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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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Saturday, December 13, 2008

Conflation Conflict, Continued (Unfortunately)

I thought I'd let the "conflation conflict" go, barring any significant new arguments, because in my opinion it can't go much further without simply rehashing the arguments that have already been made (case in point). But material like the following must not be left unanswered.

In the comments to my original "Conflation" post, Stephan Kinsella challenged P.M. Lawrence:
BTW I assume you would be for removing all corporate income tax, since it is based on the entity fiction? This is yet another way the state *harms* corporations.

Lawrence responded that the argument was
disingenuous; by itself, it would make things worse - by itself. Over and over, we have pointed out that selectively removing some burdens while leaving others can make things worse, even if all burdens should be removed. It's like scraping barnacles off one side of a ship; not only would the ship not speed up much, the side that still had barnacles would start going back, and because the ship would go in circles it would make less headway overall.

This is true of a wide range of distorted situations; if you have 10 uncorrelated distortions, the distance from optimality will be proportional to the 10, but if you remove 5 of them that are all correlated one way, the remaining 5 will all be correlated the other way and the distance from optimality will be proportional to 5 squared, i.e. 25. The actual suboptimality will be proportional to the square root of that, but of course gains and losses to individuals within that aggregate will be proportional to the distance from optimality - there will be serious gainers and losers, from a smaller aggregate loss.

What is more, Kevin Carson has already pointed out that corporate income tax tends to make resources stay inside corporations rather than trickling down to natural persons. This strengthens those artificial entities over natural persons.

In a subsequent comment he added, by way of clarification:
I can see Kevin Carson's point about getting rid of it, but with Australia's franked dividend approach I think it would be a low priority to get rid of it here. That is, I think it should be eliminated at about the same time as personal income tax, which I feel should be phased out by turning it into a SAYE scheme from which people could draw down amounts above a cap. That cap would fall to zero at an ever reducing cut off age matched to an ever increasing age benefit entitlement age (here, those are paid from consolidated revenue). The best way of transitioning from corporate tax probably involves compounding it for issues of shares to an endowment fund, which should be decentralised from the state to charitable services as rapidly as possible. At or after that time, corporations themselves should be restructured as partnerships, with bearer shares to convert former shareholders into de facto limited liability sleeping or silent partners (unless and until they came out to vote or something), and with the managers the active unlimited liability partners (with a debt to pay off to buy themselves in, and novated on retirement to cut their liability after that). Then let firms shake out as events dictate.

Finally, Kinsella commented:
Glad to know you are for the state imposing the corporate income tax and for the double-taxation of shareholders it implies. IF you hate shareholders, might as well want them punished, eh?

From all this, Kinsella distilled a post at Lew Rockwell Blog in which he 1) ignored Lawrence's direct contradiction of Kinsella's claim that identified the left-libertarian position as pro-corporate income tax; 2) selectively edited the material to conceal the fact that Lawrence in fact aims at an end-state without the corporate income tax, but wants to phase in the abolition and coordinate it with other tax reductions to minimize destabilizing effects; 3) edited out Lawrence's acknowledgement that I favored abolition and that Lawrence's position differed from mine.

On top of all this, he published the material under the highly misleading title "Left-Libertarians: Pro-Corporate Tax"--suggesting that PML was inconsistent or hypocritical, or was inadvertently giving away the real, esoteric Left-Libertarian doctrine that we hide from the Gentiles.

P.M. Lawrence is a polymath with a wide-ranging body of knowledge on history and economics, and in particular an MBA with some direct knowledge of the inside world of corporate management. His critical intelligence and erudition have always been enthusiastically welcomed here. PML has never made any pretense of being a left-libertarian, left-Rothbardian, or mutualist, or anything else but an interested reader who likes to point out error (wherever he finds it) and offer helpful information.

He is not guilty of any hypocrisy whatsoever, orof any inconsistency with his stated principles. And to suggest that his remarks reflect a pro-corporate tax position on the libertarian left, or amount to some sort of defining doctrinal statement on behalf of left-libertarianism, is utterly misleading and disingenuous.

Such a "gotcha" approach--and in a venue which does not allow reader comments, no less--suggests that Kinsella has exhausted his supply of legitimate arguments.

Update. Although no doubt we fail to see eye to eye on what exactly I found objectionable in his previous post, Stephan Kinsella has obligingly informed his readers of those objections.

8 Comments:

Blogger Brainpolice said...

It seems to me that this is generally how Kinsella has been acting the entire time. He balks at the terminology of the left-libertarian and proceeds to argue against it as if the left-libertarian takes a marxist or state-socialist position. It is highly disingenous, and he is blatantly grasping at straws in the attempt to get the high ground by mischaracterizing left-libertarians.

December 13, 2008 1:57 PM  
Blogger scumble said...

Still, Kinsella does take the trouble to actually discuss things over here. Most of the "Misoids", as Kevin often refers to them, tend to take shots from a safe distance.

I think what the whole discussion shows is that "right" or "conservative" libertarians are very resistant to extending libertarian criticism into the corporate economy, as if to draw a veil over it because it is nominally private.

Obviously this is what Kevin and other leftlibs have been arguing for years, what we've seen just shows that not much changes. Groups of people can get caught in an ideological bias even though they would strongly object to that claim. Human nature or just cultural baggage?

December 14, 2008 9:19 AM  
Anonymous P.M.Lawrence said...

Time for a cameo appearance, I think.

My guess is that Stephen Kinsella (as I shall call him for a while, until he spells my name right) was lashing out after I dealt with some of his claims on a couple of the Mises blog threads - I've just followed up on those threads again, here and here. I was pleased but not surprised to find that the limited partnership I worked out from first principles to cover how far a corporation could arise "naturally", really did have a significant historical role. That is, I worked it out for theoretical reasons some while back, as part of generally looking at things that could be used in transitions away from what we have towards what we should have ("should" is both engineering and ethical "should", here). I checked the history after that, around the time of the present debate, to get my facts ready for that (trusts are another approach).

On one of those threads as well as in his Rockwell post, Stephen Kinsella challenged me to state what I was, if not a left-libertarian. On due consideration I decided not to, and told him why not - that it would open the way for ad hominem and/or straw man attacks, when he should only pay attention to the facts and arguments he was being given quite openly. However, it may be of general interest, so I shall release it by instalments as convenient. Maybe I'll just email it to Kevin Carson when the time comes. For now, I'll address the "left" part.

I have never come at any of this by choosing what to follow, but rather by finding what had an overlap with what I worked out about myself and the world, hitching a ride rather than picking up others' positions as such. So, for me, it's not whether I am "left" but rather, who is around me in relation to me. That may make me somewhat left-wing by US standards - as it does nearly everybody else in the world - but by British standards, and even more by Australian ones, I am moderately right wing in some ways and very right wing in others. I prefer the Australian main stream right wing Liberal Party to the main stream left wing Australian Labor [sic] Party (voting is compulsory here) and the Australians for Constitutional Monarchy to the Australian Republican Movement, both for positive reasons of sentimental attachment (my attachment directly, and the constructive effects of these things in a polity, if polity there must be), and for negative reasons of knowing how things really hold together and what could so easily go wrong.

Now to that Rockwell post of Kinsella's.

Calling me "P.M. Lawerence" is at worst sloppy and indicative of a general approach to getting things right, and at worst deliberate, but either way offensive. I do not see how he can get from what he quoted, let alone from other stuff I wrote, to the implication in "I suppose if I hated corporates and shareholders, I would not mind seeing the state punish them either", that I hate them and want them punished. No, I just want things fixed. And I don't see why he couldn't have quoted or at least presented the position I gave in "I think it [corporate income tax] should be eliminated...", with or without the context "...at about the same time as personal income tax, which I feel should be phased out...", rather than implying - even more strongly in his first version - that I was in favour of corporate income tax, which is quite the opposite.

In case anyone is missing the point, I was making a specific recommendation for the Australian case that I have studied, by way of illustration, leaving it for others to cover other stuff in detail; sticking to what I know (that's how I give the impression of knowing a lot - I keep my head down when I don't know what I'm talking about, e.g. sport). Here in Australia, there is already little or no additional burden to individuals from corporate income tax, because of the way the tax system avoids double taxing. That also means it would do little or no good to individuals to get rid of corporate income tax before personal income tax, because they would simply have to start paying it personally. So the whole thing goes further down the priority list, and has to be dealt with along with other matters because it is already entangled with them.

December 14, 2008 6:59 PM  
Anonymous Anonymous said...

This spat is somewhat strange, as it seems to involve labelling anyone who recognises reality a "leftist" or a "Marxist."

I should also note that Proudhon was well aware of the issue of bargaining power. Writing in What is Property? in 1840:

"But it is superior strength also which enables the manufacturer to reduce the wages of his employees, and the rich merchant and well-stocked proprietor to sell their products for what they please. The manufacturer says to the laborer, 'You are as free to go elsewhere with your services as I am to receive them. I offer you so much.' The merchant says to the customer, 'Take it or leave it; you are master of your money, as I am of my goods. I want so much.' Who will yield? The weaker."

That was before Marxism was invented... But, then, Proudhon can be dismissed as a "leftist" -- and, presumably, the whole anarchist tradition he inspired, both individualist and social anarchism...

And I should also note that Adam Smith made similar comments in 1776 -- but, then, Smith is disliked by the Austrians as well -- obviously too much in touch with the realities of this world!

But as noted elsewhere:

"However, the right-'libertarian' denial of market power is unsurprising. The "necessity, not the redundancy, of the assumption about natural equality is required 'if the inherent problems of contract theory are not to become too obvious.' If some individuals are assumed to have significantly more power are more capable than others, and if they are always self-interested, then a contract that creates equal partners is impossible -- the pact will establish an association of masters and servants. Needless to say, the strong will present the contract as being to the advantage of both: the strong no longer have to labour (and become rich, i.e. even stronger) and the weak receive an income and so do not starve. [Carole Pateman, The Sexual Contract, p. 61] So if freedom is considered as a function of ownership then it is very clear that individuals lacking property (outside their own body, of course) lose effective control over their own person and labour (which was, least we forget, the basis of their equal natural rights). When ones bargaining power is weak (which is typically the case in the labour market) exchanges tend to magnify inequalities of wealth and power over time rather than working towards an equalisation."

Pretty obvious, you would think...

Iain
An Anarchist FAQ

December 15, 2008 4:28 AM  
Blogger Stephan Kinsella said...

PML:

"My guess is that Stephen Kinsella (as I shall call him for a while, until he spells my name right) was lashing out ... Calling me "P.M. Lawerence" is at worst sloppy and indicative of a general approach to getting things right, and at worst deliberate, but either way offensive."

Uh, or perhaps it was a typo--. Jesus. I just fixed it. Now, if you would only reciprocate by ceasing to advocate aggression against me (which you do if, as I assume, you are not an anarcho-libertarian), then we'd be even-Steven.

"On one of those threads as well as in his Rockwell post, Stephen Kinsella challenged me to state what I was, if not a left-libertarian. On due consideration I decided not to, and told him why not - that it would open the way for ad hominem and/or straw man attacks, when he should only pay attention to the facts and arguments he was being given quite openly.
Calling me "P.M. Lawerence" is at worst sloppy and indicative of a general approach to getting things right, and at worst deliberate, but either way offensive."

Yeah, I just wanted to know b/c Carson said I was unjustified in attributing your view to left-libertarianism. Wow, you are wound tight.

"I do not see how he can get from what he quoted, let alone from other stuff I wrote, to the implication in "I suppose if I hated corporates and shareholders, I would not mind seeing the state punish them either", that I hate them and want them punished. No, I just want things fixed."

Bully for you! Me too.

"And I don't see why he couldn't have quoted or at least presented the position I gave in "I think it [corporate income tax] should be eliminated...", with or without the context "...at about the same time as personal income tax, which I feel should be phased out...", rather than implying - even more strongly in his first version - that I was in favour of corporate income tax, which is quite the opposite."

Hey, glad to hear you are against the corporate income tax (?). But when you wrote earlier that abolishing the corporate income tax "would make things worse - by itself. Over and over, we have pointed out that selectively removing some burdens while leaving others can make things worse, even if all burdens should be removed. It's like scraping barnacles off one side of a ship; not only would the ship not speed up much, the side that still had barnacles would start going back, and because the ship would go in circles it would make less headway overall." -- I think I was justified in reading that as opposition to, er, abolishing the corporate income tax, since that's what you said.

"Here in Australia, there is already little or no additional burden to individuals from corporate income tax, because of the way the tax system avoids double taxing. That also means it would do little or no good to individuals to get rid of corporate income tax before personal income tax, because they would simply have to start paying it personally."

And MY point was that part of the argument of the anticorpos is to oppose the entity theory of the firm, -- which I do too. Yet this theory that the state uses as an excuse to regulate the corporate form it also uses as an excuse to tax them. So I was just assuming that the anticorpos would of course be in favor of abolishing the corporate income tax since it rests on viewing the corporation as having a separate legal personality. (I think in a free market corporations, freed from income tax, would do even relatively better than they do now, but I know that's not a subtle, sophistocated left-lib way of looking at it.)

December 15, 2008 12:03 PM  
Anonymous P.M.Lawrence said...

"Uh, or perhaps it was a typo--"

I thought of that, and it won't wash. Anyone can make a typo, but letting it get past proof reading and stay in, on a blog entry that was gone over and amended, means that the blog entry wasn't checked even with several passes. That is an indicator that other stuff in there didn't get checked properly either.

For instance, Stephan Kinsella just claimed that I 'wrote earlier that abolishing the corporate income tax "would make things worse - by itself. Over and over, we have pointed out that selectively removing some burdens while leaving others can make things worse, even if all burdens should be removed. It's like scraping barnacles off one side of a ship; not only would the ship not speed up much, the side that still had barnacles would start going back, and because the ship would go in circles it would make less headway overall." -- I think I was justified in reading that as opposition to, er, abolishing the corporate income tax, since that's what you said' [emphasis added]. Only I didn't just write that, and that doesn't actually state whether I am for or against that particular abolition but just describes its cost. As soon as I realised that I hadn't given a straight answer either way, and before Stephan Kinsella ran with it, I posted a clarification.

So what did I actually write, that Stephan Kinsella had to work with? The following selection and emphasis highlights what he just missed, even this late after being told: that his argument in favour of abolition was "disingenuous; by itself, it would make things worse - by itself. Over and over, we have pointed out that selectively removing some burdens while leaving others can make things worse... I can see Kevin Carson's point about getting rid of it, but with Australia's franked dividend approach I think it would be a low priority to get rid of it here".

Quite simply, I made it clear that just abolishing it would yield no gain (for Australians) and would dislocate things further.

"I was just assuming that the anticorpos would of course be in favor of abolishing the corporate income tax since it rests on viewing the corporation as having a separate legal personality" is pretty much absurd; the state doesn't need an excuse. Change the story and they'll just change theirs.

"I think in a free market corporations, freed from income tax, would do even relatively better than they do now" would be true, apart from the fact that there would be no such animal.

December 15, 2008 2:42 PM  
Anonymous Robert Paul said...

"...then we'd be even-Steven."

Or is that "even-Stephen"?

December 15, 2008 3:08 PM  
OpenID taavi said...

This argument about corporate income tax seems bizarre to me. Limited liability corporations receive a major benefit from the state, the ability to limit their liability. They should pay for the privilege. As Dean Baker points out in "the conservative nanny state", shareholders are free to form a non-limited-liability partnership and not pay corporate income tax if they want to: http://www.conservativenannystate.org/cns.html#4

December 17, 2008 10:00 PM  

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