Blogs > Liberty and Power > My Cato Unbound Reply to Long

Nov 14, 2008 10:34 am

My Cato Unbound Reply to Long

I was asked to be one of the respondents to Roderick's Cato Unbound essay. My reply"Untangling the Corporatist Knot" is now up.

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William J. Stepp - 11/15/2008

Steve Horwitz makes good points about
"privatization" vs. "de-monopolization" and in noting that market competition itself is a form of regulation, complete with the rule of law instead of the rule of regulators.
The worst monopolies are the money monopoly, and the monopoly of law and courts. The former interferes with economic calculation and causes booms and recessions. I would vote for the former as the worst monopoly, and if given a choice of de-monopolizing only one but not the other would opt for it.

Rereading Roderick Long's essay, he attributes Wal-Mart's size to subdidies. This can't possibly be correct, because when Sam Walton started the company in 1962, it was the new kid on the block and was competing against established retailers, some of which were quite large.
Wal-Mart's success was due not to road and infrastructure subsidies (any others?), which were certainly available to its competitors at that time, as well as to its newer competitors that have cropped up since, but instead to the fact that the company managed its inventory and supply chain far better than anyone else (and not just in the retail industry), and was able to squeeze its vendors for lower prices, which it continued to do as it grew and gained market share and loyal customers. It has a history of offering "everyday low prices," and offers its customers what amounts to a pay increase.
Friday's WSJ had a front pager about how the company has been doing fairly well recently, and added something like 33,000 jobs last month. It also agreed to pay its vendors sooner in exchange for better prices. That sounds like a good deal for its customers.

Roderick Long's complaint about the low pay Wal-Mart's employees earn is typical of left-wingers. The fact that people take the jobs is enough to refute this. Wal-Mart doesn't point a gun at people and force them to work there.
Nor is the alleged lack of better paying alternatives due solely (or even mainly) to subsidies and other regulations and restrictions on employment.

As for the complaint about "hierarchy" and the size of corporations, these are irrelevant to anyone but maybe investors, like mutual fund managers (small vs. large cap). Who cares how much "bureaucracy" a company has?
All organizations have leadership and hierarchies, including owners (which btw can include low paid workers at Wal-Mart and other public firms), managers, and other employees, some of whom can and do rise into management positions, and can even become owners.
Some firms might grow because of subsidies (e.g., defense contractors that need to have a certain scale to manufacture the stuff the Pentagon buys), but I doubt this is true for most firms in most industries, and certainly not for retailers, who are responding to consumer demand, not the killing-field demand of government bureaucrats and politicians, and the taxpayer-financed "supply" to meet that demand.

Bill Woolsey - 11/14/2008

One focus of Marxism is the distribution of income between broad social classes. While the key issue is workers and owners, small business, peasants (farmers) and the like would be of passing interest.

Free market economics, other the other hand, has focused more total production and, so, total income and consumption. It is really true that the efforts of businessmen to get rich by introducing new products and more efficient methods of production "trickle-down" and improve the standads of living of the poor.

Economics in general, has moved away from a focus on distribution between classes based upon sources of income, and instead between high income (or consumption) households and low income (or consumption) households. That is where the quintiles come in.

I couldn't begin to know whether a "true" free market would create more equal incomes between groups like workers (including rock stars and CEOs,) capitalists, small businessmen or farmers.

More importantly, I don't pretend to know whether the distrubution of income or consumption (before or after taxes) would be more equal than under the status quo.

The public choice approach to political economy emphasizes the waste of negative sum games rather than supposedly sucessful efforts of a dominant social class to transfer income to itself. When one big business gets a regulation introduced because it will differentially hurt a competitor, and so allow more profit, this doesn't enrich "big business." When they are all doing it, it doesn't just cancel out. The result is waste. Total production and income is less.

Depending of businesses to limit their activites to increased production when the rules of our game allow rent seeking (transfers through the political system,) is hopeless. You need rules of the game that don't allow for these transfers.

Anyway, I coung much of Long's analysis to be truly a vulger libertarianism. It is what dogmatic libertarians used to call "intellectual ammunition." When the liberal says, "but in a free market, big business will do this or that," then you can say, "but in a trully free market.." Or worse, it is about showing that we libertarian intellectuals hate those businessmen too.

How can anyone know? But I think that those who are sucessful under the current system will be even more sucessful in a free market. But so will those who are relatively less sucessful now. This is possible, of course, because total production will be higher. I don't think we have any good grounds to argue that incomes or consumption would be more equal (or less, really.) And really, nothing much to say about what would happen to big or small business.