Libertarians Battle the Corporate State

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Same As It Ever Was: Libertarians Battle the Corporate State

by James Ostrowski by James Ostrowski

Libertarians often find themselves squirming to explain why they are not apologists for the rich, protectors of the powerful and defenders of the privileged. This predicament usually comes when we face off against the left, the self-styled defenders of the little guy and the powerless. I’ll never forget in my early days, the reaction of a leftist when I failed to condemn Ayn Rand’s economic views. He looked at me as if I was Stalin; a poor example to use I admit as this fellow probably would have warmly greeted Stalin.

I suppose we have ourselves to blame for not making ourselves clear. We have not marketed ourselves well. Though we are thought to be spokesmen for billionaires, none of them to my knowledge gives us (non-beltway libertarians) any money. While we do in fact speak for the interests of the individual, often poor or struggling, few of them know it or identify with our (their) cause.

It was a recent letter from a nice fellow responding to one of my articles that prompted this essay. He asked, as we have all been asked a million times, who is going to take care of the poor in a libertarian society? I responded, in substance, you are under the false impression that the current system is designed to help the little guy when in fact, it’s designed to screw the little guy. That’s why there are so many of them (us).

Since the skepticism of my non-libertarian readers (and some libertarian readers?) is probably sky-high at this point, let me give some examples. Recently in Buffalo, New York, a federal judge sentenced six young Yemeni-Americans to long prison terms for attending an Al-Qaeda training camp, before 9/11. There is little evidence that the young men intended to or did advance any actual terrorist activity.

Around the same time, the young men were attending the camp, the federal government gave (or promised to give) $43 million to Al-Qaeda’s partner in crime, the Taliban, allegedly for fighting drugs. I’d say giving $43 million to terrorists is worse than buying a uniform. Yet, Colin Powell has not been indicted and George Bush has not been impeached.

The system protects the rich and the powerful and screws the little guy.

I could only laugh when I heard that the Buffalo judge had lectured one of the defendants, charged with obstruction of justice, on the importance of telling the truth. Once, when I was charged with contempt, naturally by the local power elite, this same judge, who had quietly let his friend off the hook on the very same charge, later denied knowing his friend had even been charged with contempt: “The fact that [he] had been served with the initial contempt motions had completely escaped my attention.” Funny that his friend was mentioned by name in the same papers that the judge claimed to have reviewed in refusing to dismiss the charges against me.

When the lawyer who was let off the hook informed us that the judge, in an unethical ex parte (secret) communication, had told him he was out of the case, the judge denied it, though a mountain of evidence indicated that he was lying. When we tried to get the lawyer under oath, the same judge killed a deposition of his friend on the grounds that we had not filed motion papers (we did; they’re in the court file). Talk about obstruction of justice! (For the gory details, see here.)

The system protects the rich and the powerful and screws the little guy.

In 1998, Bill Clinton and Wesley Clark unleashed a terrorist campaign against the Serbs. They killed twice as many people and caused, in money terms, about the same amount of physical destruction as occurred on 9/11. Yet, neither is on death row — where poor black murderers tend to end up — and Clark is running for President!

The system protects the rich and the powerful and screws the little guy.

For years, politically-connected businesses have made millions making nuclear weapons, an economically useless "good" that is the main threat to human survival. They did it by using the state to force people to pay for these hideous weapons. At the same time, tens of thousands of Americans, many of them black and poor, have been jailed for trying to make a few bucks selling, in voluntary free market transactions, marijuana, a relatively benign substance as drugs go.

The system protects the rich and the powerful and screws the little guy.

During the Vietnam War, the poor and powerless were drafted and killed; the wealthy and connected got drunk and caroused, I mean, went to college.

The system protects the rich and the powerful and screws the little guy.

During World War II, working class guys like my father were on the front lines; many of the wealthy and powerful were back at headquarters barking orders.

The system protects the rich and the powerful and screws the little guy.

Recently, in Buffalo, it was announced that Geico, owned by Warren Buffett, would open a local office in exchange for $102 million in "inducements." All it took was a flunky of Buffett’s to put in a call to the Governor. I imagine that at the same time, an elderly woman, on a fixed income, had her phone shut off for non-payment. Would George Pataki have taken her call, asking for a waiver from her state taxes?

The system protects the rich and the powerful and screws the little guy.

Let’s examine this particular example in greater detail and come closer to identifying the nature of our present political economy.

When I heard Geico was coming to town, I knew there must be a catch. Why would any company come to Buffalo where it and its employees would be fleeced by the local political class? And the answer is — when your owner is the second richest man on earth, he can manipulate the state’s corrupt political system — corporatism — and get a waiver from the state’s tax slave policies and crazy regulations. This is the key lesson of the Geico story. You will not learn this lesson reading the Buffalo News, which is owned by the owner of Geico.

Geico plans to open an office in Amherst, a suburb of Buffalo. The only large business to move to Buffalo in recent memory just happens to be owned by the second richest man in the world and owner of the largest upstate newspaper. Buffett probably has few other tricks up his sleeve to bail out Buffalo’s economy, so, no, Buffalo News, this is not "big, really big."

What has the Buffalo News done for the last forty years while our economy has been steadily declining, but continually support incumbent politicians and the numerous failed plans, schemes and scams of the local power elite? All the while though, the News and its top staff have, like the rest of the local elite, done well for themselves while the bulk of the population struggled to survive or moved away.

Did the News flub this story because they’re biased or because they often flub the big stories? The News was a cheerleader for the Adelphia Waterfront Project (which would have increased the value of its real estate across the street). I was virtually its only opponent in town. That pet project of the News ended in with the arrest of John Rigas in Manhattan.

The News has downplayed the $102 million in "inducements" to Geico: tax breaks, grants, and utility discounts. It’s all very complicated which means that politically-connected lawyers and law firms will earn huge fees putting it all on paper. Economic development bureaucrats — a class of people which would not exist in a free society — also will earn huge salaries administering all this legalized graft.

So, merely from the point of view of common sense, the project is a loser. Why spend $102 million to bribe a company to spend $37 million building a service center? Oh yeah, the telemarketing-type jobs. Wow. The headlines say 2,500. Don’t believe it. The fine print says 10—12 years down the line. Sounds like what John Rigas was saying a few years back. Will Geico exist in 10—12 years? Will Warren Buffett still own it? Doubtful. In the modern economy, it is virtually impossible to plan ten years ahead. How many Fortune 500 companies in 1993 are still on the list today?

Let me get to the real heart of the matter, though, lest I be misunderstood. I hate taxes so please don’t misconstrue anything I say as believing that drastic tax relief is not needed. But here’s the $64,000 question. Why should Geico get tax breaks and not the rest of us? I don’t know much about the law — just twenty years of law practice and dozens of published articles on the law — but, isn’t that a violation of equal protection of the laws? Prior to FDR’s corruption of the judiciary, the courts would probably have agreed. This is the core of the story but the Buffettlo News wouldn’t understand what I am talking about in a million years.

Not that I don’t have nitty-gritty, nuts and bolts objections to these shenanigans as well. There are reasons — nefarious ones — why our leaders choose special breaks over citizen-wide tax cuts. First, as in this case, it forces the businessmen to ask for help. That help always comes at a price: contributions, endorsements, and mugging for the cameras at ground-breaking time. That’s why you see politicians at all these openings.

Equally important, the politicians get to run these complex deals through their patronage apparatus — connected lawyers, real estate firms, development bureaucrats — all of whom make an enormous amount of money figuring out how the wired fat cats can avoid paying the taxes and complying with the regulations the rest of us are stuck with. The recipients of the patronage then kick back campaign contributions to the politicians, do free legal work, and form the backbone of their campaign organizations at re-election time.

Thus, the seemingly abstract principle of equal protection of the laws, if enforced, would have an immediate and tangible impact on cleaning up our corrupt political system. "Ideas have consequences."

The bottom line is that our corrupt political/economic system in Buffalo and elsewhere continues as it has for many years. The left thinks that system is capitalism. It isn’t, unless they view Mussolini as a capitalist. No, it’s corporatism or the corporate state, a marriage between big government and big business with big labor as a junior partner. The beneficiaries are of course big business, big government and big labor. Everyone else, that is, 85 percent of us, lose out big-time.

This is the system Hamilton wanted but which was never realized until the Hamiltonian Lincoln wiped out his Jeffersonian opponents in the War Between the States. Lincoln is the prophet and progenitor of the thoroughly corrupt modern American political system, a thesis Tom DiLorenzo and I demonstrate elsewhere. This system is dominated by small, cohesive groups — political machines — out for graft, whose superior organization, discipline, greed and ruthlessness allow them to seize control of the state and use it for their own confiscatory purposes. This system, based on corporate welfare, extensive control over the economy, and political patronage, got a huge boost from FDR’s New Deal, copied from Mussolini. It remains the system today, nationally and extra-strength in Buffalo.

This system is far from free-market capitalism. In fact, it is precisely engineered to eliminate the individual freedom and competition of the free market. Big business has never been a friend of competition. Competition means they must always live with the uncertainty that someone will build a better mousetrap and put them out of business. Big business has always sought to use the government to fend off competition from small business. Organized labor likewise has always feared competition from the little guy, the guy willing to work harder for less (historically often a black guy, or more recently a Chinese guy or gal). Big labor has always wanted to use the state to fend off competition from those poorer than them. That’s why their current bête noire is free trade.

What’s in it for big government? This is the easiest question to answer. They’re in it for power and money. The beneficiaries of big government, like their partners in big business and big labor, also seek to avoid the competition of the free market. By definition, government is the ultimate monopoly. It has no competitors. It is true of political power what was once thought to be true of money: it represents the instant gratification of an infinite number of desires. Government power is even better than money. With it, you can get money any old day — through taxes, inflation, borrowing, and confiscation. But you can also exercise power over others in numerous ways. You can even nuke them, something that even Warren Buffett can’t do.

The purpose of the corporate state is to deprive the people of their freedom and to concentrate power into the hands of a few large organizations and their leaders. As a result, a tiny number of people wield virtually all of the power. Buffalo, for example, is run by about fifty middle-aged politically-connected businessmen, lawyers and bureaucrats. The same "interlocking directorate"; the same usual suspects pop up wherever power is lurking in Buffalo.

The power elite are not stupid. To quote Jack Warden to Paul Newman in The Verdict: "How do you think they got all that money?" Not being stupid, naturally they have on call numerous flacks, professors, and consultants to con the public into accepting their system. It’s all lies. How can handing over your personal freedom, your money and property, and your right to pursue happiness, to a handful of rich and powerful strangers, be good for you?

The political left often complains about the disparity in wealth between the rich and the rest of us. It is the corporate state, not the free market, that has created a society where a few at the top are doing very well while the bulk of the population juggles credit cards, if they have credit cards.

Here’s how it works. We can break down the corporate state into three main elements:

  • Lincoln’s and Clay’s American System of high tariffs (to benefit big business), national bank (controlled by big banks and causing inflation), and "internal improvements" (corporate welfare/political patronage)
  • The Progressive’s Regulatory State, and
  • FDR’s and LBJ’s Welfare-Warfare State

The resulting corporatist economy puts so many obstacles in the way of starting a business and staying in business, that the most successful businessmen tend to be those most skilled at manipulating the system to get special tax breaks and regulatory and prosecutorial leniency. The bulk of the population, without the wherewithal to manipulate the system, have no choice but to work for wages, which after inflation and taxes, leave most people without any substantial capital even after decades of hard work. Most of them end up voting Democratic, even though that Party’s heroes helped create the very system they suffer under. Thus, simultaneously, big business gets reduced competition and a larger pool of workers, resulting in lower wages than would be the case in the free market.

The regulatory state inevitably and inexorably favors big business over small business. There are two reasons for this. First, the bigger the business, the greater is the ability to absorb the costs of regulatory compliance. Even a medium-sized firm can hire a worker whose sole job is to fill out the maddening paperwork. Obviously, a one-person firm started with sweat equity cannot do that. This is one of the reasons why there are so few small businesses in the inner city. Second, the power elite, always genetically linked to big business, controls the legal command posts of society — the courts, the regulators, the prosecutors, and the police. All these officials are installed by the political machine and ultimately the machine answers to its big money contributors. The legal command posts tend to treat the poor and powerless harshly while winking at the high and the mighty.

By way of example, if it costs one million dollars to leap over all the regulatory and legal hurdles to start a new bank in New York State, the big banks can pay that price easily and they’ll probably know the regulators — former employees or wannabe employees. Joe Schmoe, even with $500,000 in working capital, will not be able to compete. And the big banks like it that way.

In the era of laissez-faire, people came here from Europe, with no money, no education, and not speaking English. A free economy allowed thousands of them to start from scratch and makes millions. In the 1980′s, I would read their obituaries in the New York Times with amazement. This is much more difficult under the corporate state. Bill Gates? Sorry to burst your rags-to-riches bubble, but Bill’s mom was a friend of the President of IBM. (It helped.) It is significant though that most of the nouveau riche in America made their money in the least regulated area of the economy: computers and the Internet.

Thus, the corporate state creates an obstacle-course economy that is best navigated by the wealthiest and most connected firms. As time goes on, the rich get richer, which only magnifies their advantage by giving them more working capital and ever more political influence. Thus, if the left really wants to help the little guy, they will join us libertarians in seeking to vanquish the corporate state (the left helped create) and establish a free market.

The Geico story perfectly illustrates how the corporate state operates. A huge insurance company gets special favors from big government so that it can get even bigger. The politicians smile for cameras; their tangible rewards will come later and you won’t hear much about them.

If you are a big insurance company, the corporate state sure beats the vagaries of free market competition. It’s easier to pick up a phone, dial the governor and get $102 million than it is to go out in the marketplace and convince ten million New York drivers that you have the cheapest and best policies.

The Buffalo News is a big business owned by a fat cat who thrives under the current political system in the Unites States. That’s why you are reading the truth about the Geico story on LewRockwell.com, and not in the Buffalo News or in any other establishment media outlet.

Thus, the corporate state is a system which concentrates power into the hands of a few for their own benefit and everyone else’s expense. Under this system, the powerful control the legal command posts of society, the courts, the prosecutors, and the police. With such control, they are able to maintain a double standard: the little guy gets the dirty work and harsh justice if he ever slips up; the fat cats pick the judges and the prosecutors so for them the courts are just another private club.

The only true opponent of the corporate state is the hardcore libertarian movement, by which term I mean to exclude the beltway types, the liberventionists, and people who think the label "libertarian" is fashionable, but don’t really know what it means. This means that we are the only movement or philosophy which consistently stands up for the interests of the little guy, the minority of one, the individual. That’s why big business gives tens of millions of dollars to the Republican Party, the Democratic Party, and the beltway think tanks, but apparently won’t give a lousy $50,000 to LewRockwell.com.

To return to the question we libertarians are so often asked — what are libertarians going to do about the poor — I hope you can see by now that this is the wrong question. The better question is, why do you support a system that is designed to benefit the wealthy and powerful and which necessarily produces so many poor and economically marginalized people? In other words, why are you producing so many poor people right now?

While I await your response, I will answer your question. Libertarians will help the poor and struggling by establishing a free economy where all will be able to pursue their economic happiness unfettered by tax slavery and insane regulations. Many more people will be able to start and successfully maintain their own businesses — approximating Jefferson’s vision for modern times — and those who do choose to work for others will have far greater choices, and because capital investment will skyrocket and taxes plummet, far greater real wages.

All this will greatly shrink the number of poor people. Even the intractably poor who remain will face drastically reduced costs of living as we are slashing taxes and eliminating barriers to trade so that the poor will be able to purchase their goods and services from the world’s cheapest suppliers — not from the corporation with the sleaziest lobbyist on Capitol Hill.

Finally, by lifting millions out of poverty, and by allowing the rest of us to be far more productive and keep the products of our labors and investments, those 95 percent of us inclined to help those absolutely unable to care for themselves, will have far greater means to do so.

Even the corporate state power elite will benefit. Though they’ll have to seek out legitimate, productive, but less remunerative employment than they once enjoyed, and their legal and political power will be destroyed, their souls will be cleansed and they will eventually realize that they can make it on their own merit after all. They’ve been selling themselves short all these years. Moreover, their relations with their fellow man will improve, once they start dealing with them as equals and not suckers.

Now stop asking me what I am going to do about the legions of poor created by the Corporate State and start contributing to poor old LewRockwell.com!

December 31, 2003

James Ostrowski is an attorney practicing in Buffalo, New York. See his website at http://jimostrowski.com.

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