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Friday, October 22, 2010

The Most Dangerous Derivative

In the October 1962 issue of The Freeman an obscure 28-year-old lawyer wrote, in one of his first published works, “Giant government has outgrown the capacity of the institutions designed to restrain its encroachments and abuses. . . . [F]reedom, to be meaningful, must find direct expression in practice as well as in principle.” The occasion was the young man’s chronicling of how the small town of Winsted, Connecticut, had defeated a public-housing project by public referendum—three times—after the federally financed housing authority tried to impose it.

Within three years this man had gained considerable fame as well as infamy. You might have heard of him:

Ralph Nader.

So, he’s come a long way ideologically since 1962. Or has he?

Nader’s Freeman article came to mind last August when I read his op-ed in—the curiosities continue—the Wall Street Journal: “Where Left and Right Converge: Anticorporatist Views Are Becoming More and More Common.”

Leaving aside the dubious left/right reference, Nader’s point is that an unlikely alliance could be forming among people who would not ordinarily be found in the same room. “A convergence of liberal-progressives with conservative-libertarians centering on the autocratic, corporate-dominated nature of our government may be growing,” Nader writes. “I have received earfuls on these matters during my three nationwide presidential campaigns from both workers and taxpayers who call themselves conservatives or progressives. The Main Street versus Wall Street figures of speech bespeak a deep sense of loss of control over just about everything that matters to people’s lives. In their daily discourse they know that big government beats to the drums of big business or, to use the elegant words of conservative philosopher Russell Kirk, ‘a host of squalid oligarchs.’”

Nader aptly points out that corporatists portray themselves as free-enterprisers, which disarms some who truly value free markets and prevents the emergence of effective coalitions in opposition to the policy elite. “The issues that don’t get nearly the attention they deserve include opposition to the arbitrary erosion of privacy by the Patriot Act and to the daily collection and storage of personal consumer information in corporate databases; resistance to tax-funded sports stadiums, the Federal Reserve’s out-of-control powers, unconstitutional wars and monopolistic practices against small business, and to the swarm of corporate welfare subsidies, tax havens, handouts, giveaways and bailouts,” he writes.

Nader misses the mark on lots of things. For example, he shows little understanding of how the competitive market would work in the absence of corporatist intervention. He may get the diagnosis more or less right, but he usually sees government as the solution rather than the problem. And he overlooks something fundamental. When he refers to “abuses of corporate power, especially when supplemented by state power,” he shows a failure to understand that corporate power is derived entirely from State power. Big business can’t impose its own eminent domain, trade rules, IP laws, and banking cartel. Unsupported by the State, business would have nothing but the power of persuasion at its disposal. But since the age of mercantilism, that has never been enough. Hence the abundance of competition-inhibiting measures. You know who gets the short end of the stick.

Corporate power is what I call The Most Dangerous Derivative. It’s the one Congress refused to address in its financial regulation bill.

Ralph Nader a potential ally against corporatism?

I can imagine stranger things.

* * *

Property owners are regularly abused by governments exercising their power of eminent domain. Sometimes the courts intervene to protect victims, but what’s an abused property owner to do when a judge refuses to abide by a higher court’s ruling? David Laband looks at the case of one rogue judge.

Law enforcement authorities at the local, state, and national levels are coordinating their efforts to an unprecedented degree. This is happening in the name of homeland security, but Wendy McElroy sees danger in the monitoring of people on the flimsiest of pretexts.

With the Gulf of Mexico still marred by oil, people expect government to protect them against manmade disasters. James Payne finds that ironic, considering that bureaucrats have been responsible for some pretty serious disasters in the United States.

The distance between the American economy and a true free market can be measured by how much government has subsidized transportation throughout history. Kevin Carson discusses how subsidies shaped the economy.

Those who are perplexed by the inefficiencies and irrationalities of the American medical system might contemplate what Theodore Levy has learned: Doctors essentially are government employees.

The U.S. government profits from inflation, correct? Actually, it hasn’t in some time and isn’t likely to in the future. Jeffrey Rogers Hummel explains.

The key to understanding the self-destructiveness of democratic politics is the overwhelming temptation to gain power by bribing voters with booty paid for by others. Tracy Stone Lawson found this out at an early age.

Throughout the latest financial debacle banking deregulation was the bogeyman so many loved to hate. Warren Gibson contends, however, that the genuine deregulation which occurred over the last several decades has delivered the goods.

One of the most important—and least intuitive—ideas in economics is the law of comparative advantage. And one of the best explanations of this law was written by Manuel Ayau, Guatemala’s great champion of liberty and a former FEE trustee, who died this past summer. We reprint Ayau’s article in memory of one of freedom’s heroes.

Here’s what our columnists have whipped up this time: Lawrence Reed discovers Canada’s most libertarian prime minister. Donald Boudreaux realizes how powerful freedom is. Roberts Higgs traces the causes of the 1937 depression. John Stossel tires of Alan Greenspan. Charles Baird keeps the pressure on government-employee unions. And Charles Johnson, reading E. J. Dionne’s claim that we must trust government more, protests, “It Just Ain’t So!”

Books on the late Norman Barry, technological progress, abusive federal law enforcement, and entrepreneurship occupy our reviewers.

Sheldon Richman, Editor
[email protected]

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.