Mar 20, 2013

Libertarian Pardox: How the free market will lead to a One World Corporation

Two ideals for most libertarians are in direct conflict with each other. The free market without government intrusion is the ideal economic environment; the sovereignty of the nation-state (specifically the United States sans military adventurism) is supreme and should be without intervention of foreign government or any semblance of  a One World Government.

Free enterprise being motivated purely by profit, and the stock market seeking out perpetual growth to out pace the rest of the market, without outside regulation of government and other disinterested entities monopolies and oligopolies are the  inevitable result. As the corporations grow too large for consumers to counteract monopolistic tendencies for their patronage choices to exert the 'invisible hand' of the market and assert reforms on the these economic Leviathans, competitors will either be acquired by or collude with the biggest enterprises of their particular market. Along with the horizontal monopoly (or effective monopoly among the few colluding competitors) for the sake of efficiency vertical monopolies would be sought out due to profit motives and demands for higher returns on investment. The current trajectory of the economy is veering towards a more globalized one, if this continues while there is an absence of government intervention then there is nothing to prevent a One World Corporation dominating every aspect of economic life.

I can hear my conservative-libertarian friends bellowing "No! That would never happen because the market is self correcting and the government only gets in the way." The profit motive does not have any incentive for either self-restraint nor delaying gratification, so whatever action or transaction that can be profited in this fiscal quarter and avoid liability or risk to the next fiscal quarter if it couldn't be avoided in perpetuity, leaving nothing off limits. But what of the individual moral compass that make the decisions for the corporations, won't they show restraint? With the free market and amplification of person-hood through incorporation accountability and responsibility are diffused beyond any individual.

For example the in the recent economic downturn that had provided incentives to initiate mortgages regardless of the outcome (mortgages brokers), to provide liar-loans (Countrywide Mortgages), securitized risky loans (Lehman Brothers, Bear Sterns, Salmon Brothers), then create markets to be traded (Goldman Sachs, Bank Of America, Citibank, etc), have the securities fraudulently rated providing false sense of stability to the typical investor (S&P, Moodys, Fitch), securitized risky mortgages with intention of losing value (Magnetar Capital), the risky financial transactions all insured to further diffuse accountability (AIG).

How would less regulation have prevented the credit crisis of 2008? How would an unrestricted pursuit of profit been different in the prior five (5) years of the crisis? If the self regulating market was hindered in it's course correction by say, the Federal Reserve, why would the for-profit private banks that ostensibly run the Fed also be the biggest barrier to a self regulating market? Removal of the Federal Reserve as Ron Paul and his acolytes would propose wouldn't be a reasonable cure-all unless one were to ignore economic history prior to 1913 and the raison d'ĂȘtre for the Fed: the Panic of 1907, where the American stock market lost 50% of value within a year. At the time of the Panic there was no means to insert liquidity into the economy so Teddy Roosevelt's had to accept J.P. Morgan's acquisition of Tennessee Coal, Iron, & Rail Company into his already monopolistic U.S. Steel Corporation in order for J.P. Morgan's to infuse liquidity into the market. J.P. Morgan was then given wide latitude when the Federal Reserve was formed and the reason why the Federal Reserve today is remains a tool of the private market rather than answering to people's representatives in the government.

The libertarian movement, in an bizarre attempt to achieve their goals, only target the public sector and do not speak ill of the private sector letting loose the golem that is corporations as if they could do no wrong and would never be destructive to the long term of the economy for short term gains. Of last year's Libertarian Party platform plank 2.6 (curiously named Monopolies and Corporations) concludes that corporations should be freely able to form and regulated by the free market alone, no mention other than the title of monopolies. Without government intervention there is no means to restrain monopolies occurring, and from the libertarian perspective that governing via free market is an inalienable from human freedom then there it should be a universal form of government for the entire planet. How could the free market prevent the monopolies of each country's economy from merging? If the free market is seeking out the most profitable (allegedly the most efficient) means and with the removal of redundancies of multiple competitors the most profitable and the only logical conclusion without government intervention is a one world corporation.

The libertarians fearful of a One World Government with command economy devoid of individual freedom holds up an ideal that would lead to a One World Corporation with an corporate aristocracy that will be the sole source of all employment and consumer products imposing their will without any repercussions other than outright rebellion against the free-market overlords. This has been an argument for moderation and a mixed economy, rather than the extremism that free-marketeers put forward. Extremism on either end and those that are proponents of extreme economic philosophy and ideology should be castigated and shunned at all costs.