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When the Good Guys Get it Wrong

My response to Toby Rogers' screed on free markets and progressivism

Toby Rogers has been one of the heroes of the medical-freedom movement since before most Americans knew there was a need for a medical-freedom movement. (His cost-benefit analysis of the Covid-19 vaccines is just one example of what he has contributed here.) He recently wrote a lengthy post in which he asks, essentially, “since both free markets and the progressive regulatory state have failed, what’s next for humanity?”

My reply to Toby follows.

Toby,

I hope you are sincere in welcoming corrections. Because there are some fundamental errors here, and I hope you will be open to hearing about them.

Let me start by saying that there is a story about free markets that is told to everyone who goes through a government school in America (and I imagine elsewhere). The story goes something like this: “Free markets are all well and good in theory, but in practice they produce monopolies that are no longer accountable to their customers and must be reined in by the government.”

This story is a lie. And if you understand why the government lies about all the other things it lies about, I think you’ll understand why it has an interest in perpetrating this lie too.

With that in mind:

1. You say: “The dirty little secret of classical liberalism is that it came to depend on both slavery and colonial empire to infuse wealth into the system.”

In fact, colonial empire was a drain on the British economy. Yes, it made a few people – “John Company”, and other cronies, along with the crown itself – very wealthy. But it did so at the expense of everyone else in Britain.

This book presents an accounting of all of this. From the description:

“…empire profits were earned at a substantial cost to the taxpayer. [The authors] depict British imperialism as a mechanism to effect an income transfer from the tax-paying middle class to the elites in which the ownership of imperial enterprise was heavily concentrated, with some slight net transfer to the colonies in the process.”

The reality is that both the ideals of classical liberalism, and the economic interests of the population as a whole, were very much at odds with British imperialism, and the mercantilist system – which was precisely what Adam Smith addressed in his “Wealth of Nations.”

2. You say: “…and “Adam Smith’s famed “butcher, baker, and brewer” got rich from being downstream of the enormous wealth generated when Scotland cornered the market for new world tobacco (which was slave-grown…”

I’m not sure what point you’re trying to make here. That markets cannot function without an assist from slavery? But that’s patently untrue. You must recognize that the world is overflowing with examples that contradict that claim. So what are you saying?

3. Your description of progressivism:

Progressivism was a reaction by the middle and upper classes against the failures of both liberalism and Marxism while attempting to retain the best aspects of both — seeking to preserve individual liberties while using the state to impose limits on corporate power. Progressive muckraker Upton Sinclair described the disgusting practices of meat packing plants in The Jungle and this led to the Federal Meat Inspection Act of 1906. Support for anti-trust action to break up large monopolies was another hallmark of progressivism.”

To begin with, “The Jungle” was completely made-up fiction. Lawrence Reed has written a thorough expose of this book and the mythology around it.

He writes:

“…historians with an ideological axe to grind against the market usually ignore an authoritative 1906 report of the Department of Agriculture’s Bureau of Animal Husbandry. Its investigators provided a point-by-point refutation of the worst of Sinclair’s allegations, some of which they labeled as “willful and deliberate misrepresentations of fact,” “atrocious exaggeration,” and “not at all characteristic.””

and:

“According to the popular myth, there were no government inspectors before Congress acted in response toThe Jungle, and the greedy meat packers fought federal inspection all the way. The truth is that not only did government inspection exist, but meat packers themselves supported it and were in the forefront of the effort to extend it so as to ensnare their smaller, unregulated competitors.”

It’s worth reading the whole piece by Reed, to get the full sense of the extent to which this novel really was nothing more than anti-capitalist propaganda. (There’s a reason it is required reading in so many government schools.)

More broadly, the myth that government regulation was borne of a desire to “impose limits on corporate power” is simply not true. The historical reality is that established businesses not only supported regulation of their industries, but were instrumental in setting up the regulatory state.

My dad wrote a book about this. In it, he:

“…makes a deep inquiry into the attitudes of business leaders toward competition during the years 1918 through 1938 to see how those attitudes were translated into proposals for controlling competition, through political machinery under the direction of trade associations.

“What he finds is a business sector not only hostile to free markets but aggressively in favor of restrictions that would protect their interests. This, he finds, is the very source of the origins and development of the regulatory state.”

OK, I’m biased – it’s my dad. But he’s not the only one who has written about this history. Most notably: Dominick Armentano, Tom DiLorenzo, Don Boudreaux, and Murray Rothbard.

4. You write: “And now the progressive regulatory state has failed because it was captured by the industries it was supposed to supervise.”

I don’t know how to emphasize this enough: Regulatory capture is a feature, not a bug. It’s how regulation began, and how it will continue. To think that the regulatory state somehow “failed” or that it is broken but we can fix it and then it will serve our interests, is to badly understand how this all works.

If you recognize that monopoly is a problem, then you must also recognize that seeking to solve that problem with yet another monopoly doesn’t actually solve the problem.

Here’s the problem with monopolies – and I mean genuine monopolies, the kind markets can’t put out of business. The kind that really do behave the way the textbooks tell us monopolies behave. The problem with real monopolies is that they are not accountable to the people they serve.

Think DMV. Think your local public school board. Think the TSA, DEA, IRS, etc. What these entities all have in common is that not a one of them has any meaningful accountability to those they claim to “serve.” If any private business did the things to its customers that these agencies do to us, not only would customers stop frequenting the business, but in some cases, its proprietors would end up in prison.

The institution of the state is the biggest monopolist around. And the regulatory and other alphabet agencies comprise the least accountable “branch” of the state. To expect that regulatory agencies will ever serve the interests of “the public” (whoever that is), rather than their own interests and the interests of their cronies, is like expecting a pack of lions to decide to become gazelle-rights activists. They simply have no incentive to do so.

Again, I cannot stress how important it is to get this. The coercive state, the regulatory state, cannot be made accountable, because the very fact of its being a coercive monopoly itself precludes any accountability to anyone else. This is at the heart of our frustration with “stupid politicians” (they’re not stupid – their interests just aren’t aligned with yours), and “corrupt regulatory agencies” (it is their nature to be “corrupted” by the entities they claim to regulate – it is literally how they were designed.) And those of us who fail to learn this lesson will end up spending a lot of time drawing up plans for optimal deck-chair placement in the coming years.

5. You write: “But the enormous problem with classical liberalism is that it has a tendency to lead to concentrated power (monopolies).”

No. It. Doesn’t.

You’re repeating the narrative that was handed to us in high school and in mainstream college econ. classes. The problem is: it doesn’t stand up to scrutiny.

Remember Standard Oil? The Standard Oil that was broken up by the government in 1911, and is cited as the textbook example for why we need the monopoly state to protect us from private monopolists? Here’s a fun paper you might want to read that tears apart that myth. (And here’s a TLDR version.)

It is true that in a free market individual players can come to dominate the market. What they cannot do, is maintain that dominance while behaving the way econ. textbooks tell us monopolies behave. As long as it is a free market, those companies are still subject to market forces, and must still satisfy the needs and wants of their customers, or they will lose market share to competitors.

Why do you think the most powerful corporations have always promoted government regulation of their industries? It’s because the last thing they want is competition. The last thing they want is a free market, because then they have to work hard to maintain their position.

The world we live in now is the world of crony capitalism. So it’s easy to look around and say things like “but look at Amazon! It’s a big monopolist that dominates the market while mom and pop shops are going under!” And indeed, our world is characterized by an awful lot of giant corporations succeeding in an environment that seems harder and harder every year for the little guy.

…which is exactly what one would expect to find in a crony capitalist system. Not to be confused (although it always is) with a free market.

Even large corporations that do not receive direct largesse from the state, or special favors of any kind, still benefit from the regulatory state. How? The same way that all those businesses that pushed for antitrust laws benefitted from that particular kind of regulation: A more regulated marketplace is a much harder place for competitors to enter, and to flourish in and grow big enough to become a threat. Every single regulation represents more of a burden for the smaller companies (and raises the entry barrier for complete newcomers) than it does for the big, established ones.

And so this is what we get: The Amazons and the big fast-food chains and the Ikeas and giant grocery stores – and the small independent businesses closing down at record speed. None of this should come as any surprise to anyone who has a clear understanding of the nature of the regulatory state.

6. Finally: “It seems to me that whatever political system comes next must wrestle with the question of how to preserve individual liberties while limiting the corrosive effects of concentrated power.”

You’re making this more complicated than it needs to be. The classical liberals were right, and those public-school narratives about the dangers of individual liberty in an economic setting are wrong.

Freedom is not our enemy, and it doesn’t need to be “balanced” with anything. Concentrated power is the product of the state, not of liberty, and if we are to have a new political system that allows humanity to flourish, then it cannot allow for the kind of violence-based monopoly that characterizes our current world. What we need are systems that allow for, and protect, individual liberty. It’s really not more complicated than that.

I hope that you will take this in the spirit in which it is meant: As a heartfelt attempt to correct what I see as a fundamental misunderstanding of both free-market theory and history, on the part of someone I think of as one of the true heroes of the medical-freedom movement.

And I didn’t write all of this because I think it’s critical that you, Toby Rogers, get this right. I felt compelled to write it because so very many people – good people, smart people, lots of people on the right side of things these days – have absorbed the government-school version of economics and economic history. Getting this wrong costs us dearly, because if we start out from fundamental misunderstandings of how the world works, it’s going to be very very hard to come up with good solutions. My hope is that you will take what I’ve said here to heart, but even if you don’t, I imagine some others who read this will.

God bless you, and keep up the good fight!