Oh, actually, here it is in plain text. Well, I'm still going to take the chance that somebody won't like me having the full text here.
BY SHELDON RICHMAN
In The Wealth of Nations Adam Smith famously
wrote, “People of the same trade seldom meet
together, even for merriment and diversion, but the
conversation ends in a conspiracy against the publick, or
in some contrivance to raise prices.” It may seem strange
that history’s best-known advocate of the free market
would cast such aspersions on business people. But there
is nothing strange about it. A defense of the market, and
of voluntarism in general, should never be mistaken for
a defense of particular business interests.
Opponents of the free market love that quote from
Smith. For obvious reasons they rarely add the sentences
that follow: “It is impossible indeed to prevent such
meetings, by any law which either could be executed, or
would be consistent with liberty and justice. But though
the law cannot hinder people of the same trade from
sometimes assembling together, it ought to do nothing to
facilitate such assemblies; much less to render them necessary”
(book I, chapter X, part II, paragraph 27; emphasis
As Smith well knew, government often facilitates
such assemblies. Effective “conspiracy[ies] against the
publick” would be impossible without state support.
Absent political privilege,“contrivance[s] to raise prices”
would crumble under the pressure of free competition.
It takes a state to make a tariff, a price support, or a punitive
tax or regulation on one’s competitors.
Smith’s book was a brief against mercantilism, the
nationalistic system of business privilege. But we sometimes
forget that the economic system that succeeded
mercantilism was not free of all mercantilist features.
Especially in the second half of the nineteenth century
and at the hands of the Republican Party, mercantilism
(in the form of Henry Clay’s old American System) had
wide influence at the national level. (The states had their
own modest versions earlier in the century.) Its program
consisted of protective tariffs, taxpayer-financed infrastructure
projects (“internal improvements”), regulation
of private infrastructure, a national bank for credit
manipulation, and other forms of government intervention
intended to guide society’s development and in the
process benefit the well-connected business class.A good
deal of land was also parceled out to politically favored
interests, such as most of the major railroads. Dominant
business figures did not oppose this program; on the
contrary, they championed it because they stood to gain
from the above-market prices, lucrative government
contracts, and burdens on smaller competitors.
Later, the Progressive Era “reforms” were not only
supported, but were often proposed, by big business.
Meat inspection, railroad regulation, drug-safety monitoring,
and policing of competition were activities
favored by the major players in the relevant industries. It
is not widely appreciated how much big-business support
the New Deal had (or how the New Deal actually
began under Hoover). The industry codes enforced by
the National Recovery Administration were a godsend
to businessmen who for years had striven, unsuccessfully,
to create stable cartels to assure long-run profits.Government
economic planning during World War I had
given many businessmen (and bureaucrats) a taste of
what it was like to run an economy. They liked it
enough to return to Washington during Franklin Roosevelt’s
tenure in the White House.
What today is called rent-seeking, exploiting others
through political means,was as common in earlier times
as it is now. It was a rare business proprietor who favored
laissez faire.Why risk your money in the unpredictable
marketplace when you could have stable prices and
profits with government intervention? Even an income
tax might be a small price to pay for that safety. Most
business people were uninterested in moral philosophy,
economic theory, and ideology. The shortest route
between them and a nice return on investment usually
went through the statehouse or the Capitol.
No knowledgeable champion of free markets will be
surprised by any of this. The problem is that we too
often forget it in the heat of current controversies. By
dropping the historical context we weaken our case and
sound like defenders of the corporate state, the opposite
of laissez faire.
This has been pointed out before.Kevin Carson,who
calls himself a “free market anti-capitalist,” writes in
Studies in Mutualist Political Economy that many libertarians
“use the term ‘free market’ in an equivocal sense:
they seem to have trouble remembering, from one
moment to the next, whether they’re defending actually
existing capitalism or free market principles.”
For example, several months ago opportunistic members
of Congress proposed a windfall-profits tax on the
oil companies because gasoline prices had jumped during
the hurricane season and profits had risen dramatically.
In arguing against the tax, many libertarians (and
conservatives) explained why in a free market, prices and
profits would rise under the current circumstances.Thus
higher prices and profits warranted no government
Fine. The economic theory and conclusion were
impeccable. But something was missing, and this gap
gave credibility to the free market’s adversaries. What
was missing? An acknowledgment of the contemporary
effects of the long period of pro-business interventionism,
what Carson calls “the subsidy of history.” For many
years oil companies have benefited from a system of federal
and state favoritism. Much U.S. foreign policy has
the effect of forcing the taxpayers to pick up the huge
tab for stabilizing the companies’ sources of crude oil.
All of this has distorted investment, prices, and, therefore,
consumer behavior, and it’s hard to know what the
oil industry—or indeed the entire economy—would
look like without the distortion. The rippling effects
have been pervasive and substantial.
In sum, the companies are not creations of the free
market. And if we defend them as though they are, we
will sound naïve at best and like apologists for the corporate
state at worst.That diminishes our efforts to win
the public to our position. Let us never be guilty of supporting,
even implicitly, the socialization of costs, for there
is no surer way to undercut the case for the privatization
Another example: Free-market advocates frequently
criticize unions and their supporting laws. Any
government intervention deserves to be criticized, but
once again the context is often dropped. The context
includes the fact that the business elite historically supported
labor laws, even if in the end they objected to the
precise form of the National Labor Relations Act and
other enactments. Business-backed social-reform organizations,
such as the National Civic Federation and the
American Association for Labor Legislation, long had
proposed labor laws in the belief that they were the path
to labor peace and the end of wildcat strikes.
“Respectable” union leaders would be brought to the
corporate-state table as responsible junior partners who
would discipline their unruly elements. Moreover,
industrywide collective bargaining would have a
cartelizing effect on American industry, reducing the
“cutthroat competition” that was so unsettling and that
worked to the advantage of upstart rivals.
While we should hit at government intervention in
the labor market, as everywhere else, we must hold the
context and never fail to point out that such intervention
was integral to the system enacted largely at the
behest of the dominant business interests. It is reasonable
to believe that workers would have more bargaining
power if all corporate privilege were abolished and
competition were truly unfettered. If talk of the corporate
state and exploitation sounds left-wing, it’s only
because laissez fairists seldom talk about those things.
But we should.They are our issues.
Context-holding is not just of academic interest; it
has strategic implications. If we keep in mind that the
current threat to liberty is the centrist corporate state,
we will see that a top priority is the repeal of all corporate
subsidies, even the most subtle kinds.
25 APRIL 2006
F u l l C o n t e x t