Just Curious

Hayek, Schumpeter and the monopolistic players

One thing that many libertarians do tend to overlook as we study the history of economic thought is that both F.A. Hayek and Joseph A. Schumpeter, two of the most vehement defenders of the market order when it was under Socialist assaults in the 30s, was that both men tend to view oligarchic enterprises as quasi-governmental entities, which means that their domination is just as harmful, if not more so, than government dictatorship over the individual's ultimate choice of his own end of life.

Schumpeter mentioned how it was precisely the mega-capitalists' vast successes that will eventually lead to their demise. This works on the following way. As capital accumualte and accumulate and these enterprises grow disproportionately, they become increasingly run not be entrepreneurs (who are prone to pursue Creative Destruction) but by bureaucrat-like managers. And lack of creative destruction in turn lead to impediment to new inventions, etc., and the whole system will eventually be bogged down the same way our federal government is.

Hayek on the other hand mentioned repeatedly the mammoth enterprise's domination in the market as some kind of half-way-house to complete government control over the economic life (and later the entire social life, for what are economic choices but choices to best utilize scarce resources to achieve ultimate, non-economic ends?) of the citizens. He did this by noting how most monopolies were in fact either set up by the government (East Indian Co.) or encouraged by the government. And this universal "struggle against competition promises to produce in the first instance something in many respects even worse...a sort of syndicalist or 'corporative' organization of industry, in which competition is more or less suppressed but planning is left in the hands of the independent monopolies of the separate industries." How very interesting. So in a sense the government that encourage monopolistic behavior is even worse, in the eyes of thie chief classical liberal thinker of the 20th century, than the statist government that promotes social programs such as the Great Society...

I wonder how many classical liberals and libertarians out there are happy to face this ugly reality. Whereas it is true that there is not many monopolies out there, there are plenty of oligarchic players, which are a little less harmful, but still...

In a nutshell, shouldn't modern liberals also start to realize that many early libertarians are not just "anti-government" (a favorite pet charge they love to make against classical liberals, libertarians, etc.) but "anti big businesses" as well?

posted by James Chang @ 3:17 PM