Those Who Control the Past Control the Future

by Roderick Long

Those Who Control the Past Control the Future

There’s a popular historical legend that goes like this: Once upon a time (for this is how stories of this kind should begin), back in the 19th century, the United States economy was almost completely unregulated and laissez-faire. But then there arose a movement to subject business to regulatory restraint in the interests of workers and consumers, a movement that culminated in the presidencies of Wilson and the two Roosevelts.

This story comes in both left-wing and right-wing versions, depending on whether the government is seen as heroically rescuing the poor and weak from the rapacious clutches of unrestrained corporate power, or as unfairly imposing burdensome socialistic fetters on peaceful and productive enterprise. But both versions agree on the central narrative: a century of laissez-faire, followed by a flurry of anti-business legislation.

Every part of this story is false. To begin with, there never was anything remotely like a period of laissez-faire in American history (at least not if “laissez-faire” means “let the market operate freely” as opposed to “let the rich and powerful help themselves to other people’s property”). The regulatory state was deeply involved from the start, particularly in the banking and currency industries and in the assignment of property titles to land. (Even such land as was not stolen from the natives was seldom appropriated in accordance with any sort of Lockean homesteading principle; instead, vast tracts of unimproved land were simply declared property by barbed wire or legislative fiat.)

The early republic’s two major political factions – to oversimplify a bit, call them the Jeffersonians (as represented by the Democrats) and the Hamiltonians (as represented successively by the Federalists, Whigs, and Republicans) – disagreed primarily about which forms of governmental interference to emphasise. To be sure, both side paid lip service (and sometimes more than lip service) to the “Principles of ’76,” i.e., the libertarian ideals enshrined in the Declaration of Independence; but each side quickly deviated from those principles when doing so served its economic interest. The Hamiltonians, whose chief base of support was in the urban financial centers of the northeast, called for mercantilist interventions such as subsidies, protectionist tariffs, and central banks; the Jeffersonians, whose chief base of support was rural, including the plantations and the frontier, called for state assistance in extracting labour from slaves and land from Native Americans. In each case the state ran roughshod over laissez-faire in the interests of a privileged elite.

To be sure, the Hamiltonians sometimes offered up good libertarian-sounding defenses of the rights of blacks and Indians, while the Jeffersonians offered up equally libertarian-sounding condemnations of mercantile privilege; but it’s relatively costless to take a stand against those violations of liberty of which your political opponents, rather than yourselves, are the primary beneficiaries.

But while 19th-century America was no free market, it was still too free-market for the corporate elite, who accordingly campaigned for government relief against “cut-throat competition.” As Adam Smith famously pointed out, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”; hence the perpetual mercantile quest for monopoly privilege.

One especially useful service that the state can render the corporate elite is cartel enforcement. Price-fixing agreements are unstable on a free market, since while all parties to the agreement have a collective interest in seeing the agreement generally hold, each has an individual interest in breaking the agreement by underselling the other parties in order to win away their customers; and even if the cartel manages to maintain discipline over its own membership, the oligopolistic prices tend to attract new competitors into the market. Hence the advantage to business of state-enforced cartelisation. Often this is done directly, but there are indirect ways too, such as imposing uniform quality standards that relieve firms from having to compete in quality. (And when the quality standards are high, lower-quality but cheaper competitors are priced out of the market.)

The ability of colossal firms to exploit economies of scale is also limited in a free market, since beyond a certain point the benefits of size (e.g., reduced transaction costs) get outweighed by diseconomies of scale (e.g., calculational chaos stemming from absence of price feedback) – unless the state enables them to socialise these costs by immunising them from competition – e.g., by imposing fees, licensure requirements, capitalisation requirements, and other regulatory burdens that disproportionately impact newer, poorer entrants as opposed to richer, more established firms.

The vast regulatory apparatus that emerged in the late 19th and early 20th centuries was thus specifically campaigned for by the business community. (This is documented for the “Progressive” era by James Weinstein’s Corporate Ideal in the Liberal State, Gabriel Kolko’s Railroads and Regulation and Triumph of Conservatism, and Murray Rothbard and Ronald Radosh’s [PDF] New History of Leviathan; their findings are usefully summarised in Roy Childs’ article “Big Business and the Rise of American Statism.” Butler Shaffer’s In Restraint of Trade extends the analysis through the New Deal.) The supposedly pro-labour legislation that emerged from this area was also mostly bogus, a matter of co-opting labour leaders into a junior partnership with government and business in exchange for not rocking the boat.

That this should be so is not terribly surprising; wealthy, concentrated interests are inevitably going to have a greater impact on the political process than poorer and more dispersed ones. (Contrary to popular wisdom, which has the contrast going the other way, it is only on the market, where the price system aggregates the preferences of the poorer and more dispersed, that the latter can systematically trounce the influence of business power.) What is more surprising is that such blatantly and thoroughgoingly pro-business legislation should have been perceived as anti-business.

But in the end this is not really all that surprising either. Of course these pro-business “reforms” had to be packaged as anti-business in order for the politicians and their corporate cronies to get away with them. Moreover, many of the instigators appear to have sincerely believed, on ideological grounds, that control of the economy by a government-business partnership was in the best interests of the general populace; and thanks to such partnerships’ disproportionate control of the means of information (media and public education), the rest of society could be brought to take a similar view. In addition, because business and government each always want to be the dominant partner, there was inevitably some grumbling in the business community about the precise way in which, for example, FDR advanced their shared corporatist agenda, and this likewise contributed to the misperception of fundamental antagonism. But the historical research cited above indicates that big business has been the chief architect and cheerleader for the regulations that are supposedly designed to restrain its power. Liberals who advocate further such regulations in order to combat plutocracy, and libertarians who leap to the defense of the poor embattled corporation, are equally misguided.

22 responses to “Those Who Control the Past Control the Future

  1. OK, there is some truth in this. But a useful addition to your essay would be to point out a type of organization that also greatly benefited from state (i.e. mostly federal) legislation to the point that would not exist or at best (i.e. worst) be a shadow of what they are today. Their grasps and nominally legal efforts of cartelization has vastly benefited its members (in the short term) but greatly and fundamentally harmed the public as a whole (not just “the rich”). And not just in the US, the UK is much worse. What am I talking about ?

    Maybe you guessed it. Labor Unions.

  2. What this ignores is matters of degree. It is like saying that the Holocaust was no different to before, because there had always been anti-semitism. Matters of degree do, er, matter.

    I don’t think there is a single Libertarian I’ve ever encountered who has claimed some past Utopia of pure laissez faire, let alone of pure liberty. There has always been a struggle between different philosophies and different interests. It is however the case that in the 19th century there was less State intervention.

    So Roderick’s initial assertion is really something of a straw man.

  3. Fair point. Give me good health and strong teeth, and £500 a year, and I’d go back to 1880. No regrets.

  4. I have a romantic fondness for the 18th century; irreligious, bawdy, lots of swashbuckling and swordfighting, small government, liberal philosophers. Probably the most libertarian period in our history. And that £500 would go even further.

    • More smells, though. By 1880, £500 a year would have bought you flush toilets and a bathroom. Electric lighting was on the way in, and the railways were a most civilised way to get about.

  5. Thor is correct.

    The Unions – who in the leftist account of history are the victims of government (wicked Grover Cleveland – Pullman Strike…..) are really the creatures of government.

    “Collective Bargaining” (what W.H. Hutt describes in “The Strike Threat System”) is basically a machine for creating unemployment – and it can not flourish without government “legal” support.

    As for the Roderick Long view of history……

    Plently of land in the United States was actually bought (for example the real Chief Seattle was not the Green presented in American school books, the “famous speech” was actually written in the 1970s, he was actually a real estate speculator – and that is not bad thing).

    Plenty of people (David Crockett and Sam Houston sping to mind) tried to defend Indian rights – but the behaviour of many of the Indians themselves (as much as the whites) was not much help to such would-be defenders.

    And even that land was taken by force was taken from people who had taken it by force. One can not have it both ways – one can not say “the Native Americans had no concept of landed property” (as the left claim) and say they were “robbed” – as people with no concept of landed property can not be robbed of landed property.

    In reality various tribes had different ideas and some did (did) have ideas of landed property – but that did not stop them robbing other tribes.

    As with Slavs and the Germans or the various groups in Irish history (those bloodstained centuries) at some point the confiscations and counter confiscations have to stop – and saying “your grandfather took this land by force, so you have no right to it” is basically B.S. (as both Common Law and Roman Law understand).

    Still if Roderick Long is a tender hearted man and wishes to get out of Alabama (the memory of the dead indians being more than he can accept….) and return to the European lands of his forefathers I wish him good fortune (although I would suggest he does not try to settle in Northamptonshire) – certainly many people in Alabama (such as people trying to run a business without danger from the local Kevins, or people who just want to practice their religion without being mocked) might well be only too glad to wave Roderick Long farewell.

    As for the general point – Ian B. (and even Sean Gabb) has already answered it.

    Certainly taxes and regulations existed in the 19th century.

    And some business enterprises benefitted from both the regulations and from the government spending and the taxes – but most business enterprises (including most large business enterprises) lost more than they gained.

    And government was tiny (tiny) compared to today. Not just in taxes and govenrment spending but also in terms of regulations – just compare the Federal Register as it once was to how it now is (use the eyes that God gave you – sorry, no offence meant, use the eyes that Zeus gave you).

    Saying that the United States in, for example, 1885 was “not a free market” is technically true – but it the implied claim is that it was not basically a free country worth defending, then the claim is utter nonsense.

    When was the United States at its most free?

    Slavery is a big factor – no slave State (and I am not talking about Deleware or somesuch with only a handful of slaves) can really be considered a free society.

    So for the South the time between the fall of the (wild spending) Reconstruction governments, and the rise of the (Jim Crow) Populist governments would have to be the time when they were most free (or least unfree).

    In the North things are different.

    State education spread like a plague after the Civil War (there has been a lot of government schools even before the war – but only Mass had a Compulsory Attendance law that really functioned).

    Also the Civil War debt meant that the internal taxes on booze and so on (that Jefferson had got rid of in the early 1800s) came back and stayed.

    The tax on imports went up (1815, 1824, 1828), but then down again and carried on going down till the Civl War.

    So if I had to pick a time when, say, New Hampshire was at its most free I would say just before the Civil War.

    Although, it most always be remembered, that government did fall back after the Civil War – total government spending (local, State and Federal) was only about 10% of the economy as late as 1912.

    People who say that the United States was not a 100% free society a century ago are technically accurate.

    But people who claim that such places as New Hampshire were not basically free societies (far from perfect – but bascially O.K.) a century ago – are wrong, wildly wrong.

    There is a Russian saying “First they smash your face in – then they say you were always ugly”.

    Left “libertarians” who libel the past, are following this saying.

  6. By the way – if I had to pick a year when where I am sitting was at its most free I would say “1874” (most people in town had voted against having a School Board a couple of years before – and it was not forced on the place till 1891, and national taxes reach their low point in 1874).

    No indian tribes around here, and not much in the way of taxes on imports either. So the “libertarian” left have to find other things to complain about, And they do – for example the Norman Conquest of 1066.

    No I am not making that up – it is the centre piece of Comrade Kevin’s “argument” about why 19th century England/Britain was evil.

  7. Sorry for the triple – I forgot to mention that 1875 is when Dizzy puts unions above the common law (allowed to obstruct, “picket”, and so on) and insists that local councils spend the money of ratepayers on about 40 different things – whether the ratepayers want them to or not.

  8. Ah, the Norman Yoke. Wasn’t that Winstanley’s thing?

  9. Yes – and he made the same anti large scale property jump. For example at the “Digger” community eight miles or so from where I am sitting.

    The real Anglo Saxons would have hanged him if had tried to put his ideas into practice by force – as the so called Levellers actually suggested be done (he was not hanged – Winstanley ended up a rent collector it I remember correctly).

    I remember trying out Keven with an Anglo Saxon estate example (one of the very few that carried on from before 1066 – and went bankrupt only a couple of years ago).

    But he just found some other excuse as to why it was not “justly acquired” property.

    A Radical will always find an excuse to plunder and murder – that is why the correct response to active ones (ones that just talk can be ignored) is, as the “Leveller” leadership actually supported, a rope and a long drop.

    Oh no! I feel another Sean Gabb article is comming to denounce me……

  10. I’m beginning to think that the education of every Libertarian should require a pilgrimage to Northants. We really are ground zero of the English radical forces, aren’t we? Communists centuries before Marx, and Puritans, and every time I walk into the town centre I pass a pub called the Charles Bradlaugh (I less often pass his actual statue though). The Levellers occupied Northampton briefly as Cromwell’s troops hunted them down. We even had parliaments here until the 14th century. Quite the historic epicentre, Northamptonshire.

    Some nice churches also. The one down the road from me by the green was built in 1207. Not quite Norman, but still quite old.

  11. The above hardly squares with your constant slagging of Northampton as a dump.
    I only visited once in 1971 for a short stay in a tent-trailer at Biling (sic) Aquadrome. Based on that I would have to agree that Northampton is a dump. A lot might have changed (for the better?) in 41 years tho’.

  12. Actually I quite liked Northampton when it was a market and shoe factory town, with a lot of villages around it.

    But they it grew (pushed by government “development” and “London overspill” plans) and the villages was just caught up in an jungle of estates……

    By the way Northamptonshire does have a couple of points of interest for the left.

    It was the only county in England or Wales where a majority of land was enclosed by Act of Parliament (by the way these Enclosure Acts did not violate ownership – but they may have violated customary use).

    Hence the poetry of John Clare.

    Not that he was exactly a reliable witness – being bonkers.

  13. Northampton is one of England’s great historic dumps.

  14. That is true – there is much that is of great historical importance in Northampton (not astonishing – as it is basically the centre of England), but it is not in a good setting.

    For example, there is a “Templer” style (i.e. round) Church from the Middle Ages – one of very few in England based on the design of the one in Jerusalem. But, in Northampton, it is in what appears to be a seedy Red Light area.

    Still Northampton is not Corby.

    Corby, that out-of-town Glasgow developent – in Northamptonshire.

  15. I was sitting in the Holy Sepulchre churchyard the othe day, in fact. To have a cigarette. I wasn’t propositioned by any immoral ladies. On one side is Sheep Street, which is quite nice (mainly offices) and on the other side is The Mounts, which has the law courts and municipal swimming baths, all built in the 1930s in a curiously Nazi-reminiscent style. You can imagine them on those models of the never-built New Berlin. On the third side is Greyfriars Bus Station, built to much acclaim in the 1970s. We were all very excited about it then. They’ve now decided to tear it down and “upgrade” us to open-air bus stops instead. The complaint is that the bus station is ugly, and smells of wee. This is true. But at least it’s dry when the weather is bad. Yay, progress.

  16. My memory was clearly at fault – my apologies.

    Open air bus stations on this cold, wet island make no sense.

    Greyfriars bus station is actually quite sensible (although ugly) as one can go from it straght into the main shopping centre – and from there it is a short walk to the railway station.

    Of couse, in a ideal world, the bus station and the railway station would be next to each other – but one can not have everything.

  17. Unfortunately most of the people who make these decisions don’t use the buses and are rather dazzled by the idea of grand “redevelopment” plans, which brings us back to HItler and Speer, funnily enough. But then you’re familiar with councillors, Paul :)

  18. Yes – and they should be strung up (especially me).

    God is just.

    My latest political thing (going round Brambleside school picking up litter) has given me a terrible cold.

    Of course it could be a coincidence – but I prefer to believe it is cosmic justice.

  19. Shouldn’t you be “stimulating the local economy” by hiring a “litter warden” on the public payroll, using the magic State money that “multiplies” (unlike nasty “capitalist money” that doesn’t multiply)?

  20. Ian – the trouble is that I know people who talk (almost) like that.

    And they actually mean it.