"If that wasnt the case, Somalia with its absence of government would be a Capitalist paradise"
Capitalism deals with the ownership of economic resources. The absence of government doesn't define capitalism, indeed the protection of private property can be undermined without the support of the state, which is exactly the case in Somalia.
The economic principles behind the free market and Smith's invisible hand are simple, they're not made so by their proponents.
Since the discrediting of controlled economies their proponents now talk of "sensible regulations". However it's no more obvious what constitutes "sensible" as other forms of government intervention.
Competitive markets are the goal, these are not always obtainable. Significant market failures exist in the real world. Use this measure when evaluating legislative impacts, not some imagined view of capitalism.
John Boehner thinks net neutrality rules are a threat to freedom in the United States (paraphrased, but that’s the thrust; click the link at left to see him in his own words). It’s a weird concept, given that Capitalism is replete with restrictions on freedom. I’m not free to borrow my neighbor’s car without asking, and when I sign a contract that I break, my freedom is greatly impinged by the full force of the legal system that will fall upon my rule-breaking head. I can’t reprint the latest Stephen King novel and sell it in a book store, and if I want to build a skyscraper, the government will spend lots of time making sure I adhere to stacks of engineering standards.
Capitalism, in other words, isn’t economic anarchy. It requires the creation of walls and barriers that guide human productive activity in useful directions. It’s a framework, built on rules created and enforced by government, that is as artificial as the gleaming reflective skyscrapers in downtown Los Angeles.
Granted, Capitalism is designed to harness natural impulses. Humans tend to be very good at focusing on the things that affect them directly, an impulse that has been described as “selfish” by some economists, but is really just a reflection of the human condition. We are, for all intents and purposes, ships sailing alone in life, and though we may lash ourselves to other vessels periodically (my wife may resent that comparison), our experiences are still uniquely our own. No outside entity can gather the same level information about our wants, needs and requirements, and that’s why central planning boards have a hard time out-thinking the collective rationality of individual buyers and sellers. Those vessels navigate the economic seas armed with more accurate information than any third party could possibly collect. That is, in one paragraph, the essence of Austrian Economist Ludwig Von Mises criticism of Socialism.
But therein lies the paradox of Capitalism. Yes, you need to respect the collective decision-making power of the masses, as it has the most accurate information upon which to base choices. On the other hand, you must have a structure that channels those impulses. If that wasn’t the case, Somalia with its absence of government would be a Capitalist paradise. The walls that guide the capitalist mice through the maze are as essential to the functioning of capitalism as the mouse’s desire to find that yummy cheese.
There is a point to all of this, and it is that, in my humble opinion, Speaker of the House John Boehner (R-OH) and the entire Tea Party-inspired Republican party have fetishized one critical aspect of Capitalism as if it was the only thing that matters. I spoke in a previous article about fixating on the engine to the exclusion of the wheels, chassis and steering wheel (among other things). Just to add to my metaphorical heap, I think the current Republican stance on net neutrality is like telling a long distance runners to eat carbohydrates exclusively, all the while ignoring the fact that most keel over in a few weeks from scurvy or some other vitamin deficiency.
As I explained in that previous article, ISPs and providers of network access have a real need to make money from their infrastructure. If they don’t, bandwidth constraints tighten rather rapidly as providers have little incentive to boost capacity to support the massive shift in user behavior precipitated by rapid growth in the consumption of Internet video. I’m contributing to the bandwidth problem, as I have cut the chord to subscription cable services, replacing my television experience with what I can stream through my XBOX 360 (your mileage may vary; I have a second child on the way, so it suits me perfectly).
There is, however, an inherent conflict of interests. Carriers have a strong economic motivation to do things to hinder competitors like Netflix who are “stealing” away subscribers from their built-in video streaming options. They don’t even have to do something so crude as banning access to Netflix servers. They can just price things such that Netflix, as an alternative, is uneconomical. Don’t think carriers would do that? Did you think banks would erase the risk premium on bad loans by packaging them into securities that were sold to Icelandic pensioners (among others)?
It’s a simple and obvious choke point. Carriers control the data pipe that leads into your home. Due to the difficulties of laying parallel wires that serve the same customers, most users have, if they are lucky (and many aren’t), only two credible alternatives for fixed-line broadband. That is, by any standard, a monopoly position as unassailable as the oil pipeline’s control over the distribution of an essential source of power across this country (which is why Reagan turned them into common carriers). Why wouldn’t it makes sense to make sure carriers can’t abuse that position?
Arguing that the FCC’s rules aren’t properly designed to do what they aim to do is one thing. What the Republicans are arguing, however, is essentially that the problem does not exist, couching it in soft, gauzy words like “freedom” and “constitution” to hide the fact that economic goals aren’t their primary consideration. Badly understood abstract principles are what matter, and that is a serious problem.
Like I said before (and I can quote myself as much as I want): “I hate the language of rights.” It obscures ability to deal with the goals we are trying to achieve, painting the battle between the different options in near-religious terms. How can one consider creating rules that prevent carriers from blocking video alternatives when what is being proposed is the functional equivalent of enslavement? It’s like arguing with someone that believes that he can’t get medical treatment for his child because God doesn’t want him to.
As parting words to those who like to put everybody into neat and simple categories, I’m about as free market as it comes. I’m a big proponent of reducing global trade barriers, and believe that real freedom can only come when we stop hiding behind the walls of the places we were accidentally born and start thinking about the GLOBAL economy (and well being) as things that really matter. Sitting in my blog someday pile is a response to David Gewirtz’ ridiculous notion that Apple should use robots to replace foreign workers so that approximately 1000 Americans can replace a 100,000+ Chinese work force (which I called the Cylon solution…never mind, it isn’t important). Heck, I don’t even think Reagan, the man who pushed through the biggest amnesty of illegal immigrants in this nation’s history and was a driving force in the global free trade negotiations that led to the WTO, would have disagreed with me.
I’m a free trade, global freedom advocate. I just happen to understand what in the hell makes capitalism work, and it isn’t some blind devotion to the notion of the invisible hand. If that was the case, Japan’s MITI program wouldn’t have built all the major Japanese electronic manufacturers from the dust of WWII, Korea’s Chaebol wouldn’t have given us Samsung and LG, America’s university system wouldn’t be the best in the world (18 of the top 20 are American, and many of those are public), and a simple thing like turning oil pipelines into regulated common carriers wouldn’t have made natural gas competitive. Granted, Japan and Korea supported their favored industries for too long, and there is always a limit to what government should do in education (K-12 education in the US is a marked contrast to our experience at the university level), but the principle stands. Government is an essential component of capitalism, and all the gross simplifications won’t change that.
The invisible hand, in other words, is a force that only functions properly if provided the right context…and context takes work. Markets exist only in the presence of sensible regulations designed by smart people who have the incredibly difficult task of designing rules that guide the individual choices of billions of economic actors in useful directions. I don’t pretend that is a simple thing to do, but I reject categorically Republican willful refusal to even try.
Absence of government isn’t economic nirvana. It’s Somalia. I sometimes wonder if today’s Republican party understands that.
