Another Victory for the Free Market

Politics & Current Events

It's no secret that I do not believe in many of the sacrosanct tenets of capitalism. Too often, they exist in that vague world unique to Economics where most theorems start with a supposition that amounts to "assume everything is perfectly aligned for this theorem to be true."  Is competition vital to success? It's the cornerstone of capitalism (of course, the global leaders in capitalism do everything they can to limit competition, so it can't be great.)

Case in point, England. In 2006, the monopoly of the Royal Mail ended, and private firms were allowed to compete for postal business. And what happened was a microcosm of the ills of capitalism. Corporate and business customers saw "clear benefits from liberalisation – choice, lower prices and more assurance about the quality of the mail service". Great!

What about you and me? The residential mail that is the backbone of the postal business? No change. In fact, it suffered, because the competing companies don't want to get into the residential mail business. So, the Royal Mail lost the revenue of working for corporations, and still had the expense of sending my postcards. Now, thanks to the myopic decision, the Royal Mail is in serious trouble and serious changes need to be made for it to be tenable.

Doesn't this sort of sound like our insurance market? Or any other number of industries that competition was supposed to help? A few large corporations see better service, and the majority of normal folks (where there might not be a profit margin) get hosed.

Capitalism! It's great if you're already rich!

Last 5 posts by Ezra

32 Comments

32 Comments

  1. Ken  •  May 6, 2008 @9:34 am

    It sounds as if larger businesses were previously paying a premium for inferior service, and that premium was being used to prop up universal service to small businesses and individuals.

    Why should that be so?

    Britons are free to decide to subsidize universal delivery by paying more taxes. Or they could pay more for mail service (with higher postage) until they reach a point where it is profitable for private industry to pick it up. Either solution would more accurately reflect the actual cost of universal delivery. This result makes it sound as if the old method was simply hiding the actual cost.

  2. PLW  •  May 6, 2008 @10:08 am

    +1 for Ken. Businesses were subsidizing rural mail delivery. Maybe we think rural mail is a public good; if so, great, let's publicly subsidize it, but let's not pretend like it was getting by without subsidy before. In fact, a straight-up price subsidy should be much better than the weird tie-in to business mail (a totally different sort of good than your postcard delivery), which obviously led to all kinds of distortions in quality provision in business mail.

  3. Patrick  •  May 6, 2008 @10:11 am

    The BBC is another example of hidden British inefficiencies covering the absence of a free market. Sure, everyone loves Fawlty Towers, but would you like to have to pay the equivalent of $200 for it, whether you watch it or not? Everyone who owns a television in the United Kingdom has to pay that, annually, for the privilege of BBC programming.

  4. Grandy  •  May 6, 2008 @10:28 am

    Most theories are constructed in a framework that controls for environmental variables. It's how you go from "idea" to observable, testable, hypothesis. Also, models representing controlled environments aren't limited to capitalist economics. Or economics in general. Nor are these models designed to be applied to the real world as-is. There's a reason my industrial econ prof (Kamerschen I believe was his name) was the guy who got called on to give testimony at monopoly hearings and I wasn't; I could speak intelligently about elasticities and such, but only in a simplified manner. He could process complex data collected from the "real world" and give meaningful, contextually relevant, analysis that I could only dream of (and did, on a couple of occasions).

  5. Patrick  •  May 6, 2008 @10:58 am

    Speaking of theory and economics, I take it you're leaning Clinton right now Ezra?

  6. Dan  •  May 6, 2008 @11:05 am

    It pleases me to see people who have the moral courage to defend neoliberal hegemony against the lurking evil of collectivism (or, as Grand Dame Maggie put it, "society"). I would be happy to furnish a letter of recommendation to anyone wishing to apply for the new Ayn Rand Studies Program at Marshall University in West Virginia. A neat project would be to re-educate those socialist hillbillies that are *still* on the federal Black Lung dole. Maybe a t-shirt campaign would do the trick: "Pneumoconiosis: it's a market thing you wouldn't understand."

  7. Ezra  •  May 6, 2008 @11:23 am

    Actually, I'm pretty sure you know that I don't think we tax gas enough. Another thing I liked about Edwards, he came out and said we have to raise taxes. At least Barack is saying we shouldn't cut them. That's something.

    Again, look at this Royal Mail deal in a larger sense. Especially compared to our insurance industry. Has competition given us better insurance? Well, when I worked for the Fed, I had great health care. My friend who worked for a temp company, not so much. These deals overwhelmingly favor the rich.

    It seems just as likely that now individuals will be subsidizing corporate mail. I agree that we should just subsidize individual mail service, but do you really see that happening on a large scale? Instead what we will see is what is already happening. Fewer and fewer services for those who can't pay a premium.

  8. Patrick  •  May 6, 2008 @11:23 am

    Dan, please.

    Pointing out the existence and costs of hidden subsidies and the inefficiencies of a private or public monopoly no more makes one a heartless objectivist opposed to workers compensation and occupational safety than your straw man rant makes you a Stalinist.

  9. Dan  •  May 6, 2008 @4:18 pm

    Comrade Patrick,

    It was generous of you to not call me a Stalinist. I am encouraged by this gesture and interpret it as an invitation for me to explain why I posted a politicized response to some commentators' free-market apologies for the dismantling of Britain's socialized postal service.

    I want to suggest that, despite claims to the contrary, economics is *never* innocent of politics. Indeed, the notion that it even could be is itself profoundly political. Ostensibly purely economic arguments carry tacit moral claims that sacralize narrowly prescribed, individualistic notions of "freedom," "choice," and "efficiency," that most of the time will only expand real opportunity for a small minority of people. These moral claims have enframed the debate in such a way that alternatives are all but unthinkable. As a result, as Karl Polanyi once put it, "[T]he idea of freedom thus degenerates into a mere advocacy of free enterprise–which is today reduced to a fiction by the hard reality of giant trusts and princely monopolies. This means the fullness of freedom for those whose income, leisure, and security need no enhancing, and a mere pittance of liberty for the people, who may in vain attempt to make use of their democratic rights to gain shelter from the power of the owners of property" [1944: 265].

    The upshot, I think, is that such claims produce framings of reality that render us as though helpless to do anything about the really big injustices that our global economic system can entrain. The consequences of this could not be more serious. We're about to see one mother of a famine, I'm afraid, and by some funny coincidence, it's going to make truckloads of money for the same free-market pundits who wring their hands and insist that, sadly, the best possible solution is to stand back and let it ride.

    Hugs.

  10. Patrick  •  May 6, 2008 @4:28 pm

    Dan my friend, that's about a thirty-to-one ratio of platitude to thought.

    "Your dialectic is weak." — Linton Kwesi Johnson

  11. Ken  •  May 6, 2008 @5:17 pm

    What's the justification for making people pay for a substandard and overpriced government service just to fund the provision of that service to everyone? I suspect that the problem is that you can't sell it to the people — who no doubt are suffering from false consciousness — if they discover how shitty and overpriced the service is, which they would if they had to fund it through taxes. So rather than do the honest thing — which is to let people decide whether they want to either subsidize a service through taxes or pay what the market will charge for it — people rush to do the dishonest thing — which is to enact or maintain a government monopoly that conceals the real costs.

  12. Dan  •  May 6, 2008 @6:32 pm

    Patrick, I agree that platitudes and counterfactual takens-for-granted are precisely the problem. That's why I pointed out three of them (freedom, choice, and efficiency). We could add democracy. I happen to value all those things, but I think the words have been sapped of much of their meaning and potential, ruthlessly reduced to their instrumentality vis-a-vis the defense of unregulated free-market capitalism. Kinda like "support the troops"; as they're deployed, they tend to stifle critical approaches to real social problems that I think free-market capitalism hasn't dealt with very well.

    Ken, I don't think that it follows that just because a thing isn't rentable, it's not a good idea. On the face of it, that's not necessarily your position either. But it's clear from your remarks that you understand that one of the best ways to strip away the social welfare state is to unbundle those services and then pick them off one by one. I wouldn't chalk that up to "false consciousness," by the way. I have even more nefarious explanations for it.

  13. Patrick  •  May 6, 2008 @6:52 pm

    And yet Dan, all of your jargon to this point has been deployed in defense of a comment stating that people who merely dared point out hidden costs and inefficiencies in the postal system support lung disease. You still haven't said anything of substance, or addressed a single point anyone has raised.

    Grow the fuck up, or take your ninth grade trolling back to the Alameda County Bukharin Appreciation Society.

  14. Ken  •  May 6, 2008 @6:59 pm

    Use short non-cant words so that a dumb guy like me can understand, Dan. Given the choice between these two:

    1. Make everyone buy postal services through the state monopoly, and

    2. Let people buy postal services where they want, and subsidize delivery through taxes to the extent the market doesn't deliver the same service to everyone who needs it at the same or lower price,

    what is the basis for preferring #1?

  15. Dan  •  May 6, 2008 @9:07 pm

    Hi there guys,

    I think I'll just respond to Ken's post. There are a number of angles for approaching your question. The one that requires the least amount of theoretical framing is the precautionary principle. Now mind you, this is a liberal case I'll be trying to make, and as Patrick has so eloquently deduced, I come from somewhere left of liberal, so bear with me.

    Per that famous fount of fancy writin', Wikipedia, "The precautionary principle is a moral and political principle which states that if an action or policy might cause severe or irreversible harm to the public, in the absence of a scientific consensus that harm would not ensue, the burden of proof falls on those who would advocate taking the action." Now, it's usually invoked in the name of protecting environmental and ecological health, but I think we can also use it here. I am suggesting that the move to privatize the Royal mail service poses an unsupportable risk to the public good. That's because it displaces the state as the guarantor of a public service in a realm of social activity–interpersonal communication–that I would submit is necessary for the enjoyment of such generally recognized rights as the right to free speech, the right to make informed decisions, the right to social intercourse with our peers and loved ones. There is a material infringement on people's ability to exercise those rights if they lose the state-guaranteed delivery vehicle, as it were. The move to unbundle the (presumably lucrative) business-mail service from the (uneconomical) individual mail-service, potentially does at least three things I don't like to see (and that I think violate the precautionary principle). First, it *may* entail numerous subsidies to private industry (roads, airports, telecommunications infrastructure, pickup/dropoff infrastructure, artificially low sales price of public inventory). This is certainly true in most cases of poor-country privatization, where erstwhile state services get sold for pennies on the dollar to private interests. Second, that move is based on an anti-government a priorism that then gets reinforced. The move may very well produce greater efficiencies, at least for a short while (or it may not). But it's taken as an article of faith that it will. In the longer run, this assumption is often not born out, especially since subsequent mergers so often get greenlighted in this age of de-regulation. (Cf. everything the FCC has done in the past 7.5 years.) Third, it exposes the shocking truth that the state carries out a social redistribution function and invites public controversy over that fact. And I think for many free-marketeers, that's the real prize. Taken all together, we have a process that effectively reduces the status of the social good of "postal communication" from that of a right (because its continued provision is guaranteed by the state) to that of an economic good (because its continued provision is now made more tenuous and more susceptible to a market-based calculus). I'm suggesting there's a slippery slope involved, and this brings us a step closer to a scenario where low-income snail-mail folks will be SOL, and, in the larger picture, where the values of social and economic justice get sold down the river.

    There's a parallel, of course, to the education-voucher debate here in the US. Supporters summon arguments that in the abstract sound reasonable. But there is nothing abstract about the monied political interests behind it. The goal is, quite simply, to undermine state education at every level. This goal is in keeping with a push, evident all over, to supplant collective with individual notions of responsibility. The individual is to become an "entrepreneur of the self," to quote Nik Rose, and is to be responsible for a life of mainly self-financed self-training and re-training (witness the rise of for-profit, non-liberal-ed universities such as de Vrys, Phoenix, and so on). I am suggesting that the voucher movement is another piece in a conscious strategy to dismantle the whole Keynesian class compromise that held things together for the middle decades of the 20th century. And (I'm borrowing here from David Harvey's 2005 "A Brief History of Neoliberalism") I think we'd be insulting the intelligence of the architects of the neoliberal resurgence that all of this has been one big misunderstanding. Von Hayek, M. Friedmann, and their many intellectual heirs deserve more credit than that.

    David Harvey quotes a guy named Matthew Arnold, and I like the quote: "Freedom is a very good horse to ride, but to ride somewhere." [Quoted in Harvey 2005: 6.] How concepts like freedom get used has very much to do with where that horse takes us. I'd say we could say the same thing about Efficiency, Democracy, and the whole stable of key words that get trotted out whenever these debates come up. What do these words really mean in practice? By whom, and under what circumstances, can they effectively be employed, and what difference does it make in their security of existence and, by extension, in their ability to enjoy any other rights?

  16. Ken  •  May 6, 2008 @9:33 pm

    Second, that move is based on an anti-government a priorism that then gets reinforced. The move may very well produce greater efficiencies, at least for a short while (or it may not). But it’s taken as an article of faith that it will. In the longer run, this assumption is often not born out, especially since subsequent mergers so often get greenlighted in this age of de-regulation. (Cf. everything the FCC has done in the past 7.5 years.) Third, it exposes the shocking truth that the state carries out a social redistribution function and invites public controversy over that fact. And I think for many free-marketeers, that’s the real prize.

    Pardon me, but are two of your big three reasons really about encouraging wrong thinking? Isn't that rather … totalitarian?

  17. Dan  •  May 6, 2008 @10:09 pm

    Well, Ken. Let's take stock.

    So far I'm a (non-)Stalinist, Bukharinist, "fucking" immature, 9th-grade trolling totalitarian. I realize most of these are not your attributions, but that last one was. At this point, I don't think I'm the one who's coming off as a Thought Police interrogator. I'm trying to make a defense for the very thinkability of collectivist interpretations of words like freedom, rights, choice, opportunity, and possibility, and what I'm being told is that any ethic other than an unexamined obeisance to free-market individualism amounts to totalitarianism. I think even Jeane Kirkpatrick would blush.

    P.S. I wasn't trolling. I am a good friend of Ezra's and was just checking in on his latest post. See ya.

  18. Ken  •  May 6, 2008 @10:22 pm

    Go read your first post again, and tell me how sympathetic I should be.

  19. Dan  •  May 7, 2008 @1:19 am

    It's not about sympathy. It's about respecting my honest efforts to communicate with you. And respecting the people who are impacted by neoliberal policy.

    Yep, my Ayn Rand comment was cheeky. I admit it. I had just heard about the new program on NPR Tuesday morning, and I couldn't resist. But I don't think any of my comments, including in my first post, have been directed at any individual, at any point. (And aren't individuals the only meaningful unit of society?) When people raised a reasonable objection to my exaggerated rhetoric and asked me where I got off, I gave repeated, good-faith, and increasingly time-intensive efforts to elaborate an argument to show what I think are some political dangers (both immediate and broader) attendant to what I consider to be attacks on the (by now minimalist) Keynesian welfare state. The more carefully reasoned I have tried to be, the more wildly ad hominem and dismissive the return volleys have been. Why might that be?

    If I didn't satisfy Patrick's desire for me to address all of his points, it's partly because I had thought better of mentioning such embarrasing "hidden subsidies" of capitalism as the Enclosures, genocide, colonialism; (or to move to more recent examples) Apartheid; forced child labor; no-bid contracts for the war in Iraq; an increasingly privatized prison-industrial complex that locks up the chronically unemployed; fortress-style iPod factories where the workers can't leave; Nike factories where the workers are beaten; Coca-Cola bottling plants where the workers are assassinated; open-pit gold mining (by US and Canadian companies) that leaves children's skin sloughing off; special legislation okaying increased arsenic levels in the water supply; Red Lobster seafood dragged up by unregulated divers who are dying from the bends; cheap tropical hardwoods stolen from indigenous peoples' territories and "mixed in" with the legally exported wood; cheap produce underwritten by sub-minimum-wage exemptions for farm workers; ethanol R&D funding; one-sided "free trade" agreements; riot cops; surveillance cameras; made-to-order US-sponsored coups (at the behest of United Fruit, Anaconda, various oil companies); and so on and on and on. This is where the critique moves me further afield than simple populism (which is where I had previously mainly left it).

    I have some familiarity with third-world development issues, and from this vantage point I can attest to the fact that (so-called) free-market capitalism gets its foot in the door with substantial state and suprastate intervention, nearly every time. The notion of a fully self-regulating market has always been a convenient fiction, but in many parts of the world it's a baldfaced lie. By relying on IMF/IDB/World Bank requirements for the stripping away of every public good, yanking the commons out from under subsistence-sector folks, and in short, creating "free" subjects by systematically dispossessing them of all means of their own physical reproduction save by the sale of their labor power in a market glutted by these very processes of mass dispossession. In such contexts, and especially now, as 100s of millions of people are caught in a world food crisis, words like "freedom of choice" and "the market" and "comparative advantage" do worse than ring hollow. They ring a death knell. I think these facts ought to count for something. But what do we see instead? We see, time and again, that the tautological nature of free-market theology requires that every charge of a market-induced crisis be quickly stifled with the retort that the problem was that the market reforms had not gone far enough. Or calling out the messenger with red-baiting dodges.

    The supplanting of government-guaranteed rights with the vague reassurance of an 18th-century Scottish philosopher that an invisible hand will take care of everything, is not a politically neutral act. The very mobility of ideas that has come with improvements in transportation and information technology, coupled with the obvious power differentials that mark global capitalism, make such ideas extremely potent. They get reproduced and strengthened through innumerable channels, including Pope Hat, and when taken up and applied willy-nilly by IMF flunkies or Chicago-trained technocrats in government posts, they gain the power of fiat in places where they can (and do) wreak great mischief. By the same token, I would argue, their very ubiquity and (when unmitigated by extra-market interventions) their stolid indifference to human suffering make them fair game for a lively critique from whatever corner of the earth they might happen to touch. Even Appalachia.

    Best,

    Dan

  20. Patrick  •  May 7, 2008 @4:17 am

    And yet you still make yourself out to be the injured party Dan.

    Or calling out the messenger with red-baiting dodges.

    I appreciate your effort to have a meaningful discussion with Ken about all of the ills of capitalism complete with citations to authority, and even to fit this blog into them from a Gramscian perspective, but in your efforts toward martyrdom you make yourself a parody of the more original thinkers you cite.

  21. David  •  May 7, 2008 @5:48 am

    Too much Foucault and Althusser. Not nearly enough Strawson.

  22. Ken  •  May 7, 2008 @9:31 am

    Dan,

    Those weren't short, non-cant words.

    Here's the thing. You want to use generalized philosophical arguments about capitalism as a whole, and complaints about some of the wrongs that have accompanied it, to answer my questions about the best policy approach to a single problem. I don't tend to find that convincing. Despite your attempts to characterize me as using unrestricted free-market rhetoric, I've only tried to address this one single situation. Nothing else is before me at the moment. I've not responded, for instance, with generalizations about how many millions of people have been killed by communism or socialism, or how much growth has been suppressed by them across the world, or how they've been accompanied by suppression of dissent and innovation. That would be the rhetorical equivalent of what you are doing.

    I'm focused on this one situation. I'm in general agreement with you that reliable universal mail service is a public good that should be maintained for a variety of policy reasons. I'm just trying to determine whether there's a reason to deliver it through government monopoly rather than subsidy — a reason that doesn't boil down to faithfulness to dogma. I'm ready to be persuaded, for instance, that the monopoly method is less expensive for the government.

    The totalitarian comment was quite deliberate. I'm not on board with an explanation that we should go with policy X to prevent people from thinking wrong thought Y. That is not, to me, an appropriate relationship between governors and governed.

  23. Dan  •  May 7, 2008 @10:35 am

    Hi again, guys.

    1. Patrick, where's the Gramsci, aside from I think one reference to hegemony? I gave the dude the day off. I'm afraid it's true that I'm a parody of my kind, but I can think of a worse thing to be.

    2. Any Foucault stuff is pretty 101. I was going more with Chomsky's and Barsamian's framing-the-debate stuff. Don't know Strawson, sorry.

    3. I'm afraid I have no idea what "non-cant" means. Oh wait, I just looked up "cant." Good word. For others out there, it means I'm hypocritical and sanctimonious in a religious, moral, or political way. Ironically enough, my dictionary's example of usage reads, "The liberal case against all censorship is often cant."

    4. Ken: really? No policy X to prevent people from thinking wrong thought Y? So I guess it's okay to permit the teaching of FSM theory to 8th-grade science students in our public schools. My flying spaghetti monster example *may* qualify as a reductio ad absurdum argument (although I don't think it does), but if so, your formula does the same thing. I don't agree that it represents my position very well. I would summarize my concern as, "Strongly consider Policy X if it substantially increases people's ability to act and participate in society and enjoy other rights and not die, especially if those whose rights would otherwise be abridged are vulnerable sectors of society." A decision to not subject an already existing, progressive, redistributive, and beneficial law to a simple-majority recall vote is not remotely similar to hooking people to machines to control their brainwaves. Norway just is not the gulag archipelago you're invoking. And BTW, have you noticed that the states' tax revolt movements' favorite move is to make any new tax subject to a 60-70% supermajority? My slippery slope is not just Foucaultian discourse theory; it's how the right has been setting us up.) Rights exist precisely in order to protect the most vulnerable among us–yes, even to protect us from the majority at times. If everything were done on a simple majority vote, gays and blacks would likely still have no rights, and you could be sent up on murder charges on a 5-4 decision. I'm honestly surprised that you, as a lawyer, seem to take such a firm stance in favor of this position.

  24. Patrick  •  May 7, 2008 @10:47 am

    Dan, if you don't get the Gramsci in this:

    The very mobility of ideas that has come with improvements in transportation and information technology, coupled with the obvious power differentials that mark global capitalism, make such ideas extremely potent. They get reproduced and strengthened through innumerable channels, including Pope Hat, and when taken up and applied willy-nilly by IMF flunkies or Chicago-trained technocrats in government posts, they gain the power of fiat in places where they can (and do) wreak great mischief. By the same token, I would argue, their very ubiquity and (when unmitigated by extra-market interventions) their stolid indifference to human suffering make them fair game for a lively critique from whatever corner of the earth they might happen to touch.

    you need to hit the books. Gramsci isn't a keyword. I daresay your knowledge of the classics is lacking.

  25. Ken  •  May 7, 2008 @10:47 am

    Actually I was using cant in the sense of jargon — "the phraseology peculiar to a particular class, party, or profession."

    And your response is indeed reductio ad absurdam, and misses the point. We don't teach FSM in the school because the school is not the appropriate place to teach religion. That's rather strikingly different than deciding not to allocate a task to private industry rather than a government monopoly because failure to support the public monopoly might lead the people to think Bad Things about the role of government.

  26. Dan  •  May 7, 2008 @11:54 am

    Patrick,

    Gramsci. Yeah, okay, I guess. Kinda. I'm not at all offended by that particular attribution. Actually, I should feel flattered. (BTW, "Gramsci is not a keyword" is kind of funny, since Raymond Williams, the author of "Keywords," was a Gramscian.) I think there's certainly some stuff in there that Gramsci would agree with, but I think he'd blanch at some of the other stuff. But there's not much in what I wrote that sets it off as *specifically* Gramscian. I guess the closest your cited passage gets to a patented Gramsci notion is the "potent ideas" bit, but then, that's probably what someone else was calling Foucauldian. Maybe you're reading into it a bit, in hopes I'm implying you're an intellectual.

  27. Patrick  •  May 7, 2008 @12:34 pm

    You picked up on the wrong keyword Dan, and while your last comment leaves me pretty convinced you haven't even read the prison works (or you would have appreciated its no-doubt-unintended irony as much as I did), I'll bow out of our conversation with the observation that you've provided me with more amusement in this discussion than you could have hoped. I yield the last word to you.

    Cheers

  28. Dan  •  May 7, 2008 @1:46 pm

    Thanks for the last word, Patrick. The last word is, It's called the Prison Notebooks. I guess you were quick to forget that google is for using (cf. Ben Kingsley). Keep it in mind for your next round of "I spy a social theorist." Til then.

  29. Brian  •  May 7, 2008 @2:45 pm

    I have a right to affordable mail services? When did I get that?

  30. PLW  •  May 7, 2008 @3:02 pm

    Not you. Britons.

  31. Brian  •  May 7, 2008 @3:11 pm

    Britons actually have a right to affordable mail services? When did they get that?

  32. Patrick  •  May 7, 2008 @3:19 pm

    It's part of the unwritten constitution.