Home > Anarchism and Voluntaryism, Democracy, Law, Markets, Taxation > Don’t fear the free market, part 3: Rich and poor

Don’t fear the free market, part 3: Rich and poor

Redistribute wealth?

“What’s ‘just’ has been debated for centuries but let me offer you my definition of social justice: I keep what I earn and you keep what you earn. Do you disagree? Well then tell me how much of what I earn ‘belongs’ to you – and why?” – Walter Williams

My neighbour has far more money than I do. Should I be allowed to go over there with a gun and force him to pay me? No. When I do that, it is called robbery. But why is it okay for the government to do so? Is it no longer robbery? No, because calling it “law” makes it legitimate. Is it altruistic to force others to give someone else their money? Does anyone else deserve that money? Is taking it from people who earned it justified? Is that the only way to help the poor?

The problem with many statist arguments is that they confuse the ideals of government, which vary depending on the person, but which may well include a perfect redistribution of wealth and opportunities, with the reality, which is that government does not make us more free, more wealthy, more educated or more equal. Government is the institutionalisation of thuggery. The desire to redistribute wealth is an excellent example of this flawed thinking. We need to take more from the rich and give it to the poor. But such policies do not make things much better for the poor.

If a man acquired his wealth ethically, which means that he provided goods and services that people were willing to pay for, then any so-called transfer or redistribution of that wealth is theft. It punishes the people who contribute most to the general prosperity and provides a disincentive to do more. Because it makes it harder for those people to do what they do best, which is create jobs, wealth, products and services, the argument that redistribution of wealth adds to social welfare falls on its face. It is giving a man a fish. Letting the captains of industry strengthen the economy raises social welfare. If people want to raise their individual welfare, they can upgrade their education, learn new skills and start their own businesses, provide what people want and get paid for it, relying on themselves rather than on force.

But a redistribution of wealth is not really a redistribution anyway. Even if you believe it is good to use violence to take money from people who have made it legitimately, most of that money does not go to the poor. It goes into the enormous pool of the government revenues, which pay for the generous salaries and pensions of politicians and bureaucrats, subsidies to large farms and airlines, and making war on weaker countries. Does any of it go to the poor? Sure. But not much of it. And the poor are still poor, even after decades of welfare.

Besides, along with their providing jobs, goods and services, wealthy people give to charity. Facts about who gives and how much can be difficult to come by, as many donate anonymously. Nonetheless, we know Bill Gates, who brought the world Windows and innovated the hell out of computer software, has given some $28b to charity. Warren Buffett, who has financed many successful companies, has given about $40b. The Waltons, the Dells and the Rockefellers have all given in the hundreds of millions. And if you get rich, probably making others rich in the process, you can too.

The rich do not want to keep the poor poor. They have not for at least a hundred years, when industrialists like Henry Ford and John D. Rockefeller began paying their employees more, in part so that they could buy from the corporations for which they worked. (Also because if they wanted the best workers, they needed to offer more. That is how the labour market works.) No one who is not simply cruel wants the poor to stay poor. The more buying power the people have, the better off the rich, as well as the poor, are.

Inequality of wealth is only a problem because of jealousy. It does indeed cause serious problems, such as, to an extent, the current riots in the UK. But taking from others is not the way to solve those problems. Government is not making the poor any richer. The poor are taxed, just like the rest of us; not necessarily through their income, but through taxes on food, housing, and cell phone plan activation fees to name a few. They are taxed by central bank policies that encourage inflation. Sometimes you need to save to buy assets. Inflation eats away at savings. People with weak skills are kept out of the labour market by minimum wages, which discourage hiring. They cannot start art stands at the side of the road without a permit and government stamps.

Instead of resenting the rich and using violence to take their property, we could either learn how to become rich ourselves, which would benefit everyone, or we could learn to move beyond our base emotion of envy and be content.

Protect us from the rich?

A lot of people believe that we need government to protect us from the rich and powerful. I think people who think that way do not understand the nature of government very well, and they have it backwards. The rich and powerful use government to become more rich and more powerful. Whatever party you vote for will be the powerful people of your country. They will have control of a big chunk of the money and the ability to make whatever laws they want. The rich will ally with them, they will take their share, as they always do, and the government will continue to protect them, as it always does; or else a new elite will emerge, as it did under communism. If you really believe that getting more people out to vote, or getting the right person in power is going to fundamentally change that, I think you are naïve. There is no reason to believe that the powerful become any less powerful for any meaningful length of time when there is a new government. And to think that the rich would be more powerful in an anarchic state I believe is wrong, because in fact they wouldn’t have any political power, and they wouldn’t have state protection. That means no more riot police protecting world government-G8-WTO-IMF-whatever-you-don’t-like meetings—there could be security guards, but the people at the meetings would have to pay for them out of their own pockets. In fact, no more of those billion-dollar photo ops at all. No government means no more lucrative insider no-bid government contracts. It means no subsidies for the well-connected, just the people deciding whom to give their money to. It means no government protection and bailouts for the corporations no one likes, only the whims of the market. It means no more police breaking into the wrong house and shooting the wrong man for suspecting him of selling drugs (the war on the poor). It means no more soldiers going to fight for private control of resources overseas (the war on Islam) and coming back in body bags, or coming back as nervous wrecks who do not get treatment. It means more money for the productive sector, which means more and better-paying jobs. And sure, it might mean the rich go to better schools and get better health care, but I think it is fair to say they already do now.

The rich would have the most to lose from an anarchic society, because they would no longer receive all the various handouts they get in the form of bailouts, subsidies, government contracts, and laws that create barriers to entry and monopolies. There would be no limited liability, so people would be accountable for what they do, rather than hiding behind a legal corporation. And though it’s a bit simplistic, it is basically true that managers of public corporations are legally bound to pursue profit. If there were no laws, that would not be necessary. If there is someone with power, which by definition is unaccountable, and he has the power to tax and pass laws, he will pass laws that favour rich people so that he can get some of that wealth for himself. The very existence of government is why the elites can concentrate both money and power in their hands and not have to listen to the voters on the bottom. If you are afraid of the rich, let us start cutting off by cutting off the money they make from taxpayers. How about eliminating bailouts and stimuluses that take trillions of dollars from the productive sector and hand it to any lobby group from failed banks to the wives of failed bankers?

The more wealth is concentrated in the hands of one person, the more others will attempt to rob that person. As such, he or she needs greater and greater security. At the moment, the rich outsource their security to the state, which means they get the taxpayers to pay for the defense of their property. (Find a more robust discussion of this topic here.) The police protect the rich and beat the poor, and yet everyone is paying for them.

Then there is this perpetual fear that anarchy would mean that the rich would have their own private militias to take from everyone else. Well, what do you think the government is? It is a tool of the elites to take from everyone else. But it is also a professional salesteam, selling the illusion that it works, or maybe that it can work, for the people, so that people keep showing up on election day, and the elites keep going to the bank. At least in a free market, rich people would need to pay for their own militias, instead of making you pay for them like now. But I do not know why they would want their own militias. Everyone can pay private security firms for protection, but obviously rich people would not need to use militias to steal from others if they already have money. Of course, voting for a party promising to redistribute wealth is similar to using a militia to steal from others. Left-wing government is a tool of the well-meaning but ignorant.

If you really resent the rich that much, don’t give them your business. It’s as simple as that. If Sam Walton is a bad person, don’t shop at Walmart. If Ray Kroc spends money to finance wars in South America, stop going to McDonald’s, and shame those who do.

Having no state, no concentrated political power, would mean a more egalitarian society, not less.

Save the poor?

“If there were no government, what would be done about poverty?” First, what is the government doing about poverty now? Governments have had anti-poverty policies for decades and poverty has not gone away. If anything, it has become entrenched. (Some data: most money going to welfare programs is wasted; most charitable giving is not.)

Second, welfare has existed before and beyond the welfare state. The welfare state as we know it emerged in the wake of World War Two. Governments wanted to maintain the massive spending they had begun, as reducing spending means reducing government power, and governments hate relinquishing an inch of territory they have grabbed. (A case in point: even after the wave of privatisation in the late 1990s, government spending continued to increase rather than decrease.)

Third, there are ways in which government can alleviate poverty, but simply channeling tax money to the poor is not one of them. Property rights and legal contracts help, though those things are part of the reciprocal nature of normal human trade and interaction, and a state that takes away your property through taxation and imprisonment is not a guarantor of it. (Does the state confiscate property and give it to the rich? Yes.) Businesses operating in a free market end poverty. Look at China, or any of the middle income Asian economies. Walmart alone has brought millions of people out of poverty. People complain about sweatshop labour, but how else do they think hundreds of millions of people could have sent their children to school? Conditions are terrible, but if they were better, they would be more expensive and the corporations would hire fewer workers, be less productive and have less profit to invest back into their operations.

Poverty is beaten with economic growth. That was true during Europe’s development, America’s development, the development of the Asian tigers, and it will hold anywhere. Economic growth means clean drinking water, better nutrition, reduced child mortality, more access to electricity (which replaces burning much dirtier coal, wood and dung), and the freedom to take care of yourself and do what you want with your life. But economic growth takes time. It is not something that the government can fix in a few months with stimulus packages, regulations, makework projects and redistribution of wealth. People need to be able to start their own businesses and operate them without knowing thousands of pages of regulations and tax codes. It takes many years of free enterprise for people to understand, adjust to and plan according to a set of rules, which cannot happen when the government keeps adding to and changing them.

Who are the poorest people in North America? Native North Americans. The indigenous people. Why is that? It is obviously not for lack of government assistance. In fact, it is because of government assistance, and other regulations (like Canada’s “Indian Act”), that they are poor. It is because handouts called “help” are not actually help. The US government spends an average of $7000 per native on healthcare, in contrast to $2000 for other Americans; and yet natives still do not get good healthcare. The problem is with the incentives. Natives who pull themselves up by their bootstraps do just as well as anyone else; those who remain under government stewardship are crippled by dependence. They do not own their resources, meaning they do not have property rights. As Hernando de Soto explains in The Mystery of Capital, property rights is a major factor in enabling people to increase their earning power, because if they own their land and house and other property, they can put it up as collateral for a loan, which means they have credit, which enables them to expand their farms or businesses and make more money off them. It is the same principle as that of microloans. Government bones do not help; property rights just might.

Poor people are simply better off where they have more economic freedom, not more government. In the US, poor people can start businesses (though they might be hampered by fees, forms and other red tape), they can use their property as collateral, they can provide goods and services on a relatively free market and end up surviving and sometimes prospering. We do not need laws for ownership. As Frederic Bastiat once said, “Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.” Government, like religion, expropriated the laws of human nature and added to them unnecessarily, and has come to make everyone believe those laws could not exist without it. Let the poor climb out of poverty and many of them will.

If the people think something is a good idea, it will get done. And if they are not willing to pay for it, how could it be all right (or democratic) to force them to? That one is lost on me. But let’s say for the sake of argument that it is okay to force people to pay for schools, hospitals, roads and the fire department. I can understand that, although I still think people would pay for those things themselves, and save money by purchasing from a competitive market rather than a sclerotic public sector. I really do not see why they would not. We help those in need because we are sympathetic, we take time and money to improve our neighbourhoods because everybody gains, especially people who are recognised as putting their time and effort into doing so.

Why do you think that every culture and every religion has some tradition and institution for dealing with poverty? It is because the desire to help others is universal. Try it out some time: if you feel bad, do not try to get more for yourself; do something for others. Give something of yours away. Spread love to other people. As you shed your selfishness, you will feel better. It is a universal truth of human nature.

  1. Steve
    August 15, 2011 at 4:52 pm

    In this article you present conflicting ideas. One is that the rich capitalists are the “job producers”, the ones who create value etc. You say, “hey! we shouldn’t fear these guys! they make everything good in our lives!” You also point out Bill Gates and Warren Buffett as examples.

    And yet, at the same time you concede that the rich and the corporations run the US government to the detriment of the population. The government is the shadow cast on society by big business, to paraphrase John Dewey. It seems that these rich people and rich corporations are looking out just for themselves. They do it by buying the state.

    So which is it? Are the rich noble caring people who want nothing more than to make the world a happier friendlier place, or are they the ones who pay lobbyists to bend the ears of politicians so they can kick old ladies off of income assistance?

    In my opinion, they are both. Any large group of people will have variants in it, the rich included. Some will be good and some will be bad. But looking at the structure of US society as a whole instead of individual examples paints a dire picture. The rich use their influence to better themselves and crush those who try to impede them, to the point of irrationality. I can’t see why this overall tendency would be diminished by there no longer being laws that they can’t shoot union organizers.

    • August 16, 2011 at 9:53 am

      the state sets up the conditions for corrupt bankers/corporations to monopolise by selling its power to make law & use violence legally…. the corporations/banks are productive, unlike parasitic governments, so eventually they gain more financial leverage than governments & thats when you start to see fascism/corporatism like we have now…

      the corruption/monopoly in the corporate world mostly stems from an unfree & unequal market that is manipulated by a few politicians, to help the companies that are loyal to the state & destroy those that arent. free markets would fix this problem.

  2. August 15, 2011 at 6:01 pm

    It’s not both, it’s neither. Most people are both selfish and altruistic. But when you or I or the rich pursue our self interest without resorting to violence or trickery, we make everyone else better off as a result, as I wrote in part 1 of this series, and as anyone who has studied economics knows.

    If we dispose of the government, or eliminate its role in the economy altogether, the rich will not be able to use the government to enrich themselves and accumulate political power. They will be completely subject to market forces, meaning that only those who agree with what they are doing will give them money, instead of being forced to through subsidies, bailouts, etc. They will not have government coercion (laws) and thugs (police) to legitimise the beating up of union organisers. And if they did beat them up (using their own money), I would expect most people to boycott their corporations and shun them from their communities.

    • Steve
      August 15, 2011 at 6:21 pm

      And how would people find out about the shooting of union organizers? Through the mass media? The one that’s owned by big corporations that have a vested interest in keeping labour movements down? The one that’s paid for by advertisers? Are these big media companies going to run stories detailing the crimes of the people who pay their salaries?

      Your faith in the holy laws of economics is touching, but I don’t see any reason to believe it. Just because you read it in a textbook doesn’t make it true.

  3. Steve
    August 15, 2011 at 7:43 pm

    To get back to my main point, let’s look at your maxim: “when you or I or the rich pursue our self interest without resorting to violence or trickery, we make everyone else better off as a result”

    Let’s just say that I accept that (I don’t) for the sake of argument. Right now, by your own admission, the rich use violence and trickery (in the form of the state in your version of things) in order to advance their own agendas. What possible reason could there be to believe that they will cease to use violence and trickery when all regulation and law is removed?

  4. August 15, 2011 at 11:24 pm

    You don’t know much about economics, do you? There’s no holy law. Most economist disagree with one another. If you think I have little capacity for critical thought regarding economics, or politics, or human nature, you are mistaken.

    I think we should take a step back. We are clearly coming from different premises. I do not know how we could reform government so that it would stop protecting corporations and only protect citizens. I do not know why you think greed is inherent in corporations but can somehow be squeezed out of government. This goes along with the statist belief that we can get the government to do all the things we want it to, such as abolishing war (or making purely humanitarian wars and eliminating civilian casualties), protecting people from everything, protecting the environment, perfecting socialised medicine and education, and so on. It is a chimera.

    This is the problem with government as the initiator of violence. Giving an institution coercive power and then asking it to do what you want it to will not work, as power by definition is unaccountable. They no longer have to listen to you. Corporations, on the other hand, do not have coercive power. A corporation no longer protected by law is just a collection of people working together. And if a corporation started killing its employees, chances are a lot more of them would quit.

  5. Steve
    August 16, 2011 at 2:41 am

    You said that anyone who has studied economics would know your maxim to be true, thus implying that there is agreement among economists that it is true. You’re right, I don’t know much about economics I was just assuming that what you had previously said was correct.

    I didn’t say that greed could be squeezed out of the government. Not sure where you’re getting that from. Clearly there is massive greed to be found in corporations, however.

    As for the rest of what you said, you’re arguing from your axiomatic first principles about the basic nature of governments and corporations. You’re not addressing my points. In a lawless society, corporations would have just as much coercive power as anyone else, and in fact, they would have much more because they have an overwhelming amount of wealth behind them. In our current context, corporations use their power to influence governments and laws in order to maximize their own profits. They do this in an unethical way. In a future scenario where laws are non-existent, there would be even less stopping them from acting in an unethical way. As far as I’m concerned, you have failed to give a compelling argument showing why this would not have dire results.

    Clearly governments are not perfect, but what you are suggesting would be much worse. At least governments, when functioning properly (ie democracies) are in theory accountable to the people. Corporations are only accountable to their shareholders.

    • August 16, 2011 at 10:37 am

      @steve how on earth is a monopoly that takes its payment by violence (government) better than free market solutions who must compete in order to keep prices down & effectiveness up & the only way they get paid is voluntarily…

      the fact is the states use of violence is totally immoral & until we recognise that, things are never going to improve, there is NO WAY to have efficiency through violent extortion & monopoly, ever.

  6. August 16, 2011 at 10:01 am

    Corporations are accountable to the market. I do not know how many times I need to explain that. Governments are barely accountable to their constituents because their existence does not rely on people’s returning to the polls every day to keep supporting government or buying its services. Despite your fears, corporations are not nearly as powerful as governments, not only because they do not have as much money or any coercive power, but because they are in competition with one another. And again, they would have less money in a free market, because they would not have government protection behind them. Big business is not hobbled by government, nor do I see why a government capable of receiving benefits from big business (which is all governments everywhere) would do much to hobble them that people could not do themselves if they organised. (Regulations and laws tend instead to affect small businesses, making it harder for them to compete with big ones.) People talk about corporations as if any one could come to dominate a market, but that does not happen in a free market, as I write in part 1 of this series. But you don’t seem to get any of this, so I don’t know why I am still arguing.

    If you do not want to read the rest of this series, perhaps you would rather see a Mike Shanklin’s review of the movie the Corporation–>http://www.youtube.com/watch?v=P7ccCN6cjFU

  7. Steve
    August 16, 2011 at 3:45 pm

    Oh, great, I’ll just watch a four hour movie review! I’d rather that YOU explain yourself.

    Corporations are accountable to the market in the sense that if their shareholders fail to make money, there will be a shakeup at the top of the corporation. Ultimately, they are accountable to their shareholders.

    Big business is hobbled by government because there are laws. Corporations and people within corporations have to obey the laws in order to avoid jail or massive fines. Without any government this constraint would be lifted.

    Governments are accountable because they always live in fear that the population is going to show up at the parliament and demand change. Elections are one part of democracy. In the American system, this is pretty much the extent of it, because American democracy is broken. In Egypt and elsewhere, we are seeing another form of democracy. Direct democracy.

    You still have failed to answer my question. What’s going to stop these greedy amoral corporations from running amok when there’s no law or oversight? You previously mentioned that people would find out about their crimes and boycott them or quit. As I said, that would assume that there’s a free flow of information, which is precluded by the corporate ownership of media. We’d never have to find out these crimes; they could be suppressed so that only a small handful of affected people would know.

    Every time I bring an argument to you, you don’t answer it. You just talk about “the market” and how the government is inherently violent. Yeah, OK, I understood what you meant by that the first time you said it. I think that’s an abstraction that glosses over a lot of important nuance and detail. It’s the cartoon version of politics, where the government is an evil robot and corporations are just average guys, trying to do what’s best (dbudlov, you’re not helping). I’m trying to look at consequences to your suggestions. Your “theory” is clear, I don’t need to be reminded about point one and two.

    Corporations compete, but they’re not stupid. You would think that there would be an incentive for all these corporations to slam each other in the media. BP could run ads that say, “Chevron’s business practices in the Niger Delta led to them provide transport for marauding government troops who murdered activists occupying an oil platform at Chevron’s behest” But of course, they don’t point that out! Why? Because dig into BP’s past and you’re sure to find a similar incident. A mud slinging contest will have them all dirty. It’s much more sensible to have ads that have no content and don’t focus on anything substantive, so that people stay completely misinformed.

  8. August 16, 2011 at 5:39 pm

    I have answered all your points that are worth answering, either here or on other posts on this blog. I am getting tired of my ideas’ being rejected out of hand, and I am sure any others I put forward will not satisfy you.

    I don’t really think any of your fears are very realistic. But in case I am wrong, let’s try something else. How about YOU think of a solution to this problem? The great thing about anarchy is that there would be no one person whose job it is to do all the thinking and planning and organising and leading. You are a smart guy. Use your imagination. How do you think a free society, ie. one without a government, could deal with the problems you present, assuming your premises that the media and the market could not stop them?

  9. Steve
    August 16, 2011 at 6:23 pm

    Please tell me which of my points are not worth answering. Every time you write a post you don’t address anything I say, so I guess you think everything I’m saying is complete drivel. Yet, you don’t or can’t explain why that is. Maybe because you only read things that confirm your beliefs and you can’t stand a little criticism?

    So I’ve been begging you to explain why you don’t think these fears are realistic. You haven’t done so. Please, show me the error of my ways. I’m literally begging you. Please.

    Why don’t YOU try something else. Instead of dodging my questions (a politician’s favourite trick), why don’t you answer them or admit that you don’t really know what you’re talking about. This is your blog, defend it. I don’t have to provide a better theory to show that you don’t know what you’re talking about.

  10. August 17, 2011 at 7:32 am

    I’m not as smart as you think I am, and I think I must have misunderstood some of your arguments. I thought I had addressed them but maybe it is just flaws in my logic or my writing. I also realise that you do not want to read another post on this blog or on any of the links I provide to get the answers, but are only willing to read comments on this post. Having provided sources of information from myself and other people, I thought I had defended my ideas, but apparently I have failed. I am still going to provide links, but they will be for people who are interested in learning more on the subjects this post deals with. Feel free to ignore them and continue to call yourself open minded. I will try to answer your points in detail.

    I am certainly not an expert on economics myself, but I can read and think about what I have read and see or fail to see evidence for it in real life. Wikipedia says that the “invisible hand”, Adam Smith’s idea of the self-regulating marketplace, is composed of the pursuit of self interest, competition and supply and demand. (http://en.wikipedia.org/wiki/Invisible_hand) That is how you allocate resources most efficiently, and it makes most people better off as a result. You don’t have to believe in it, but I do. Not only Austrian economists but others, even Keynesians, have come to see it as a general rule. Where economists differ, still according to Wikipedia, which cites the Encyclopedia of the Industrial Revolution, and I don’t know how reliable that is, is how powerful the invisible hand is. The evidence I can provide is all around you. Everywhere you look, you see people pursuing their self interest, working at jobs or their own businesses for other people’s money. When we buy things from each other, from a pack of gum to the sweat off our brow, we both win. Very few people cheat. It could be that they don’t cheat solely because of the fear of legal punishment, but there is reason to believe there is more to it than that.

    Humans are endowed with a sense of reciprocity. In other words, if you do something for me, I feel indebted to you and will do something for you. That is why we have been trading for so many years. Arab traders never needed governments to secure contracts because they understood the principle of reciprocity, the fact that everyone would look down on you if you broke a deal, and that you could make lots of money if you kept your word. Related to reciprocity is the idea of cooperation. Cooperation is a natural human phenomenon, because we need others to get things done, and every team or partnership relies on a reciprocal exchange of work. As Richard Dawkins puts it in “Nice Guys Finish First” (http://www.youtube.com/watch?v=x6rgWzYRXiI),
    “Of course there is a great deal of cooperation in human society. A city…could never have been built or maintained without huge amounts of cooperation between its inhabitants over centuries. And we do it naturally, of our free will, without having to be forced into it. But is our cooperation to do with our ability to think deeply, rationally and philosophically, or have our brains evolved as advanced social organs, designed to police tit for tat reciprocity, to calculate past favours, balance debts; an organ of social calculation designed to make us feel angry when we feel we’ve been cheated and guilty when we know we are the cheat?”

    Cooperation beats cheating over time. eBay provides evidence for this fact: if you keep your word, your reputation is secured; if you cheat someone, don’t expect to make any more deals. We have evolved to trade with each other, and trade is all about sharing benefits. And since most people do keep their word, eBay works out pretty well. (Learn more here–http://www.youtube.com/watch?v=x6rgWzYRXiI and here–http://www.youtube.com/watch?v=I5a23t_9Y1w)

    When we talk about the mass media, remember that we live in the age of incredible abundance when it comes to where we can get our news from. The big news corporations are certainly problematic in the distorted pictures they try to paint, but they compete increasingly with new media of varying forms. Not everyone watches Fox News, because some prefer to watch Democracy Now. I know Fox has more viewers but I don’t think every person needs to watch the alternative media for word to spread. Look at Wikileaks and how it brought truth into everyone’s living rooms. Wikileaks is not funded (in fact, as you know it’s boycotted) by corporations or governments. Not everyone reads the Murdoch papers; they read local papers as well. According to some articles online (http://www.google.com/search?q=percent+read+local+papers), 78% of Americans living in towns surveyed said they read most or all of their local newspapers. I am not sure how many of them are independent and locally owned (though certainly many of them are), nor to what extent they discuss news outside their towns, but then there is only so much we can expect people to be interested in. If they do not care about the war, maybe they won’t care about corporate hijinks either. But if they or anyone they know are affected by them, they will pay attention. I don’t know how many people read local city papers, but people in cities may be more aware of the wider variety of media sources and the current of word of mouth. If you want consumer information, such as which pills are killing us, you could try Murdoch, but some have realised how unreliable his stuff is, and turn to more credible alternatives or start their own. That is why we have various consumer groups, consumer watchdogs, and so on. This is what it means to work through the free market. It’s not just corporations. It’s reliance on people other than the government. Such consumer groups have investigative journalists, the kind that are in it for the truth and will put their necks on the line for it. In fact, we do not know who is telling the truth, even though I must admit I trust Democracy Now more than Fox News. That is one reason competition among media outlets is good, and the existence of such a wide selection of them is evidence that there is indeed much healthy competition in the market for information.

    The great thing is that all these things already exist, so it is not just theoretical. Where theory needs to play a role is in answering the hypothetical question, what would stop corporations from doing whatever they want? And it is a difficult question to answer, because it concerns deviant behaviour, such as cheating, callous disregard for others, the willingness to use force, and so on. It cannot be easily addressed with arguments about the majority, which is capable of all the good sides of human nature, as deviants by definition are not among the majority. First, I think it is fair to say that there are certain people who are simply losers in life. If there are people willing to take advantage of others and people foolish enough to be taken advantage of, it is going to happen. The state, the corporation, the next door neighbour, someone will end up pulling the rug under these people’s feet, and we can try to help them ourselves but it will happen to some people eventually. To say we can somehow stop people cheating each other altogether seems impossible; at least, I have no solution to it. Nonetheless, we can create checks and balances.

    The various media discussed above are one way to tackle corporations that act immorally, because as we have established, consumers will withhold their dollars if they are deeply opposed to a business’s actions. Many consumers make choices based on their impressions of the companies they buy from. There have certainly been successful boycotts (http://www.ethicalconsumer.org/Boycotts/successfulboycotts.aspx), which give more credence to the fact that businesses a) are beholden to the market and b) can be pressured by small numbers of ordinary people into changing for the better. Business groups such as the Better Business Bureau ensure that ethical businesses get certain benefits of belonging to clubs and the unethical ones get shunned. All manner of organisation can use boycotts, along with public shaming of people involved, if their rules for ethical behaviour are broken. Shaming can actually be a powerful weapon, as we see when we see a man’s bad cheque on the side of a cash register. We need good reputations in life to be able to sign contracts, and we sign many of them in our lives. One of Stefan Molyneux’s articles on dispute resolution spells it out very well. (http://www.lewrockwell.com/orig6/molyneux1.html) Again, you do not have to agree, but I find his arguments logical and compelling. This is why I say I do not need to have all the ideas, as many good ideas are out there already, waiting to be tried. This is a theoretical argument that addresses your concern about rampant corporate malfeasance.

    Since the people who own and run corporations would no longer have limited liability or other legal protections, the same rules apply to them as to corporations themselves, and anything I say about corporations must apply to the people who comprise them. They would also have no legal mandate to make a profit, though it is more accurate to say, as you have, that they must do what their shareholders want. As not all shareholders of all corporations are purely interested in making money, some of them have taken to shareholder activism, and have made positive changes differences in the corporations they own that way, sometimes—gasp!—even to the detriment of the balance sheet. (http://en.wikipedia.org/wiki/Activist_shareholder, http://www.greenbiz.com/news/2011/07/08/how-shareholder-activism-moved-needle-sustainability-2011) Here we have yet another check on corporate power, and I see no reason to believe it would disappear without a government.

    Another potential hazard is corporations’ combining to form monopolies, or their conspiring to create oligopolies. If corporations in a free market attempted to monopolise any given sector of the economy, they would find it very difficult. A free market abhors monopolies. n 1879, when John D. Rockefeller’s Standard Oil controlled 90% of the US’s refineries (all purchased through more or less ethical means), the remaining oil producers attempted to avoid working with Standard Oil by constructing the first long-distance pipeline. Rockefeller’s dream of controlling oil supplies by controlling the railroads did not work, and gave birth to a useful, monopoly-busting innovation. Admittedly, Standard Oil bought a small stake in the pipeline and continued to control most oil transport in the region. Customers did not complain much, however, as Standard Oil kept prices low and quality high. If it had not, oil would not have been the cheap, alternative fuel of its day that it was. After all, another rule of the free market is that overcharging by any firm gives rise to competitors or substitutes. (Perhaps that is why international competitors soon emerged and began to ship oil more economically to Russian and European markets.) The antitrust suit against Standard Oil was not brought by its customers or a concerned public but by its competitors. (Read more here–http://lewrockwell.com/woods/woods175.html) The rhetoric that alleged a criminal conspiracy worked in the end, but the unethical business practices did not take place on the free market but when competitors demanded the state strongarm a successful business.

    Competition from other parts of the world (and other parts of the US) arose when oil was discovered outside Pennsylvania. To break Standard Oil’s stranglehold, the new oil men, bankrolled by financiers who knew the venture could be profitable, developed a new, safer type of oil tanker. Because of the risk of spills and explosions, the Suez Canal had been closed to oil tankers. However, with this new innovation, oil could be safely transported around the world, and prices could remain low.

    Alternatives to oil exist. We just need more time to understand better how to exploit them. Take the electric car, another great example of a monopoly-breaking innovation that promised to end (well, reduce) dependence on oil, but which was ended by a powerful lobby group and a pliable government. Monopolies are made possible when government steps in to protect business. If business is left to itself, anyone else can and will enter the market (http://www.youtube.com/watch?v=nOBD6v8g1F4). Look at Microsoft. It was charged with attempting to monopolise the software industry. Such charges seem irrelevant (and hilarious) today: no one could monopolise the software industry anymore, if they ever could. (Find more on monopolies here–http://mises.org/daily/621) If new entrants can provide something cheaper, or something better, or just something different, the company might get established and might undercut the larger corporations and might thrive in doing so. As far as I know, it has always worked that way in the past when there have been no government-imposed barriers to entry and one firm has tried to monopolise.

    (This is all in part 1, as I have been urging you to look at for some of the answers to your questions. https://theruleoffreedom.wordpress.com/2011/08/03/don%E2%80%99t-fear-the-free-market-part-1-what-it-is-and-what-it-isn%E2%80%99t/)

    But even with all this evidence corporations would not have unchecked and indominable power, it is still possible that corporations would band together to commit overt violence, as if they were a government or a mafia, because they would probably still have lots of money and struggle for dominance. Not all information would reach everyone affected; not everyone would join in every boycott; not everyone would change due to public disgrace. So we need more ideas.

    A stateless society would not be a completely peaceful utopia. How could it? When will we end aggressive behaviour? Few anarchists I know would even try. A lot of them believe that communities should separate from the state and become autonomous. I won’t go into this idea much here because it is the subject of a future post. Suffice it to say, communities would defend themselves against an aggressive corporation in the same way that they presumably defend themselves from any state or empire. That is something they have been doing for thousands of years. They or any anarchic society would need to have some kind of protection. That protection could come from the free market, as corporations competing for business would provide their customers with the protection they need. I understand if you think those corporations could just turn on their customers and steal from them, as that is the premise of your argument. Mine is that businesses in a free market will provide enough customers with what they want that their shareholders will not want executives to start killing people. As Robert Murphy says, there is a market for security, and it could work very well against a corporation or any other organisation that wishes to harm people. (http://www.youtube.com/watch?v=V0_Jd_MzGCw)

    The good guys tend to win over time, which makes sense in this case. If a security company (or any other company that depends on repeat customers and good reputations, which is most (or all?) successful ones) kills or steals from or even enslaves a bunch of people, there are two problems. First, they will have less profit. I don’t think greed is necessarily bad: it depends how it is channeled. If you want to maximise profit, the rational solution might be to be a highly ethical corporation. In theory, and usually in practice, wherever free markets have existed (today’s markets are not very free), people are far wealthier when they are free, partly because they can pursue their self interest, partly because their motivation and creativity are higher, and probably for other reasons I haven’t thought of. If corporations want money, they are better off being good businesses and providing what the customers want, and if they do, the customers will come back.

    Likewise, most corporations find that being good to their employees pays dividends in employee loyalty and motivation. If they start killing employees, or even just thwarting their attempts to unionise, employees must make a decision: stay here and risk getting exploited by this corporation, or quit and find another way to make a living. That is their decision. But as competition for workers grows, corporations need to provide better wages and working conditions. A major reason the vast majority of businesses do not regularly cheat customers and shoot employees is that it is not in their interest to do so.

    Communities would still have rules, just like all societies have rules, and they could decide one of those rules would be no Walmart. That could mean no Walmart stores, no Walmart goods, and even no Walmart employees if they felt that strongly, would be allowed in the town. Every community that shunned Walmart in this fashion would mean that much less money, and thus power, for Walmart. Of course, we might not be able to get every community to push away our hypothetical violent or otherwise unethical corporation, but surely we should not force those to believe what we believe. If we are right, people might see it in time; and if they do not, they probably cannot be saved anyway.

    The second solution to the problem of protection against a violent corporation is for people to defend themselves. Attempting violence against free people would probably lead to anyone sympathetic’s helping them out in the name of ending injustice. People should really be able defend themselves anyway, at all times, whether there is a government or not, because violence can be committed whether there are 1000 police on the street or none. History shows that people band together in times of crisis, which include villages or cities allying to repel aggressors. And if they did so and had any chance of winning, where would this leave the business? It would need to reconsider any kind of violent campaign, and if a business is supposed to make money, war is clearly not the answer.

    In sum, it is wrong to say there would be no law or oversight, nor does it follow that corporations would make things much worse without a coercive state. There are already rules of ethics that would continue to govern the actions of consumers, and when the people make rules for themselves and their communities, they can back them up by defending themselves from greedy outsiders with force if they need to. Oversight is provided by journalists and consumers, and is spread by the innumerable media we have at our disposal and by word of mouth.

    If I still have not answered your points, I must not have the answers.

  11. Steve
    August 17, 2011 at 5:01 pm

    Thank you for your thoughtful reply.

  12. August 17, 2011 at 5:24 pm

    Thank you for challenging me.

  1. March 6, 2012 at 1:40 pm
  2. June 18, 2012 at 1:09 pm

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