Capitalism: Freedom to Compete or Freedom to Cooperate?

The enemies of Capitalism and free markets like to describe them as being characterized by dog-eat-dog competition and the survival of the fittest.  Ayn Rand's philosophy of Objectivism provides moral support for Capitalism and hence is subjected to the same criticism.  Before examining the derogatory portions of those claims, let us ask if the free market should be viewed as that part of society in which man has the freedom to cooperate or to associate with others.

Of course, all real freedoms adhere to individuals and each and every individual has the same sovereign rights.  If I have the freedom to cooperate or associate with another person, then I have the right to use my mind to evaluate whether I will enter into a particular cooperation or association with another person and  he has the corresponding right.  If we arrive at a mutual agreement to cooperate or associate, we do so.  If we cannot do so, we go our separate ways and perhaps seek out others with whom we can reach a mutual agreement.  In practice, this means that we seek people out who we can trade values with such that each party believes they are better off because of the trade.  There are innumerable such trades being made in a society and it is perfectly rational for the parties to make such trades in many cases.  The value of living in a society is found in the wealth of such advantageous exchanges.

Such free market trading requires that men be free to use their minds to choose their own values and then to manage their own lives in accordance with their values.  Much of the prejudice against free markets is based on the opinion of elitists that others are not capable of choosing their own values and of managing their own lives.  But let us be frank that if men are not allowed the freedom to choose their own values and manage their own lives, then they are fundamentally enslaved.  There will then be no free market or a very restricted domain will be all that is allowed to the free market.

If there is no free market, what have we lost?  We have lost the ability to manage our own lives according to our own values.  We have also lost the ability to cooperate freely with others in our society or even between societies to trade values for mutual benefit.  We lose the freedom of association which is a freedom to choose with whom we will cooperate or associate and for what reason we will do so.  We lose the freedom to exchange money, goods, services, ideas, friendship, and love.  Of course a restricted society which has begun the process of eliminating the freedom of association tends to do so in the realm of money, goods, and services exchanges if freedom of speech was once well-established.  In many societies freedom of speech has never been well-established and in those societies the exchange of ideas may be among the first exchanges lost.

When it is well-established that the government has control of those exchanges, it can further expand its controls to ideas, friendships, and even love.  In America today, we have some cases in which government already controls ideas.  This is common in government-run schools and colleges, as well as in the workplace.  We have restrictions on friendships in the form of outlawed sexual exchanges, especially if friendship is mixed with the exchange of money.  We have restrictions on love in the form of Don't Ask, Don't Tell and the Defense of Marriage Act.  It is perfectly appropriate to view these restrictions as restrictions on the free market, which is a concept really much broader than the strictly economic concept usually given to it.  The reason is that all of our human relationships are based on an exchange of values and these values need not be economic values.  The values may be friendship, love, and ideas.  In this realm of the free market, it is not competition, as people usually think of it, that most characterizes it.  It is cooperation and willing association.

Returning to the economic marketplace, where goods, services, and ideas are exchanged, the more fundamental action an individual makes a choice about is also one of with whom and for what reason will he cooperate and associate.  His primary motive is not to bury some opponent.  It is to find a way to exchange values with others in such a way that each is made happier by the result.  Of course, he may only be thinking of his own happiness, but then so are those with whom he is trying to arrange the trade.  So, the result is that everyone, to the extent they are rationally using their minds, is better off.

Of course, some people may wish to make trades that others will not choose to make with them and they may be disappointed.  This cannot be helped because everyone has an equal, sovereign right to cooperate or associate with others.  Force cannot then be used to make others enter into exchanges to which they have not agreed.  Those who do not like Capitalism or the free market then proclaim that the disappointed person or persons have been "eaten."  This is a clear exaggeration.  The proposed solution to this disappointment is to have the government use force to make people, who calculated that the disappointed person's proposed trade was bad for them, enter into the exchange nonetheless.  A better alternative to using force would be for the disappointed competitor to establish more reasonable evaluations of his proposed trades with others.  If he is simply not good at arranging certain types of exchanges on a voluntary basis, then he needs to find other types of exchanges which he is better at arranging.  A wealthy free market society is rich in possibilities for many other alternative exchanges.

Government restrictions on free markets take the form of mandates disallowing cooperation between people or forcing unwanted exchanges of values.  Either way, the government is destroying the freedom of association, or we might say the freedom to cooperate, that every sovereign individual has.  I just learned about an example of just such a nefarious government interference upon one of my nieces today.  She is a very good soccer player and a deep-thinking strategist of the game.  She teaches soccer to children in classes operated by a sports store.  The other soccer coaches are paid.  She cannot be paid because of the Child Labor Laws.  She teaches soccer because she loves the game and she likes teaching children.  But, there is clearly no justice in the perhaps well-intentioned law, that keeps her from being paid.  Her freedom to associate with children who want to learn to play soccer well because she might both love teaching it and be remunerated is interfered with by government.  She teaches anyway, but her freedom to choose payment and maximize the values gained is lost.  Of course, she is a child, though a very intelligent and hard-working child.  We have governments which are only too happy to restrict the freedom of adults in very many exchanges as well.  Why not, since our governments think adults are no more able to choose their own values and manage their own lives than they think children can.

Government interferences with the free market always take the form of restrictions on the freedom of association.  It is voluntary cooperation that the government limits to prevent competition or to achieve other goals contrary to the choices made by individuals in the free marketplace.  The reason is that the economic marketplace exists so that people can form partnerships and companies together voluntarily, hire voluntary labor, use capital from voluntary investors, buy equipment, facilities, and supply goods from voluntary venders, acquire knowledge and ideas from cooperating consultants and inventors, buy a technical library, and provide goods, services, and ideas to voluntary clients.  Each of these relationships is characterized by a voluntary exchange of goods, services, or ideas.  Each is an example of the freedom of association.  Each is an example of cooperation.

Of course competition usually occurs in the process.  But, competition in the sense that people usually think of it is not as fundamental as the freedom to cooperate is.  While some people have a surfeit of competitive juices, many are simply seeking out one value after another and care only about the value they gain in any given transaction.  They hope to string together many successful transactions and do very well for themselves.  In many cases, they have no idea with whom or what they are in competition.  For instance, when I quote a material analysis job for a possible client, am I in competition with another materials analysis laboratory, or am I in competition with other alternative uses of the company money?  The company could buy a piece of equipment, pay off a loan costing them interest, or send an employee off for training.  My experience is that most often my real competition is not another materials analysis laboratory.  It is a host of other alternative uses that my possible client has for his money.

It is very hard to conjure up visions of dog-eat-dog competition in this context!  What does become clear in this context is that competition is fundamental to an economic exchange only in the broader context that everyone rationally is placing a value on his values that can be realized in a trade.  It is very hard to see this as evil.  Indeed, this is exactly what the moral man does and it is why he develops a moral code.  He needs a moral code to place relative values on the many possible values he might pursue and might gain in exchanges with others.  Of course the exchanges in question are all exchanges of values, of which economic exchanges are a subset.

Competition exists in the free market because people act to realize value gains in their exchanges with others.  But, the exchange itself is an act of cooperation or association.  There is no way to interfere with the natural competition without losing acts of cooperation and denying the freedom of association.  The act of competition is the act of the evaluation of values.  It is not stabbing someone in the chest.  It is not throwing them in a dungeon and starving them.  These are the things governments do when they interfere with our voluntary exchanges of values whether in the economic free market or in the broader free market.

You may say I am extreme in this assessment, but no, I am seeing the complete context very well.  If a government interferes with my sovereign right to associate with others, it may place a less severe penalty on me for trying to go ahead with a denied exchange.  If I then assert my sovereign right and refuse to take or accept the penalty, the government will ratchet up the use of force on its part and may well have a SWAT team shoot me or imprison me for life.  The real penalty for asserting my sovereign right may well be death or permanent enslavement.  This is clearly evil.

Rational men do not want their societies to go into these sorts of death spirals.  They understand the need to keep their society as free as possible from the use of force, including government-wielded force.  Capitalism is the form society takes when men are free to associate with one another.  Mixed economies deny the freedom to cooperate with others and trample the right of association.  These principles are readily illustrated in Ayn Rand's ingenious novel Atlas Shrugged and in the excellent movie Atlas Shrugged Part I.

The Right to Association with Others - The Right to Work and Hire

The equal, sovereign rights of individuals to life, liberty, property, the ownership of their own minds and bodies, and to pursue their own happiness are very broad.  Limitations put upon individuals by legitimate governments are few and strictly limited to the prevention of violence and fraud.  Among the most basic of an individual's rights are the right to work for a living.  Another is the right to associate with others for voluntary purposes, which includes such rights as the right to trade goods and services, the right to hire employees, the right to be an employee of another, the right to be a service provider, the right to be a customer, the right to use property to provide goods and services, the right to practice a profession or trade, the right to enter into a business partnership, the right to enter into a domestic partnership, the right to exchange ideas, and the right to enjoy friendships and romantic and/or sexual relationships.  The freedom to work and the freedom to associate voluntarily with others are very broad freedoms, which legitimate governments seek to protect.  On the other hand, illegitimate governments, which are much more common, seek to interfere with these basic freedoms.

Illegitimate government was defined in our Declaration of Independence.  Government which is destructive to the unalienable rights of the individual to, among other rights, the right to Life, Liberty, and the Pursuit of Happiness is declared illegitimate and tyrannical.  The United States of America today is full of such illegitimate and tyrannical governments.  These governments feel especially free to interfere with our voluntary associations in trade, work, and cooperation in the following ways

• controls and regulations on the production of goods,
• mandates and limits on the employer - employee relationships, 
• the licensing of professionals and tradesmen, 
• the imposition of slavery upon employers to keep financial records and to keep tax records and file tax forms, 
• limitations on the exchange of services, 
• the dictation of who can be hired and who cannot be hired, 
• the unequal treatment of various domestic partnership combinations, 
• the denial of access to the market of very large companies, 
• the excessive burdening of small companies with laws, mandates, regulations, and paperwork,
• micromanaging safety issues not understood by governments in complex workplaces,
• micromanaging performance standards not understood by governments in complex professions,
• exaggerating safety issues to gain control and to reward special interests,
• exaggerating issues of potential fraud in the interest of control and to award special interests,
• discriminating against many professions with property taxes on their tools and equipment, which does not hurt government pets such as lawyers and accountants and actually increases their business,
• discriminating against many professions because some people believe they are immoral, such as prostitution or marijuana suppliers,
• discrimination against some people in education and the exchange of ideas,
• preventing those with little wealth or income from entering many professions or trades,
• using minimum wage laws to discriminate against the undereducated and the disabled,
• using minimum wage laws to discriminate against young people lacking previous job experience or those living in low-cost-of-living areas (popular with unions),
• limiting the number of companies providing services to bolster the income of those previously in business,
• as a change-up, forcing companies and associations to grant special privileges to unions, people of favored races, people with handicaps, and to governments,
• requiring people to purchase goods and services, such as the services of accountants and lawyers by businesses, health insurance under ObamaCare, seatbelts in cars, child safety seats, high mileage vehicle mandates, unnecessary radiation inspection services for fully contained radiation sources, 
• the regulation and taxation of fossil fuels due to unproven and scientifically wrong fantasies of man-made global warming disasters,
• subsidies for favored people, companies, institutions, and industries, such as the cake-taking ethanol, wind generation, and solar power industries,
• manipulations of the value of the dollar to favor financial institutions or exporters or importers,
• restrictions on foreign competition such as the Jones Act provisos against foreign-owned shipping,
• interference with railroad and trucking rate structures,
• bailing out companies with strong union ties, such as GM and Chrysler, at the expense of other companies and taxpaying consumers,
• the massive transfer of wealth from the private sector to governments,
• requiring the payment of labor union labor rates on government projects or by government contractors,
• crippling American businesses with much higher taxes and regulatory burdens than foreign competitors have,
• and interfering with or failing to ease restrictions on foreign trade, since every individual has the right to trade with others, even when they are in foreign nations.

Of course, many of these restrictions on the freedom of association and work are justified with claims that public safety or the prevention of fraud make them necessary.  These claims are commonly exaggerated in the interest of some special interest, often that of the politician to award his friends and contributors being the foremost special interest.  Fraud should be combated with vigorous legal action against actual instances of fraud, not by overly active imaginations conjuring up ways in which someone in a profession might defraud a customer.  These anti-fraud prevention schemes will always cause more trouble than they address.  They gain traction, however, because many Progressive elitists believe the People are too stupid to choose their own associations well.  The People are imagined to be defenseless against fraud.  Somehow, the government will anticipate every possible fraud and prevent it.  Or so it wants us to believe.  In fact, it is mostly just successful in keeping entrepreneurs from competing for the business of a nation of sovereign individuals.

One of the best organizations in fighting such abuses of governmental power is the Merry Band of Freedom Litigators at the Institute for Justice. They have a long and successful track record of attacking irrational licensing laws and other approaches to preventing people from working and earning a living.  Here is a recent example of their work:

As demonstrated by a series of eight new reports issued in October 2010 by the Virginia-based Institute for Justice, one of the principal obstacles to creating new jobs and entrepreneurial activity in cities across the country is the complex maze of regulations cities and states impose on small businesses.  IJ’s “city study” reports are filled with real-world examples of specific restrictions that often make it impossible for entrepreneurs to create jobs for themselves, let alone for others.

The Institute for Justice has documented how police in Pine Hills, near Orlando, used barber licensing laws there, to fine barbers hundreds of dollars who had years of experience as barbers, but no license.  These raids on unlicensed barbers were used as a cover to search for drugs without a search warrant, showing how a disregard for some individual rights commonly leads to a disregard for other rights.  They also found that in eight major metropolitan areas, nearly one in three professions requires a license.  In the 1950s only about one in twenty professions needed a license.  One of the best ways to reduce unemployment is simply to let people work.  No subsidies are needed, no tax breaks are needed, and no government-sponsored training need be provided.  The governments simply need to get out of the damn way and allow people to work!

My bullet list above provides reason after reason for why Americans are unable to find jobs or to create their own jobs now.

FCC Upset with Verizon and Google Private Agreement on Internet

The FCC has been holding closed-door talks with lobbyists to reach agreement on ways to regulate Internet traffic without making major changes to existing laws.  However, Verizon Communications Inc. and Google Inc. reached an agreement of their own on Internet traffic rules that would allow Verizon to move some broadband traffic at higher speeds at premium prices.  This has angered the FCC, which is seeking the power to dictate how Internet providers manage traffic on the networks they have built at great expense themselves.

The FCC was under attack about the closed-door meetings as another of many violations of the Obama pledge for transparency in government.  The FCC called off these talks upon the announcement of the Verizon-Google agreement.  The FCC very much wants the power to enforce what it calls Net Neutrality, which supposedly means that all broadband traffic must be carried at the same speed at the same price.  This does not allow the investors in the broadband networks as much flexibility in pricing their services and as much opportunity to make a good return on their investments as they might have under other negotiated terms with customers.  Net Neutrality would result in slower networks, lower volume handling capabilities, and if operated through a political gateway such as the FCC, almost certain restrictions on content, probably based upon a lowest common denominator viewpoint of morality and based upon the political viewpoints of the party in power.

Some inter-company private agreements may seem inconvenient to some of us at one time or another, but that inconvenience has historically proven minor compared to the inconvenience of government regulation.  A good case in point is the regulation of the railroads because many people did not think it was "fair" for the railroads to charge less to large-volume shippers and to long-distance shippers.  Regulation by the Interstate Commerce Commission of the railroads did much to bring on the long-term decline of the railroads.  The result was a decrease in the growth of track mileage, a slowdown as regulations increased in the rate at which freight rates had been dropping under competition, a decrease in innovation, and the growth of a few very large rail systems because the ICC did not allow existing smaller railroads to pool their resources to handle a shipper's needs with agreed upon rates over longer distances on the tracks of multiple railroads.  The long-term growth and the competitive nature of the railroads was stunted by the ICC.  This is the usual pattern for industries regulated by government.  For the moment, the Verizon-Google agreement may be a bump in the road for the FCC attempt to similarly manage the Internet.

It is also a victory for property rights, albeit momentarily.  The government does not have the right to impose duties upon property owners which require them to offer services using that property which they do not voluntarily wish to perform, as things are customarily done in the free market.  The government does not have the right to push investors and their operations managers into involuntary servitude either.  Freedom in the market place is essential so that we will have as many personal choices as possible.

The Cost of Public Schools

Today I mean the cost in tax dollars to support public schools, not the cost in ethical relativism, ignorance, group think, and propaganda devoured. Andrew Coulson of The Cato Institute did some looking into the numbers for the Washington, D.C. public school system. Through the last couple of years I have seen the cost per student given commonly in the range of $9,000 to $12,000 something. He states that the most commonly cited figure is $8,322 per student now. Why do these numbers vary so much? Well, it turns out that it is because it all depends on how much the school system decides to hide from the public.

Coulson found that for K through 12 in 2007-2008, the local operating budget is $831 million, the capital budget is $218 million, federal funding is $85.5 million, and the D.C. Council kicks in an additional $81 million. There are 49,422 students, some of whom, on a given day, actually come to school. Divide this number into the sum of the annual funding and the cost per student is found to be about $24,600, which is rather a bit more than $8,322.

I have heard many discussions about how it is difficult for private schools to take on the education of a child for about $8,322 per year, so they could not take over the public school burden of education. But.......the story is clearly very different when you realize that the public schooling cost for a virtual non-education is on par cost-wise with the very elite private school, Sidwell Friends, that Chelsea Clinton attended. Would any sane person actually send their child to the dangerous and dilapidated D.C. public schools rather than an elite private school? No!

It clearly makes much more sense just to provide parents with a scholarship voucher to use on the school of their choice. Sure, the amount on the voucher may be less than $24,600 per year per student, allowing one to save considerable money for the poor beleaguered taxpayers. Florida's McKay Scholarship program provides money for special-needs children and the average scholarship for 2006-2007 was only $7,206. Sure, the cost of living is lower in Florida, but special-needs education is more expensive to deliver than general education. It is clear that private schools are now available to do a better educating job even at a cost of $12,000 to $15,000 per year per student in even the D.C. area. Many new schools would soon arise to meet the need if parents were given such scholarships.

The quality of the education in D.C. schools is indecently poor. This school system is awash in bureaucracy, inefficiency, and out-right corruption. Parents should be allowed to put it out of business or force it to meet the competition. The fantasy that this public education is free and that it even is education, must be challenged. The forces enforcing its monopoly on the education of our young are truly evil. Those forces include egalitarian socialists and the teacher's unions.

Neither is interested in the individual student learning to think for himself.