September 23, 2011

The Eminently Real Free Market (XXXVI): Sketchy Stories (24): The Corporation as “Sociopath” (1)


Given Mr. Ferrara’s stated purpose, namely, to demonstrate the incompatibility of Catholic teaching and Austro-libertarianism, it is hard to regard the material in Part 1 as anything other than one, long Emily Litella-like ignoratio elenchi. Besides misrepresenting everything Austro-libertarian, his only counterpoint so far is a farrago of non-Catholic opinion.
In a particularly egregious appeal to emotion riddled with reification and false juxtaposition, Mr. Ferrara judges it to be “morally bizarre” that
corporations, the exclusive vehicle of worldwide “free” market activity today, are immortal “legal persons” under the meaning of the law with all the rights of human beings, yet are not subject to incarceration for their crimes, whereas millions of unborn children put to death all over the world by machines and drugs sold to abortionists on the “free” market—by corporations—do not even have the right to life. (25)
How cautiously he proceeds. The implicit syllogism is: abortion is murder; corporations trade in abortifacients; ergo, corporations are accessories to murder—a propagandistic gem worthy of Goebbels and Ehrenburg, and unworthy of critical reply. When he writes like that, which is almost always, Mr. Ferrara reminds us of no one more than the so-called New Atheists.*
Mr. Ferrara shows no interest in understanding the networks of trade that human persons spontaneously generate in the peaceful pursuit of their ends. This lack of interest in what his adversaries in controversy actually defend effectively concedes the case to the latter, who are keen to remove impediments to markets that fallen human beings have erected. Mr. Ferrara is fixated on the hampered market, which hampering Austro-libertarians have always condemned. And so:
The demise of Enron and the Meltdown have made it clear to the world that these gigantic entities are not operating in a “free” market but rather in a vast supranational fiefdom, built upon government privileges, whose collapse could wreck entire nations. (25)
Exactly, they’re operating on hampered markets, but the darkness does not overcome the light. The hampering is not absolute. The economies of the world are, as they say, “mixed,” so the analysis of how the various factors—voluntary trade and politically inspired trade-hampering privilege—is complicated. To say so does not reflect double-mindedness or forgetfulness about what one is saying “from one moment to the next” as Mr. Ferrara impudently insinuates (inspired by Kevin Carson).
And it was not government alone that caused the Meltdown, but also “free” market actors, hiding behind the corporate veil, who created and sold on an immense international scale a web of interlocked “toxic assets,” traded with the lacunae of securities regulations. (See Chapter 13) (25)
But Austro-libertarians never said it was “government alone.” They have rather argued that it was government in the first place, that is, governmental policy as the indispensable prime mover and sine qua non without which the other historical factors that crowd the pages of Mr. Ferrara’s yellow journalism could not have even arisen, let alone conspired, to cause the Meltdown. His acknowledgement that the “very existence” of multinational corporations “would be impossible without government support” (25-26) provokes the anarcho-Catholic to ask: What governmentally provided goods compensate for that evil? And: So why do you rationalize and tolerate the existence of that intrinsic moral hazard?
Without the Act of Congress that authorized the creation of the Federal Reserve System, bankers could have hoped that their cartelizing desires would be satisfied one day in a central bank. There would, however, have been no legal protection for that racket from market forces, which inexorably erode such collusions of convenience. (The most efficient producer in any cartel is usually the first cartel member to have second thoughts about the arrangement, and on free markets that firm is free to break ranks.) On this point Mr. Ferrara’s next sketchy story will outline much of what every Austro-libertarian has known for most of the last century.
No, not government alone, for in themselves, no governmental personnel can produce the cartel's economic effects, that is, lower quality at higher prices. Only the cartel itself, and the market players who are at its mercy, can do that.
Facilitated by legal tender laws, the Federal Reserve functions as a central planner and therefore as a market signal-distorter. As fallen human beings, market players are indeed motivated by greed, but greed is necessarily balanced by fear of loss—unless a market-hampering agency enters the scene to take fear out of the equation (to cite again Peter Schiff’s memorable aphorism**).
As we shall see a few posts from now, Mr. Ferrara showers his reader with historical details but offers no explanans alternative to the Austrian that relates the facts intelligibly.
To Be Continued

* “The books by [Richard] Dawkins, [Sam] Harris, and [Christopher] Hitchens are not mild treatises like those that trickle tentatively, and often unreadably, from departments of philosophy. They are works of passion, and I suspect that most philosophers would be embarrassed by their intemperate style of presentation.  So I do not expect that philosophers will recommend these writings to their own students either, although the books might usefully serve as case studies for classes in critical thinking.” John F. Haught, God and the New Atheism: a Critical Response to Dawkins, Harris, and Hitchens, Westminster John Knox Press, 2008, 25.
** We’ve quoted this once before, but it bears repeating given the present context:
Just as prices in a free market are set by supply and demand, financial and real estate markets are governed by the opposing tension between greed and fear. Everyone wants to make money, but everyone is also afraid of losing what he has. Although few would ascribe their desire for prosperity to greed, it is simply a rose by another name. Greed is the elemental motivation for the economic risk-taking and hard work that are essential to a vibrant economy.
But over the past generation, government has removed the necessary counterbalance of fear from the equation. Policies enacted by the Federal Reserve, the Federal Housing Administration, Fannie Mae and Freddie Mac (which were always government entities in disguise), and others created advantages for home-buying and selling and removed disincentives for lending and borrowing. The result was a credit and real estate bubble that could only grow—until it could grow no more.
Peter Schiff, “Don’t Blame Capitalism,” The Washington Post, October 16, 2008