Debunking libertarianism

Since 2019 Chile has been shaken by massive protests against the hardcore neoliberal policies implemented by successive right-wing and social democratic regimes implementing libertarian ideas of governance.

This is a repost. First run Jun 27, 2020. 

Few ideologies are more insidious and disastrous to society than libertarianism, but its popularity continues in the US, propelled by fanatics who live in an alternate universe, and the power of a multitude of billionaires, their media, and bought politicians, and the fact it remains the core value of capitalism, aka "the American Way of Life".  The affluent—especially their children—lap it up, and there are far too many who become intoxicated with the notion of absolute freedom, a social impossibility. 

As usual, Caleb Maupin does a pretty good job here, but a couple of things may further elucidate why Libertarians are badly misguided. For one thing, they are ahistorical—in itself an impossibility—as no one can dismiss the historical record and its lessons (duly and reasonably observed, of course).

Ahistoricism in this context refers to the fact that libertarians dream of a perfect market that never was and never could be, the one usually sketched out in "neoclassical economics 101", taught by both "centrist" economics evangelist Paul Samuelson, and rightwing Chicago School gurus like Milton Friedman. But while Samuelson, like a good modern liberal, accepts the role of the state in stabilising capitalism, thereby placating the discontented masses born of market failures and abuses (something that FDR understood quite well), Milton Friedman’s libertarian and fiercely anti-Keynesian dogma completely rejects the need for government intervention. Friedman's intransigence holds even for extreme crises, preaching that the market, left to its own devices, will in time clean up excess production and restore equilibrium, thereby returning society to a happy status. Friedman and his acolytes should reflect on the fact that those on the right who complain about "the Left" would do well to remember that it was they who created it.  Yes, it was the historical right's innumerable abuses of power and outright tyranny that eventually created a counterforce.

Of course, capitalist boom and bust cycles existed long before Keynes came along with his theories, so, in a sense, Friedman was not entirely wrong.  Given enough time it is usually true that an economy will right itself and bring back a measure of normalcy to society. But here's one of Friedman's and his fellow libertarians' huge blind spots, for, we must ask, at what cost? Can any government with a modicum of democracy in it escape public fury and retaliation, not just at the polls, but outright social rebellion, when caught in the whirlwind of a wholesale economic implosion? Sitting on high academic or government perches, many of them products of the higher strata, or parvenus and suckups like Edmund Burke catering to the uber-wealthy ("conservatism" has an enduring allure to those who admire and seek approval from "their betters"), leading libertarians are frequently indifferent to the massive human, material, and political cost of such upheavals. Human-made poverty is an abstraction to them. Empathy need not be wasted on such matters. 

But the historical record cannot be swept under the rug so easily. The wounds of an economic cataclysm run too deep to leave no visible marks on the national psyche. An economic recession, or worse, a depression, can last many years and cause incalculable human suffering and destruction. The Great Depression of 1929 lasted for more than 15 years and threw (depending on the region) from 25% to 33% of the US labor force on the streets. Alcoholism, drug use, prostitution, public health issues, homelessness, and crime of all types proliferated. An untold number of families disintegrated. A virtual army of tramps, a legion of the unemployed, or, rather, "unemployables", crisscrossed the nation in a desperate search for jobs, any jobs, but none could be found as most industries had shrunk or succumbed to the crisis. Their misery was captured by great novelists like John Dos Passos, Upton Sinclair, and John Steinbeck, the man who gave us the classic The Grapes of Wrath, while James Agee and Walker Evans, a writer-photographer team that authored Let Us Now Praise Famous Men (1941), focused on class during their immersion in the daily lives of southern tenant farmers in Alabama in the 1930s. Many of these books were eventually made into memorable films and even TV programs. Meanwhile, for most of the rich, the Depression was simply something they read in the newspapers.

Libertarian notions clash with reality
The failure of the marketplace was also evident in Germany, one of the nations most severely afflicted by economic collapse due to the Great Depression and, in her case, war-induced hyperinflation. Germany was a nation where leftism had already a long history (the German social democrats were the main party by the 1920s and mid-30s, and even the Nazis had to call their entity "National Socialist" to attract new members), so the rather shocking outcome of this crisis with the rise of fascism came as a surprise to many participants. The crisis, which wiped out the hard-won economic security of the German middle and lower-middle class, not to mention the workers, was so brutal that fascism —encouraged by the betrayal of the social democrats and supported by the aristocracy—found an easy road to power. Yet to save the capitalist class and pull Germany out of the catastrophe, Hitler —in cahoots with the great industrialists—did not wait for the magic of the market to heal the economy. Instead, he immediately adopted an enthusiastic form of something resembling military Keynesianism, that is, the bete noire of all laissez-faire fanatics, statism, or government-mandated demand. Indeed, merely days after his ascension to power in 1933, Hitler turned to an ambitious military buildup complemented (as FDR had done) with extensive public works and infrastructural construction. The German Autobahn, conceived in the 1920s under the Weimar Republic, but whose sluggish progress and lack of a broader vision and spotty political support had made it almost impossible to complete, now, fully endorsed by Hitler, soon came into fruition as one of the regime's proudest accomplishments. (Always the consummate politician, and to court labor, the Fuhrer also ordered the production of a "people's car"—Volkswagen—as part of his grand "people's motorization" project). Such measures promptly re-energized great manufacturing plants while employment surged.

The Fuhrer inspects an early Volkswagen model, in 1936. Adolf Hitler enthusiastically embraced an ambitious autobahn construction project, appointing Fritz Todt, the Inspector General of German Road Construction, to lead it. By 1936, 130,000 workers were directly employed in construction, as well as an additional 270,000 in the supply chain for construction equipment, steel, concrete, signage, maintenance equipment, etc. In rural areas, new camps to house the workers were built near construction sites. The job creation program aspect was not especially important because full employment was almost reached by 1936. However, according to one source autobahn workers were often conscripted through the compulsory Reich Labor Service (and thereby removed from the unemployment registry). (See Autobahn, Wikipedia)

As some astute voices have commented, it looked like Capitalism, because the factories were humming at full capacity. But it was largely Government expenditures in many directions, some would say with a measure of central planning, the dreaded approach of communists, in this case chiefly toward armaments—equipment for millions of troops, plus thousands of tanks, warplanes, submarines and so forth—that did the trick and put Germany back on her feet. Ironic indeed that the most implacable enemies of Bolshevism borrowed not just the "socialist" label, but also crucial aspects —however limited—of their economic approach to social organization.

The "Chilean Miracle" that wasn't
Given the dishonesty of Western media, many people have heard by now about Chile's "economic miracle", a triumph supposedly owed to the bold implementation of libertarian ideas imported via Chile's economic "evangelists" —the "Chicago Boys"—trained at the University of Chicago School of Economics. Such people unfortunately have heard only part of the story.  What they were not told is that Chile's dictator Augusto Pinochet, who took over in 1973 after a bloody, US-supported coup, and who quickly began implementing the brutal "Chicago boys" model of market fundamentalism, ran into heavy water by the mid-1980s and had to rapidly switch gears and introduce state manipulation of the economy, this, despite the fact his constituency of oligarchs was solidly behind him, and that he could still keep his regime afloat "at gunpoint", by liberal use of torture, wholesale imprisonment and systematic murder. Despite Pinochet's intimidation of the powerless masses, in the ensuing years, despite the growth of wealth in the top 3% of the population, the problems proliferated, and at times the country, by now heavily privatised and mired in horrendous corruption, unemployment, and inequality, simply became ungovernable. By 1990, the Pinochet regime had run out of steam and a cautious plebiscite replaced him with the first democratically elected president in 17 years. The Chilean Reich had lasted less than 20 years. Two bourgeois economists with the University of North Carolina (Chapel Hill), by no means radical, offered a snapshot of the Pinochet era thusly (excerpt):

The God That Really Failed: Recapitulating
The doctrine of neoclassical economics that most libertarians accept as sacred scripture tells people that capitalism can be quite OK if left to its own devices completely free of government meddling, but have no real answers to the multitude of questions and problems that quickly crop up when the market is allowed to run wild according to its own unfettered dynamic.

The unresolvable issues range from the provision of healthcare to the masses, to dependable and equitable social safety nets, to the establishment of efficient transportation systems, public education, and housing for all, not to mention decent and fair remuneration for labor rendered, protection of the natural environment, and so on. But more embarrassingly, they have no answer to the fact that ANY perfect market—the God they worship— will eventually succumb to the collapse of one of its supposed major pillars, perfect competition. It is in fact competition—the serpent that eats itself by the tail—that brings about monopoly, that is, the end of real competition, not to mention the rise of huge megacorporations at the root of oligarchic capitalism and de facto corporatism, and, in time, finance capitalism, the organic cocoon of imperialism.

The basic and inexorable law is that competitive markets yield to monopoly in time, and this applies to all industries, with no exception. Consider, for example, that in the 1890s the US boasted thousands of car companies. Hard to believe? Argue with Wikipedia, hardly a communist venue:

Starting with Duryea in 1895, at least 1900 different companies were formed, producing over 3,000 makes of American automobiles. World War I (1917–1918) and the Great Depression in the United States (1929–1939) combined to drastically reduce the number of both major and minor producers. During World War II, all the auto companies switched to making military equipment and weapons. However, by the end of the next decade, the remaining smaller producers disappeared or merged into amalgamated corporations. The industry was dominated by three large companies: General Motors, Ford, and Chrysler, all based in Metro Detroit. Those "Big Three" continued to prosper, and the U.S. produced three quarters of all automobiles in the world by 1950 (8.0 million out of 10.6 million). (Automotive industry in the United States, Wikipedia)

By the 1950s the list had been cut to less than 10, with the "Big Three" —Ford, Chrysler and GM—dictating terms to much of the industry. What happened? Competition—along with social, economic, technological, and political change no one can fully control or predict— had killed most of the companies alive in 1900 in the normal process of commercial war.  Indeed, price wars, bankruptcies, mergers and phaseouts took their toll, not to mention the almost infinite accidents of fate befallng any living entity: proximity to markets, fashion twists, access to corrupt politicians, easier access to financing, access to cheaper and/or superior labor pools, natural advantages (raw materials), and superior designs and/or superior advertising. For any or many of these reasons, the industry had seen a dramatic attrition, from a vigorous, competitive market with numerous firms to a handful, and these were now struggling to remain standing in the face of fierce foreign competition. Commercial life is fluid. Libertarians simply refuse to look at such facts.

As for the idea, often marshaled by capitalism's apologists, that pure capitalism "has never been tried", and that if only people gave the system a chance all would be well, that's simply a massive delusion. The problem is many people continue to believe such falsehoods or pretend to believe them, which is worse. While antecedents of capitalist institutions existed in the ancient world, and pockets of capitalism, in its more rudimentary form, may have existed in the Middle Ages, modern capitalism was born primarily in Great Britain ("primarily" because other nations, such as France, Holland, etc. showed similar processes) during the Industrial Revolution, toward the end of the 18th century. In those roughly 300 years and counting, the capitalists have seen several periods in which the system operated under conditions of "laissez-faire", with minimal or no interference from the state—whether monarchic or republican. Because of that simple fact, easily corroborated by history, we can categorically state that libertarian capitalism has been tried, and found to be an unmitigated failure. It hardly needs to be mentioned at this point that libertarians have no solution either for capitalism's unique flaw, overproduction. The perplexing womb of the devastating boom-and-bust cycle.

—P. Greanville[/su_note]