Gabb on Milne’s Time to Say No: Alternatives to EU Membership

Anti-Statism, Non-Fiction Reviews, Protectionism
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English libertarian Sean Gabb, Director of the Libertarian Alliance, has just published an excellent book review of Ian Milne’s Time to Say No: Alternatives to EU Membership. It’s appended below.

This little review is chock full of great insights. He explains that the EU, while it does not really infringe UK sovereignty–“this country is governed from London, and by our own ruling class–has “help[ed] make the exercise of power by this ruling class less accountable.” He gives the example of metrification foisted on the country in 1995. Gabb points out that the British Government ignores other EU directives when it wants to (Gabb gives examples). But when it enacts a law based on an EU directive, it provides cover for the politicians who can just point to the EU and blame it on them. This allows special interest groups like the big four supermarkets to lobby the state to pass laws that harm smaller competitors, and the politicians to be absolved of blame by pointing to the EU Directive they “have” to enact (even though the ignore others). The larger grocery stores can afford the expense of retraining but hobble smaller grocery stores.

This is yet another example of how big businesses are actually in support of supposedly “anti-business” regulations since it helps to protect them from competition. Rothbard has pointed this out many times as I note in this post.1

By the way, I recommend Gabb’s novel The Churchill Memorandum and also his excellent Literary Essays, both linked at his site. About the latter book I wrote the following for a back cover blurb: “Libertarians have sound ideas but are not always great writers, and are not usually authorities on literature and literary matters. Rarer still is the literary essayist who is not confused or ignorant about politics and economics. It is thus refreshing to encounter Sean Gabb’s literary writing. A long-time libertarian activist and writer who is also a superb novelist and literary essayist, an honest and clear writer, he is our modern libertarian man of letters. This splendid and sparkling collection of essays provides fascinating insights into literature and other literary topics, without the typical leftist baggage and economic illiteracy.”) …

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  1. See note 10 and accompanying text of my article Reducing the Cost of IP Law (“Once again, as in the case of minimum-wage, social-security, and prounion laws, federal legislation works in favor of big business, … For a recent example, UPS is currently lobbying Congress to enact legislation that would redefine its rival, FedEx, as a trucking company rather than the airline it started out as in an attempt to make it easier for the Teamsters union to unionize FedEx drivers and raise their wage rates—and of course FedEx’s cost structure. See Del Quentin Wilber & Jeffrey H. Birnbaum, Taking the Hill By Air and Ground: Shift in Congress Favors Labor, UPS Over FedEx, Washington Post(September 14, 2007).

    See also Murray N. Rothbard, Origins of the Welfare State in America, Mises.org (1996) (“Big businesses, who were already voluntarily providing costly old-age pensions to their employees, could use the federal government to force their small-business competitors into paying for similar, costly, programs…. [T]he legislation deliberately penalizes the lower cost, ‘unprogressive,’ employer, and cripples him by artificially raising his costs compared to the larger employer.… It is no wonder, then, that the bigger businesses almost all backed the Social Security scheme to the hilt, while it was attacked by such associations of small business as the National Metal Trades Association, the Illinois Manufacturing Association, and the National Association of Manufacturers. By 1939, only 17 percent of American businesses favored repeal of the Social Security Act, while not one big business firm supported repeal.… Big business, indeed, collaborated enthusiastically with social security.”); Llewellyn H. Rockwell, Jr., “The Economics Of Discrimination,” in Speaking of Liberty (2003), at 99 (“One way the ADA [Americans with Disabilities Act] is enforced is through the use of government and private ‘testers.’ These actors, who will want to find all the “discrimination” they can, terrify small businesses. The smaller the business, the more ADA hurts. That’s partly why big business supported it. How nice to have the government clobber your up-and-coming competition.”); Rothbard, For A New Liberty (2002), pp. 316 et seq.; Rothbard, The Betrayal of the American Right, 185-86 (2007) (“This is the general view on the Right; in the remarkable phrase of Ayn Rand, Big Business is ‘America’s most persecuted minority.’ Persecuted minority, indeed! To be sure, there were charges aplenty against Big Business and its intimate connections with Big Government in the old McCormick Chicago Tribune and especially in the writings of Albert Jay Nock; but it took the Williams-Kolko analysis, and particularly the detailed investigation by Kolko, to portray the true anatomy and physiology of the America scene. As Kolko pointed out, all the various measures of federal regulation and welfare statism, beginning in the Progressive period, that Left and Right alike have always believed to be a mass movement against Big Business, are not only backed to the hilt by Big Business at the present time, but were originated by it for the very purpose of shifting from a free market to a cartelized economy. Under the guise of regulations “against monopoly” and “for the public welfare,” Big Business has succeeded in granting itself cartels and privileges through the use of government.”); Albert Jay Nock, quoted in Rothbard, The Betrayal of the American Right, 22 (2007) (“The simple truth is that our businessmen do not want a government that will let business alone. They want a government they can use. Offer them one made on Spencer’s model, and they would see the country blow up before they would accept it.”).

    See also Timothy P. Carney, The Big Ripoff: How Big Business and Big Government Steal Your Money (2006), and also Rothbard, Confessions of a Right-Wing Liberal (“This is the general view on the right; in the remarkable phrase of Ayn Rand, Big Business is “America’s most persecuted minority.” Persecuted minority, indeed! Sure, there were thrusts against Big Business in the old McCormick Chicago Tribune and in the writings of Albert Jay Nock; but it took the Williams-Kolko analysis to portray the true anatomy and physiology of the American scene. … As Kolko pointed out, all the various measures of federal regulation and welfare statism that left and right alike have always believed to be mass movements against Big Business are not only now backed to the hilt by Big Business, but were originated by it for the very purpose of shifting from a free market to a cartelized economy that would benefit it. Imperialistic foreign policy and the permanent garrison state originated in the Big Business drive for foreign investments and for war contracts at home.”)

    See also the Wikipedia article on Rothbard: “Rothbard was equally condemning of relationships he perceived between big business and big government. He cited many instances where business elites co-opted government’s monopoly power so as to influence laws and regulatory policy in a manner benefiting them at the expense of their competitive rivals. He wrote in criticism of Ayn Rand’s “misty devotion to the Big Businessman” that she: “is too committed emotionally to worship of the Big Businessman-as-Hero to concede that it is precisely Big Business that is largely responsible for the twentieth-century march into aggressive statism…”[49] According to Rothbard, one example of such cronyism included grants of monopolistic privilege the railroads derived from sponsoring so-called conservation laws.[50]”

    Patents are state-granted monopolies, which are in “tension” with antitrust law; you can have and use this monopoly, even though it technically seems to violate the antitrust laws, so long as you don’t abuse it. This means that the larger companies who amass the large patent arsenals (and cross-license with each other) sort of have immunity from antitrust law while smaller competitors are not only subject to the anticompetitive effect of the patent monopolies possessed by the big players but also subject to antitrust law still. Absent antitrust law perhaps smaller companies could cartelize somehow to combat the patent monopolies of the big companies–for example perhaps they could form defensive patent pooling arrangements–pools that might under current law violate antitrust (I am not sure, have not looked into it in detail). I.e., the antitrust law (maybe) gives enough of an exemption to big companies to acquire large patent monopoly arsenals and to cross-license with each other forming anticompetitive barriers to entry but does not give enough of an exemption for smaller companies to collude and cartelize and form defensive patent pools. I sense that this is basically one thing that is going on.

    Another example would perhaps be Big Sports. If I recall correctly federal antitrust law had to grant a special exemption to certain college or large sports leagues, so that they would not be hampered by antitrust law. I can imagine that the combined effect of antitrust law and the special exemption might give some favoritism to the NFL etc. This may be on point but not sure it’s the only one: http://en.wikipedia.org/wiki/Sports_Broadcasting_Act_of_1961. ↩

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The Corrosive Effects of IP

Corporatism, IP Law, Pop Culture, Protectionism
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Libertarian thought has largely moved against IP in recent years, largely due to the groundbreaking work of Stephan Kinsella. Kinsella’s work is a powerful defense of genuine property rights and a thorough repudiation of government-granted monopolies. One of the overlooked implications of the rights violations inherent in intellectual property laws is the terrible effect of copyright laws and government spectrum licensing on culture.

Social conservatives have long attacked the media for promoting immoral behavior. This is often quite correct. Their statist worldview has made them ill-equipped to understand the nature of the problem, and the correct solution. With laws which establish monopolies, a number of problems naturally follow. Let me illustrate this by comparing the world of professional music today and about 200 years ago. During the days of Beethoven and Mozart, musicians earned a living from performances, patronage, and, perhaps most importantly, teaching. In a world without public schools, they taught the children of the wealthy. This required them to present themselves to those people in a way which would appeal to them. Contrast that with today. Musicians are promoted by a few major record labels, and intellectual property laws mean that they have to be paid whenever their works are played or purchased. There is a greatly diminished requirement for ongoing work and constant customer relations. The fact that a relatively few people who run the labels and own the radio and television stations, act essentially as gatekeepers to popular culture, means that a tiny cabal of entertainment executives are able to drive the culture down paths of their choosing. IP, spectrum licensing and other media regulations are largely to blame for the oft-cited decline of Western culture.

 

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IP As Intellectual Laziness, Skewed Business Models

Business, Corporatism, IP Law, Protectionism, Technology
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We have heard it said that IP causes people to “rest on their laurels.” What this means is that intellectual property causes entrepreneurial laziness in at least two ways. The first, and the one that is often mentioned in IP abolitionist circles is that there is less pressure for the original innovator to continue to innovate–IP legislation artificially generates profits above market rates, and there are fewer competitors willing to enter the market. The second way in which intellectual property fosters entrepreneurial laziness has to do with the business model that is required to produce such a good or service.

IP legislation also has a potentially devastating effect. Because in some heavily controlled areas–specifically medicine–it takes endless years of R&D and trials before a drug or medical device is approved, resources are therefore shifted to satisfy the demands of the state rather than the demands of the market. It has become almost unimaginable to even consider that a company (or even a small independent group of scientists and inventors) could develop, test and market drugs quickly; the norm is that things must take a decade.

There are two main consequences of IP-caused distortion of what could otherwise have been a traditional entrepreneurial plan. The first is that fewer and fewer companies can adopt the “fail fast” approach that is often seen in high tech startups. Instead of devoting time and money to building prototypes and openly testing on the market, even if only on a limited, private/restricted basis, the feasibility of a product, they must invest resources away from “fail fast” and into “succeed huge.” IP destroys, at least in some industries, the ability to have agile business models that attempt to quickly test what works and what doesn’t work. Instead, we see companies spending billions of dollars and taking a decade passing government tests. Big Pharma, thus, requires Big R&D and Big Litigation, which are required because of (prior) government interventions. As can be expected, the ones hurt the most are consumers, who often have to pay huge sums of money to get their hands on a few pills.

The second consequence, which is possibly as important as the first, is that IP has a chilling effect on the possibility of adopting incremental models. There are fewer incentives to make a product better, faster, cheaper, when such a product is given a monopoly. You don’t have to improve on it (the “rest on your laurels” I mentioned above) but neither can others. Imagine a car company that decided to stop innovating their own product one day, never to receive any modification in the future. How long would it take before it goes broke? Also imagine if nobody else could improve on the idea behind such a product. The market for new cars would cease to exist. Incremental models also benefit from not having to reinvent the wheel; personnel, knowledge, production lines, distribution, etc. are already in place for specific products. It takes a small amount of resources, especially if coupled with a “fail fast” business model, to improve on something that exists, rather than having to come up with something entirely new that needs IP protection.

In a society without IP legislation, inventors would either have to become entrepreneurial themselves (as a small individual operation), partner with an already established company to bring the product to market, or form a new company around the invention, perhaps by raising venture capital or other methods. Though the same happens today, there is a big key difference–monopoly protection rights, especially patents and copyright–distort the capital and production structure of goods and services that make it to market under intellectual property protection. Resources are diverted towards litigation and “Big R&D”–both of which are the inevitable result of corporatism and other state interventions. Normally, submarginal products on the market do not tend to last long. Moreover, submarginal business models, because of their prohibitive cost, do not tend to last long in the free market. Thanks to IP, however, they do–profits are received when losses should have been incurred. Economic inefficiency, and the perpetuation of wealth-destroying business models, are the norm, at least when IP is present.

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Don’t Bet on China: Redux

Business Cycles, Democracy, IP Law, Mercantilism, Protectionism
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A Chinese libertarian, Nicolas Dong, who recently did a Mandarin translation of one of my IP articles, recently told me this in an email regarding my earlier post, Don’t Bet on China:

I agree most part of your point of view about China. I believe that after the bust of the current housing bubble and high inflation, there will be much more unrest. The costs to maintain a “stable” social order have exceeded the cost of maintaining the army. Great changes may occur after the Xi Jinpin administration. But democratization will probably make China more socialist, for reasons explained in Hoppe’s Democracy: The God that Failed. There are just too many mobs here. And many social democrats are controlling the media, preaching democracy and equality instead of liberty. Fortunately, some influential media have libertarian-leaning editors or columnists. We also have libertarian and classical liberal university professors. We are trying our best to have a greater influence.

Also, regarding the libertarian perspective on intellectual property and my anti-IP article that he translated, he said:

They [the Chinese libertarians] debated for a while, and now, most libertarians in China are anti-IP.

However its influence is limited since we are just circulating it in our circle, and posting it on websites. Most people in China don’t know what libertarianism is, and they may not capable of catching the idea in the article.

… You know, something nice is that those who control the internet here don’t know what libertarianism and the Austrian School are; thus, most of those sites are not prohibited. The Austrian School does have some influence in academia here, albeit mainly Hayekian.

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Erecting Entry-preneurial Barriers

Business, Protectionism, Victimless Crimes
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The caption accompanying this NY Times article picture of a street vendor selling bottled-water reads “Many sidewalk peddlers are doing record business, though the city considers it against the law to sell water without a license.”

I think Brad Spangler’s timely Facebook status update expresses how one should react to this:

Note carefully that states will be glad to bust down doors, “sweep streets” and so on in order to combat the problem of child prostitution. What states will not do is stop making the only choice for many prostitution or starvation, by impoverishing the populace with taxes, regulation and the sclerotic choking off of economic opportunities other than prostitution.

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