Rather than being opposites, markets are a superlative form of regulation.
Tucker Carlson criticized the “free market system” in his much-discussed Fox News commentary earlier this month. Numerous commentators came immediately to the defense of the “free market system,” criticizing Carlson in return. The sides lined up predictably. More libertarian and libertarian-leaning free market conservatives versus more populist/traditionalist free market critics. By choosing up sides so quickly, conservatives continue to miss vital conversations about the nature of the U.S. (and world economy) and how conservatives, whether libertarian-leaning or not, should respond to it.
Something assumed in Carlson’s commentary, and the responses, is this: Does the U.S. have a free market economy? Or more nuanced, just how free is the U.S. economy and how does that matter when considering policy recommendations?
While Carlson said he was talking about free markets, but it is unclear he was actually discussing problems with the markets themselves, but rather an perennial challenge from the state.
Conservatives have long recognized the existence of rent-seeking and crony capitalism. Carlson criticized a legal regime that, he suggested, allows companies to repudiate earned pension commitments, adopts tax systems that discriminate in favor of capital owners and against labor, supports government activity “to make the world safe for banking” and the creation of a “finance-based economy.” We can argue about how Carlson styled each of these policy issues, but none is obviously required by free-market commitments. All can plausibly be accounted for as outcomes of rent-seeking, which is the antithesis of a free market economy rather than its exemplar.
And at that, Carlson only scratched the surface of ways that America’s current economic system fails the free market test. Do we believe state and national regulatory regimes are neutral with respect to the interests of large capital interests? Even if they are, might even a “neutral” regulatory regime deter free market entry? For example, might the cost of complying with otherwise neutral regulatory requirements impose costs that deter market entry for new firms? Let’s say the cost of paperwork for regulatory compliance in a market is $100,000 a year. That’s a drop in the bucket to large, already-existing businesses. But those costs can deter the entry of new, small businesses; businesses that without the compliance expense might otherwise start, grow and compete with existing businesses.
This possibility has at least two implications, one rhetorical and one substantive. Rhetorically, perhaps it is time for conservatives and libertarians again to insist on the distinction between “capitalism” and “free markets.” To wit, identify “capitalism,” as the name suggests, as an economic system created to serve the interests of capital. “Market systems,” in contrast, create prisoner dilemma-like incentive structures to channel the interests of capital owners (and those of other factor owners) to serve social interests more broadly. This is why, as Adam Smith observed, capital owners seek to replace the markets’ invisible hands with the visible hand of collusion. To Adam Smith’s collusion we can add today’s many incentives for rent seeking.
The tougher issue is the substantive implications for conservatives and libertarians if one were to grant that rent seeking and crony capitalism have been endemic throughout large parts of the American economy. The problem is this: Simply repealing rent-seeking policies would not necessarily reestablish the status quo ante of a free market system: One could believe businesses with real market power would never have arisen initially in a free market system while at the same time believing that capital accumulation that occurred in the past as a result of rent seeking would not be eliminated simply by repealing rent seeking policies and allowing markets to continue without further intervention from that point. The distribution of capital is different in economic systems that never accommodated rent seeking in the first place relative to economic systems that accommodated rent seeking but then, after allowing rents to be accumulated, eliminated the rent-seeking policy infrastructure.
Consider an analogy: It’s one thing to prohibit, and thereby deter, robberies in the first instance. It’s another matter entirely for a system that privileged some set of legal robberies for an extended period of time to then extend criminal statutes to cover the once privileged thefts. The new legal regime forbids new robberies going forward but does nothing to address the effects of earlier robberies.
John Locke’s discussion of injustice at the hands of a conqueror is pertinent here, we need only substitute “privileged by the crown” to apply his thoughts to rent seeking:
Should a robber break into my house, and with a dagger at my throat make me seal deeds to convey my estate to him, would this give him any title? Just such a title, by his sword, has an unjust conqueror, who forces me into submission. The injury and the crime is equal, whether committed by the wearer of a crown, or some petty villain. The title of the offender, and the number of his followers, make no difference in the offence, unless it be to aggravate it. The only difference is, great robbers punish little ones, to keep them in their obedience . . .
One can dismiss Carlson’s criticisms of the “free market system” because much of his criticism criticizes outcomes that result from impositions on the free market system. But that’s the easy way out. Let’s wave the nominal question of whether he characterizes a truly free market and instead ask whether Carlson is accurately characterizing the U.S. economy. One can concede the ills Carlson identifies without conceding that the “free market” caused those ills.
If, however, one believes the ills Carlson identifies result mainly from abuse of government power by capital owners (and others), it is nonetheless little more than utopian fancy to think merely repealing rent-seeking policies would reestablish the status quo ante as if privileged abuse of power in favor of capital never existed at all.
Justice might require implementation of policies to rectify the earlier injustices. Such rectifying interventions would be required by conservative or libertarian free-market principles rather than opposed by them. The implications of that possibility is a road much less traveled on the political right.