Bailouts and Capitalism

The G-20 protesters in Pittsburgh seem to have some interesting political views:

The marchers included small groups of self-described anarchists, some wearing dark clothes and bandanas and carrying black flags. Others wore helmets and safety goggles.

One banner read, “No borders, no banks,” another, “No hope in capitalism.” A few minutes into the march, protesters unfurled a large banner reading “NO BAILOUT NO CAPITALISM” with an encircled “A,” a recognized sign of anarchists.

The “NO BAILOUT NO CAPITALISM” sign raises some interesting questions about the word “capitalism.” Many self-described leftists (some of whom I come very close to agreeing with) see bailouts and other forms of corporate privilege as part and parcel of capitalism. Many non-left libertarians see bailouts as antithetical to capitalism. Both groups are wrong.

The only useful definition of capitalism in line with its historical and contemporary usage is a system which allows the private ownership and alienation of property. This definition can accommodate a wide variety of institutional arrangements, from a market-anarchism to fascism: there are both good and bad forms of capitalism (full book here!).

By that definition, I am completely and utterly pro-capitalist in the sense that I think any system without private property would be irredeemably awful. History hasn’t exhausted the design-space of propertyless social systems (and I, for one, hope it never does), but it teaches some valuable lessons.  At the same time, I’m completely and utterly opposed to some forms of capitalism. Government funds lining the pockets of well-connecting firms is neither essential to nor inconsistent with capitalism. It is essential to some kinds of capitalism and inconsistent with others.

Where my Georgists at?

Many libertarians accept that government, and therefore taxation, is necessary. If taxation is unavoidable, the economically literate libertarian should prefer a tax system with minimal distortionary effect and injustice. I think the Georgist idea of a single tax on the unimproved value of land is clearly the best tax on both counts, but is seldom discussed by economists or policy wonks.

Taxation distorts economic activity by discouraging the taxed activity. If we tax income, people will work less. That’s bad. Given that (almost) all the land there’s ever going to be is already in existence and can’t be destroyed, a tax on the unimproved value of land wouldn’t have these distortionary effects. Of course, there’s really no such thing as the unimproved value of land: the value of a particular piece of land depends on improvements made in neighbouring areas. Still, such a tax would surely be less distortionary than other forms of taxation.

Many libertarians will object that efficient theft is still theft, and therefore wrong. I’ve never completely bought in to the taxation is theft line, since I think property rights are themselves morally problematic. I really like property rights, and I think it’s pretty indisputable that we’d all be poor and miserable in a world without them.

I don’t like the quasi-mystical overtones of the “mixing one’s labour” metaphor, but I think some version of homesteading principle is the only way to think about just and reasonable acquisition. The Lockean proviso that we leave enough and as good for others, though, is never completely met in reality. Even if there’s an abundance of unclaimed land, location remains important. If I claim exclusive right to a piece of land, I am reducing the options available to everyone else.

I don’t like Nozick’s move of interpreting the Lockean proviso as being met if everybody is better off in a system of private property rights than the alternative. This neglects the intermediate possibility of attenuated property rights. It seems fairly plausible that everyone would prefer a system in which people could claim private ownership of land, but only on the condition that they compensate others – in Georgist terms, paying rent to the community. There are some problems in terms of justice, but, to me, there much less serious than the problems of current tax systems.

Milton Friedman once called it “the least-bad tax” (but to my knowledge never discussed the possibility in any depth). I’d go further and say it could be a positively good tax. If we could design a government and ensured it remained within predefined bounds, a nightwatchman state funded by a single land tax could be preferable (in expected value terms) to anarchism. (Constraining government in this way is impossible, though, which is why I’m an anarchist. Still, the “imagine a perfect government; wish really hard” approach is the dominant one in political discourse.)

Why, then, is the idea largely confined the certain portions of the left-libertarian fringe? With few exceptions, free market economists have neglected the possibility of replacing income or consumption taxes with land taxes. Fred Foldvary has done some great work, but that’s about it.

I don’t get it. Any ideas?

Libertarianism and Beneficiary-Bashing

There has been much chatter in the New Zealand blogosphere about “beneficiary bashing” after the Minster of Social Development Paula Bennett released details on how much two solo mothers who complained about some of their benefits being reduced were still receiving from the state.

I don’t find the privacy issues particularly interesting, but the issue of whether those on welfare are receiving too much is important. As a libertarian, my first-best set of policies would not include welfare payments (in fact, it would not include government). This is not because I hate the poor and want to see them starve, or becuase I assume that they would all be able to look after themselves in the market. I think many people do need assistance and should receive it, but I am not willing to forcibly take from the rich to give to the poor. I think voluntary charity in a free society would be entirely adequate to address genuine cases of poverty.

Even so, I do not advocate a general reduction in benefits given the current set of policies. I certainly think there are better ways to provide welfare, but I don’t think it’s fair or helpful to complain about dole-bludgers and insist they just need to get a job. I think there is a very strong moral second-best argument for significant rich-to-poor redistribution in the presence of significant (stupid) government intervention. To my mind, the most just system would be a completely free market; but removing some types of government intervention can make the system less just.

Much government policy today disproportionately harms the poor. Mandated minimum levels of safety and quality on housing and other goods outlaws the products many poor people would choose to consume, and barriers to starting a business (such as licensure) or employing low-skilled workers (such as the minimum wage) reduce the opportunities for gainful employment. For the most vulnerable, this increases costs and decreases income. Given that this is happening, I’m glad that there’s a little more coercive taxation going on in order to stop the poor from starving.

If we were to remove all welfare benefits today, we would move from a system which forces people into welfare dependency (which is very bad) to a system in which takes away their options and doesn’t offer them any assistance (which is downright horrible). A system which effectively prohibits certain people from making a living and doesn’t offer them any compensation seems like the worst of all possible worlds to me.

Roger Douglas is a Left-Libertarian

Roger Douglas nicely lays out the principles of classical liberalism as they relate to the poor (hat tip: Anna):

Many think that ACT New Zealand is a party for big business. It is a real tragedy that ACT suffers from this stereotype. It is a tragedy because the profile is so out of whack with the reality.

I have spent most of my adult life in the Labour Party. For 21 years I represented one of the poorest electorates in New Zealand. (…)

The goals I have today are the same as those I had when I was in Labour. I am just as concerned today as I was then about poverty. I am just as concerned today as I was then about opportunity. I am just as concerned today as I was then about second class citizens.

But where I have changed is what I see as the cause of second class citizenship.

New Zealand has two classes of citizens. And we have two classes not because the Government isn’t doing enough for the poor, but because what the Government does for the poor denies them choices, destroys the incentives they have to get ahead, and subjects them to political abuse. (…)

I hold the same ideals I always have. In fact, every party in Parliament claims to share essentially the same goals when it comes to welfare. National, Labour, and the Greens are all wedded to the current system. Only ACT has an alternative to the failing status quo.

The problem with the status quo is that it all about power. Politicians control who gets an operation, where kids get educated, and how much superannuation you receive.

I can share the goal of equal opportunity for all, and have a different way of achieving it.


I’m not one for electoral politics, and would certainly never support the ACT party these days, but Roger Douglas is good people and the whole article is well worth reading. Surely he must realise, though, that stupid policy is what government always reverts to. We can’t just complain about policy without thinking about the underlying system which produces it. He has done more than any other politician to improve policy, only to see many of the changes reversed.

If Roger were to accept that coercive government is always going to produce policy which disproportionately harms the poor, his views would be nearly identical to many anarchist left-libertarians. This excellent Freeman article from Charles Johnson, aka Rad Geek, springs to mind (which Mike Gogulski recently read aloud as a podcast):

Artificially limiting the alternative options for housing ratchets up the fixed costs of living for the urban poor. Artificially limiting the alternative options for independent work ratchets down the opportunities for increasing income. And the squeeze makes poor people dependent on—and thus vulnerable to negligent or unscrupulous treatment from—both landlords and bosses by constraining their ability to find other, better homes, or other, better livelihoods. The same squeeze puts many more poor people into the position of living “one paycheck away” from homelessness and makes that position all the more precarious by harassing and coercing and imposing artificial destitution on those who do end up on the street.

I’d love to see Roger Douglas come out as an anarchist.

Hopefully Unnecessary Clarification of the Day

Roderick Long, after suggesting that noncoercive authority (Patriarchy and all that) is a bad thing from a libertarian point of view:

No, I am not saying that non-forcible forms of authority are rights-violations, nor that they should be combated by forcible means appropriate to such violations, nor again that those who wield non-forcible authority should be hurled into the Pit of Azathoth, there to boil and burn for all eternity in His howling, bubbling chaos. The solution to noncoercive authority is not coercive authority, any more than the cure for flu is pneumonia.

Read the whole thing. I have a lot of time for left libertarians like Long. I also have a lot of time for the other sort of left libertarians, who want redistriubtion to correct what they see as unjust inequalities of wealth but reject most other forms of government interference. I would see that as a huge improvement over the status quo, but question whether it’s possible to have a state powerful enough to redistribute but constrained enough to avoid further state action. Then again, I’m not sure limited government is at all possible.