STATES AND MARKETS ARE BOTH NEEDED
Henry Moore (“Hank”), a 23-year old libertarian blogger hailing from Montana, is the proprietor of The Libertarian Liquidationist. He is interested in politics and history and libertarianism since picking up Dr. Ron Paul's “The Revolution and End the Fed in 2009”, and in blogging since late 2011. [The following is his entry for the Thorpe-Freeman Blog Contest, originally published at Notes on Liberty on May 22nd 2013, and The Libertarian Liquidationist on January 8th 2014]. Henry Moore posts on Liberty.Me HERE http://thelibertarianliquidationist.liberty.me/2014/07/04/the-ham-fist-of-the-state-or-the-invisible-hand-of-the-market/
“Ham-Fisted Coercion and Incompetence versus the Invisible Hand of Self-Interest”
A Tale of Two Hands
“I came across Gary Galles’ recent article in The Freeman about Leonard Read’s analogy of government coercion as a clenched fist, “ the Clenched Fist and the General Welfare.” I see a symmetry between this analogy and Adam Smith’s about self-interest unintentionally channeled into market organization, one that is so familiar to free market proponents and detractors alike that it is a common metaphor: the invisible hand.
Government coercion and market organization. Two very important concepts for any libertarian to master. Which one better provides for the general welfare? Smith and Read would contend the latter. The reasons for this are contained in the analogies. As Read and Galles point out, not much good can come from a clenched fist. Only violence and incompetence. It can punch. It can pound. That’s about it. What better description of government? Likewise, as Smith notes, the usefulness of markets is that they do better than government many of the noble things government tries to do, thereby rendering it redundant, if not unnecessary, in those areas. The all-too obvious fist of government regulations and mandates is no match for a more efficient, less obvious hand: self-interest."
The above Blog Post is almost pure ideology, devoid of contact with the real world. It sweeps to one side the “violence and incompetence” of “punching and pounding” when used by mercantile-motivated self-interests enforcing trade-embargoes and prohibitions on behalf of dominant market-players, as happened when Europeans invaded foreign countries in the then undeveloped world from the 14th century. The first things built by traders in distant lands were armed fortifications to protect the invaders from local harassment. In these events the States played a role corrupted and influenced be local domestic market enterprises (East India Company, for example, with free shares and cash for legislators and politicians).
Modern markets also play their role in these grubby affairs and, for various reasons, do it “better than governments” on their own account, by “replacing open government collusions” to achieve “many of the IGNOBLE things that mercantile-influenced governments did in the past on behalf of their domestic businesses, often for a consideration, like Monarchist Honours and trinkets, as valued socially by the likes of ”Aldermen’s wives” over what Smith called their shuffles for “place”. In commercial matters, much of government legislation and diplomatic activities are directly related, not always openly, in favour of what today we call “big business” - Prime Ministers leading “trade missions” to China, for example.
The “clenched fist” of government coercion, however, is quite hyperbolic, especially nearer the top, and is more subtle and softer for holds all the occasional good it achieves, and downplays the great expense at which such good comes about, blaming its own inadequacies on the failings of “free” markets. The so-called invisible hand, for which there are multiple definitions, however, is mythical and does not exist. Supposedly, it is able to do more, and better, than the clenched fist, without stifling progress in other areas.
I agree that “what is unethical for an individual is also unethical for a group of individuals.” Outside the fantasies of perfect competition, universal morality is noble, but inconsistent with either market or state behaviours.
Adam Smith wrote his “Theory of Moral Sentiments” not because moral sentiments were shared and operated universally - they were’nt and didn’t. He set the standards by which moral behaviour might be judged. Those standards evolved in practise though not universally in societies prior to the 18th century. The daily and life-time contests between moral and non-moral sentiments continue from his days to ours. Nothing I have read on these questions has changed much up the 21st century, except that the richness of the tapistery of moral choices and their incidence is now probably more evident to us from our familiarity and direct experience of human behaviours, rather than from reading about them through the fog of previous times.
Self-interested behaviours are not a universal panacea for our mixed economies. Pure markets on their own or pure states in sole command are nowhere possible, nor experienced since before the classical period. Exchange has always existed among humans - it predates the earliest markets right back to human speciation from the common ancestors of the Apes.
Today, states and markets exist everywhere. Where one or the other dominates there are failings in both of them. That is why the appropriate balance may be best approached by following the pragmatic dictum of “markets where possible, the state where necessary”.