the military sector, he writes: "Whatever the explanation, one conclusion is inescapable: major firms with huge aggregations of corporate capital and productive capacity owe their survival after World War II to the Cold War, and today they are almost totally trapped in the military sector."44 In this connection, Paul Baran suggests that "systematic wastage" of production on military build-up "can provide the necessary 'outside impulse' to the economy of monopoly capitalism" and help prevent depression.45
Another such "outside impulse" was developed after World War II in the form of foreign aid, which functions as a subsidy to American export firms. In David W. Eakins's words:
The agreement that corporate liberals had reached in 1945 on
the saving qualities of foreign trade was institutionalized in the
new program of 1947. Massive infusions of dollar aid abroad
solved the problem of full production at home. 46
Since aid is often granted on condition that it be spent on American products the aid program acts as "a new domestic tax that was to be used to finance American exports as the means to full employment." 47
That the Empire is immensely important becomes clear when Williams (following Harry Magdoff) notes that foreign operations were responsible for some 20 percent of after-tax profits of U.S. manufacturing companies in 1965.48 Domestically, the junior partner of government and Big Business, the labor unions, aggravate the problems of corporatism by causing involuntary unemployment of those who might otherwise work at lower wages; by discriminating against blacks; by forcing wage increases which the State must mitigate through inflation; and by generally limiting the free entry of workers into various trades. We can conclude that under corporatism the felt need for markets abroad leads to imperialism; similarly, the expensive trial-and-error work of development and innovation must be subsidized by the State, just as it must seek to "employ" those who cannot find work in the restricted labor markets by schooling and conscripting them and by expanding the Parasitic Sector (government)to provide uses to economically redundant human and material factors of production.
LIBERTARIAN STRATEGY FOR AN OPEN DOOR AT HOME
Our situation under State capitalism, or corporatism, is well described in Jane Jacobs' words: "In developing economies, parvenus are constantly emerging. . . But in stagnant economies the same people and those whom they choose to admit into their rankshold onto power indefinitely."49 Having seen that economic statism benefits business monopolists, we have at least circumstantial evidence that there is a power elite drawn chiefly from Big Business and in control of the State apparatus. We may rely on G. William Domhoff's Who Rules America?, C. Wright Mills's The Power Elite, and Ferdinand Lundberg's The Rich and the Super-Rich to confirm that, in Jacob's words, "the same people" and "those whom they choose to admit" keep power.
Domhoff, especially, has tried to show the existence of a "national upper class" drawn from wealthy businessmen and their descendants whose members dominate the State apparatus and who recruit new blood from below. 50 This would not be surprising in view of the relationship between statism and the monopoly gains of today's corporate hierarchy. Similarly, Lundberg has compiled a long list of stock ownership which explodes the corporate liberal myth, spread by Adolf Berle
and Gardiner Means, that ownership and control of corporate property have become separated. 51 This myth, which suggests that a managerial elite full of Corporate Conscience and noblesse oblige (and unfettered by crass ties to property) has arisen and will take care of us all, has been a major ideological prop of corporate liberalism.
The socialist alternative to corporatism can be dismissed as a cure worse than the disease, which would destroy all liberty, and which, since it cannot calculate rationally, amounts to planned chaos.52 Socialism, the forcible abolition of the market, would be far worse than the cartel-fostering limits placed on free entry in the present system.
The alternative is the free market. In Rothbard's words: "On the free market...there is a harmony of interests, for everyone demonstrably gains in utility from market exchange. Where government intervenes. . .caste conflict is thereby created, for one gains at the expense of another."53 Since monopoly is "a grant of privilege from the government," he writes, "it is impossible for the government to decrease monopoly by passing punitive laws." 54 We come thus to the conclusion reached by the French economic writer, M. Paul de Rousiers, in 1899:
Directly the formation of Trusts is not induced by the natural
action of economic forces; as soon as they depend on artificial
protection, the most effective method of attack is to simply re
duce the number of these protective accidents to the greatest
possible extent. We can attack the artificial conditions, but are
impotent when opposing natural conditions. 55
Hence, the one solution that will not create more monopoly lies in the repeal of all laws regulating the economy and the reduction of the State to the much-maligned "night watchman State" of classical liberalism (at least pending the complete "withering away" of the State and its replacement by competitive defense and judicial companies as advocated by some of us). Not only would the new monopolies be thus precluded, but the former monopolists, now stripped of their privileges, would be forced to serve the consumers better than their competitors, or face the deterioration of their previously protected positions. In Mises' words, "in an unhampered market society the consumers daily decide anew who should own and how much he should own." 56 Hence, few punitive measures would need to be undertaken. (Fellmeth has suggested just this sort of repeal for the trucking industry.)
Since the major means of freeing the economy from the grasp of entrenched interests (and attendant stagnation) is the repeal of regulation (i.e., depoliticizing political capitalism) we are brought face to face with the problem of political action. In his "Letter to the Left" in 1960,
the late C. Wright Mills wrote that "Left means, or ought to mean. . . structural criticism and reportage and theories of society, which at some point are focused politically as demands and programs." 57 While such a definition puts radical libertarians on the Left, it remains quite problematic how we can focus our structural criticisms politically and bring about a free society.
"The great virtue of revolutions," Williams writes, "is that they create the circumstances in which a society's problems can be solved."58 Despite this attraction, we can take it as axiomatic that no revolutionary movement (much less a revolutionary libertarian movement) can succeed in the short run in the United States. Thus, among libertarians at least, all talk of impending upheaval should cease in favor of the building of a social "base" for a long-range libertarian struggle. The revolutionary method of clearing away the debris of corporatism is not to be relied upon in the short run.
We may assume also (though some people in Washington make one doubtful) that formally democratic politics will continue indefinitely in this country. Since a revolutionary strategy is precluded on practical grounds (and for some libertarians on other grounds as well), and since democratic institutions are there, libertarians will necessarily attempt to use them for their ends. Rothbard writes:
The socialist and the libertarian...while recognizing the in
herent instability of the democratic form, may favor democracy
as a means of ARRIVING at a socialist or a libertarian society.
The libertarian might thus consider democracy as a useful way
of protecting people against government or of advancing in
While our short-run politics may be democratic, we are now up against, in Mills's words, "the most important issue of political reflection and political action in our time: the problem of the historical agency of change, of the social and institutional means of structural change."60 Criticizing the "labor metaphisic" in the socialist theory of change, Mills wrote that "if we try to be realistic in our utopianismand that is no fruitless contradictiona writer in our countries on the left today must begin with the intellectuals.... For that is what we are, that is where we stand." 61
Mises has made a very similar point. The majority merely adopt the ideas created by others, he says, and "(w)hat is needed to turn the flood is to change the mentality of the intellectuals. Then the masses will follow suit."62 By engaging in what Lenin called "all-sided agitation" by dramatizing the deleterious effects of corporatism and imperialism, the abuses of power by the State and its encroachments upon liberty
we can begin to form a body of ideas and propaganda for a libertarian politics (or anti-politics). As Carl Oglesby said in 1965, when he was SDS president, "We must name the system that creates and sustains the war in Vietnamname it, describe it, analyze it, understand it, and change it." 63
In the ideological struggle, libertarianism enjoys a few advantages, including its emphasis on liberty at a time when voters are getting restive at the results of corporatism. For example, if many restrictions of trade were enacted piecemeal, perhaps many can be eliminated similarly. In Mises's words, "(o)nly an infinitesimal fraction of the American people is interested in... a high price for sugar.... Nonetheless the American government is firmly committed to a policy of high sugar prices by rigorously restricting both the importation of sugar from abroad and domestic production." 64 If voters can be shown that such price supports are not in their interest (i.e., if they can be dissuaded from believing corporate liberal rationalizations about the "common good"), then to the extent that they can still make their wishes felt such supports may fallone by one. In this connection, it may prove possible to win support by demonstrating that in a free market the prices of many necessities (especially food) would be a good deal lower than at present.
While forging intellectual tools for our struggle against statism must be the first task of libertarians, electoral politics offers a means of defending liberty and a forum for our ideas. Imagine a campaign in which an intelligent discussion of wage-price controls took place, or a candidate who resigned from office upon election. Or a Congressman who voted against all bills but those reducing State authority.
Still, by themselves, educational and electoral activities can accomplish only so much. Parallel institutions and resistance must accompany them if we are even to approach success in what must inevitably be a long and arduous battle. Voluntary, contractual institutions that compete with existing statist ones for legitimacy and support would provide a most effective rallying point and cutting edge for libertarian struggle while giving a libertarian twist to the early SDS idea of "countercommunity." 65 By demonstrating that the few good things government undertakes can be done more morally and effectively by alternative institutions, radicals can begin to build the free society and also make a profound point. Free schools, private postal services and coinage, defense companies, "black" markets and liberated areas point the way to Liberty.
Resistance, in the first instance a corollary of the right of self-defense, is also a potentially effective means of change, combining deed with example. Above all, libertarian strategy must embrace tax resistance (including draft resistance) to deprive the State of money and
bodies with which to do its evil work.66 In all this, the inherent clumsiness and stupidity of the State work in our favor.
We conclude, then, that freeing the economy rests primarily upon the possibility of winning over enough intellectuals to produce an impact, gaining supporters because of the advantages of the unhampered market, building parallel institutions and resisting the tyranny of the State. It is possible, though, that the various segmental groups that benefit from corporatism are so enamored of their privileges (as opposed to the disadvantages, as they see it, of competition) and so blind to the costs to them of the privileges afforded other syndicalist groups, that they will constitute sufficient dead weight to prevent effectively the reopening of competition. If enough people feel that the profits of collusion and privilege outweigh the benefits of free entry, they will have their corporatism and eat it tooin unbalanced economic development, recurring "shortages" and "surpluses," pollution, inflation, controls, and military intervention to preserve the foreign markets to which State capitalism and its concomitants, statism, Caesarism, imperialism and militarism, will persist in American society and the locus of economic progress will shift to a society with fewer institutional obstacles to economic development. Libertarians had better have a good sense of both the tragic and the humorous.
In any event, Charles Beard, the old "isolationist" historian, was essentially correct when he wrote in the 1930's that Americans should pursue "the Open Door at Home." Libertarianism, the final step from status to contractfrom feudal survivals to free trade and Natural Law is that Open Door. In seeking it, we must, in F.A. Hayek's words, "learn from the success of the socialists. . That it was their courage to be Utopian which gained them the support of the intellectuals and thereby an influence on public opinion which is daily making possible what only recently seemed utterly remote."67 A new synthesis has emerged out of New Left history and libertarian economic and social thought. As "Left" and "Right" lose meaning, we stand to gain adherents from both. Even the John Birchers have discovered Kolko! As C. Wright Mills wrote in 1960: "We are moving again."
1. Ludwig van Mises, Human Action (Chicago, 1966), 357-87.
2. Ibid., 681.
3. Murray N. Rothbard, Man, Economy and State, vol. II (Princeton, N.J., 1962), Chapter 10, 560-660.
4. Ibid., 591.
5. Ibid.. 595.
6. Murray N. Rothbard, Power and Market (Menlo Park, Calif.,1970), 28-58.
7. Ibid., 29.
8. Ibid., 44.
9. Jane Jacobs, The Economy of Cities(New York, 1969), 247.
11. Paul A. Baran, The Political Economy of Growth (New York, 1957), 92. That such market societies were never fully free in our sense goes without saying.
12. Gabriel Kolko, The Triumph of Conservatism (Chicago, 1967), especially 29-56.
13. Ibid., 2.
14. Ibid.. 2-3.
15. Ibid., 107.
16. For Kolko's full definition of "political capitalism," see ibid., 3.
17. William Appleman Williams, The Contours of American History (Chicago, 1966), 358.
18. James Weinstein, The Corporate Ideal in the Liberal State, 1900-1918 (Boston, 1968), 3.
19. Ibid., 40-61.
20. M. Browning Carrott, "The Supreme Court and American Trade Associations, 1921 -1925," Business History Review, XLIV, 3 (Autumn, 1970), 321.
21. Weinstein, Corporate Ideal, 233.
22. Murray N. Rothbard, "The Hoover Myth" in James Weinstein and David Eakins (eds.), For a New America: Essays in History and Politics from 'Studies on the Left' 1959-967 (New York, 1970), 167-8.
23. Ibid.. 174.
24. Ibid., 174-5.
25. Ibid., 179.
26. Williams, Contours, 440.
27. Ibid.. 445.
28. Ibid., 440. For the position of labor within the corporatist system, see James Weinstein, "Gompers and the New Liberalism, 1900-1909," 101-114, and Ronald Radosh, "The Corporate Ideology of American Labor Leaders from Gompers to Hilman," 125-152, in Weinstein and Eakins, For a New America.
29. Williams, Contours. 448.
30. Ibid., 449.
31. Robert C. Fellmeth, The Interstate Commerce Omission (New York, 1970), 129.
32. Ibid.. 127.
33. Ibid., 1.
34. Ibid., 131.
35. Ibid., 132.
36. Yale Brozen, "Is Government the Source of Monopoly?" Intercollegiate Review, Vol. 2 (Winter, 1968-1969), 78.
37. William Appleman Williams, The Tragedy of American Diplomacy (New York, 1962), 76.
38. Martin J. Sklar, "Woodrow Wilson and the Political Economy of Modern United States Liberalism" in Weinstein and Eakins, For a New America, 80.
39. Jacobs, Economy of Cities, 228-9.
40. Williams, Tragedy, 203-276.
41. On this point, see Jospeh D. Philips, "Economic Effects of the Cold War" in David Horowitz (ed.), Corporations and the Cold War (New York, 1969), 188-9.
42. Charles E. Nathanson, "The Militarization of the American Economy" in ibid.. 230. For his list, see 228-230.
43. Ibid.. 209.
44. Ibid., 214.
45. Baran, Political Economy, 12f.
46. David W. Eakins, "Business Planners and America's Postwar Expansion" in Horowitz, Corporations, 166.
47. Ibid., 160.
48. William Appleman Williams, "The Large Corporation and American Foreign Policy" in ibid.
49. Jacobs, Economy of Cities, 218. F.A. Hayek pointed out years ago that the efforts of "the old enemies of competition" would result in "a sort of syndicalist or 'corporative' organization of industry, in which competition is more or less suppressed but planning is left in the hands of the independent monopolies of the separate industries," putting "the consumer at the mercy of the joint monopolist action of capitalists and workers in the best organized industries." The Road to Serfdom (University of Chicago, 1944, reprinted, 1965), 40-41.
50. G. William Domhoff, Who Rules America? (Englewood Cliffs, N.J., 1967), 12-37 and 84-114. See also his "Who Made American Foreign Policy, 1945-1963?" in Horowitz, Corporations, 25-69.
51. Ferdinand Lundberg, The Rich and the Super-Rich (New York, 1968), 240-263.
52. On the impossibility of economic calculation under socialism, see Mises, Human Action, 698-715.
53. Rothbard, Power and Market, 126.
54. Ibid., 45.
55. Quoted in Gustave de Molinari, The Society of Tomorrow (New York, 1904), 194.
56. Mises, Human Action, 683.
57. C. Wright Mills, "On the New Left" in Paul Jacobs and Saul Landau (eds.), The New Radicals(New York, 1966), 107
58. Williams, Contours, 51.
59. Rothbard, Power and Market, 147.
60. Jacobs and Landau, New Radicals, 109.
61. Ibid., 111.
62. Ludwig von Mises, Planning or Freedom (South Holland, III., 1962), 181.
63. Carl Oglesby, "Liberalism and the Corporate State" in Jacobs and Landau, New Radicals, 258.
64. Mises, Planning, 182.
65. On "counter-community," see the discussion in Jacobs and Landau, New Radicals, 34-38.
66. See Jerome Tuccille, Radical Libertarianism: A Right-Wing Alternative (New York, 1970), 79-92.
67. F.A. Hayek, Studies in Philosophy, Politics and Economics (New York, 1969), 194.
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