For years, we’ve been taught that capitalism is good for freedom. Dominant right-wing talk radio hosts to this day recommend “libertarian” classics like Hayek’s Road to Serfdom and Friedman’s Capitalism and Freedom that claim markets free us, and this picture still dominates the schools and the political spectrum. Well get bent, one percent, because Rob Larson’s Capitalism vs. Freedom: The Toll Road to Serfdom puts big business under a microscope. This book debunks the conservative classics while demonstrating that the marketplace has its own great centers of power, which the libertarian tradition itself claims is a limit to freedom. In fact, Larson illustrates how capitalism fails both this and other concepts of human libertynot just failing to establish a right to a share of society’s production, but also leaving us subject to the great power plays of the one percent’s corporate property.
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About the Author
Rob Larson is a professor of economics at Tacoma Community College in Washington State and the author of Bleakonomics. He's written broadly, including for In These Times, Dollars & Sense and Jacobin, and appeared on Alternative Radio and other programs.
Read an Excerpt
Classes and Crashes Freedom of Work
Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour ... Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen ... It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the others into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen.
Experience demonstrates that there may be a slavery of wages only a little less galling and crushing in its effects than chattel slavery, and that this slavery of wages must go down with the other ... those who would reproach us should remember that it is hard for labor, however fortunately and favorably surrounded, to cope with the tremendous power of capital in any contest for higher wages or improved condition.
In the twenty-first century a rising wave of men and women globally are seeing alarming failures of our social system, and frustration is growing because many people don't feel free to fix things. Americans told the Gallup opinion polling agency in 2014 that they are less and less happy with their "freedom to choose what you do with your life," with reported satisfaction dropping to 79 percent. A BBC World Service poll also found people's belief that media are free has fallen around the world, with confidence in the UK, US and Germany falling below 50 percent. Less than half of respondents felt free to safely express their opinions online, not only in Russia and China, but also Australia and Mexico. These tumbling numbers are leading people around the world to search for answers about their weakened freedoms.
One heavily promoted road to freedom follows figures like Milton Friedman and Friedrich Hayek, whose ideas are reliably featured on more conservative media like US talk radio and New Corporation properties from the UK to Brazil. Friedman's central claim was that capitalism, or a "free market" system, leaves consumers "free to choose" among different goods and jobs, while Hayek is most associated with a complementary opposition to government policies like income taxes or broader social "planning," which many would now call "big government." Hayek held that these policies were in fact a "Road to Serfdom," because they meant more government power in the economy, threatening to reduce us to the condition of unfree "serfs" — the helpless economic semi-slaves of the feudal economic system that preceded capitalism.
But while this view has continued to be promoted on the most dominant commercial media, there are some problems. The issue reviewed in this chapter is the problem of power — whether authority is mainly held by government, as Friedman and Hayek claim, or whether large amounts of money could also mean significant social power. An honest look at these subjects can help us understand a puzzling statement by billionaire Nick Hanauer, a hugely successful investor and a cofounder of Amazon.com. In an article written for "My Fellow Zillionaires," Hanauer disagrees with these prominent economists when they dismiss income inequality — the gap between the incomes at the top of society and the average household. Hanauer credits his business success to his strong foresight, and writes that today he sees "pitchforks" because "inequality is at historically high levels and getting worse every day," warning that the US and the world are turning into "a feudal society."
So which is the real road back to the Dark Ages and a loss of freedom? Is it growth of government functions in society, the regulations and taxation that Hayek claimed would lead to "serfdom?" Or is it the growth of towering fortunes and corporate empires that is reducing us to "a feudal society," as the billionaire Hanauer suggests? Let's cross-examine the case for capitalism and see if the books have been cooked.
One of the greatest advocates for the libertarian view of capitalism was the economist Milton Friedman, Nobel Prize winner and maybe the most respected conservative economist in the US. Friedman was an informal economic adviser to conservative US president Ronald Reagan, who said in an interview with the libertarian magazine Reason that "I believe the very heart and soul of conservatism is libertarianism." Reagan himself wrote a warm blurb for Friedman's book Free to Choose and recorded an endorsement video for Friedman's TV series based on the book, calling the show "something of rare importance." Friedman's policy views had an enormous impact across political lines and media platforms.
And despite his death in 2006, Friedman has remained prominent in today's conservative media. The right-wing radio icon Rush Limbaugh said on his talk program that "Milton Friedman should be the Bible for young people, or anybody, trying to understand capitalism and free markets." When Friedman died, William F. Buckley, considered the dean of conservative intellectuals until his own death in 2008, wrote an obituary of Friedman in the most respected right-wing magazine in the US, National Review. He said:
The period since 1980 has been the Age of Friedman economically ... The Age of Friedman began approximately in 1979–80 when his disciples, Margaret Thatcher and Ronald Reagan, took power ... And these two leaders embarked on economic policies, broadly inspired by his theories, that have given their countries a quarter century of fast economic growth interrupted only by two short and shallow recessions in the U.S.
Considering the $12 trillion financial cataclysm and semi-depression that followed later in 2008, this warm praise is the tiniest bit ironic now.
So what is this Age of Friedman? Friedman himself proudly summarized in The Wall Street Journal the Reagan administration policies he had helped create, including "slashing taxes" and "attacking government regulations," a trend called "deregulation" which has continued to this day. Based on the Friedmans' ideas becoming a major global policy inspiration, the Review said of Friedman and his wife and frequent coauthor, Rose, "These two great champions of freedom should recognize that they have won. The course of history is firmly on their side." So today's main economic policy trends, strongly in the direction of tax reduction and economic deregulation, are parts of this Age of Friedman.
Friedman's basic view was that freedom is promoted by markets, which are social arrangements for the buying and selling of goods and services. To visualize a market, you can picture yourself at a mall, or a farmer's market, or shopping online. This "market freedom" had a huge importance, as Friedman wrote in his influential book Capitalism and Freedom:
Economic arrangements play a dual role in the promotion of a free society. On the one hand, freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself. In the second place, economic freedom is also an indispensible means toward the achievement of political freedom ... Viewed as a means to the end of political freedom, economic arrangements are important because of their effect on the concentration or dispersion of power. The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other.
Friedman held that these free markets promote freedom because they allow competition, giving consumers and workers the freedom to decide what they want to buy and from whom, and likewise whom to work for. Writing with his wife in Free to Choose, he explained that in a free market "When you enter a store, no one forces you to buy. You are free to do so or go elsewhere. That is the basic difference between the market and a political agency. You are free to choose."
This basic picture of market freedom was a main focus of the other most prominent figure of right-wing economics, Friedrich Hayek. He taught at the highly prestigious London School of Economics and the University of Chicago, and later advised conservative governments including Thatcher in the UK and Augusto Pinochet in Chile. He had a more recent popularity boom after being extensively promoted on the popular rightwing Glenn Beck Program.
Hayek held that the provision of economic goods and services by government had none of the freedom of the market, and that Western civilization had gone far beyond an appropriate level with its attempts to moderate the market's cycle of growth and recession, called the "business cycle." Hayek called such programs "socialist" and a betrayal of Europe's history of "freeing the individual from the ties which had bound him to the customary or prescribed ways in the pursuit of his ordinary activities." Since then, "We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past."
Like Friedman and the broader "libertarian" tradition, Hayek held that markets bring about the maximum of human freedom and unlock human potential. "Economic liberalism ... regards competition as superior not only because it is in most circumstances the most efficient method known but even more because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority." This crucial connection, between a "free market" and competition, is usually taken for granted, as it was in Friedman's arguments above.
Other major economists of this tradition on the Right include Murray Rothbard, less prominent than Hayek and the Friedmans but considered a major figure in libertarian and conservative circles. He concluded that markets allow "free association" and that successful businesspeople possess superior qualities: "A man earns profits ... by superior foresight and judgment" and "The greater a man's profit has been, the more praiseworthy his role." Profit, of course, is the money made by a business after its basic costs have been paid. Rothbard's argument was also based on the use of profits to pay for new investments by the company, to buy new equipment or build new productive facilities. These investments increase the amount of production in the economy, and can create new jobs and goods, leading economists to refer to businesspeople as "job creators."
A figure with similar views, but far more popular, is Russian-American author Ayn Rand. Rand has long been a mascot for libertarian politics and her book Atlas Shrugged is one of the best-selling books in history. Her work is often read among powerful people, yet her work is a crude, comic book version of this same conservative picture of the market economy. To make the concepts a little more obvious for the reader, Rand's infallible executive protagonists are all described as good-looking, and the antagonist workers and regulators are ugly and poorly dressed. Only slightly less shallow is her capitalist characters' tendency to magically run the firm themselves — they both manage their corporate empires directly and also invent the new scientific products and do the striking commercial art and design the buildings. They are truly portrayed as borderline supermen, only based on their power as big businessmen, not their ethnicity.
Many libertarian figures are less extreme than Rand's near-worship of capitalists, like Friedman who wrote more modestly that "the inequality of income" in "large part reflects initial differences in endowment, both of human capacities and of property." But more than Friedman and even more than Rand, the bar for capitalist worship was set by Ludwig von Mises, who is considered to be the founder of the highly conservative Austrian School of economics, to which Hayek and Rothbard belong. Mises wrote about the "Creative Genius" of wealthy entrepreneurs:
Far above the millions that come and pass away tower the pioneers, the men whose deeds and ideas cut out new paths for mankind. For the pioneering genius to create is the essence of life ... For him there is no leisure, only intermissions of temporary sterility and frustration ... The accomplishment ... does not gratify him mediately because his fellow men at best are unconcerned about it, more often even greet it with taunts, sneers, and persecution ... Creating is for him agony and torment, a ceaseless excruciating struggle against internal and external obstacles; it consumes and crushes him.
While Friedman and Hayek implied business people and the rich have little social control, Mises and Rand celebrated CEO power. In fact, Mises was such a fan of Rand's Atlas Shrugged that he delightedly wrote to her about their shared views:
You have the courage to tell the masses what no politician told them: you are inferior and all the improvements in your conditions which you simply take for granted you owe to the effort of men who are better than you.
Business figures themselves only occasionally make arguments similar to these fascists of capital, like the nineteenth-century corporate lawyer John Hay, who claimed "That you have property is proof of industry and foresight on your part or your father's; that you have nothing is a judgment on your laziness and vices, or on your improvidence. The world is a moral world, which it would not be if virtue and vice received the same reward."
As for critics of these views, Friedman wrote in Capitalism and Freedom that "a major source of objection to a free economy is precisely that ... It gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself." Writers on the Right don't often bother to actually quote an opponent of their views, instead just insisting that they're literally against freedom and moving on. Indeed, Charles Koch, multi-billionaire oil industrialist and a major funder of Tea Party candidates and libertarian think tanks, wrote that opponents of these views support "big government" and believe "that you are incapable of running your own life."
So the traditional right-wing picture of capitalism celebrates the freedom of a creative class of entrepreneurs whose competition creates new industries, lifting up the rest of us in happy employment. It's a view of freedom that starts at the top of society, a picture where the masses should get out of the way of the creative elites. It's a very traditional view, and widely seen on conservative and commercial media around the world. It's also weak-sauce ideology.
The Fun Percent
The first aspect of capitalism to explore, and to evaluate for its relationship to freedom, is its concentration of wealth. Wealth has many forms, including money wealth, like cash and deposits in bank accounts. But it also includes productive wealth, like ownership of agricultural land or industrial property, often through "shares" of corporate stock, which are pieces of ownership of businesses. This second form of wealth is especially important because it produces more wealth — food or products for sale — and profits from their production. These basic forms of wealth are often called "capital."
The connection between freedom and the concentration of wealth has been debated for some time, and the picture painted by the thinkers on the Right is fairly consistent. In Free to Choose, for example, the Friedmans are skeptical of:
... the widespread belief that it is not fair that some children should have a great advantage over others simply because they happen to have wealthy parents. Of course it is not fair. However, unfairness can take many forms. It can take the form of the inheritance of property — bonds and stocks, houses, factories; it can also take the form of the inheritance of talent — musical ability, strength, mathematical genius. The inheritance of property can be interfered with more readily than the inheritance of talent. But from an ethical point of view, is there any difference between the two? Yet many people resent the inheritance of property but not the inheritance of talent.
Excerpted from "Capitalism vs. Freedom"
Copyright © 2017 Rob Larson.
Excerpted by permission of John Hunt Publishing Ltd..
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Table of Contents
Introduction: What is Freedom? 1
Chapter 1 Classes and Crashes - Freedom of Work 9
Chapter 2 Pennies For Your Thoughts - Freedom of Information 73
Chapter 3 Codependence Day - Political Freedom 111
Chapter 4 Hierloom Doom - Freedom of Future Generations 164
Chapter 5 Socialism and Freedom - Democratic Economic Organization 193