Libertarians are very confused about capitalism

Elites didn't get rich off of some “free market.” Here's why libertarians should back radical wealth redistribution

Topics: Libertarianism, Ron Paul, Capitalism, Wealth, Free Market, Bitcoin, Big Pharma, CEOs, laissez-faire, JPMorgan Chase, Serfdom, Taxes, Editor's Picks, ,

Libertarians are very confused about capitalismRand and Ron Paul (Credit: Reuters/Jim Young)

“There is no evidence that capitalism exists today,” says former congressman Ron Paul. A leading libertarian voice in American politics, Paul says the land of the free no longer has free markets but an economy centrally planned by powerful elites, one that “allows major benefits to accrue to the politically connected,” not the most deserving.

These days, “corporate subsidies” and “privileged government contracts to the military-industrial complex” are the path to riches, says Paul. “This is not capitalism!”

If one defines capitalism as a system designed by and for the interests of those who hold capital (what it is), capitalism is what the United States has today. It is a system based not on principles of freedom and liberty and justice for all, but the accumulation of wealth for people called “capitalists.” It entails structuring an economy in such a way that natural resources are exploited for private gain and land is parceled off into mortgage-backed securities. It means rich people using their money to buy power and shape economic relations to their advantage, which makes them more money.

But let’s say this isn’t “capitalism,” as libertarians define it: this is not a genuine “free market,” which would entail the institution of private property and the privatized control of vital natural resources, yes, but would also be free of much if not all state intervention, with financial success based not on coercion and heavily armed people with guns but healthy and fair competition. Wealth would be a just reward for producing better widgets, not a license to rewrite the rules in one’s favor.

I am told this does not exist today, “the free market,” and I agree, but I suspect it doesn’t exist now – a capitalism based on rigid notions of private property but not systemic violence that manifests itself in a massive transfer of wealth to an already wealthy elite – for the same reason human babies aren’t born to alligators: because it’s impossible and goes against everything we know about our world.

We know that money buys power, for instance. And we know that rich people are not typically concerned with sainthood when it comes to their pursuit of money. When enormous wealth is allowed to accumulate in the hands of a small fraction of the population, then, that minority can use that wealth to manipulate economic outcomes – and they don’t care if they violate every principle known to the Paul family. That is why some oppose this concentration of wealth no matter whether it comes from “good” or “bad” capitalism.

But there is common ground here that can be exploited. Libertarians need not agree that the accumulation of enormous sums of wealth is immoral and unhelpful when it comes to the preservation of freedom, even though it is. All libertarians need to do is keep on with the “this isn’t real capitalism” stuff, because if people are getting wealthy off something other than producing the best widget in a free and competitive marketplace, then why do all those rich people get to keep all their money?

Capitalism without the change

“I complain about some of the rich,” says Ron Paul. “If the rich are getting rich because they have a super-good [government] contract … or subsidies and they’re part of that system, then you want to get rid of that system that’s doing it.”

Like other libertarians, Paul tries to distinguish between rotten and not-so-rotten rich people, despite his condemning the system as a whole; he sees a difference between those who feed at the trough of taxpayer money and those who – what? Traded Bitcoins for drugs on the federally indicted free market of the Silk Road? The thing libertarians will sometimes say but don’t want to admit invalidates most wealth by their own standards: There is not a single aspect of the U.S. economy untainted by state intervention on behalf of powerful rich people (again, a redundancy).

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Drug companies, for instance, reap billions of dollars in monopoly profits due to “intellectual property” laws that make the free sharing of scientific knowledge a criminal offense. Oil and gas companies drill on public lands for private profit, while socializing the risks (“Sorry about the Gulf.” – BP). Even children’s books are subject to statism, with author J.K. Rowling becoming a billionaire only after using the legal system to ensure no one could so much as mention the name “Harry P*tter” without paying her a handsome fee.

As of 2012, the average CEO at a top American firm now makes 273 times as much as the average employee, up from a ratio of 20-1 in 1965. Few libertarians would say the market today is freer than the market then. So why don’t we hear anything about any grand, liberty-minded plans for the radical redistribution of wealth? When you change a system but keep the results of systemic injustice in place, you are not really changing anything. Who cares about “freedom” when the only difference between that and oppressive Big Government is that an absentee landlord now relies on a private security firm to kick you out of your home instead of the cops?

When property is obtained through illegitimate means, which libertarians would take to mean “not the free market,” then “the only proper solution is an immediate vacating of the title and its transfer to the [people], with certainly no compensation to the aggressors who had wrongly seized control of the land.” That’s according to Murray Rothbard, a guy Ron Paul describes as the “founder of modern libertarianism” and one of America’s “greatest men.”

Before throwing down with the angry white right in the years before his death in 1995 – going so far as to defend David Duke, a white supremacist and former leader of the Ku Klux Klan –  Rothbard exerted a lot of effort trying to make libertarianism more palatable to what at the time was a rising left. Distancing himself from those who were mere defenders of the rich, Rothbard argued that money made through systemic coercion was no more legitimate than highway robbery.

It’s OK to take it back

In his 1982 book, “The Ethics of Liberty,” Rothbard went after those sort of “American laissez-fair economists” who “tend to confine their recommendations … to preachments about the virtues of the free market.” People don’t want to hear that, he wrote: They want to know how you plan on freeing people, not some abstraction called a “market,” which sounds to many like a simple defense of the right of rich people to be richer than you.

Rothbard exempted North America from his calls for land redistribution, claiming America’s was the only “truly libertarian” property system because early settlers claimed land free of much state interference (sorry all you dead indigenous people). But not even he could keep that up. A few hundred words after that assertion, Rothbard pointed to the treatment of former slaves in America – what better illustration of how “property” comes to be defined under capitalism – and argues that it was incredibly unjust that slaves were freed only to spend the rest of their lives impoverished, working for their former masters. By contrast, wrote Rothbard, “elementary libertarian justice required not only the immediate freeing of the slaves, but also the immediate turning over to the slaves, again without compensation to the masters, of the plantation lands on which they had worked and sweated.”

By not doing so, the United States made the same mistake as Russia when it “ended” serfdom in the 19thcentury:

[T]he bodies of the oppressed were freed, but the property which they had worked and eminently deserved to own, remained in the hands of their former oppressors. With the economic power thus remaining in their hands, the former lords soon found themselves virtual masters once more of what were now free tenants or farm laborers. The serfs and the slaves had tasted freedom, but had been cruelly deprived of its fruits.

In 2005, financial giant JPMorgan – later bailed out by the very taxpayers it is currently foreclosing upon – admitted that it profited from the slave trade, which is to say: The effect of letting slave owners keep their illegitimate wealth can still be felt today. What then of the multitude of other state interventions on behalf of the unjustly rich that have happened since: “This isn’t capitalism,” right?

Let’s start over. The wealthy elite are too tainted by the current system of state capitalism for us to rely on a “good” and “bad” distinction when it comes enormous wealth. No one worth more than $10 million is able to get that much money without systemic state violence. There is no reason they should get a head start in Liberty Land.

Oh, forget raising marginal tax rates – that’s catnip for liberal suckers and people too dumb to put their money in tax shelters. Instead, distribute property that has been unjustly acquired directly to the people. Give property titles held by bailed-out banks to the people those banks are currently foreclosing upon. Pool together the salaries of Fortune 500 CEOs and distribute the money equally across the land.

Libertarians don’t have to agree on where all this ends (it ends with workers seizing the means of production), but they should understand that no matter what one replaces it with, dismantling an unjust system requires addressing the injustices that system created. If you don’t, then your idea of “freedom” will be attacked as the freedom to be exploited by the same people running the world today. And with good reason.

Charles Davis is a writer and producer in Los Angeles whose work has been published by outlets including Al Jazeera, The New Inquiry and Vice. You can read more of his writing here.

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