Liberalism and Economic Freedom

In recent months, Matt Yglesias has had a series of excellent posts about the anti-competitive effects of regulations on barbers, dental hygienists, tour guides, and various other industries. And each post has been greeted by a chorus of condemnation from his readers, who accuse him of being a libertarian sellout.

Now obviously, as a libertarian I think Matt is right on the merits. But I also think Matt’s critics are wrong about the ideological valence of these issues. It’s true that in contemporary politics there’s a tendency for people on the “right” to be reflexively anti-regulation and people on the “left” to be reflexively pro-regulation. But I think this is largely a matter of folks on the left not knowing their own history. Matt’s posts are, in fact, comfortably within the confines of liberal intellectual traditions.

If you look back to the work of early liberals who are the common intellectual ancestors of both liberals and libertarians, you’ll find a lot of concern about interest groups using the power of the state to enrich themselves at the expense of the general public. Early European liberals strongly opposed the state practice of selling state-enforced monopolies as a way of raising revenue and rewarding political supporters. The free-market and free-trade arguments of 19th Century liberals often took a populist, anti-business cast precisely because government interventions of the time were often such blatant attempts to benefit entrenched interests at the expense of the general public.

This liberal strand of leftist thought declined in the early 20th century. It was largely displaced by illiberal progressive and socialist movements that favored favored the centralization of economic decisions in the hands of either industry cartels (in the case of FDR’s National Recovery Administration, for example) or in the hands of the state itself. These trends created a schism in the liberal intellectual tradition, with libertarian-leaning liberals such as Henry Hazlett permanently distancing themselves from their erstwhile intellectual allies.

Yet the corporatist and socialist strains of leftist thought never completely eclipsed the liberal strain, and the former has made a comeback in recent decades. At the urging of staffer (and future liberal Justice) Stephen Breyer, and with the support of President Carter, Ted Kennedy spearheaded a sweeping deregulation of the nation’s transportation and communications industries, which had been organized as cozy government cartels since the New Deal. Presidents Kennedy and Clinton were both strong free-traders.

There’s a tendency to view this kind of thing as a fluke: liberals inexplicably deviating from their ideological commitment to government regulation. But this is stupid. Even the most hardened left-winger doesn’t see government regulation as an end in itself; they see government as a means to various ends, such as public health and safety, economic stability, and so forth. When regulations aren’t achieving those ends, and are instead benefitting special interest groups, it makes sense for liberals to favor their repeal. Not because they favor “deregulation” in the abstract, but because doing so is consistent with liberal values of equality, fairness, freedom, and so forth.

A big part of the problem is that the political right has become so effective at branding deregulation as their issue that people have come to talk about these things in a very right-wing way. Libertarians see the deregulation of barbering as part of a broader “economic liberty” agenda that also includes privatizing government services, cutting taxes, and so forth. And this means that even when regulations have clearly inegalitarian effects, the left has a knee-jerk tendency to support them on the grounds that anything the other side supports must be bad.

What’s needed, then, is an authentically liberal (in the modern American sense) way of talking about economic freedom—one that allows liberals to claim the mantle of Stephen Breyer without simultaneously signing up for Social Security privatization, abolishing the inheritance tax, and so forth. We need a vocabulary that reclaims the populist, egalitarian spirit of classical liberal thought. Modern libertarians spend an awful lot of time defending the deregulatory agenda of large corporations. We’re often right on the merits in these arguments, but it understandably makes the left suspicious that all our deregulatory proposals are somehow benefitting the wealthy and powerful. One of the brilliant things about the Institute for Justice is that they almost always choose “little guys” as their clients: individuals or small businesses who are having their livelihoods destroyed by more powerful incumbents. Even if these cases are not any different in principle from deregulations favored by large corporations, they’re much more likely to win over skeptical observers on the political left.

Incidentally, this is one of the reasons I’m so interested in copyright and patent issues, an issue about which (not coincidentally) Matt has sensible views as well. These legal regimes are remnants of the monopolies that were the focus of much 18th and 19th century liberal agitation. In recent years, we’ve seen the rise of the free culture movement, a deregulatory movement that largely identifies with the political left. Larry Lessig’s work, with its focus on corporations using government to enrich themselves, gives us an excellent model for advocating deregulation in a way that appeals to the left-hand side of the political spectrum.