March 27, 2024
David Wallace-Wells had a column discussing the trip by Javier Milei, Argentina’s new president, to the World Economic Forum (WEF) in Davos, Switzerland. The WEF is an annual gathering of many of the world’s richest people, where they also invite politicians, academics, and others who they think may amuse them. According to Wallace-Wells, Mr. Milei definitely fits into that category.
The piece talked about how Milei calls himself as an anarchist, with the government just doing basic functions, like defending the country and running the criminal justice system. Otherwise, Milei would eliminate any role for government, if he had his choice.
It is humorous to hear politicians make declarations like this. As a practical matter, almost all of these self-described anarchists would have a very large role for the government. What they want to do is to write the rules in ways that sends income upwards and then just pretend it is the natural order of things.
Patent and Copyright Monopolies
The best place to go to start ripping off the phony face of these “anarchists” is with government-granted patent and copyright monopolies. These monopolies, which make folks like Bill Gates incredibly rich, are not part of any natural order. They are explicit government policies designed to promote innovation and creative work.
It is possible to argue for these government-granted monopolies as good policy, but that doesn’t change the fact that they are government policies. It is just a lie to say that you don’t want the government intervening in the market and then support these monopolies.
The lie also has the effect of avoiding a serious debate on the relative merits of these mechanisms for supporting innovation and creative work, compared to other mechanisms. People like Milei pretend that copyrights and patents are just the natural working of the market, whereas other mechanisms, like publicly funded open-source research and creative work are government interventions.
This means that even if these other routes are more efficient, Milei doesn’t want them to be discussed. Oh yeah, if patents and copyrights happen to send a huge amount of income upward, well we don’t have to talk about that.
And let’s be clear, we are talking about a huge amount of income. It’s likely more than $500 billion a year ($4,000 for every family) in the case of prescription drugs alone. In total we are almost certainly talking about more than $1 trillion a year, a sum that is close to half of after-tax corporate profits.
The Privilege of Incorporation
It’s always fun to ask anarchist-libertarian types if they want to get rid of corporations. It usually draws a blank stare.
It shouldn’t, because corporations are creations of the government. We can have individuals agree to work together in partnerships, but you need big bad government to create a corporation, an entity that has a distinct identity from the people who own it.
This is a big deal for many reasons. The most obvious one is that a corporation can go bankrupt, stiffing its creditors, even as the shareholders retain their wealth, apart from what they invested in the company’s shares.
This is an especially big deal when the creditors did not voluntarily lend money, such as a neighborhood wrecked by chemical contaminates or the patients who took a drug that turned out not to be safe. Suppliers who delivered goods or workers promised pensions can also find themselves as unintentional creditors.
The anonymity allowed by corporate status can also allow individuals to profit from activities that they would rather not be identified with, such as selling tobacco, guns, and pornography. Corporate status allows investors to hide in a way that would not be true of partnerships.
When the government passes laws allowing incorporation it also sets up rules for corporate governance. These rules determine who is likely to benefit most from corporate status. In the United States the rules are much more friendly to top management than elsewhere. As a result, our CEOs tend to get far higher pay than their counterparts at large successful companies in other wealthy countries. This matters not only for the CEOs, but for top management more generally, and skews the pay structure in the economy as a whole.
Rules of corporate governance can also require some role for stakeholders other than shareholders. In Germany, large companies are required to include worker representatives on their board. There is no natural set of rules of corporate governance, they are set by governments. The libertarian bible won’t help here.
Labor Unions
Another area where self-imagined anarchist libertarians often have trouble is with labor unions. If we let people associate with whoever they want, presumably workers are free to get together and act collectively just like businesspeople can get together to form a partnership. So good libertarians have to accept unions.
But what are the boundaries for union activities? Can unions, or their members, be liable for the damage a company suffers as a result of a strike? There have been many efforts over the years to make workers pay for a company’s losses from a strike. Can unions sign contracts that require all of a company’s workers to pay a representation fee to the union?
What about secondary boycotts? Can the Teamsters refuse to make deliveries to a restaurant or hotel being picketed by its workers?
These questions and others are policy issues that can be decided any number of ways. The desire to “get the government out” provides no help here. The government is in whether we like it or not.
The “Libertarian” Philosophy is Lie, Why Pretend Otherwise?
I could go on at length and show other ways in which most people who call themselves libertarians are happy to have the government intervene in the economy. (This is the main point of my book Rigged [it’s free].) In almost all cases the effect of their approved interventions is to redistribute income upward.
It is totally understandable that people like Milei would like to conceal their approach in an anarchist-libertarian philosophy. After all, it sounds much better to run around saying that you support anarchist principles and get the government out of the economy than to say that you want the government to intervene in ways that give all the money to rich people.
The part of this story that is hard to understand is why people who don’t want to give all the money to the rich accept the claims of the “anarchist-libertarians” at face value. We get people absurdly arguing against “free-market fundamentalists,” like they are arguing against the market.
This makes zero sense. The market is a tool, like the wheel. It makes no more sense to argue against the market than to argue against the wheel. We all want to use the market in the same way we all want to use wheels. We are arguing over how best to use it.
It is both bad politics and terrible policy to pretend that the enemy of progressive change is somehow the market. The issue is how best to shape the market. We can’t have this discussion if we pretend that people like Milei are sincere in wanting to get the government out of the economy.
Let the rich at Davos enjoy this clown show. Serious people need to deal with reality.
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