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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Tuesday, March 15, 2005

Those "Anti-Business" Liberals at Work

Elizabeth Anderson concedes, perhaps unwittingly, that big business was the main interest served in the supercession of common law tort liability by the regulatory state. This ought to put paid (as if a whole body of literature on corporate liberalism by Kolko, Weinstein, and Domhoff had not already done so) to the notion that technocratic liberalism is somehow "anti-capitalist" or "anti-business." The heart of the New Class ideology, the faith that class antagonisms can be transcended by harmony and rational planning, and the application of disinterested expertise, is if anything directly contrary to the classical socialism of the nineteenth century (you know, the socialist movement made up of actual workers).

To quote Anderson:

The libertarian Richard Epstein, following through on individualist intuitions about justice, has argued in favor of replacing our negligence system of torts with a system of strict liability ("A Theory of Strict Liability," 2 Journal of Legal Studies 151 (1973)). Such a system would ensure that whenever one person caused damage to another, they'd have to compensate them for it. Long before we reached this point, I'd be joining the critics of the tort system in crying "crisis!" The problem wouldn't be frivolous lawsuits. It's that when negative externalities are systematic, it's grossly inefficient to deal with them on a case-by-case basis, as the tort system does. The costs of litigation are too high, not in the amounts of judgments, but in lost production opportunities, as the valuable time of defendants and plaintiffs gets sopped up in lawsuits. That's why I prefer alternatives to litigation, such as regulations for worker safety and pollution, workers' compensation, and no-fault auto insurance, to cover systematic costs imposed on people by our advanced capitalist system of production. Excessive reliance on Individualized solutions puts too much sand in the gears of capitalist production.

Such considerations were exactly why American courts, in the first half of the nineteenth century, gradually pulled the teeth out of the traditional common law of liability, and public and private nuisances. The process, by which strict liability was heavily tempered with negligence standards in order to promote commercial development, was described by Morton Horwitz in The Transformation of American Law.

And at the turn of the twentieth century, what civil liability law remained was further preempted by the regulatory state, enforcing a dumbed-down, least common denominator set of rules. At best, this system of administrative law involved a set of penalties considerably less than the costs that pollutors and other malfeasors imposed on society, and at worst was enforced with a wink and a nudge by agency personnel who had been or were planning to be employed by the same agencies they ostensibly regulated.

Furthermore, there's no way that regulatory law ever could be effective, without entrusting the regulatory bodies with a degree of power utterly abhorrent to the constitutional traditions of the English-speaking world. Regulatory law, in its essence, is a revival of the prerogative law tradition. At the time of the American Revolution, prerogative law (or Roman civil law) survived solely in the courts of admiralty and in revenue law. And the abuses of those institutions had been a major grievance of the colonists in the political crises leading up to the Revolution. The so-called "writs of assistance" were essentially general warrants, abhorrent to the Anglo-republican tradition on both sides of the Atlantic (as indicated by the Wilkes affair).

But in the nineteenth century, administrative law gradually spread from the customs operations of the U.S. Treasury, and was applied in one new area of regulation after another. The law enforced by administrative tribunals was utterly devoid of traditional common law notions of due process: especially, it placed no burden of proof on the prosecution. And by the late twentieth century, there were dozens of federal agencies with the ability to seize property (civil forfeiture) and imprison people without ever proving anyone's guilt to a jury beyond a reasonable doubt.

In any case, Anderson's description of the evils of strict liability illustrate a home truth of capitalism: large corporate firms can only operate over a large market area if there is a state acting coercively to overcome the transaction costs of dealing with numerous local entities, and enabling it to operate under a single legal identity in all of them. The transaction costs of bottom-up federation of mutual defense associations, in a free market anarchy, would be considerably higher than those involved in imposing a single set of rules from the top-down. For firms that had to operate over a large area--those specializing in geographically limited commodities, for example--the benefits would probably be worth the cost. But the centralized control of many local production facilities by multi-unit firms would almost certainly be prohibitively expensive.

Thus we see, in the Gilded Age, the rise of a truly federal commercial law, the enforcement of corporate rights under Fourteenth Amendment jurisprudence, etc. For the corporate revolution to take place on a continental scale, there had to be a political entity geographically coextensive with the large corporations to protect them against local governments, and to subsidize their operating costs. Similarly, in the post-WWII era we see the rise of global capitalism coinciding with the creation of a de facto world government in the form of the Bretton Woods institutions (the World Bank, IMF, and the GATT process). The institutional base was completed in the 1990s with the World Trade Organization, a revival of an abortive proposal originally made at the same time as the other Bretton Woods agencies but rejected by a Congress more touchy about issues of national sovereignty than at present.

As Roy Childs suggested, liberal intellectuals have been the running dogs of big business.


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