Saturday, 9 November 2013

More Faux Lib fun with Murray Rothbard

Kj draws my attention to this:

In the September 15, 1970 issue of The Libertarian Forum, (Vol. II #18), prominent libertarian economist Murray Rothbard wrote:

"The Heathian goal is to have cities and large land areas owned by single private corporations, which would own and rent out the land and housing over the area, and provide all conceivable "public services": police, fire, roads, courts, etc., out of the voluntarily-paid rent.

Heathianism is Henry Georgism stood on its head; like George, Heath and MacCallum would provide for all public services out of rent; but unlike George, the rent would be collected, and the land owned, by private corporate landlords rather than by the government, and the payment therefore voluntary rather than coercive.

The Heathian 'proprietary community' is, of course, in stark contrast to the scruffy egalitarian commune dreamed of by anarchists of the Left.

I accept that such Heathian corporations will often lead to better outcomes than dividing up land into ever smaller plots, that's a separate topic. But it amazes me that somebody can say something so incredibly stupid and then not realise what he has just said.

He merrily overlooks the fact that all landownership arises from the use of force.

To make a car, you need metal, rubber, electronic stuff, plastic, machines, lots of electricity and workers and so on. And you put it all together and have a car. For sure it is helpful if you have anti-locking devices and police who will chase car thieves and so on, but that's an extra. There can be no "car ownership" until people create the car, the "car" and the "car ownership" are the same thing. In a sane world, whoever makes the car is the first owner (not in a Socialist or Home-Owner-Ist world, of course) and they can sell it and split up the proceeds between themselves.

To own land, you need an army, police, courts and prisons. You need fences, gates, locks and barriers. That's all you need, the "land ownership" was not created by the people who created the land. "Land" and "land ownership" are not synonymous, what are synonymous is "land ownership" and "the state". That land or location has been knocking about for billions of years, and belonged to nothing and nobody. The "land ownership" did not come into existence until somebody ("the state") built up a big enough army to invade it and/or defend it from invaders.

Secondly, like all Faux Libs he says that any payment to the government must automatically be a tax paid under coercion and therefore BAD, but that any payment to a "private" entity is voluntary and therefore GOOD.

We can illustrate that this is nonsense quite simply by following the logic through:

i. Let us imagine that the country is divided in a few dozen areas, each owned by a Heathian corporation. We know that they will make bumper profits, even after paying for border patrols, roads and so on.

ii. Unless you want to move abroad, you will have to choose in which area you want to live. You have no choice about this. You can choose the amount you are willing to pay but not whether you pay. Even if you move abroad, you will always have to pay something (unless you hide somewhere uninhabitable).

iii. So each corporation in raking in £10 billion in rents, spending maybe £3 billion on border patrols, roads etc and the rest is a handsome profit. That is monopoly profits, it cannot be competed away (the rents would level out at whatever cannot be competed away, by definition. If they could be competed away, they would be). Perhaps the shares in the corporation are publicly traded on the stock exchange, so what, it is still monopoly income.

iv. If the government tries to tax that profit (i.e. by demanding £6 billion in LVT from the corporation), the Faux Libs argue that this is a tax and therefore automatically BAD.

v. From the point of view of the citizen, it does not make any difference, his rent is the same however it is split up between corporation and government, the government is just the superior landlord. But the Faux Libs think it does.

vi. Suitably outraged, the corporation decides to cede from the country and form its own independent state. Again, apart from customs hassle, this makes little difference to the citizens of that area, he's still paying the same rent to the same people and goes about his business.

vi. But wait - that is no longer a corporation, it is now a "state" in its own right. So according to Faux Lib logic, any payment to that state/corporation is now paid under "coercion", is a tax and is BAD.

I mean, I've heard some really shit KLNs in my time but he disproves his own point.

And why he bundles in Georgism with "the scruffy egalitarian commune dreamed of by anarchists of the Left" I do not know, I don't even know what this is supposed to mean. "Egalitarian" suggests some form of redistribution, but in anarchy, there is no government to collect and redistribute.


Bayard said...

"I do not know, I don't even know what this supposed to mean."

Oh come on, you know that that lot think all Georgists are closet Communists. In fact anyone who doesn't agree with them is one too.

Lola said...

Rothbard was generally a Good Bloke. His bette noir was 'The State'. He was paranoid about it. And overall, I generally agree, when you look at the state of the modern state. But it rather coloured his thinking as regards taxation and LVT.

The daft thing is, if you think it through, LVT is the only tax vaguely compatible with Libertarianism.

Mark Wadsworth said...

B, the faux libs are barking mad, but at least they are in a tiny minority. And as we know, the Home-Owner-ist manifesto overlaps with the actual Communist Manifesto far more than the Georgist one does.

L, maybe he was, but he is clearly a Faux Lib.

And yes, governments do some terrible things (and some governments do some very nice things), but that is an argument against governments, which is quite a separate concept to "the state" (which is an unalloyed Good Thing, as I don't see any realistic or preferable alternative).

"The State" is like the football club, the "government" is just the manager from time to time. So bad "governments" are the price we have to pay for having "a state".

And you can't really blame the government entirely for Big Spending either, that is what voters demand

Kj said...

Well put MW.

Secondly, like all Faux Libs he says that any payment to the government must automatically be a tax paid under coercion and therefore BAD, but that any payment to a "private" entity is voluntary and therefore GOOD.

Yes, because the corporation probably "homesteaded" the land, thereby creating a magical right that makes all those billions of years of history irrelevant...

Some additional points is;
- there is only one landlord. It´s efficient for public goods, crap for tenants who are unhappy with the landlord. On the one hand, if there´s lots of competing corporations close by, then you have corporations mooching of each other´s externalised benefits, like the airport in the corporation next door. OTOH the larger the corporation is, the more the tenant is closed off from competing landlords.

And the whole point of LVT versus just someone collecting economic rent themselves, is pushing land into economic use, or let someone else do it. Someone owning everything can just reduce supply until they´ve maximised rent.

Any landlord who produce rents over and above what the surrounding landowners can demand, like Disneyland vs. orange groves, good for them, but that´s just a return on capital investment. And georgists are not against capital investment.

Mark Wadsworth said...

Kj, ta.

the whole point of LVT versus just someone collecting economic rent themselves, is pushing land into economic use, or let someone else do it.

Someone owning everything can just reduce supply until they´ve maximised rent.

It's not the whole point, it's just one of dozens of points, I think.

And if that large landowner is economically rational, he would behave like a benign government and try and get as much rent as possible, which means bringing as much land into use as possible or maximising the way it is used, which includes making his area as attractive as possible for outsiders.

So it would lead to the same thing in the end. Only with Heathian Corporations, the shareholders get the dividend and there will be damaging speculation in the shares, and with Georgism every citizen gets the dividend and no need to speculate in shares.

I suppose you could see different countries as very large Heathian Corporations, competing with each other (which further demolishes Rothbard's argument)

The countries which choose Georgism will always be more attractive to immigrants, so those countries have the luxury of only allowing desirable immigrants into the country.

Lola said...

MW. Bad use of the state. I did mean - and was thinking - the government.

Bayard said...

So Mr Rothbard, when British India was run by the Honourable East India Company, that was presumably a Good Thing, but when they were replaced by the British Government, that was presumably a Bad Thing, despite the fact that it made not a scrap of difference to yer Indian in the street, and the BG didn't end up with a full-scale armed rebellion on their hands.

Mark Wadsworth said...

L, good. As a general rule, I despise the UK government, whoever it is (apart from Major's lot) and most of the ruling classes. That doesn't mean that I don't like England (I do or else I wouldn't live here) or that I don't like the "nation-state" as a way of organising things (what is the alternative?).

B, another good example.

Paul Lockett said...

Reading this brought to mind one of first bits of Georgist commentary I came across, Mike O'Mara's essay outlining why a landlord is a government.

Mark Wadsworth said...

PL, yes exactly good essay.

James Higham said...

all landownership arises from the use of force

Or being there first and paying a fair price.

Mark Wadsworth said...

JH: "Or being there first and paying a fair price"

Well no, those are mutually exclusive.

If you are there first, the "price" you pay is building up the biggest army to defend it from invaders.

If you pay a "fair price" that means that you are paying for the protection of somebody else's army etc.*

Ultimately, it's the army which is the "cost" of landownership. Everything else is unearned profit.

* The whole "having paid a fair price" argument is irrelevant. Otherwise stave owners would have been straight off the hook.

Kj said...

James Higham: "homesteading"?