Don’t Confuse Free Markets with the Interventionist State

First Published: 2020-12-06

Summary

Most people know that what politics is really like is a corrupt contest for power, privileges, and favors among special interest groups who support the politicians who will use the government to provide such plunder in exchange for campaign contributions and votes on election day. 

In literature, the movie and television entertainment industry, and the mass media, the villains are always businessmen using the political process for their own greedy profit-seeking ends at the expense of their workers, the consumers, and the entire planet they are hard at work destroying. In other words, it’s all the fault of “capitalism.” 

An example of this is the recently aired mini-series on PBS, “Roadkill,” starring Hugh Lourie (who played “House” in the TV series of a few years back). Now portraying a corrupt, lying and cheating, cynical power-lusting cabinet minister in a British Conservative government, he takes bribes and is finally ushered into becoming Prime Minister with the aid of murdering corporate interests who will do anything to keep their profits flowing.  

In my article this week, I say that much of the corrupt, plundering, political power-lusting portrayed in this fashion exists to one degree or another in modern democratic systems. But its cause is not something inherent in free market “capitalism,” but is the product of the interventionist-welfare state. The confusion is due to the mixing up of a free and open economic system based on equal individual rights for all, with neither favors nor privileges for any; and a regulated and coercively redistributive system of government interventionism precisely meant to benefit some through political connivance at the expense of others not able to successfully “game” the political system in the same way. 

It is imperative for friends of freedom to find ways to persuasively explain to others the idea and ideal of economic liberty, and to challenge the premises and presumptions of the interventionist state that creates the corruption and special interest favoritism that we see all around us in the societies within which we all find ourselves living.


Don’t Confuse Free Markets with the Interventionist State

by Richard Ebeling

First published at AIER here…

When most people put on their “reality” hats about politics, there are few among them who do not cynically see the power-lusting, the corruption, and the hypocrisy in most of what is said and done by those running for or sitting in political office. A constant point of dispute and disagreement is over how and why it is that governments have this seemingly inescapable tendency. The all too frequent answer in modern democratic societies is the claimed nefarious influences of businessmen to use government at the expense of most others everywhere around the world. 

The latter is a near permanent theme in literature, movies, and the mass media. Widely used political and ideological rhetoric is portrayed as a false cover for what is really an often-successful attempt to dupe most people into thinking that what is “good for business is good for America.” Far too many politicians are the partners and accomplices to these private sector abusers of the public trust, it is said, since government is supposed to assure fairness and “social justice” for the many rather than privileges and favors for the capitalist few. 

While mostly left unstated in any explicit or direct manner in movies and on television, the implicit message is that businessmen are inherently exploiting oppressors and abusers of their workers, their customers, and “the earth” due to their physical harms to the planet that threaten environmental sustainability. “Business” has to be heavily regulated and restricted if public harm is not to be done. Or . . . maybe there are just some if not many sectors of everyday life that must be placed outside of private reach through government production and provision of publicly necessary and needed goods and services. Otherwise, not just public harm, but human death and destruction will come in the wake of allowed private enterprise. 

“Roadkill’s” Twisted Conception of a Libertarian

One example of these views may be seen in the recently aired four-part Season One of “Roadkill,” broadcast as part of Masterpiece Theater on PBS, starring Hugh Laurie (known to many American television viewers for his role as the medical doctor, “House,” which ran from 2004 to 2012). In this latest outing, Laurie plays Peter Laurence, a British Conservative Party cabinet member who serves, at first, as Minister of Transportation. 

He is “hip” and “progressive,” saying that in his personal life and in his politics, he always looks at what’s ahead, and not at what has happened or what might otherwise tie you to the past. He regularly appears on a radio talk show with glib remarks outside of the seeming mainstream of even his own party’s politics. The first episode opens with him having won a libel case in which a newspaper reporter had accused him of corruption and bribery in the service of a consortium of businessmen wanting to make the world safer for their ill-gotten profits. 

It seems that our Minister of Transportation may have been in cahoots with American medical companies who want to “privatize” parts of the British National Health Service (NHS). What could be more damning than the idea of replacing socialized medicine with private enterprise health care and service? Oh, the horror!

At one point when he is challenged about whether he is really innocent of the accusation, he insists that the charge was absurd, since, after all, what he is all about is personal freedom and choice. He declares, how could he be guilty, why, he views himself as a “libertarian.” When he is mildly injured in a car accident with a deer, he praises the heroes of Britain’s NHS as he leaves the hospital where he has been treated. Clearly, there are limits to his public libertarianism.  

Personal and Political Corruption Envelops the Main Character

In his personal life, he cheats on his wife, lies to his two daughters, views his mistress as a convenience rather than a commitment, and faces a new potential scandal just as he is made Minister of Justice in a cabinet reshuffle, when he discovers that he has a previously unknown daughter from an illicit relationship with a black woman 20 years earlier, a daughter who is in prison for major bank fraud. But don’t worry, he gets ahead of it by going public on television saying he is pleased to find out about this daughter and hoping to get to know her better; after the show, Peter Laurence tells his personal assistant that that should get his public support up a bit. 

But things are not all blue skies for our main character. The news reporter who brought the corruption charges against him won’t give up; she finds a witness who can confirm that Laurence was where he said he wasn’t, working for an Anglo-American lobbying group and earning a $500,000 “speaker’s fee” for an hour’s presentation; but the witness mysteriously dies. However, the news reporter doggedly heads over to Washington, D.C. to still get the goods on Laurence; alas, she is killed in a hit-and-run on the streets of the U.S. capital. 

Not that Peter Laurence is, himself, behind the murder of the young reporter. Oh, no, that has been taken care of by an arms consortium and others, because they have bigger plans for our Minister of Justice. When it turns out that weapons used by the Saudi Arabian government that have killed three British NGO representatives in war-torn Yemen were sold by those U.K. armament manufacturers to the Riyadh government, the Conservative Party Prime Minister orders a temporary arms sale embargo to calm public outrage. 

British Prime Ministers may come and go, but the pursuit of private profits never comes to an end, even if it kills innocent fellow citizens doing humanitarian work in a faraway country. The armament consortium engineers a vote of no confidence in the British Parliament to oust the current Conservative Prime Minister from 10 Downing Street. 

Your Political Friends Can Get You to 10 Downing Street 

Peter Laurence meets with the head of the British Conservative Party and one of the leading U.K. armaments manufacturers; he is reminded about how the three of them have been such good friends for, oh, so long a time. Yes, what a tragedy about the unfortunate death of that British reporter while she was over in the States. But, well, that just means one less thing for everyone to worry about. They just need to remember that without the tourist trade and the armaments industry there is no British economy, so what’s good for armament manufacturers is good for Great Britain. They just know they can count on Laurence not forgetting that. 

The final episode of Season One ends with our “hero” stepping into 10 Downing Street as the newly elected Prime Minister of Great Britain. What could go wrong? The betrayed wife is beside him as they enter their new residence, many in the public look on him as that “progressive” forward-looking Conservative Party leader, and, clearly, his “friends” in British industry have shown their appreciation for his right-thinking by helping his arrival at that lofty political position of power and privilege. 

But shadows of his personal and professional past that he says he always tries to put behind him are still looming just ahead. So how and what will bring about the downfall of Peter Laurence, or the misstep from his past that he says might make him the next “roadkill” in the processes of political power-lusting, corruption, and abuses of positions in high governmental authority? 

The answers await Season Two, if there is one, because the show’s producers have not yet announced whether it will be back next year. 

All the Marxian Messaging About “Capitalism” is There

All the elements of the standard anti-capitalist tale are here, with its subliminal Marxian presumptions. Public statements of believing in personal choice and individual liberty, and a claimed “public good” arising from profit-pursuing private enterprise are all part of the rhetorical “false conscience”-creating manipulators of public opinion. It is all a smokescreen to hide the “real” power relationships of greedy businessmen using politicians and government organs of power to acquire their ill-gotten gains by wanting to undermine national health care and make millions by manufacturing the means by which innocent people are killed in various conflicts around the world. 

Self-labelling libertarians like Peter Laurence in “Roadkill” are corrupt and manipulative people using the rhetoric of freedom to live their own comfortable lives in government positions that are theirs only because they serve and work with the “real” power behind “the system,” that being evil, murdering businessmen. The honest people, like that truth-seeking reporter, end up dead as their reward for trying to unmask the powers-that-be. Governments are put in place and torn down by capitalist wire pullers behind the curtain.  

It is of note that far less frequently in such movies and on television is corruption and abuse of power shown to be in socialist or left-of-center governments in office. Rarely if ever is their rhetoric portrayed as the cover to advance the special interests of labor unions wanting closed shops, or leftist-friendly businesses wanting subsidies to cover their unprofitable enterprises, or socialist ideologues hungry for power to coercively socially engineer the lives of tens or hundreds of millions of ordinary people. 

The heroic person in almost all movies and television shows with some political message imbedded in it is the lone person trying to stand in the way of lumber companies destroying the rainforests, or oil companies poisoning the land, sea and air, or businessmen willing to murder their own grannie for an extra buck. If there is a “good” businessman, he is always someone who in some way sacrifices his profits for a higher and more socially just cause. But even one of these is few and far between. Or if there is a good businessman, he is the small underdog enterpriser who, also, is a victim, just like the other “little people” against “big” business.

The Free Market and Its Institutional Premises

What all such films and shows are portraying are the intrigues and workings of the Interventionist State, not the nature and reality of a functioning free market economy in which governments actually are limited to the few functions of securing and protecting the individual rights of each person to their life, liberty and honestly acquired property. And a system of an impartial rule of law, under which there are the same equal individual rights for all, but privileges and favors for none. 

Under such a true political-economic system of classical liberalism, politicians like Peter Laurence in “Roadkill” have no role to play because there are no special favors to give or take away. A way to see the difference, perhaps, is by laying out an eight-point contrast between the liberal free market economy and the interventionist state. The institutional presumptions and premises of a liberal market economy are:

  1. All means of production are privately owned.
  2. The use of the means of production is under the control of private owners, who may be individuals or corporate entities.
  3. Consumer demands determine how the means of production will be used.
  4. Competitive market forces of supply and demand determine the prices for consumer goods and the various factors of production (including labor).
  5. The success or failure of individual and corporate enterprises is determined by the profits or losses these enterprises earn, based on their greater or lesser ability to satisfy consumer demand in competition with their rivals in the marketplace.
  6. The market is not confined to domestic transactions and includes freedom of international trade.
  7. The monetary system is based on a market-determined commodity (for example, gold or silver), and the banking system is private and competitive (neither controlled nor regulated by government).
  8. Government is limited in its activities to the enforcement and protection of each individual’s life, liberty and honestly acquired property under impartial rule of law.

Under such a system there are no possibilities for corrupt acts by politicians to bestow special privileges and favors on some at others’ expense, since by definition and institutional constraint there is nothing to politically buy or sell from the government, for as long as these “rules of the game” are recognized, abided by, and enforced. 

The Interventionist State and Its Institutional Premises

Contrast this with the institutional presumptions and premises of the interventionist state that more closely resembles the type of world with its personalities and incentives as represented in Masterpiece Theater’s “Roadkill.” In the interventionist state:

  1. The private ownership of the means of production is restricted and abridged.
  2. The use of the means of production by private owners is prohibited, limited or regulated.
  3. The users of the means of production are prevented from being guided solely by consumer demands.
  4. Government influences or controls the formation of prices for consumer goods and/or the factors of production (including labor).
  5. Government reduces the impact of market supply and demand on the success or failure of various enterprises, while increasing its own influence and control over market outcomes and earned incomes through such artificial means as pricing and production regulations, limits on freedom of entry into segments of the market, and direct or indirect subsidies, and compulsory redistribution. 
  6. Free entry into the domestic market by potential foreign rivals is discouraged, restricted, or prohibited through import bans, quotas, or tariffs, and other means.
  7. The monetary system is regulated by government for the purpose of influencing what is used as money, the value of money, and the rate at which the quantity of money is increased or decreased. These, and other policy instruments, are used for affecting employment, output, and growth in the economy.
  8. Government’s role is not limited to the protection of life, liberty, and property. 

Here, in the political arena, is a potential cesspool of corruption and abuse. With the government’s hand increasingly in more and more aspects of everyday economic life, the future of every enterpriser’s business now depends on what, how, and for whom the political interventions are introduced and secured. Politics rather than markets more and more determines the fortunes and fate of any private enterprise. Businessmen find it necessary to cultivate the qualities of political entrepreneurship, rather than simply that of a market-oriented entrepreneur.

Ludwig von Mises on the Workings of the Interventionist State

This was explained nearly 90 years ago by Austrian economist Ludwig von Mises (1881-1973), at the twilight of the interventionist and corrupt Weimar Republic in Germany, shortly before the coming to power of Adolf Hitler and his National Socialist (Nazi) Party. In 1932, during the Great Depression and amid a wide belief that the prolonged and severe economic downturn was “proof” of the failure of a capitalist economy, Mises explained the institutional nature and behavioral characteristics of those attempting to get ahead in the interventionist state:

“In the interventionist state it is no longer of crucial importance for the success of an enterprise that the business should be managed in a way that it satisfies the demands of consumers in the best and least costly manner. It is far more important that one has ‘good relationships’ with the political authorities so that the interventions work to the advantage and not the disadvantage of the enterprise. 

“A few marks’ more tariff protection for the products of the enterprise and a few marks’ less tariff for the raw materials used in the manufacturing process can be of far more benefit to the enterprise than the greatest care in managing the business. No matter how well an enterprise may be managed, it will fail if it does not know how to protect its interests in the drawing up of the customs rates, in the negotiations before arbitration boards, and with the cartel authorities. To have ‘connections’ becomes more important than to produce well and cheaply.

“So the leadership positions within enterprises are no longer achieved by men who understand how to organize companies and to direct production in the way the market situation demands, but by men who are well thought of ‘above’ and ‘below,’ men who understand how to get along well with the press and all the political parties, especially with the radicals, so that they and their company give no offence. It is that class of general directors that negotiate far more often with state functionaries and party leaders than with those from whom they buy or to whom they sell.

“Since it is a question of obtaining political favors for these enterprises, their directors must repay politicians with favors. In recent years, there have been relatively few large enterprises that have not had to spend very considerable sums for various undertakings in spite of it being clear from the start they would yield no profit. But in spite of the expected loss it had to be done for political reasons. Let us not even mention contributions for purposes unrelated to business – for campaign funds, public welfare organizations, and the like.” (Ludwig von Mises, “The Myth of the Failure of Capitalism” [1932] in Selected Writings of Ludwig von Mises, Vol. 2 [2000], pp. 188-189)

Ayn Rand and the Mindset of the Politically Privileged and Powerful

The psychological atmosphere of the interventionist state and its users and abusers was also captured in Ayn Rand’s famous novel, Atlas Shrugged (1957), when a group of the business plunder participants meet for a drink to discuss how they cannot be held responsible for the bad times through which the country is passing. That their failing businesses and falling profits, their inabilities to meet contractual obligations and commitments, are not the fault of the poor management of their enterprises. 

No, it’s “the system,” it’s the unreliability of others, it is due to business rivals not willing to sacrifice for the “common good” and contribute a “fair share” to others in the industry, with, instead, those “selfish” rivals attempting to compete more effectively for consumer business that leaves these others financially less well off. “The only justification of private property,” one of them says, “is public service.” Another insists that, “After all, private property is a trusteeship held for the benefit of society as a whole.” One other points to “the blight of unbridled competition,” while still another argues, “It seems to me that the national policy ought to be aimed at the objective of giving everybody a chance at his fair share . . .” (pp. 49-50)

Represented here are the politically oriented businessmen about whom Mises was referring. People not focused on making better and less expensive goods, or whose attention is directed at meeting consumer demands, and at those from whom they buy and to whom they sell as the basis upon which any profits may be earned. No, their interest is in gaming the interventionist state to hinder their competitors, gain subsidies and protections through government regulations, and to weaken respect for and belief in private property rights by insisting that coerced sharing and service to a “common good,” as the ideological means of rationalizing the political interventions to win those privileges and favors that without the government would never be theirs on an open and free market. 

Confusing Free Market Capitalism with the Corrupt Interventionist State 

This points to one of the most commonly made and dangerous confusions in modern society, that being the assumption that the economic system under which we have been and currently are living, represents and reflects a liberal free market economy. It is difficult for many people to see the difference between an actual free market and the interventionist system under which we live because so many across the political spectrum refer to ours as a “capitalist” society. 

If we use as a benchmark the institutional characteristics defined, above, as the meaning of a free market economy, the U.S. is very far from that conceptual idea and ideal. Our system possesses and operates in the context of all the institutional characteristics outlined as defining the interventionist state. 

Is there favoritism and privilege? Is the “system” manipulated by those who know how to “play the game” of political entrepreneurship at the expense of consumers and competitors? Do politicians rise to and retain power and position in government through political pandering and offer plunder to those special interests who can get them elected? Are false promises, often outright lies, and frequent appeals to irrational emotionalism and primal envy frequently the avenues to political success? 

Yes, to each and every one of these. The events of the last year under the coronavirus crisis have only reinforced and intensified this trend down the interventionist road. No corner of society or the economy has been free of a hyper-politicization in which governments have determined who may work and under what conditions, what goods may be manufactured and sold and at what prices, and who may stay open for business and with what restrictions on how they may operate their enterprise. 

This is the breeding ground for even more of the political hypocrisy and corrupt privilege and favoritism portrayed in programs like “Roadkill.” How can it be otherwise when everyone’s life and fate are in the hands of politicians like that fictional Peter Laurance, and the ideological and special interest groups that want to use government to get what might never be theirs under a real system of free market capitalism?

The important task for those who value personal freedom, economic liberty and the free market economy is to disabuse our fellow citizens from thinking that what we have is a fully capitalist system, and to appreciate that what critics of capitalism call for and want in the form of even more and bigger government would only magnify the corrosive trends already in play in the modern world.


Dr. Richard Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel, in Charleston, South Carolina.

Dr. Ebeling is the author of Austrian Economics and Public Policy: Restoring Freedom and Prosperity  (2016); Monetary Central Planning and the State (2015) as well as the author of Political Economy, Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition (2010) and Austrian Economics and the Political Economy of Freedom (2003). And the editor of the three-volume, Selected Writing of Ludwig von Mises, published by Liberty Fund.

He is also the co-editor of When We Are Free (Northwood University Press, 2014), an anthology of essays devoted to the moral, political and economic principles of the free society, and co-author of the seven-volume, In Defense of Capitalism (Northwood University Press, 2010-2016).

Visit Dr. Ebeling’s Archive here…
print
Help support The Nassau Institute