Is Libertarianism a Bankrupt Ideology?

Being a libertarian in Portland, Oregon during an election year is a slightly depressing experience. The topic of politics inevitably comes up--which I admittedly savor--and the overwhelming majority of my friends and colleagues favor Senator Bernie Sanders. Of course, there's nothing wrong with this. Indeed, I previously made the case that he could be the least bad option remaining among major party candidates.

There is some incidental common ground between your average libertarian and your average left-leaning Bernie supporter--on issues like drug policy reform, immigration, and criminal justice reform. But the underlying worldviews could scarcely be further apart. Many libertarian beliefs are on economic principles, limiting coercion, and a healthy distrust of all concentrated power. By contrast, leftists will tend to focus on outcomes and have a strong distrust of concentrated power, but only when it's in private hands.

Thus, even though libertarians and leftists share many of the same goals, political discussions between them can be confusing. The premises we're starting from are so different that it's a high barrier to overcome. As one example, the libertarian suggests a higher minimum wage will kill jobs; the leftist replies that corporations need to treat people fairly. Meeting in the middle between those two positions is obviously going to be a challenge. But that does not mean it isn't worth trying.

In what may be my only article of faith, I like to believe that intellectually honest people will eventually arrive at the same conclusions--provided they share the same values and discuss long enough. To that end, we must always be able to openly consider opposing points of view, especially if we want anyone to sincerely consider our own.

Enter, a somewhat recent article at Salon written by a former Ron Paulian who now supports Bernie Sanders. The piece was recommended to me by a friend who supports Bernie. And given that he has been the unwitting consumer of a great deal of libertarian articles from this blog, it's only fair that I should respond in kind. Here's a link to the piece we'll be discussing.

I gave up Ayn Rand for Bernie Sanders: How I grew up and traded libertarianism for a progressive “socialist”

The article touches on a variety of Sanders' key issues to make its case--ranging from vague critiques of capitalism to poverty and taxes. Unfortunately, it does not offer more than a word (that word being "Benghazi") on foreign policy--where Ron Paul's record would appear to be clearly superior to that of Bernie Sanders, for anyone that doesn't work for a defense contractor.

Not one to mince words, the article starts by describing libertarianism as a "bankrupt" ideology. Unfortunately, the author does not attempt to define this libertarianism ideology. This quickly becomes confusing, as the author proceeds to essentially conflate Ron Paul's brand of libertarianism with the following:

• The Tea Party
• Congressional Republicans who pushed the Benghazi scandal
• Donald Trump
• The right, in general, with an obligatory Ronald Reagan reference

Now, I don't assume any malintent on the part of the author, but I'd like to suggest this is a grave slander to libertarianism. Yes, libertarians shared some core grievances with the Tea Party Movement--such as the bailouts. So did Occupy Wall Street. From this fact, however, it clearly does not follow that they are part and parcel of the same whole. Moreover, it's deeply silly to blame libertarians for things that are wrong with government today because it implies that libertarians were in power at some point. Obviously, they have not been. So if one wants to critique Republicans in general or Donald Trump, please be my guest. Just don't pretend there's anything libertarian about them when you do so.

The author isn't making a philosophical critique of libertarianism, so we won't offer a philosphical defense. Instead, we'll touch on a few of the hot political topics mentioned and discuss the libertarian position on them. (Or to be more precise, since libertarians don't agree on everything, this is really just my take on them.)

Taxes and Poverty

From the article:

For too long, the anger and passion has been driven by Tea Party types and libertarians. Their solution seems to be throwing more gasoline on a trailer-park fire. Inequality? Cut taxes for the wealthy and implement a “flat tax.” Poverty? Eliminate the social safety net and cut food stamps.

Inequality is a problem, but poverty is a bigger problem. On the left, these are thought of as essentially the same issue. They are not.

To see why, imagine for a moment some future state in which the 1% has grown massively more wealthy than they are today, controlling say, 90% of all the wealth. But in this same world, the economy has expanded sufficiently that even the poorest people have shelter, access to clean water, and are no longer food insecure--that is to say, a world in which extreme poverty no longer exists. If the same economic system that produced massive inequality also eradicated poverty, would this be an acceptable outcome? I would say yes. 

Of course, you may object that the hypothetical world I've offered is implausible. But in fact, if you look at trends in global poverty over time, it's what we see occurring in the world today. The top income bracket has gotten progressively more wealthy over time, but extreme poverty around the world is the lowest it has ever been.

Reasonable people can disagree about just how much wealth redistribution programs might help or hurt the progress on poverty. But at face value, it is true that the same capitalistic system that has produced today's inequality, has also caused a dramatic reduction in poverty around the world. The problem is that we often imagine the economy as a fixed quantity, in which case wealth redistribution seems imperative to fix poverty. But if the economy is not a fixed amount--and clearly it's not--it follows that it is also critical to support policies that maximize economic growth as well. Those policies would likely include things like cutting taxes (for everyone).

Which brings us to the bogeyman of the "flat tax". Without getting too much in the weeds here, if one is going to have an income tax, it should not be truly flat. It should be progressive up to a point. So perhaps, the first $50,000 is entirely tax free, and then the rest is taxed at a flat rate of X%. That's the only credible kind of flat tax plan; it's difficult to make a strong case for why the government needs to take a cut of a desperate person's first few dollars of income. On this, the author and I should agree.

Of course, I say "should" there because the fact is that America already has a flat tax. Sure, we don't call it that; we call it the payroll tax. But that's what it is. It's a roughly 15% flat tax on everyone's income, starting from the first dollar earned.* And, as part of Bernie's new healthcare proposal, he wants to raise it considerably. For more on this, please see our previous discussion on Bernie's new tax. A literal flat tax is not a good thing--but that's true for payroll taxes as well as income taxes. And before one begins to contemplate welfare programs to help the poor, maybe we should start by preventing the government from taking the money they already have.

The question of a social safety net is a harder one. Certainly, returning 15% of their income is a great start towards reducing the need, but it's unlikely to eliminate it entirely. The general opinion of libertarians would be to suggest that private charity tends to be far more effective than direct government assistance. The reason is because the private charity has to prove to its donors that it's actually making a difference in order to keep getting donations and existing. In contrast, the government gets the taxes automatically and doesn't really need to prove to anyone that it is solving the problem. This understanding might recommend a policy that further encourages charitable contributions.

In the long-run, most libertarians would probably agree that a minimal or non-existent safety net was ideal. But we're a very long ways from that in any case, and cutting such things is nowhere near the top priority. For now, the focus should be on protecting the benefits of the most vulnerable people by setting the distribution programs on a more sustainable financial course. We recently outlined such a program in a series of articles on Social Security.

Socialism Inverted
From the article:

Sanders calls himself a socialist, which is just about as big an American insult as you get. Conventional politicians and business people decry the evils of socialism, except when they are wallowing in it. America has the most generous socialist government that has ever existed in human history, but it only applies to millionaires. If you’re on the board of a bank or massive corporation, the government has unlimited socialism for you. No cost loans, favorable bankruptcy laws, bailouts and tax breaks without limit. At the same time, unemployed students cannot discharge student loans no matter how bleak their financial circumstances. Socialism has been inverted. Rather than deployed for the poor and struggling, it’s doled out endlessly to people who don’t need it.

There's not much to disagree with here. Obviously, corporate welfare isn't literally the only kind of welfare, but it is the most insidious sort. No libertarian worth their salt would dispute that.

But notice that all the items the author highlights as problems are things the government has done for corporations. He's right to complain about them. But we must also ask how it became that way.

Here, libertarians would point to the problem of concentrated benefits and diffuse costs. Government will consistently fail to act in the public interest when it comes to questions of corporate welfare because the incentives are wrong. It'd work with just about anything, but let's consider the case of GM, which got bailed out during the financial crisis. The management and investors of GM had a very powerful incentive to see that deal go through--their very livelihood was at stake. But by contrast, the average taxpayer didn't have as strong incentive to oppose it. The loan was around $11B, and even if we assumed it wouldn't be paid back, that would come to less than $40 per individual citizen (assuming ~300 million Americans). So, who do you think Congress is going to hear from more, the people trying to save their whole company, or the people that might save $40, at some point, by opposing it? That's not a hard question.

Coincidentally, Bernie was in favor of that form of corporate welfare (though he ultimately voted against a bill including it because it also included bank bailouts). But the bigger point here is that large central governments are inherently corruptible because of the problem above. And you can hope for campaign finance or lobbying reform to solve that problem, which has plagued us for years. But those reforms suffer from the same fundamental challenge in getting passed. Even if they could work, the lobbyists have a much stronger incentive to block the reforms than the average voter does to support them.

Alternatively, you could solve it by eliminating the government's power to play favorites in the first place. A weaker government with less discretion--as the Constitution envisioned--isn't worth corrupting. So if you care about corporate welfare, libertarians would suggest your first goal should be to limit the size of the government that provides it.

Walmart and Totalitarian Corporations
From the article:

Corporations benefit from weak labor and a beaten down population. Many are almost too powerful to tame. Walmart generates more money in sales in a year than the GDP of Norway. (Don’t worry I’m sure it doesn’t do anything evil with all that money.) Walmart and like-sized corporations are no longer businesses. They are instead autonomous, totalitarian states existing right in our own nation. They care only for their own interests, unconcerned with national borders or anything like the public good.

Here, I'm particularly interested in the description of Walmart as a totalitarian state. The folly in this should be obvious. If I disagree with Walmart's policies or just hate the color blue, I don't have to shop there. I can just drive to a different store. And in my particular case, living in Portland where Walmart has been banished by public opinion to the deep 'burbs, shopping at anywhere besides Walmart is actually more convenient. But the key is that, to my knowledge, Walmart isn't forcing anyone to do anything. The employees don't have to work there; the customers don't have to shop there.

The whole interaction is voluntary.

I have a sneaking suspicion the same could not be said of your run-of-the-mill totalitarian state. By definition, the totalitarian state (and actually, any government) has a monopoly on just about everything it does, and almost none of it is voluntary. I don't go to the DMV, because I love the experience. I go there because I have to. And I don't pay taxes because I hate money and love financing wars. I pay them because if I don't, my property would be confiscated or I'd eventually go to jail. If I think the government is wasting my money or providing poor service, my only real recourse is to vote once every two years for a candidate that may or may not care about my pet issue. By contrast, if Walmart does something I hate, I can stop giving them money the very next day.

Since Walmart is a favorite punching bag for everyone, however, perhaps it's useful to say a word in their defense. Yes, I realize it's their marketing slogan, but there is some truth to the idea that Walmart helps its customers "Live Better". Walmart made its mark on the world by relentlessly driving down prices in its stores. One could object to some of the means used to achieve this--paying low wages, overseas labor, etc. But Walmart doesn't exist to give jobs to Americans. It exists to sell cheap products, cheaper than anyone else, and make a profit doing it. In the process, it just so happens to help poor people afford more goods and have a higher standard of living than they otherwise would.

So we can look at it as an autonomous totalitarian statelet, with all the nefarious undertones that entails. But we could also look at it as one of the most successful poverty relief agencies in the world--since we're just using words without any real connection to their meaning. In reality, it's neither of these things. It's just a business pursuing its own narrow profit-motive. Fortunately, the resulting benefits extend beyond the board room.

Summing Up
The author concludes by emphasizing the common ground that leftists and libertarians share, and an implicit call to have them join the Bernie movement. One wonders how many libertarians would still be reading after the balance of the article was spent alternately mischaracterizing their views and expressing total contempt for them. The article was less about refuting libertarian ideas and more about simply declaring them to be wrong. Which is fine. He's entitled to his opinion, and I'm sure many Salon readers appreciated his take.

Still, he is right to point out the common ground. Leftists and libertarians share many of the same goals; we just see different paths forward. And if we are to find common cause more often, we must begin by first understanding the ideas in depth--both our own and colleagues' on the other side. Because you can't critique an idea you do not understand. And you cannot persuade anyone if you start by denouncing them and their ideas as "bankrupt".

*Technically speaking, it's actually worse than a flat tax in terms of progressivity. After a certain dollar threshold, high-income individuals are exempt from paying a portion of the taxes on the remainder. This makes it an explicitly regressive tax.