STAFF NEWS & ANALYSIS
How Real Freedom Works
By Staff News & Analysis - June 28, 2011

Managerialist America … Mark Roe … a professor at Harvard Law School, asks how capitalist America really is in a stimulating Project Syndicate piece. Mr. Roe suggests that the level of state ownership of capital, or the level of government intervention in the economy, may offer a misleading picture of America's political economy. – The Economist

Dominant Social Theme: America is not as free as it seems to be. The government needs to pass laws to empower shareholders. Then shareholders will run corporations and America's Constitutional republic shall blossom once more.

Free-Market Analysis: The Economist is a miserable, elitist newspaper; its standards continue to decline. Read the first sentence, above (excerpted). The professor "asks how capitalist America really is." What does that mean? How America really IS? The colloquialism is so inexact that we had to read the sentence three or four times before we decided it wasn't some sort of typo.

Then there's the anonymity that The Economist continues to adopt. Anonymity has an ancient and respectable history, but The Economist regularly runs anonymous first person articles. This is ludicrous. This column, "American politics – Democracy in America," provides us with the following sentence: "To my mind, all this suggests a structural antagonism not between the rich and the not-rich, but between the corporate managerial class, the diffuse crowd of individuals who actually own the companies the managerial class so jealously control, and the rest of us …"

Whose mind is this exactly? The Economist isn't telling, or if it is, we couldn't find the byline. Usually, anonymous articles, if they introduce a personal perspective, do so using "we." This is how the New Yorker offered its witty, anonymous columns. But to run an anonymous first-person column is a kind of literary degradation in our view. Sure, it's done – but why? It's a perversion of the anonymity that the magazine seeks to use.

The Economist is increasingly perverse in any case. As a publication that was once, a hundred years ago, republican and is now a solidly ensconced elitist mouthpiece, The Economist has come on hard times from an editorial standpoint. During the current resurgence of free-market thinking, The Economist is in the unenviable position (as a self-styled thought-leadership magazine) of having to square the proverbial circle.

It has to pretend to be free-market oriented when in fact it is entirely corporatist. It is through corporations and capitalism that the powers-that-be disguise their authoritarian and anti-freedom agenda, and nowhere is this more evident and obvious than in the pages of this eminent publication.

It is, in fact, a major dominant social theme of the Anglosphere power elite – that corporations and capitalism are analogous to free-market, agrarian republicanism. We sometimes use capitalism interchangeably with free-markets, but we shouldn't. Capitalism has some fairly specific overtones and the two terms are increasingly differentiated.

A free-market is simply that, an untrammeled venue. Capitalism is much different. Capitalism implies corporatism, and the corporate state. Corporations are essentially artificial creatures, brought to life by judicial decision-making. In a free-market republic, corporations likely wouldn't exist. Business, as we have pointed out before, would have a partnership orientation (as it once did). Commerce would be a good deal more accountable.

Corporatism is in fact the great bane of free markets. Corporations shove free-markets toward gigantism and away from transparency. Without corporations, business would likely be conducted by flexible linkages of entrepreneurial partnerships. That's not how The Economist sees things, though. For Economist journos and big thinkers, capitalism CONSTITUTES a free market. The problem from The Economist's perspective is how to rationalize capitalism so that it can be further perfected.

In fact, anybody who wants to look at Western society would conclude that both Europe and America are increasingly authoritarian, police states. Corporations function within consumerist parameters set by federal governments. (See other article, this issue.) The Economist sees none of this. "One might infer that America is very capitalist," the article informs us. Really? "Capital largely controls the economy," the article adds." This is true, though the bigger question is … who controls the capital?

That's not an issue The Economist is ever likely to touch. What does concern the writer of this column, whoever he/she is, is that the current system become ever-more amenable to marketplace dictates. To this end, it quotes Mark Roe's recent research approvingly.

What concerns Roe apparently is that the ownership of capital is often extremely diffuse, "spread over many thousands of shareholders." Thus, these shareholders really have little say over the corporations they own. "The people with real power are the class of managers and executives," Roe writes disapprovingly.

Being a sincere sort, Roe wants to fix this. What America has now, he believes is a "managerial" society and he wants to give power back to the "owners." He is dissatisfied with things as they are. "The law is clear: the corporation's board of directors, not its shareholders, runs the business," he observes. Managers are insulated from market authority.

There are problems with such a managerialist society. "Managers of established firms continue money-losing ventures for too long, pay themselves too much relative to their and the company's performance, and too often fail to act aggressively enough to enter new but risky markets. "

What's the solution? "An 'ownership society' worth the name would both increase shareholders control in corporate governance and make it much easier to push out incumbent managers by means of 'hostile' takeovers."

Actually, Roe doesn't come right out and say this in the article from which The Economist column is drawn. But the conclusion is warranted; Roe implies this solution in his own article.

Ironically – there are so very many ironies inherent in modern regulatory democracy – the solution to managerial-capitalist excess is to be found not in the market but in … government regulatory authorities!

It is very clear from both The Economist column and Roe's article that the Securities and Exchange Commission in particular would have to change the rules to make corporations more responsive to shareholders.

This conclusion of course is not surprising. America has traveled almost as far away from a free-market economy as the rest of the West at this point. Between a plethora of licenses, lack of available capital, aggressive regulation, environmental laws, terrorist "concerns," hyper-active taxation and central-bank initiated price-inflation, there is not much leeway left for someone who wishes to work entrepreneurially within the system as it's constituted.

There is a solution, though. It is not strictly-speaking a formal libertarian one (as libertarianism has been formalized in recent years) and does not necessarily partake of the finer points of the non-aggression principle. It is very simple, however, and hews to what we understand of natural law.

The idea is actually based on what is already happening. In America especially, people hoping to live in a freer manner are dropping out of the system as best they can. They are reasserting their anonymity and in some cases attempting to return to agrarian roots.

This was in fact the vision of Thomas Jefferson's agrarian republicanism. It was a vision that was repudiated only by the force of the American Civil War that initiated the authoritarian and statist perspective of Alexander Hamilton and the vision of the European banks that apparently backed him.

The idea would be to return as much as possible to small, voluntary, familial oriented communities that exist outside the ambit of the regulatory state. These familial units would surely be armed for defensive purposes, use honest money and would partake of private justice wherever possible.

This sort of solution removes the libertarian conversation from the sterility of the "non aggression principal" – a principal that sounds good but that in practice seems to us increasingly unworkable. What WOULD work is to simply observe history, natural law, and how human are biologically prompted to live – in small, familial-oriented communities. In such communities, historically, there was not much conversation about the non-aggression principle.

Smaller is better, correct? (Within this context, anyway.) Family is the fundament of freedom and most people biologically can't support more than 150 relationships anyway. It is no coincidence that Western power elites have attacked farming communities and emphasized urban environments. China is doing the same, even today. And nowadays, grandparents are supposed to live separately from the family in their own retirement communities. Children are aggressively provided with their own culture to separate from their parents.

Public schools and universities undermine the age-old concept of apprenticeship and enmesh the child in a network of state-approved, authoritarian notions. Religion, a communal glue, has also been undermined. Price inflation along with "women's lib" has been engendered to ensure that both husband and wife have to work, and in fact wish for the female to work, removing her from the family.

Above all, the elites have endlessly emphasized the judicial component of the state. The state is both parent and teacher; judge and jury; enforcer and incarcerator. Morality within this context is what the state says it is. We prefer Mises' definition: morality is personal.

In fact, justice can be delivered in numerous ways. Private justice would be the preferred default in our view. What is private justice? It is justice as it was practiced for thousands of years before the modern state introduced its brand of authoritarian, monopoly justice. Private justice is likely based on the principle of the honor duel and family vendettas.

It is the threat of force that impels people to a judicial negotiation, whether one wishes to negotiate face-to-face or utilize a private third-party adjudicator. Societies that practice private justice tend to be very polite. Such a communal structure may also obviate the need for a formal non aggression principle.

If the culture is organized properly, the need for such elegant conceptualizations is greatly diminished. People, in fact, are emotional and passionate beings. Conflict is a fact of life; the Ten Commandments are regularly traduced, even though people understand them well enough and try to live by all or most of them. Conflict resolution within this context is perhaps a good deal more important than first principles.

Such private justice is laissez faire and informal. Decisions reached one time may not be reached again the same way. This sort of justice is still practiced, especially in some Islamic countries where even murder is negotiated via monetary payments. Sometimes such practices may be referred to as "common law," but the modern legal industry has done its best to confuse people over what is common law.

Today, common law is said to refer to British Common Law of the past 500-1,000 years. Such Common Law actually encompassed a fairly complex system. But REAL common law is even more basic and simpler to enforce. It was a kind of unspoken contract law, and one could argue it made no differentiation between "civil" and criminal." When a contract was broken, justice might be demanded. If justice was not sufficient, violence might ensue.

Much of the effort of modern Western jurisprudence is spent demonizing private justice in our view. Words have been coined to describe it. "Vigilante" is one of them. The repetitive element of American Westerns is that bad eggs are eventually brought to justice by government enforces. Civilization is dependent on state authority.

Next to central banking itself, modern monopoly justice is perhaps the most important dominant social theme that Western elites have implemented. We have always predicted it will be the last meme to come under attack in this era of Internet Reformation. Most people simply cannot imagine life without state monopoly justice. And even the anarchy movement seems to prefer the non-aggression principal as a communal building block.

We suggest natural law and, as necessary, agrarian emphases. But our proposal is aspirational, not didactic. We are not trying to preach, only point out that there is more than one kind of jurisprudence and even more than one kind of justice. We think Anglosphere elites have perverted much that is decent and good in Western culture and that a harkening back to what worked once upon a time, even referentially, isn't such a bad idea.

Most people also conflate justice with a single outcome. It is not "just" that some people end up being punished differently for the same "crime." Of course, this brings up specific questions about what crime is and how the state should go about enforcing morality. The standard answer is that the state enforces one's debt to society. But one could reasonably ask what is a "debt to society," exactly, and how is to be erased by incarceration, etc.

Edited on date of publication.

After Thoughts

The Economist article is a good example of how the assumption of monopoly justice taints almost every observable aspect of the modern conversation as regards law, business and commerce. And mainstream media literally cannot and will not conceive of an unregulated environment. Even when the conversation turns to empowerment, it is assumed – stated – that such empowerment is a regulatory function. From The Economist, we would expect nothing else.

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