Thursday, 29 April 2010

The Conflation Debate

There's a frisky argument in libertarian circles about how good an approximation the 'capitalist' side of modern corporate capitalism is to a free market.

To simplify vastly, the right considers actual Big Money as an image of the sort of entity that would flourish in a better and freer society, but twisted and degraded in the crazyhouse mirror of actual State intervention. The left, on the other hand, sees Big Money more as Big Government's own ugly image in the mirror of its self-servingly warped and rigged market.

Roderick Long, one of the left's most eloquent and thoughtful advocates, terms this argument the conflation debate - the question as to how far support for free markets can sensibly be conflated with support for actually existing 'capitalism'.

Long makes his point in detail here.

Defenders of the free market are often accused of being apologists for big business and shills for the corporate elite. Is this a fair charge?

No and yes. Emphatically no - because corporate power and the free market are actually antithetical; genuine competition is big business’s worst nightmare. But also, in all too many cases, yes - because although liberty and plutocracy cannot coexist, simultaneous advocacy of both is all too possible.

A robustly capitalist response from Peter G Klein suggests that whilst this point is valid as far as it goes, it won't carry us very far:

As Roderick rightly points out, in the mixed economy large corporations are among the prime beneficiaries of government largess, such that a wholesale defense of "big business" is silly and counterproductive for libertarians. However, Roderick spoils (for me, anyway) an otherwise excellent summary by jumping to the unwarranted conclusion that today’s corporations are, on average, larger, more hierarchical, and more diffusely owned than the firms that would emerge under laissez faire.

Sheldon Richman of, with his post Is Capitalism Something Good?, hosts a spirited exchange in the comment section.

This debate centers on rival empirical predictions about the changing size distribution of firms, as society tends towards free-market anarchism. (Yes, I realize that is an exceptionally large 'as'.) My summary:

Conflationists expect lots of highly capitalized, keenly competitive firms of a familiar pattern benefiting from economies of scale, as also many smaller and nimbler outfits snapping at their heels or adapting to specialist niches. Large hierarchical corporations employing wage labour will continue to do most of the heavy lifting. The removal of both state regulation and corporate welfare should, however, lead alike to leaner and less fatuous management bureaucracies.

Anti-conflationists predict that in a genuinely free market, diseconomies of scale and of specialization will set in much earlier, with smaller and more labour-owned production dominating through flexible co-operative trading networks. Wage income from managed labour will lose much ground to income from personal production and trade. Kevin Carson offers a detailed and highly optimistic analysis of this alternate scenario here.

Unfortunately, there is only one sure way to find out which side is more nearly right. Like a good scientist, I have attempted the experiment. In tests, a randomized sample of 25 governments were requested to dissolve themselves so that the economic results could be observed. 20 said, "No!"; 3 said, "Bugger off!"; 1 said, "It is this sort of request which causes earthquakes!"; and 1 left a horse's arse in my mailbox. My tentative conclusion is that I am not going to get very much co-operation.

I may have to do some brain work, instead.

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