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Contrarians in Conflict! Anarchists in Abundance!

The Journal of Libertarian Studies

Tags Austrian Economics Overview

10/22/2005Roderick T. Long

With Volume 19.2 completely online and available to non-subscribers, permit me to call your attention to the issue that just came off the presses. Issue 19.3 of the Journal of Libertarian Studies offers a cornucopia of exciting and controversial articles debating some of the central questions of libertarian theory:

• The traditional Austrian explanation of the business cycle maintains that the chief cause of this cycle is the artificial lowering of interest rates through credit expansion, which misleads producers into shifting investment, unsustainably, from shorter-term to longer-term projects; once it becomes clear that consumption has not been deferred to the extent that lowered interest rates implied, producers come to realize the insufficiency of the goods available for completing their projects, and costly liquidations ensue.

In "Is 'Malinvestment' Enough to Go Bust?," Enrico Colombatto challenges this account. As he sees it, toward the end of a credit-fueled boom, as holders of fiduciary instruments become aware that the supply of these instruments is becoming inflated, they will increasingly return them to banks in exchange for hard money. This flurry of reverse seigniorage may cause banks to fail, but producers will not be especially harmed, Colombatto argues, because their malinvestments were already paid for at artificially lowered interest rates. Moreover, the form such malinvestment takes is misunderstood: in the face of cheaper credit, producers are more likely to step up their demand for fiduciary instruments, and thus to increase their production in their current short-term projects, rather than shifting to investment in longer-term projects. The real problem, he maintains, is thus not the effect on producers but rather that on consumers, whose rate of savings has been artificially lowered; it is their discovery of the inadequacy of their savings that triggers the crisis. Colombatto also explores ways in which a business-cycle can be driven by noncredit factors, and in particular by governmental attempts to protect those hurt in ordinary market fluctuations.


• Those who condemn the low wages and harsh working conditions of much third-world employment are often criticized by libertarians, on the grounds that workers must prefer such employment to its alternatives or they would not seek it; hence anti-sweatshop campaigns, such libertarians conclude, actually work to make the poor worse off by depriving them of their highest-valued opportunity.

In "Establishing Government Accountability in the Anti-Sweatshop Campaign: Toward a Logical, Activist Approach to Improving the Working Conditions of the Poor," Ellenita Muetze Hellmer questions the logic of this response, given the fact in many of these cases the employment is not truly chosen voluntarily — either because the government literally and directly forces people to work at certain jobs, or else because government policies that displace farmers from their land leave sweatshop labor as their only alternative. Where multinational corporations are the beneficiaries of state-mandated slave labor or something close to it — Hellmer cites instances from Burma, Indonesia, Nicaragua, and El Salvador — the libertarian impulse to defend sweatshops is no longer valid. In such cases, Hellmer argues, it is a mistake to think that boycotts and embargoes hurt the workers, since most of the "wages" from such schemes are going to government officials rather than the workers anyway, and disinvestment could have the salutary effect of discouraging these tyrannical policies, or of weakening oppressive regimes by reducing their revenue. Hence Hellmer recommends, not abandoning the anti-sweatshop campaign, but rather reorienting it so as to focus on genuinely coercive arrangements.

• Walter Block has argued in an earlier issue — JLS 16.4 (Fall 2002) — that "Henry Simons Is Not a Supporter of Free Enterprise." In "The Corporation At Issue, Part I: The Clash With Classical Liberal Values and the Negative Consequences for Capitalist Practices," Piet-Hein van Eeghen offers a qualified defense of Simons by taking up what he sees as one of Simons's key insights: that the corporate form of business organization is inherently incompatible with the principles of classical liberalism.

The problem with the corporate form is that it grants to private business a distinctive governmental feature — legal personhood, and the accompanying privilege of limited liability — without the correlative burden of democratic accountability; granting such a status, van Eeghen argues, constitutes an un-libertarian surrender of individual responsibility, and confers the benefits of ownership without its corresponding costs, thus enabling corporations to concentrate power and externalize risk in ways to which libertarians should object. (Part II, to be published in JLS 19.4, will offer a critique of Robert Hessen's defense of the corporation as an institution.)


• One of the chief disputes dividing the libertarian community has long been that of anarchism versus limited government. Most defenses of the necessity of government are based on the argument that there are certain services — public goods, say — that only governments are capable of providing. In a recent article for the Independent Review, "Government: Unnecessary But Inevitable," Randall Holcombe took another tack: he willingly granted that markets can produce all services more efficiently than government, but argued that this fact does not make the state avoidable, because what drives the creation of states is not the need to provide services but the desire to plunder and dominate. Since there is no effective way to prevent the rise of a state, Holcombe concluded, it is prudent for us to acquiesce in the existence of the government we have, for fear of being taken over by a worse government otherwise. In "Governmental Inevitability: Reply to Holcombe," Walter Block challenges this argument, maintaining that if government at the level of the nation-state were inevitable for the reasons Holcombe cites, then by the very same argument world government would also be inevitable; yet the fact that world government has never yet been established casts doubt on the conclusion, and so on the shared form of argument.


• Another recent critique of libertarian anarchism is Colin Williams's "Contra Spooner," which appeared in JLS 18.3 (Summer 2004). In response to Lysander Spooner's well-known argument for the illegitimacy of governmental authority in the absence of explicit and unanimous consent on the part of the governed, Williams appealed to ancient Greek and Hebrew history to show that Spooner's standards for legitimacy have not been traditionally accepted; his conclusion was that obedience to government is a "habit of excellence." In "A Comment on Colin Williams's Arguments Against Spooner," Jan Narveson replies that an appeal to confused cultures of the past is not a refutation, and argues, on Spooner's behalf, that obedience to government is morally required only when what the government commands would have been morally obligatory anyway, apart from any such command.


• In the late nineteenth century, the most influential voice for the American antistatist movement to which Spooner belonged was Benjamin Tucker's periodical Liberty, which sought to combine a political theory based on individual sovereignty with an economic theory based on the labor theory of value. (An upcoming symposium issue of the JLS will be devoted to examining a more recent attempt at such a combination.) Robert Bass favorably reviews Wendy McElroy's book The Debates of Liberty: An Overview of Individualist Anarchism, 1881 — 1908, an invaluable guide to the various positions debated by Liberty's contributors on such still-timely issues as egoism versus natural rights, the legal status of children, the legitimacy of intellectual property, the morality of voting, the operation of private courts, and the economics of free banking.


• One of the most prominent recent critics of libertarian anarchism is the late Robert Nozick, who introduced libertarian ideas back into mainstream academic philosophy with his 1974 book Anarchy, State, and Utopia. J. C. Lester reviews Edward Feser's new book On Nozick, a sympathetic presentation of Nozick's central arguments. Contra Feser, Lester argues that Nozick and other like-minded libertarians are mistaken in attempting to derive a theory of liberty from a theory of property rights rather than vice versa, and he charges Feser's Nozickian case against anarchism with committing the fallacy of composition (reasoning from "everyone must submit disputes to a third party" to "there must be a single third party to whom everyone submits disputes"). Lester concludes that while Nozick's attempt to provide philosophical foundations for libertarianism is less successful than Feser appears to suppose, it is also less necessary; and he defends an alternative, non-foundationalist epistemological approach.

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Contact Roderick T. Long

Roderick T. Long is a senior fellow of the Mises Institute and a professor of philosophy at Auburn University. He runs the Molinari Institute and Molinari Society. His website is Praxeology.net.