Читать книгу Liberalism and Capitalism Today - Paul-Jacques Lehmann - Страница 11

The role of the state in the city has always been a hotly debated question, especially in times of crisis. The liberal state should be a state of law and liberties. Back in his time, Adam Smith asserted that any intervention by the state undermines individual liberties, since the protection of some undermines the security of the community. An entire study followed to explain that it is not up to the public authorities to decide to protect, or worse, to over-protect citizens. They must let them take their lives into their own hands, by choosing the initiatives they deem necessary; that is, they must make them responsible, because favoring a few people often hinders the freedom of a greater number.

Opposition to the increasing intervention of the state in economic life is very present in de Tocqueville, for whom the search for the elimination of social inequalities leads above all to the inevitable strengthening of the role of state power, which is the only real power and which is never impartial, since those in power always seek to obtain the vote of as many voters as possible. Moreover, simply being in a democratic nation does not preclude the state from becoming tyrannical. In an environment conducive to public intervention, as soon as economic agents feel that the market does not meet their expectations, they turn to the state, because they know that there is a chance that it will satisfy their demands, even the least justified ones. New social categories will then follow suit, with people believing it legitimate to imitate those who have obtained satisfaction in order to benefit, in turn, from advantages hitherto reserved for others. The demands become all the more pressing as special interest groups grow in importance: the acceptance of a certain level of protection multiplies the demands for protection.

Thus, when satisfaction is granted to more and more citizens, the question arises as to whether public authorities, given their capacity for constraint, are seeking anything other than achieving an economic optimum. Some even go so far as to argue that the state’s desire to reduce inequalities and its behavior as a seemingly impartial arbitrator in settling certain conflicts are merely pretexts for its insidious and increasing involvement in the lives of citizens. For example, by regulating a market, the state favors either a company, which excludes all competition, or consumers, which puts certain companies at risk.

However, even the most intransigent liberals accept that public authorities carry out a minimum number of activities, qualified as regalian: those that only the state is capable of carrying out. All of them take up the arguments developed by philosophers such as Hobbes and Locke¹, who explained that individuals must give up their freedom in favor of the sovereign, today’s rulers, in exchange for the guarantee of being assured of living in an environment where order reigns and where their interests are preserved. However, Adam Smith, trusting the “invisible hand”, explained that the state must fulfill only three missions: “the duty of protecting the society from violence and invasion of other independent societies; secondly the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals” (Smith 2007, p. 533).

It is up to the state to ensure the inviolability of property and the respect of all rights, both nationally and internationally. Public security, that is, everything related to police operations, defense, diplomacy and justice, is thus devolved to the public authorities, so that citizens are in a position to exercise their other prerogatives as effectively as possible. However, they must always act within the limits determined by the law: they must be given specific tasks that they must not overstep.

Hayek², a contemporary Austrian liberal author, took up these ideas by explaining that the state must set totally transparent rules that prevent citizens’ actions from coming into conflict and that protect each individual from coercion or invasion of their free sphere by others. Thus, the authority of public authorities should not be exercised over individual activities, even for apparently legitimate and justified reasons, except in cases of trade-distorting fraud. Indeed, private law and the freedom to contract must be permanently protected, without entrusting a central institution with the right to enforce them, because any interventionism can only lead to the disruption of free trade.

For Hayek (1944), justice is simply an attribute of the human condition, which means that it makes no sense to talk about a just or unjust economic order. Therefore, guaranteeing the social well-being of citizens and ensuring social justice should not be the prerogative of public authorities, which should not substitute rights and claims for freedom – a condition of economic equilibrium. Otherwise, unbalanced interventions will follow, because individuals are then led to behave in a way that is unnatural, and therefore cannot be optimal: “To follow socialist morality would be tantamount to annihilating most of the men making up present-day humanity and impoverishing the vast majority of those who would survive”.

For extreme liberals in politics, capitalism can only function in the best possible way if it does not go beyond this minimum: the state must intervene as little as possible in the economic field. However, it can be said, without much risk of contradiction, that no liberal has ever demanded that all economic operations be left in the hands of the markets. Thus, again, for Hayek, public power must ensure the vital minima for all citizens in the areas of food, housing, health, etc., and the state must be able to provide them with a minimum level of services. However, it should not go further, for example, by guaranteeing material equality among all, because social order should not be based on the results obtained by the activities carried out, but on the remuneration of the conduct of the various economic actors. It is illegitimate for a government to use coercion to determine an income scale that corrects distortions of competition by providing a uniform gain to all those who, for one reason or another, are unable to obtain this income on the market.

For more moderate liberals, the other interventions of political power in the economic domain are the subject of more nuanced positions, with a multitude of proposals as to the more or less numerous activities that public authorities must ensure, according to the judgments made with regard to the consequences of capitalism on the collective well-being. Even if everyone believes that state “obesity” is harmful, there are different solutions adopted in different countries, certainly according to their level of development, but also, above all, according to their history and culture. For example, as we will see, the power to mint money and guarantee its value did not appear everywhere at the same time and has evolved in disparate ways.

Beyond the functions that some call those of a “night watchman”, the other interventions of political power (especially in the economic field) are the subject of more nuanced positions. Excluding the advocates of an omnipotent state that rejects all market transactions, a centralized and planning body that ensures all the mechanisms leading to transactions, we find a multitude of proposals as to the more or less numerous activities that public power must ensure, depending on the judgments made about the consequences of pure capitalism on collective well-being.

Generally speaking, two pitfalls must be avoided. On the one hand, while it is normal for regulation to prevent abuses and ensure respect for all the principles of capitalism, this must not contravene the functioning of the market economy and lead to even more harmful consequences than those it tries to counteract. For example, many liberals refuse to allow the state the possibility of providing work, and therefore wages, to the poor: this is in fact charity, which is perfectly justified from a social point of view, but which should be distributed in another way. On the other hand, the need to regulate the economy is constantly evolving: the bureaucratic burden of its organization prevents the state from being the best predictor and the best architect of the need to implement it. Aside from the fact that public authorities can only intervene retrospectively, once the negative effects of poor regulation have been felt, the question is whether those in power have the same relevant information as market players, according to the signals provided by price evolution: thanks to their specialization and their better knowledge of the mechanisms they consistently practice, market players have multiple ways of circumventing the new rules and benefiting from them³. At the same time, too frequent changes in regulations can only disrupt agents in their behavior, for example, by preventing them from taking the decisions necessary for economic growth.

All in all, from a strictly economic point of view, the state does not have the necessary means of action to ensure growth. On the contrary, it must be able to create the conditions for market mechanisms to achieve this growth. While it is true that in reality the market is incapable of setting the “true” price of a good or service, it is not clear that the public authorities would be able to determine its “fair” price. Thus, the policy of price control is, most of the time, a failure. Blocking prices at a certain level leads to perverse effects, particularly an increase in public spending. For example, the existence of a minimum wage is often equated with an increase in unemployment insofar as some labor-intensive firms refuse to hire workers whose qualifications would require lower pay. The same is true of rent freezes, which turn against the tenants themselves, since landlords are less inclined to build, reducing the number of housing units on offer and leading to higher rents.

There is also the definition of goods and services that are presented as not being abandoned to market mechanisms (public goods) and, as a result, can only be managed by the state. The political approach to this question is often more important than the purely economic approach, which explains why this definition differs from one country to another. Nevertheless, there is agreement on the fact that collective goods are presented as indivisible and non-appropriable goods, and therefore cannot be sold and are not part of the market economy. For example, the construction, operation and maintenance of a lighthouse at the entrance to a port can be considered as responding to this approach. Yet, the choice quickly becomes more delicate: should health, education, transportation infrastructure or public transportation be considered services or public goods?

The answer given by those in favor of the management of certain goods and services by the state can be summarized by five main reasons: (1) no one can be the individual owner of these goods; (2) no one can or should be excluded from consuming them, not least because the price dissuades them from doing so; (3) they are naturally indivisible, because they can only be available for a minimum significant quantity, which is also necessary to benefit from economies of scale; (4) no private company is in a position to create or manage them because of their cost and the impossibility of setting a selling price that would cover the costs incurred; and (5) external effects exist that lead to collective satisfaction. This is the case, for example, with the construction of anti-seismic shelters in order to protect not only the individual who is able to protect themself from the risk of earthquakes, but also the entire population.

However, it is questionable whether it is up to the state to establish a list of collective property by determining what is good or what is necessary for individuals, deciding that public resources should be allocated to one good or service over another, when the majority of the public does not feel the need, arbitrating between methods to reduce waste, deciding what to do or not to do based on moral or ideological considerations. Moreover, we can never be certain that the state manages more efficiently than private companies. Thus, de Tocqueville already condemned the fact that the state seizes functions for which private initiative would be more efficient.

If we consider that the price resulting from the confrontation of supply and demand is the best signal, we can only condemn the practice of administrative pricing of collective goods and services. Moreover, if the public authorities set a price lower than that which would come from market mechanisms, financing by taxpayers can be considered a source of greater inconvenience than a high price. Similarly, if the market is not capable of meeting the needs of consumers, is it certain that public authorities can satisfy the demands of customers?

The problems to which the scope of public enterprises leads are close to those posed by public goods, even though these firms fall into the category of the market economy since they are selling something at a certain price. Most of the time, the search for profit is not one of their objectives, which does not lead them to optimize their costs, especially if they are in a monopoly situation. This mindset of public enterprises is reinforced by the fact that they often believe that their shareholder – the state – cannot go bankrupt and is therefore always able to bail them out in case of difficulties. Thus, industrial successes or prestige financed by public funds sometimes result in financial black holes for taxpayers. That said – and both old and recent examples are there to remind us of this – this belief in the infallibility of the state can be problematic, as tax increases, the creation of money and recourse to public borrowing are not infinite.

Even when they are managed according to the standards in force within private firms, for example with regard to making a profit and therefore seeking cost savings, we must also question the justification for public companies. We can envisage three types of firms under the authority of the state:

 – those that have been nationalized for moral or political reasons, as well as to fight against proven collusion of private companies in the sector, which brings us back to the problem of questionable unilateral decisions by public authorities;

 – those that concern goods with increasing returns (e.g. in the transport and energy sectors) and which only allow the economic optimum to be reached with maximum production and in the form of a monopoly, and for which it is questionable whether they are truly efficient. For example, the railway tariff set by the state may not be the best, and competition between several companies could probably lead to lower prices on some lines. The same is true of postal services;

 – those that are in competition with private companies and which have no reason to exist, because the fact that the goods and services concerned are already in the competitive sector means that they do not need to be in the hands of public authorities. As has already been pointed out, if the prices set by private companies are too high, it is up to consumers to act by refusing to accede to the diktats of certain producers, who will then be forced to revise their objectives.

The definition of public goods and their management by the public authorities is constantly evolving. This is the case for, among many other examples, the telephone or electricity, which having long been considered collective services have now in some countries become genuine private services. Similarly, when legal rules impose competition, or when public monopolies need funds that the state is unable to provide, moving them into the private domain is a good solution.

“True” liberalism rejects the existence of monopolies that annihilate the action of individuals: it is necessary to avoid the concentration of capital in the hands of very large companies that leads to the negation of individual property and the destruction of entrepreneurial freedom. Since it is people who must be privileged, they cannot be subjected to the influence of powerful groups, whoever they may be, in the economy of monopolies, private or public. One of the criticisms leveled at monopolies is that they encourage protectionism in international trade, because such a regime favors them to the detriment of consumers, whereas free trade, advocated by Richard Cobden as early as the 1830s, is beneficial for all economic actors. It is therefore logical that, in keeping with its individualistic approach, liberalism is favorable for small businesses.

The financing of public spending also remains to be considered – a problem that we will revisit in section 4.1 on capitalism today. For the moment, let us simply say that the most intransigent liberals reject, on principle, any taxation, because it involves taking resources from some people to provide them to others. In the same way, many people claim that the tax burden is incompatible with a free and balanced economy, as the behavior of agents is disturbed when individual interest no longer plays a key role. As a result, savings decrease and become insufficient to finance investment, while prices rise.

On the contrary, we will see that as capitalism develops, it rather encourages big business – if not monopolistic, then at least oligopolistic. Moreover, in many countries, public services operate in this monopolistic form, which is criticized by pure liberals in politics who believe that we are no longer in a capitalist system.