“Liberal Fascist Economics”

On November 18, 2009, in Culture, Economics, Politics, by marc

One of the best – and creepiest – books I’ve read in the last year and a half was Jonah Goldberg’s Liberal Fascism. I recall being very unnerved, perhaps surprisingly, by the chapter on economics.  A taste:

In Nazi Germany, businesses proved their loyalty to the state by being good “corporate citizens,” just as they do today.  the means of demonstrating this loyalty differed significantly, and the moral content of the different agendas was categorical.  Indeed, for the sake of argument, let us concede that what the Nazi regime expected of “good German businesses” and what America expects of its corporate leaders differed enormously.  That doesn’t change some important fundamental similarities.

Liberal Fascism by Jonah Goldberg

Liberal Fascism by Jonah Goldberg

Consider, for example, the largely bipartisan and entirely well-intentioned Americans with Disabilities Act, or ADA, celebrated everywhere as a triumph of “nice” government.  The law mandated that businesses take a number of measures, large and small, to accommodate customers and employees with various handicaps.  Offices had to be retrofitted to be wheelchair compliant.  Various public signs had to be written in Braille.  Devices to aid the hearing impaired had to be made available.  And so on.

Now imagine you are the CEO of Coca-Cola.  Your chief objection to this law is that it will cost you a lot of money, right?  Well, not really.  If you know that the CEO of Pepsi is going to have to make the same adjustments, there’s really no problem for you.  All you have to do is add a penny – or really a fraction of a penny – to the cost of a can of Coke.  Your customers will carry the freight, just as Pepsi’s customers will.  The increase won’t cost you market share, because your price compared with your competitor’s has stayed pretty much the same.  Your customers probably won’t even notice the price hike.

Now imagine that you own a small, regional soft drink company.  You’ve worked tirelessly toward your dream of one day going eyeball-to-eyeball with Coke or Pepsi.  Proportionally speaking, making your factories and offices handicapped-friendly will cost you vastly more money, not just in terms of infrastructure, but in terms of the bureaucratic legal compliance costs (Coke and Pepsi have enormous legal departments; you don’t).  Plans to expand or innovate will have to be delayed because there’s no way you can pass on the costs to your customers.  Or imagine you’re the owner of an even smaller firm hoping to make a play at your regional competitors.  But you have 499 employees, and for the sake of argument, the ADA fully kicks in at 500 employees.  If you hire just one more, you will fall under the ADA.  In other words, hiring just one thirty-thousand-dollar-a-year employee will cost you millions.

The ADA surely has admirable intent and legitimate merits.  But the very nature of such do-gooding legislation empowers large firms, entwines them with political elites, and serves as a barrier to entry for smaller firms.  Indeed, the penalties and bureaucracy involved in even trying to fire someone can amount to guaranteed lifetime employment.  Smaller firms can’t take the risk of being forced to provide a salary in perpetuity, while big companies understand that they’ve in effect become “too big to fail” because they are de facto arms of the state itself.

Remember, this was all written well before stimulus- and bailout-mania, or the effective nationalization of GM and Chrysler.  There are certainly lessons in this passage for those on the right and the left – Republicans have a nasty habit of using the state to advance their interests, too.  But examining the current political philosophies popular across the spectrum, one has to note that when those on the right try to utilize the government to advance their agenda, they are usually acting hypocritically, because at least in theory, they believe in limited government and checks and balances.  In contrast, when leftists use the power of the state to push their agenda, they are actually following their principles. And that’s really what we’re seeing right now – the left has control of the levers of power in Washington DC, and is using the mechanisms of government to entrench and empower themselves, often at the expense of our individual liberty and well-being (as in the health care debate).

Lord Acton reminded us that power tends to corrupt; as responsible citizens, we need to remember that axiom when we vote, and must guard against the tendency to leave things we could – or should – do ourselves to people in Washington, or the state capitol, or anywhere else.

This reminds me – I need to dig back into Hayek’s The Road to Serfdom and pull some quotes from him about the dangers of economic planning…

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  4. Consolidation of Power and Increasing Incompetence
  5. The Ascent

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