Free enterprise has never been an easy sell. This is partly because it is counterintuitive; our Palaeolithic minds developed in hunter-gatherer communities that could adopt a command-and-control model without encountering the economies of scale seen in a complex modern society.
It is also partly because the case for free enterprise is outwardly conservative; cautious and longsighted. Naturally, those concerns are often side-lined by the cacophony of near-sighted political rows that focus on immediate problems. It is hard to recall in living a memory a crisis that exposes that latter proclivity more than the current pandemic. Of course, in the face of such a threat, near-sightedness may not be such a bad thing; a failure to tackle imminent dangers is as much a threat to long run growth as short-termism.
There is however a third reason why free enterprise seldom gets its day in court; it is widely misunderstood. Given the often-unedifying discussions between cyber libertarians and the tokenism of anti-capitalist pundits who hold up the least convincing examples of classical liberal arguments, one can be forgiven for dismissing free market arguments as the preserve of wild-eyed ideologues.
From the wrong angle, it can appear to be a crude philosophy, espousing little else but “less government always and everywhere”. This is, however, a mischaracterisation that is as widespread as it is incorrect.
As Covid-19 arrived with a vengeance, pundits queued up to claim this was the final nail in the libertarian’s coffin. Even the editor of The Economist suggested the pandemic had weakened the position of free marketeers.
Before writing it off so hastily, it’s worth unpacking what free marketeers actually believe. “The consistent liberal is not an anarchist”, said Milton Friedman in his magnum opus, Capitalism and Freedom. By liberal, he meant what we may today call a classical liberal, or a libertarian.
Friedman believed that government was responsible for providing a basic framework within which voluntary cooperation can take place. Within that framework, the government can step in when it is not possible, or very costly, for private voluntary actions to resolve social problems. In chapter two , Friedman gives some examples where this is likely to be the case. They include, but are not limited to, preserving law and order, dealing with “technical monopolies” and “neighbourhood effects”, and offering paternalistic protection of children and the mentally sick. Friedrich Hayek would have added a modest social safety net into that list.
And so, the philosophy of free enterprise is not one that calls for less government always and everywhere. Instead, it calls for limited government. Any government needs to be sufficiently active to elevate the individual above the collective, so each man and woman can determine their own destiny, and so that mutually beneficial transactions may take place in the context of free choice and competition.
In practice, this does often involve calling for less government in certain instances; removing statutory provisions in employment contracts, introducing the private sector into areas where government holds a monopoly, reducing taxation and government spending. But these policy approaches indicate very little about the underlying philosophy, and it is conceivable that a libertarian will object to too little government in certain circumstances.
Critics might say that this underlines that libertarianism says very little, and that its theory is underdeveloped. To that, I would invoke Hayek, for whom “the curious task of economics is to demonstrate to men how little they know about what they imagine they can design”;
For him, the true liberal must resist constructing a fragile grand narrative that can be easily disrupted by complexities of which we are necessarily unaware. Equally, most political movements succeed by being a broad church. Indeed, anyone who has spent any time with libertarians will quickly spot the differences between admirers of Ayn Rand, Milton Friedman, and Friedrich Hayek; even if they share a common commitment to individualism.
In relation to Covid-19, we might justify a lockdown on the basis that it preserves law and order, the first role of government on Friedman’s list. It is difficult to characterise a society plagued by gravely dangerous infections spreading at a geometric rate as “orderly”. But if that were not enough to convince you that a libertarian can consistently support the lockdown, remember that Friedman himself declared reducing contagion to be a legitimate government activity.
By the same tokens, libertarians may be sceptical about the huge rescue package offered by the Chancellor to stave off the worst effects of this crisis. But protecting unsuspecting firms from exogenous shocks is worlds away from taxing the productive part of the economy in order to fund the unproductive. Such a distortion of incentives has plundered this nation’s wealth before, as the record shows with Britain’s post-war industrial decline.
Of course, justifying lockdown and stimulus in the abstract does not come close to justifying it in practice. Libertarians can disagree here, but supporting these policies does not disqualify anyone from being a libertarian – whatever the ideological caricatures might suggest.
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