So, as a response to the thread with the 40 minute youtube video espousing neo-liberalism/the republican party here I present the counter-point and why I consider libertarianism to be an exceptionally bad idea.
(brace yourselves for a wall 'o' text)
First of there is a fundamental difference between the traditional American and European conceptualisation of property rights. The original assumption of those who first colonised the US was firmly based on the ideas of John Locke. That is (in summary) 'If a labour on nature then the product of my labour is rightfully mine and no one else has a claim to it'. This idea can be seen repeated throughout American political thought, form Objectivism to Libertarianism to Neo-liberalism.
However, the European perception is very different. In a region of relatively high population density (at the time), long established states and a history of feudalism property was considered in a very different manner. In Europe it was more common to encounter the belief that the state 'owned' the country and anything you gained from it, be it natural resources or personal wealth, you were allowed to take with the states permission. Thus, citizens owed their taxes to the state for the continued right to exploit the countries resources for personal gain.
This is not the main part of my argument but I hope it demonstrates why ideas of low taxation and minimal welfare are more common place in the US than in Europe. Both regions have very distinct concept of property.
So, in the 1950's at the University of Chicago an economics professor by the name of Milton Friedman developed what become know as Monetarist theory of Neo-liberalism. Basically, Friedman and his team produced a series of computer models which they claimed 'proved' that if markets are completely free and governments played as minor role in the market as possible then the GDP of a state would increase without fail. Competition will drive down prices and inefficient companies will fail leaving only the best quality products at the lowest possible prices. Furthermore, with low taxation and minimal regulation individual's will freely begin their own enterprises. Government institutions which are not run for profit have an unfair advantage over private enterprise and thus distort the market. Consequently any form of government welfare (including education and healthcare) must be completely removed.
I present now some criticisms of Friedman's model:
Firstly, it assumes that economic actors have complete understanding of the outcomes of their decision and perfect knowledge of the market. However, this is clearly not possible; it is very easy to imagine a situation in which, for example, a company does not fully understand a technology into which it invests thus artificially, it just follows the trends of the market so the price is overinflated and results in a 'bubble' a particular sector (for example ICT technologies in the 1990's). Economic actors are not perfectly rational.
Secondly, Freidman assumed that companies make decisions solely based on cost/benefit analysis. That is any choice by a profit making entity will be based on the cost such action will entail and the subsequent benefits gained from it. The choice which results in the greatest benefit for the minimum cost is the one which will always be chosen.
Yet, this again is not true. If a company only used these criteria to make a choice then every decision would be almost 'predetermined'. No matter who made the choices or which company made them the outcome would always be the same. If this were the case then human beings would not be required to run an economy, it could be done by a computer (as it was in Freidman's models). If there is anything to be learnt for the Soviet Union it is that a centrally planned economy breaks down under the weight of inefficiency. Companies use many other factors than costs and benefits to make decisions, such as long term company goals, research and development environmental preservation etc.
Finally, all historical attempts to introduce this doctrine have resulted in huge inequality and political repression.
The first state to attempt to introduce this ideology was Chile. The University of Chicago, funded by the American Government had, in the 1960's developed an exchange programme by which the best economics students of Latin American were allowed to study in Chicago and become indoctrinated by the neo-liberal ideology. However, at the time Latin America was experiencing a period of growth led by Democratic, Socialistic Governments and the 'Chicago Boys' were left outside of Politics.
However, in 1973 the Chilean military over-through the democratic government and installed General Augosto Pinochet as a new dictator. Soon the Chicago Boys were brought into the government and the restructuring began. In short the economy was destroyed and almost twenty years of violence, repression, growing inequality and torture followed. Despite Milton Freidman frequently visiting Pinochet and encouraging him to take his reforms even further.
This pattern was copied all across Latin America with both Brazil and Argentina experiencing the same fate.
Anyway, that is why Libertarianism, Objectivism, Neo-liberalism, Laissez-faire economics or whatever you want to call it is a bad idea. I realise I haven't actually, said why Socialism is better but this post is long enough as it is. If there is any interest in this thread I will happily demonstrate why I believe Governments have a very important role to play in the managing of the market economy.
(brace yourselves for a wall 'o' text)
First of there is a fundamental difference between the traditional American and European conceptualisation of property rights. The original assumption of those who first colonised the US was firmly based on the ideas of John Locke. That is (in summary) 'If a labour on nature then the product of my labour is rightfully mine and no one else has a claim to it'. This idea can be seen repeated throughout American political thought, form Objectivism to Libertarianism to Neo-liberalism.
However, the European perception is very different. In a region of relatively high population density (at the time), long established states and a history of feudalism property was considered in a very different manner. In Europe it was more common to encounter the belief that the state 'owned' the country and anything you gained from it, be it natural resources or personal wealth, you were allowed to take with the states permission. Thus, citizens owed their taxes to the state for the continued right to exploit the countries resources for personal gain.
This is not the main part of my argument but I hope it demonstrates why ideas of low taxation and minimal welfare are more common place in the US than in Europe. Both regions have very distinct concept of property.
So, in the 1950's at the University of Chicago an economics professor by the name of Milton Friedman developed what become know as Monetarist theory of Neo-liberalism. Basically, Friedman and his team produced a series of computer models which they claimed 'proved' that if markets are completely free and governments played as minor role in the market as possible then the GDP of a state would increase without fail. Competition will drive down prices and inefficient companies will fail leaving only the best quality products at the lowest possible prices. Furthermore, with low taxation and minimal regulation individual's will freely begin their own enterprises. Government institutions which are not run for profit have an unfair advantage over private enterprise and thus distort the market. Consequently any form of government welfare (including education and healthcare) must be completely removed.
I present now some criticisms of Friedman's model:
Firstly, it assumes that economic actors have complete understanding of the outcomes of their decision and perfect knowledge of the market. However, this is clearly not possible; it is very easy to imagine a situation in which, for example, a company does not fully understand a technology into which it invests thus artificially, it just follows the trends of the market so the price is overinflated and results in a 'bubble' a particular sector (for example ICT technologies in the 1990's). Economic actors are not perfectly rational.
Secondly, Freidman assumed that companies make decisions solely based on cost/benefit analysis. That is any choice by a profit making entity will be based on the cost such action will entail and the subsequent benefits gained from it. The choice which results in the greatest benefit for the minimum cost is the one which will always be chosen.
Yet, this again is not true. If a company only used these criteria to make a choice then every decision would be almost 'predetermined'. No matter who made the choices or which company made them the outcome would always be the same. If this were the case then human beings would not be required to run an economy, it could be done by a computer (as it was in Freidman's models). If there is anything to be learnt for the Soviet Union it is that a centrally planned economy breaks down under the weight of inefficiency. Companies use many other factors than costs and benefits to make decisions, such as long term company goals, research and development environmental preservation etc.
Finally, all historical attempts to introduce this doctrine have resulted in huge inequality and political repression.
The first state to attempt to introduce this ideology was Chile. The University of Chicago, funded by the American Government had, in the 1960's developed an exchange programme by which the best economics students of Latin American were allowed to study in Chicago and become indoctrinated by the neo-liberal ideology. However, at the time Latin America was experiencing a period of growth led by Democratic, Socialistic Governments and the 'Chicago Boys' were left outside of Politics.
However, in 1973 the Chilean military over-through the democratic government and installed General Augosto Pinochet as a new dictator. Soon the Chicago Boys were brought into the government and the restructuring began. In short the economy was destroyed and almost twenty years of violence, repression, growing inequality and torture followed. Despite Milton Freidman frequently visiting Pinochet and encouraging him to take his reforms even further.
This pattern was copied all across Latin America with both Brazil and Argentina experiencing the same fate.
Anyway, that is why Libertarianism, Objectivism, Neo-liberalism, Laissez-faire economics or whatever you want to call it is a bad idea. I realise I haven't actually, said why Socialism is better but this post is long enough as it is. If there is any interest in this thread I will happily demonstrate why I believe Governments have a very important role to play in the managing of the market economy.
