Join us for debate at our Facebook Group, Liberty Cafe!

Monday, October 20, 2008

Re-Reviewing Thomas J. DiLorenzo

Looking back at some of my old posts on my former cooperative blog, Blog-A-Boo, I discovered one of my longest and most intellectual posts [1]. I discovered that calling it intellectual is giving it a lot of unnecessary praise. One of the things every person, including intellectuals, should do is go back and criticize yourself. If you aren't able to be truthful about your past you won't be truthful about the present, and with intellectual dishonestly being a staple of today's political atmosphere [2] we all need to stop and reflect once in a while to make sure we're on the honest track. I will reevaluate the article and you can see for yourself the difference in opinion, which is vast in some areas and nary a inch moved in others.


In the last few months of 2006 I came across a interesting and highly detailed blog called Mutualist Blog: Free Market Anti-Capitalism [3] written by Kevin Carson. At that time, being a semi-read [4], semi-retarded [5] anarchist I thought the very idea of "free market anti-capitalism" would lead the world to explode, Jews and Muslims to start making out and David Caruso to act. Investigating further, it turns out that one of the core tenant of this blog, the undeniable efficiency of the free market, makes sense! It was during this self-identified political revelation that I took it upon myself to take on the libertarians over at [6]. I chose the article with the inflammatory title How 'Sweatshops' Help the Poor [7] by Thomas J. DiLorenzo and got to work.

Inclosure and The Birth of Capitalism

DiLorenzo's begins:
One of the oldest myths about capitalism is the notion that factories that offer the poor higher wages to lure them off the streets (and away from lives of begging, stealing, prostitution, or worse) or away from back-breaking farm labor somehow impoverishes and exploits them. They are said to work in "sweatshops" for "subsistence wages." That was the claim made by socialists and unionists in the early days of the industrial revolution, and it is still made today by the same category of malcontents – usually by people who have never themselves performed manual labor and experienced breaking a sweat while working. (I am not referring here to the red herring claim that most foreign "sweatshops" utilize some kind of slave labor. This is an outrageous propaganda ploy designed to portray defenders of free markets as being in favor of slavery).
The actions of the early days of capitalism were far from free markets. Inclosure (Consolidation) Act of 1801 was a gross act of state intervention in the economy which benefited both the country land owners and the urban factory owners by ending open land by"inclosing" (enclosing), or fencing off all land, by law. The costs of such a scheme brought down many independent farmers and ranchers, which in turn lead them to the city in search of new work, which lead them into the arms of the factory owners.
[T]he process remained harsh for the small farmer, the period of parliamentary inclosures paralleled a period of increasing industrial use of labor. Inclosed land did promote more efficient farming and was able to produce an ever-increasing agricultural output during the early 19th cent., when the population was growing rapidly. [8]
Although efficiency and mass farming bloomed and the obvious benefit of such things were passed around the nation, unfortunately for DiLorenzo, the "myth" is fact, no matter the political sway. Being an economics professor, DiLorenzo should know the history of capitalism, its origins in mercantilism and the slow move from industrial (state/monopoly) capitalism to freer and freer markets in Britain and the United States. There was no magic free market the minute Adam Smith put pen to paper. It took time. It took evolution of economy.


He continues:
That the anti-factory movement has always been motivated by either the socialists’ desire to destroy industrial civilization, or by the inherently non-competitive nature of organized labor, is further evidenced by the fact that there was never an "anti-sweat-farm movement." Farm labor is still as rigorous as any physical labor, as it was 150 years ago. Indeed, in the early days of the industrial revolution – and in Third World countries today – one reason why families had so many more children than they do in wealthier countries today is that they were viewed as potential farm hands. Abraham Lincoln had less than one year of formal education because his parents, like most others on the early nineteenth-century American frontier, needed him as a farm hand. But since agriculture was not considered to be a form of capitalism, and did not pose any real threat to unionized labor, there was never any significant social protest over it.
As an experienced former leftist I think I have some good authority on the motivations and feelings of socialists (as well as most branches of anarchism) and the "desire to destroy industrial civilization" is the complete opposite of what modern socialists want. Socialism wants control of industrial civilization, not its destruction. The Communist Manifesto says it outright [9]. Even most anarchist branches are for the control of the means of production, save the anarcho-primitivists/anti-civilization [10].

Another quip I have a big problem with is the claim that "[f]arm labor is still as rigorous as any physical labor, as it was 150 years ago". Did he totally miss the internal combustion engine? Factory farms? Genetically modified crops? During the time of the Industrial Revolution none of this was around, but apparently 150 years of technological advancement means nothing. It's hard to give DiLorenzo the benefit of the doubt that he's just a sloppy writer when basic history refutes his points. It may just be this piece is ideological, not factual.

Free Markets vs. Corporatism
It is never the workers in countries like Honduras who protest the existence of a new factory there built by a Nike or a General Motors. The people there benefit as consumers as well as workers, since there are more (and cheaper) consumer goods manufactured and sold in their country (as well as in other parts of the world). Capital investment of this sort is infinitely superior to the alternative – foreign aid – which always empowers the governmental recipients of the "aid," making things even worse for the private economies of "aid" recipients. Market-based capital investment is always far superior to politicized capital allocation. Moreover, if the foreign investment fails, the economic burden falls on the investors and stockholders, not the poor Third World country.
The aid arguement DiLorenzo gets right. Its been shown time and again [11], most recently in Burma [12], that aid to governments are much less efficient than private charity or direct economic investment. The problem with his arguement though is assuming that the investment is a free market investment and not one that sides more with corporatism [13].

Today, most major economies are not free market or near free market, but "mixed" [14]. In a mixed economy the government toys with the market in a way to create monopolies, restrict market access and benefit some industries over others. Jonah Goldberg, author of the great historical correction Liberal Fascism [15], says in his book and in other forums [16] that such intervention creates lobbyists who in turn direct the intervention to the benefit of their clients and to the detriment of their competitors, which are usually small business. Kevin Carson describes this in much more economic detail giving it the name cartelization:
[T]he big meatpackers were already subject to a federal inspection regime. The federal government had adopted the older system at their behest in the late nineteenth century, when an embarrassing tainted meat scandal threatened their market in Europe. The federal government at the time adopted inspection regulations for all meatpackers engaged in the export trade. It was a classic example of cartelization through the state: the meat exporters, which happened to be the largest firms, for all intents and purposes adopted an industry code enforced by the state. [17]
What DiLorenzo refuses to point out, and which is a common practice in the Third World, is that companies like Nike and other corporations are given special incentives to create factories and through those factories come jobs. He is absolutely right that the jobs benefit the worker and the community as a whole, but is it really the amazingness of the free market that does this or is it that a state created incentive in the market that allowed for it? Its a mixture. China is the best example. The opening of markets created prosperity in China, but I highly doubt the libertarians will point to China as an example of free markets at work. Yes, the market is part of the success of the rising Chinese economy, but you cannot discount that the state's manipulation of the markets has driven the same prosperity. An American example was FDR's rebirthed war socialism [18] during his presidency that brought about a state-driven prosperity after the defeat of the Axis powers.


DiLorenzo's piece, while factual in some areas, is quite ideological. To use another term from Carson, DiLorenzo's piece is an example of "vulgar libertarianism". Basically, he laments the state's intervention in the market while defending it with hilt and blade. Its quite amusing to read, and quite easy to destroy on it face. I'm a libertarian in the market as much as I can be: small streamlined regulation, low taxes, growth of our production industries, etc. We need a well-rounded economy. What corporatism has gotten us are the bubbles we've seen in the past 30 years. We're up on one industry through speculation and hope, then it collapses and we discover (again) that our foundations are disapearring.

If Ireland can do with a corporate tax a quarter of ours [19], we may need to rethink our protectionist strategy and just cut the rates. But that'd be the smart thing to do...


P.M.Lawrence said...

It's worth pointing out that DiLorenzo is wrong about farm families needing more workers and valuing them accordingly, except in distorted special cases - ones which, unsurprisingly, turn up a lot in history. Even simple forms of agriculture don't need a whole family's labour to support itself, except at peak times like harvest to beat the weather. They only had to work all hours if they had to produce more than that, to support a wider economy and leisured classes through rents and taxes, maybe mortgages, or to support themselves while also clearing new land (which means, working even harder to invest, not to survive comfortably). Even when farmers were poor for other reasons, like too little land, that didn't show up as harder work. The very existence of large groups not farming shows that the farmers were working to feed them too. In a free market, that non-farming sector's size would have been determined by free choices about the value it offered, and there would have been correspondingly less work per head on farmers. There's a natural experiment that shows this, in the early USSR (google for it): after land reform, farmers cut back on work and on what they supplied the towns, until Lenin... er... took steps.

There are a fair many typos and spelling mistakes in the post, unfortunately, e.g. "lead" is not the past tense of "to lead" (pronounced "to leed"), "led" is; "lead" is only pronounced "led" if it is the metal.

Jordan said...

Thanks for the spellcheck