The Market and the State

I am weary of otherwise intelligent people who insist on conflating the free market and a political system dominated by business interests who use state power to achieve their ends. To what extent this confusion arises from a failure to conceptualize the distinction, as opposed to a need to condemn alternatives to collectivist ideologies, will vary from one person to the next.

Mankind has long suffered from the consequences of assumptions that have received far too little intelligent questioning. In considering how human society is to be organized, the premise has long been accepted that “responsible” and “caring” behavior consists of men and women subordinating themselves to the authority of the state. Collective activity is presumed to be orderly, while individual action raises the specter of social turbulence. Adherents to such a point of view often end up contrasting “altruistic” politicians and government functionaries with “greedy” businessmen.

I would have thought that such simplistic thinking might have evaporated in the historic awareness of how corporate interests have been the principal promoters of government regulatory schemes to accomplish, through political coercion, ends they were unable to achieve in a free market. Economic historians of socialist and other leftist persuasion, and those of libertarian inclinations, have produced numerous books and other studies documenting this practice. My book, In Restraint of Trade: The Business Campaign Against Competition, 1918-1938, was just such an undertaking, demonstrating how – as others have also concluded – major business interests were responsible for the creation of the New Deal’s keystone program, the National Industrial Recovery Act.

In the face of so much evidence demonstrating the symbiotic relationship between corporate and political interests – always achieved at the expense of free market processes – I would think that we would witness a decline in the confusion of the “free market” with the “business system.” Following the destructive events in New Orleans, various commentators have shown the earlier assumptions to be very much alive. Robert Scheer’s article, “The Real Costs of a Culture of Greed,” and Michael Parenti’s “How the Free Market Killed New Orleans,” demonstrate not simply their conceptual errors in failing to contrast political and marketplace forces, but the strength of their commitment to fusing the two.

Scheer is a writer with an otherwise strong dedication to the protection of individual liberties vis-à-vis the state, and has written strong pieces in opposition to the war in Iraq. It is because of the general thoughtfulness of his writings that I find his explanations of the New Orleans devastation troubling, albeit predictable from someone of the Left. He begins by attacking “free-market purists” who have “denigrated the essential role that modern government performs,” going on to praise government “social services that benefit everyone – education, community policing, public health, environmental protections and infrastructure repair, [and] emergency services.”

Without any apparent sense of the self-refuting nature of his argument, he later writes of the “ill-equipped public schools,” and the lack of “adequate police protection” experienced by people in New Orleans. Nor does he detail the prolonged failure, of the federal government (i.e., the Army Corps of Engineers) to engage in the “infrastructure repair” of its levees, despite many months of prior warnings of incipient danger.

How any of these governmental shortcomings can be laid at the feet of the marketplace, Scheer does not relate. A business-dominated political system is reflected in both the Republican and Democratic parties, even though Scheer refers to the Republicans as “the party of Big Business.” Nevertheless, how corporate interests controlling and manipulating the coercive machinery of the state in furtherance of their ends, can be said to express the thinking of “free-market purists,” greatly diminishes the intellectual credibility this man otherwise expresses in his critiques of government.

Parenti goes even further in his condemnation. Apparently unaware that the flooding was caused by the failure of the federal government to maintain its levees, he declares that “[t]he free market played a crucial role” in the resulting death and destruction. In an amazing twist of absurdity, Parenti criticizes those who looked to “private means” for relief, “just as the free market dictates. . . . This is the way the invisible hand works its wonders.”

Had the man been paying attention to reality – instead of spinning his statist prayer-wheel for another shibboleth – he would have discovered that, when New Orleans residents needed help the most, it was “the invisible hand,” alone, that provided it. The millions of individuals and private organizations who spontaneously collected money, clothing, food, water, and other necessities for delivery to the Gulf region, contrasted with the Gilbert and Sullivan show of ineptitude by the federal government. As truckloads of relief items began rolling into the damaged areas, the director of FEMA was announcing that his agency was going to start responding! It took many days for the government to approve the offer from financially troubled airlines to transport flood victims, free of charge, out of New Orleans. What might Mr. Scheer have to say about this expression of the “greed” inherent in the marketplace?

There were many reported instances of the federal government refusing to allow shipments of human necessities into the stricken area, although there was no shortage of armed troops brought into the city to menace flood victims and forcibly remove people from their homes. (This latter government effort apparently satisfied Mr. Parenti’s humane sensibilities, after noting, with approval, the forced evacuation of residents by the Cuban government following a hurricane last year.) The mayor of Slidell, Louisiana offered this assessment of federal efforts: “[w]e are still hampered by some of the most stupid, idiotic regulations by FEMA. They have turned away generators, we’ve heard that they’ve gone around seizing equipment from our contractors.”

I suspect that those who continue to praise government for its perceived beneficence, and to condemn the marketplace for its alleged shortcomings, are people who have never managed to work the entropy of New Deal thinking out of their minds. There is an allure, to many, of collectivist systems that allow human beings, their energies, and other resources, to be marshaled under a centralized, coercive authority that they fashion themselves fit to exercise. I have no way of knowing whether this is the thinking that drives these men, or whether they are simply distrustful of individualized decision-making. Friedrich Hayek has written of those who have a “fear of trusting uncontrolled social forces,” an attitude that motivates both the people-pushers of our world and those who have learned to be security-freaks.

One of the most dangerous assumptions to infect the human mind has been the idea that people can act out of any motivation other than the pursuit of their self-interests. To war against self-interest is to war against the nature of life itself. There is no action you or I can take that is not driven by self-interest.

Neither the state nor the marketplace has a monopoly on wisdom, efficacy, or motivation. People can be well- or ill-motivated in either sector. The primary distinction between a political system, and a non-political, free-market system, is whether some people will be allowed to use violence against others to achieve their desired ends. By definition, the marketplace eschews coercive means; by its nature, the state is organized force.

But having said that is not to confine the scope of one’s self-interested pursuits. If individuals or groups want to accomplish some objective, they are free to organize themselves and their resources to do so. The spontaneous efforts of millions of people to part with their own money or other property to help flood victims exemplified self-interested motivations. One who wishes to understand why this is so need look no further than the Austrian school of economics. Mises expressed the point so clearly: people act out of a desire to be better off after acting than they were before.

In our materialistic culture – and socialist thinking is thoroughly dominated by materialism – most people tend to think of self-interested pursuits only in terms of monetary profits. Many of my students have the hardest time understanding how risking one’s life to save a stranger, or giving away vast sums of money to a charitable purpose, can be acts of self-interest. Each of us is motivated by a wide range of desires, many of which have nothing to do with making money! Why do people commit themselves to the lifelong expense of time and money to the raising of children? If child-rearing was evaluated by the same criteria by which we traditionally measure the success or failure of a business, the activity would end up in the bankruptcy courts.

Rather than condemning the marketplace of free men and women who voluntarily responded to this disaster, Messrs. Scheer and Parenti might have addressed one of the debilitating consequences of statism that was so clearly revealed in the aftermath of this flooding. Mr. Scheer, for instance, might have written of “The Real Costs of a Culture of Power,” and focused attention on what statism has produced: the dispirited men and women who, for days, sat passively in the New Orleans convention center waiting to be rescued by government rescuers who never arrived. Human beings corralled, locked up, and held at gunpoint by government troops: this is the “role that modern government performs” in the lives of increasing numbers of Americans.

I would also be interested in his opinions about Jabbor Gibson, the eighteen-year-old who saw an abandoned bus in New Orleans, loaded it with people who wanted nothing more than to get to safety, and drove to Houston. “I just took the bus and drove all the way here . . . seven hours straight,” Jabbor stated. “I hadn’t ever drove a bus.” Perhaps Mr. Scheer will use this young man’s grammar as evidence of “ill-equipped public schools.” On the other hand, he may see in Mr. Gibson a healthier omen for the people of New Orleans and elsewhere: an awareness of the life-and-death importance of self-motivation and cooperation in the pursuit of self-interest. Decades of state domination of people’s lives have shown us the dehumanized resignation of the human spirit. Perhaps truckload after truckload of life-saving supplies pouring into the Gulf Coast through the spontaneous processes of an “invisible hand” that permitted millions of people to pursue their self-interests in helping others, will provide a superior model for societal behavior.

Butler Shaffer [send him e-mail] teaches at the Southwestern University School of Law.