What Markets Ain’t
Ayn Rand published one book specifically on capitalism, calling it Capitalism: The Unknown Ideal. She titled the most important essay in the book “What Is Capitalism?” One of her deepest insights was that capitalism is being abandoned and destroyed in large measure because people do not understand what capitalism is.
Markets Gone Amok?
To see how this plays out in practice, see Nicholas Kristof’s recent column, “Markets and Morals,” in the New York Times. Kristof is touting a new book by Michael Sandel, What Money Can’t Buy. Kristof views Americans as consumed by a “laissez-faire” ideology that has led us to allow markets where we ought not. He cites some examples from Sandel’s book, including:
Should the United States really sell immigration visas? A $500,000 investment will buy foreigners the right to immigrate.
Should Massachusetts have gone ahead with a proposal to sell naming rights to its state parks? The Boston Globe wondered in 2003 whether Walden Pond might become Wal-Mart Pond.
Some things simply shouldn’t be for sale, Kristof says, and so we have to stop this knee-jerk embrace of markets, what he labels “market fundamentalism.” “Market fundamentalists . . . accept that laissez-faire is always optimal.”
Yet, he concludes, laissez-faire clearly isn’t always optimal:
[A]nyone who honestly believes that low taxes and unfettered free markets are always best should consider moving to Pakistan’s tribal areas. They are a triumph of limited government, negligible taxes, no “burdensome regulation” and free markets for everything from drugs to AK-47s.
We can sum up Kristof’s argument this way. A market exists whenever and wherever there is buying and selling going on. Laissez-faire capitalism is the idea that everything should be up for auction, that there should be no laws interfering with buying and selling in any way. It is, in short, anarchy. Since anarchy is obviously bad, the regulatory state is obviously good—it’s just a matter of finding the right mix of markets and government intervention into the economy.
What Capitalism Is
There is one concept that is strikingly absent from Kristof’s account: individual rights. To be fair to him, it is absent from most accounts—even many alleged defenses of free markets. But Rand argued that you cannot even understand what capitalism is absent the concept of individual rights.
Check out her approach and see how it clarifies this whole matter in a way that doesn’t unleash arbitrary line-drawing about where to “place some boundaries on markets.”
“Capitalism,” writes Rand, “is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” She goes on to elaborate:
The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.
Note some implications.
- Capitalism is not anarchy. It requires a strong, active government to ensure that individual rights are protected from violation by force or fraud. Lawless areas like those in Pakistan are not illustrative of laissez-faire.
- A free market is not one free from government but free from the initiation of force—the government’s or anyone else’s. Under laissez-faire capitalism, there is a clear distinction between crime and commerce. If you’re violating someone’s rights, your activity is not protected simply because you’re engaging in an act of buying or selling. So you can’t hire a hit man to take out your boss on the excuse that it’s “free commerce.”
- Much of what the government is selling today would not be for sale in a capitalist society. There would be no state parks and so no park naming rights to be sold. Immigration would be open, and thus there would be no opportunity for government to auction off visas.
- In a free market people would be able to buy and sell some things you may not approve of—drugs, unpopular political books, sugary sodas. You don’t have to like it—you can even denounce and boycott it—but you can’t impose your values on others any more than they can impose their values on you. That’s the meaning of freedom.
The Bottom Line
Kristof is arguing against a straw man. He’s saying: Clearly we need laws, not everything should be for sale, therefore laissez-faire capitalism is bad and the regulatory state is good.
But laissez-faire capitalism has laws, including laws that ban buying or selling things like military-grade weapons. It is not a free-for-all, but a system that removes force from human affairs so that all relationships are voluntary.
Let Kristof and other critics of laissez-faire argue against that.