Libertarianism is Not Pro-Corporate

November 18th, 2008

I’ve been following the latest “Cato Unbound.”   In this month’s lead essay, Roderick Long notes that defenders of the free market are often accused of being apologists for big business and shills for the corporate elite, and asks if this is a fair charge.  His answer? No and yes. Matthew Yglesias, Steven Horwitz, and Dean Baker respond in their own essays. It’s an interesting read.

Serendipitously, I am reading F. A. Hayek’s “The Road to Serfdom” (highly recommended; here is a free, heavily abridged version), and I came across the following passage:

“There is nothing in the basic principles of [classic] liberalism to make it a stationary creed; there are no hard-and-fast rules fixed once and for all. The fundamental principle that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion, is capable of an infinite variety of applications.  There is, in particular, all the difference between deliberately creating a system within which competition will work as beneficially as possible and passively accepting institutions as they are.

Here, Hayek is countering the supposition that classic liberals (now better known as libertarians) are against all regulation. He is emphasizing that while some regulation is neccesary, we shouldn’t just accept the status quo.  Hayek continues:

Probably nothing has done so much harm to the liberal cause as the wooden insistence of some [classic] liberals on certain rough rules of thumb, above all the principle of laissez faire.

Long’s essay echoes this sentiment regarding the harm some libertarians have done to the cause, although Long is talking about the embrace of big corporations rather than laissez faire; Long sees corporatism as anti-laissez faire.  But I found Hayek’s explanation for why libertarians default to laissez faire quite persuasive:

Yet in a sense, this was necessary and unavoidable.  Against innumerable interests which could show that particular measures would confer immediate and obvious benefits on some, while the harm they cause was much more indirect and difficult to see, nothing short of some hard-and-fast rule would have been effective.  And since a strong presumption in favor of industrial liberty had undoubtedly been established, the temptation to present it as a rule which knew no exceptions was too strong always to be resisted.

Hayek is describing laissez faire / deregulation as the only method to effectively battle special interests, and seems to be anticipating much of public choice theory’s explanation of special interest rent-seeking.  For example, think about the Big Three U.S. auto companies.  The possibility of billions of dollars in bailout money is a strong incentive for them to spend millions lobbying Congress.  Yet the cost to each individual tax payer is small enough, or hidden enough, that it is not worth an individual taxpayer’s time to protest.  This is a structural flaw in U.S. politics, and Hayek’s point may be that a hard-and-fast laissez faire rule is one useful way to correct this.

Of course, Hayek’s rationale for a hard-and-fast laissez faire rule doesn’t translate into pro-Corporations. In fact, as in my example above (and as Long’s essay indicates), corporations are very often the special interest seeking favorable treatment at the expense of the general public.  And in the broader sense, the above passage supports Long’s thesis that classic liberalism is not pro-corporate, although some libertarians are.

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