What’s Stossel Supposed to be Defending, Again?

I coined the term “vulgar libertarianism” several years back to describe reflexive mainstream libertarian defenses of the existing corporate capitalist system as if it were the free market, and using “free market” principles to justify the evils of the corporate economy. I recently saw one of the worst examples of this phenomenon ever, courtesy of John Stossel (“Debunking Popular Nonsense About Income Mobility in America,” Reason, June 4).

Vulgar libertarian apologists for capitalism use the term “free market” in an equivocal sense: They seem to have trouble remembering, from one moment to the next, whether they’re defending actually existing capitalism or free market principles. So we get the standard boilerplate article arguing that the rich can’t get rich at the expense of the poor, because “that’s not how the free market works” — implicitly assuming that this is a free market. When prodded, they’ll grudgingly admit the present system isn’t a free market, and includes a lot of state intervention on behalf of the rich. But as soon as they think they can get away with it, they go right back to defending the wealth of existing corporations in terms of “free market principles.”

Stossel’s piece does that in spades. He begins by conceding Thomas Piketty’s claim, in Capital in the 21st Century, that the concentration of wealth in the hands of the super-rich is at an all-time high. It’s true, he says, that “the wealth gap has grown. Now the top 1 percent own more assets than the bottom 90 percent!” But not to worry!

Stossel begins by arguing that what matters is not the relative shares of wealth between various percentiles of the population, but the mobility between those percentiles. And moving up is just as easy as ever. Just look at Oprah Winfrey (once on welfare)! And Sam Walton (a former fieldhand)!

Actually this is a load of buncombe. First of all, Stossel in my opinion unjustifiably minimizes path dependency. For example, there are persistent structural differences between the economic security and well-being of black families generations later, depending on whether they lived in areas where the U.S. army granted land to former slaves during Reconstruction — not to mention ongoing structural injustices like black sharecroppers being tractored off their land after WWII, or bank redlining.

But even leaving that aside, there’s been a significant amount of social mobility in most class societies in history. Without such mobility, they would ossify into caste systems incapable of adapting to change. That’s why Orwell’s Inner Party in 1984 is a complete meritocracy that recruits talent from the Outer Party and Proles in each new generation. The Soviet class system was probably more mobile than the American; most of the Party apparatus and the state economy’s managerial establishment, in the mid-20th century, were populated by the millions of workers and peasants (and their children) who swarmed into the Party in the ’20s and ’30s and got sent to vocational schools. Even under Roman chattel slavery, there were more enterprising or cunning slaves than average who bought their freedom and eventually became slave-owners themselves. Does this mobility mean that the dominance of the Ingsoc Party in 1984, or the dominance of the Soviet apparatchik over the average citizen, or the Roman slave-owner over the slave, was legitimate? It’s just an amazingly stupid argument.

But the real vulgar libertarianism comes in when Stossel dismisses considerations of justice or injustice in the distribution of wealth: “Also, the rich don’t get rich at the expense of the poor (unless they steal or collude with government).”

Um, that’s a big “unless.” Stossel writes as if the legitimacy of the super-rich’s fortunes were the rule, and collusion with the government were some sort of rare exception. To be sure, Stossel occasionally writes about some government boondoggle for the rich (like subsidized insurance for their beach homes) or corporate welfare. But his instinctive reaction, when someone attacks the polarization of wealth or the power of big business, is to interpret it as a leftist attack on the “free market,” and to circle the wagons in defense of the rich and powerful.

But in fact corporate capitalism as we know it is defined by statism to its very core, and the overwhelming majority of the income of the super-rich consists of rents on artificial property rights and artificial scarcities enforced by the state. I doubt it would be possible to accumulate a fortune of 100 million on the free market — let alone 100 billion. The Fortune 500 corporations, without any exception I can think of, owe their profits and market shares to government-subsidized inputs, government-enforced monopolies, entry barriers and regulatory cartels.

Stossel isn’t defending against government intervention. He’s defending a system based on it.