Sunday, August 16, 2015

Why there are no Right Libertarian Societies

Why there are no Right Libertarian Societies 

Despite the attractiveness, to some, of libertarian prescriptions for creating a ‘better’ and ‘freer’ society, there is a notable absence of any examples of states run according to libertarian principles in the record of history.  The reason is that libertarian societies, as a matter of definition, lack an institution, ( a government, basically) capable of redistributing demand.  They thus are incapable of dealing with the producer-consumer problem, (which I describe below,) and so fail.

One of the problems in dealing with libertarian economics is the protean nature of the libertarian state, which, in the hands of libertarians, changes according to the criticism leveled against it.  That is, what ever the libertarian state one criticizes, it is not the state advocated by any libertarians.  

Anyway, from Karl Widerquist (who, granted, seems to be no apologist for libertarians,) “A Dilemma for Libertarians,” we have:

            “Libertarianism can be thought of in at least three ways: It is the ideology
supporting (1) maximal equal liberty understood as self-ownership or noninterference, (2)
strong, inviolable property rights without regard to the pattern of distribution of those
rights, or (3) a so-called libertarian state, which is either a government limited to
protecting property rights and self-ownership or no government at all.

 Natural rights libertarians think of their philosophy as embodying all three of these claims, believing that a commitment to maximal equal freedom entails a commitment to strong property rights, which in turn entails a commitment to a libertarian state.”

Widerquist, whose paper is well worth the read, argues that any libertarian state operating under these assumptions necessarily evolves into what is effectively an absolute monarchy.  (An aside:  A close analysis of the 11 incidents of property,  as described by Tony Honore an conveyed by Widerquist in his paper, at least strongly suggests that it is impossible to eliminate any of the functions of government.  These functions can only be redistributed.  Libertarians, then, seem to believe in appropriating all, or for the minimalist state libertarians almost all, of the functions of government to the individual.)

So we will address libertarianism as described above.  But we will show something different.  (Since here the notion of property is paramount, we will consider this an instance of right libertarianism. Here we will not address the concerns which might be raised by any of the many varieties of left libertarianism.) We show that in the libertarian ‘minimal state’ of government protecting only property rights and ‘self-ownership,’ the economy cannot maintain demand for its production, and so will collapse. (Actually, we will show something quite different from this!)

But consider then a closed model economy, consisting of two sectors: a producing sector, and a consuming sector.  We allocate to the consuming sector a quantity of money. Here we are just talking tokens of demand, as I discussed in “The Standard Definition of Money is in Error.“  With these tokens, this money, the consuming sector buys the products of the producing sector. The consuming sector must spend its money to support itself, since it produces nothing on its own, and therefore can earn no money selling what it produces. So eventually it runs out of money.  (With this model there is no provision for borrowing, or assets.  Adding these features do not change the direction of the dynamics.)  As a result, the consuming sector demand then collapses.  With the collapse of the demand of consuming sector, there is no one to buy surplus production.    Prices crash, and with that crash production, and so the economy.  Adding the possibility of borrowing, or the selling of assets by the consuming sector, does not change the direction of the process, but merely adds to its duration.

Reality is of course, more complicated. First, any economy is more properly divided into net consumers and net producers. Consumers do produce, and producers do consume, but the distinction may still be made.  Now, whenever the consuming sector of the remaining economy is driven from the economy, the remaining economy may still be so divided. That is, the remaining economy cannot produce a net surplus to its own consumption, because there is no one to buy it. No one else has any money.  Therefore, the remaining economy must reduce production to match the reduced demand. Because production is reduced, so is that part of the economy which produces.  Thus, the producing sector is less than the whole of the remaining economy, and so the other part of the remaining economy is necessarily a net consuming sector. But this new net consuming sector has only a finite amount of money, with which to buy the surplus production of what is now the producing sector.  And so the process iterates.  The actual process of collapse, then, can better be described as a continual increase in the concentration of money and wealth, as ever an ever larger portion of the economy is stripped of its demand on the ever shrinking net producing portion of the economy. 

Although we have argued from a closed economy, we can actually start from an open one.  The entire economy then is the net producer, which exports its entire surplus into the exterior. The exterior, however, necessarily starts with a finite amount of money.  And this money necessarily is eventually depleted.  And so we return to the start of the previous process, which we have already shown eventually leads to collapse.

In a more realistic monetary economy, relative profits determines who is a net consumer, and who is a net producer.  The net consumer is the one who profits from his production, and the net producer is the one who loses money from his production.

This is not intuitive.  But suppose a fixed money supply.  The producer who profits, can buy more than he produces.  That is, he can consume more than he produces.  He is a net consumer.  The producer who loses money, can only buy less than he produces.  That is, he can only consume less than he produces.  He is a net producer.  ( I would like to point out here that, under capitalism, labor, certainly at least in private industry, is a net producer. This is because, for the capitalist to make a profit, labor, in the net, must produce more than it consumes.  (Consider first a one product economy.)  Even if we include government labor, if in the net businesses make a profit after taxes, labor as a whole is still a net producer.)

 This fact inverts the conclusion:  It is the net consumer who ends up with all the money and wealth, whereas the net producer is stripped of all his money and eventually all his assets. So as promised, what we have instead shown is that it is production which is decapitalized, and which the economy fails to maintain, and that is the cause of the economy failing. 

Labor, of course, is not the only net producer.

In the libertarian economy, there is no mechanism to redistribute demand, as is required to maintain production. Voluntary redistribution of demand from the net consumers to the net producers cannot work.  The set of all producers represents a commons, and any consumer who restrained his consumption would be exploited by other consumers.  And any compulsive mechanism of redistribution is contrary to minimal government libertarian principles.

The best solution seems consist of the continual issuance of money by the producers, (as defined in the more realistic monetary economy,) and, in order to prevent inflation, be attendant by the extinction of money among the consumers.  This is another way of saying money is taken from the consumers and returned to the producers.  This requires an instrument of compulsion, a government.  Such government must remain an instrument of the (real) producers, or it will fail to adequately return demand to the producing sector, and the economy will increasingly, de facto, approximate the character and trajectory of a libertarian society, and collapse.    

Two final notes:

1) Principle never stood in the way of profit. For instance, there is profit to be made from slavery, that is, the violent appropriation of the ‘ownership of self’ by others.  It took a war to establish the principle, and overcome the profit.  And there is profit to be made from the violent appropriation of property. In the absence of a mechanism to enforce principle, principle is empty. While libertarians enunciates the doctrines of “(1) maximal equal liberty understood as self-ownership or noninterference,” and “(2) strong, inviolable property rights without regard to the pattern of distribution of those rights,” the ‘libertarian state’ libertarians promote provides no effective mechanism to guarantee these rights.  Indeed, the very existence of such a mechanism is anathema to Libertarianism. 

So the preservation of individual rights, civil, political, and economic, requires a mechanism to guarantee those rights:  A government. This government requires a sufficient input of real resources to both to maintain itself, and to be able to act to effect such guarantee. It must also answer to those whose rights it guarantees.  Where the input of resources to this government erodes, or where that government less and less answers to the people, so must the rights of the people that government guarantees, erode. 

2)We will divide the functions of government into two:  internal and external.  We will suppose the external functions of government to be a net consuming sector of the economy. That is, any society with external functions of government has less wealth to distribute among its members.  That every society, or more certainly, almost every reasonably complicated society that we have ever known of, has had these external functions of government, despite the net cost, suggests that at least the leading members of those societies considered those functions necessary.  

Suppose now that all the internal functions of government were necessarily a net consuming sector.  That is, any society with a government would necessarily have less wealth to distribute among its members than a society without the internal functions of that government.  There are two possibilities.  The internal functions of government are used and maintained as an instrument for the oppression of the majority of the people by some ruling elite, to that elite’s profit.  That is, the benefits of those internal functions to that elite would be greater than the cost, to that elite, of maintaining and operating those functions.   Or, it would be preferable to the members of that society to have no internal functions of government, since then they wouldn’t have to pay for any functions.  That is, the people would be better off, and presumably choose, the internal functions of the libertarian state.  (Except, perhaps, for internal functions to enforce taxation to support the external functions.)  However, we have not seen this, or at least have not seen it perpetuated often enough for it to make the record, so we must assume that such an internal libertarian state must be unstable, and evolve as described above. (One possible example, though, might be the Old West.  Which raises other issues.)

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