Monday, 29 February 2016

Economic freedom and political equality at the local level >>> or, the triumph of corporatism

Politically, there is the general belief that there is a trade-off between more 'freedom' and more 'equality' - and never the two shall meet:
Principled Perspectives: Freedom vs. Equality: It's Either/Or
What’s Wrong with Inequality? - The Future of Freedom Foundation
Deep freedom: Why the left should abandon equality | IPPR

Much of this debate is around the perceived contradiction between 'economic freedom' and 'political equality' - but in the 1970s and again today, this lazy assumption is being challenged - and questions are being asked about the power of 'corporatism':

Futures Forum: How Ralph Nader changed the world

These are not just issues of high politics, however, but of immediate relevance to things going on in East Devon: current questions include:

Futures Forum: "Local Enterprise Partnerships would appear to embody everything that is bereft of vision, imagination and indeed any of the kind of creativity and thinking that these times demand."

How far have these 'business interests' had influence over the political process - in the past:
Futures Forum: Public Examination of the New East Devon Local Plan ... EMPLOYMENT LAND
Futures Forum: A history of the East Devon Business Forum, part four... "RESOLVED that the Chairman and Honorary Secretary be authorised to write to EDDC and express the Business Forum’s concern if it was found that the membership of the Task and Finish Forum contained members that they considered had preconceived ideas about the Business Forum and its operation."

- and in the present?
Futures Forum: Devolution for Devon and Somerset? >>> "to mandate bodies of unelected businessmen to define and effect policy without any scrutiny or accountability to electors or their representatives."
Futures Forum: Devolution for Devon and Somerset? >>> of Local Enterprise Partnerships and 'what happens when a lobby group of landowners and developers gains too much influence over the democratic planning process'

Whose interests would the devolution bid serve?

Futures Forum: Devolution for Devon and Somerset? >>> "confidentiality" vs open debate and public consultation

Why is development so heavy-handed?

On the other hand, to what extent is the importance to the local economy of SMEs fully realised?

Why is the District Council so coy over Freedom of Information requests?

And to what extent do these issues merge?

How relevant is the prognosis from three years ago of goings on in the District by investigative journalist Anna Minton?

And to what extent are we living in a 'managed democracy'?

A new piece from the British Stumbling and Mumbling blogger looks at how economic freedom and political equality actually correlate:


February 23, 2016

In making a libertarian case for Bernie Sanders, Will Wilkinson draws attention to an awkward point for right-libertarians – that inequality is the enemy of freedom.

He points out that Denmark –the sort of country Sanders wants the US to be more like – has greater economic freedom than the US. This, he says, “illustrates just how unworried libertarians ought to be about the possibility of a Denmark-admiring, single-payer-wanting, democratic socialist president.” 

Will is not taking freak cases here. My chart plots a measure of income inequality (taken from the World Bank) against the Heritage Foundation’s index of business freedom – their measure of how government regulates firms – for 26 developedish nations. There is a slight negative correlation between them, of 0.16. If anything, I’m biasing the chart against the point I want to make: if I were to exclude Malaysia, which is free and unequal, or include Chile (which is unfree and unequal) the negative correlation would be much greater.

Inequality doesn’t just reduce freedom for workers. It reduces freedom for business owners too.

Will says this is because countries that want to tax and redistribute must have a healthy economy, which requires business freedom. I suspect that there are two other mechanisms at work.

One is that many of the rich have no interest in economic freedom. They want to protect extractive institutions and the monopoly power of incumbents from competition. They thus favour red tape, which tends to bear heavier upon small firms than big ones. This, I suspect, explains why inequality and unfreedom go together in Latin America, for example.

Secondly, people have a strong urge for fairness. If they cannot achieve this through market forces, they’ll demand it via the ballot box in the form of state regulation. As Philippe Aghion and colleagues point out, there is a negative correlation between union density and minimum wages: minimum wage laws are more likely to be found where unions are weak. Regulations, in this sense, are a substitute for strong unions – and, I suspect, a bad substitute because they are more inflexible.

Through these mechanisms, inequality is the enemy of freedom even in the narrowest right-libertarian sense of the word.

That said, it doesn’t follow that people who want greater income equality will necessarily promote economic freedom: Megan McArdle might be right to say that Sanders can’t or won’t much enhance it. We should, though, ask: what sort of egalitarian institutions and policies might increase freedom?

For me, the answer is clear: those which increase workers’ bargaining power. This means fuller employment and a jobs guarantee; stronger trades unions; andcitizensbasic income. The point here is that if workers have the power to bargain for better wages and conditions, and the real freedom to reject exploitative demands from bosses, then we’ll not need so much business regulation. In this sense, greater equality and cutting red tape go together.

What don’t go together – in the real world – are inequality and freedom. So-called right-libertarians therefore have a choice: you can be shills for the rich, or genuine supporters of freedom – but you can’t be both.

Stumbling and Mumbling: Inequality against freedom

With further (American) comment here from the weekend:

Freedom and Equality are not Tradeoffs
Kevin Carson | @KevinCarson1 | Support this author on Patreon | February 27th, 2016

In most American political discourse, freedom and equality are treated as inversely related: that is, economic freedom can only be increased at the expense of raising inequality, and economic equality can only be increased at the expense of reducing economic freedom. But at Stumbling and Mumbling blog, Chris Dillow (“Inequality against freedom,” Feb. 23) shows that it’s just the opposite. Economic freedom (as measured by the Heritage Foundation’s index of business freedom) tends to correlate with economic equality: the less regulated the economy, the smaller the share of total income that’s likely to go to the top 10%.

According to the standard American framing, this is counter-intuitive. Not only do high levels of inequality and concentration of wealth spontaneously emerge from a free economy, unless the state interferes with the process; but extreme inequality actually contributes to economic growth. A good example is a recent column by Jacob Hornberger (“What’s Wrong With Inequality?” Future of Freedom, Feb. 11). On the one hand he treats the Gilded Age — “[w]hen America had no income tax or welfare-warfare state,” and before “the federal government was charged with the task of equalizing wealth by taking from the rich to give to the poor” — as a basically laissez-faire period in which high levels of inequality appeared as a matter of course. On the other, this extreme level of inequality benefited everybody by letting the wealthy accumulate unlimited amounts of capital that increased economic productivity. And — a point Hornberger seems to be fond of bringing up — the super-rich used their wealth to benefit the poor in ways “such as building churches that didn’t charge an admission fee to anyone.”

But in reality it’s Hornberger’s right-libertarian framing that violates common sense — and it makes perfect sense that economic freedom correlates with economic equality. Large concentrations of wealth that result from robbery or government intervention (the increasingly popular “crony capitalism” or “corporatism” theme) are not some kind of outlier, as Hornberger suggests, irrelevant to the majority of giant fortunes that resulted from serving the free market in his mythically “laissez-faire” Gilded Age. Gilded Age capitalism itself, far from being the product of “laissez-faire,” was an edifice built on centuries of land enclosure and other massive robberies, colonial conquest and enslavement.

Government intervention in the market is the main source of large fortunes. Inequality is driven by large concentrations of wealth that derive almost entirely from rents created by the government: monopolies, entry barriers, regulatory cartels, and socialization of operating costs. The differences in wealth that resulted from genuine entrepreneurship, or variation in individual ability, would probably be several orders of magnitude smaller than at present if all those state-enforced monopolies and their resulting rents were abolished. And far from it being a matter of the 20th century state “equalizing wealth,” as Hornberger puts it, the main function of the capitalist state — including the U.S. government in the Gilded Age — has always been to promote inequality.

Rather than economic growth and technological progress being driven by giant accumulations of capital, it’s more often the case that those accumulations of capital — in league with the state — sidetrack technological development onto a path skewed towards artificially high levels of capital intensiveness and enterprise scale. In the late 19th century, when the invention of the electric motor arguably made decentralized local production on the industrial district model the optimal organization of manufacturing, the American state in alliance with industrial interests instead diverted economic development towards mass production and oligopoly industry.

Since the primary purpose of government intervention in the economy is to guarantee profits to big business and increase the rents accruing to the already wealthy — after all, government is basically the enforcement arm of the plutocracy — it stands to reason that the main effect of government intervention is to shift income upwards from workers and consumers to the propertied classes, and increase the inequality of wealth. Therefore we should expect, as a matter of course, a reduction in government intervention to reduce the upward redistribution of income — robbery — responsible for high levels of inequality.

As for those churches “that (gasp!) didn’t charge an admission fee to anyone,” I can’t help thinking of an anecdote from E.P. Thompson’s Making of the English Working Class. A group of workers passing a Methodist chapel built for them by Mr. Sutcliffe, the mill owner, “looked towards the chapel and wished it might sink into hell, and Mr. Sutcliffe go with it.” Hornberger’s churches are a prime example of what Bastiat called “the unseen.” We can see the big churches, which the robber barons built as monuments to themselves. What we can’t see is what the working classes might have built for themselves with their own money, had it not been extracted from them in the form of rents.

Rather than an economy in which the super-rich use the state to extract wealth from the rest of us, I would gladly give up those big churches for a more equal society in which workers kept the wealth they created by their own effort and used it for ends of their own choosing.

Center for a Stateless Society » Freedom and Equality are not Tradeoffs

Meanwhile, back in Scandinavia:
The Myth of Scandinavian Socialism | Foundation for Economic Education

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