Montreal, November 15, 2008 • No 261




Bradley Doucet is a writer living in Montreal. He has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also is QL's English Editor.




by Bradley Doucet

          This is certainly an interesting time to be a libertarian. The ongoing global financial crisis rocking the economy threatens to scuttle the measured support for free trade and free markets that has so benefited the world in recent decades. As the failures of misguided government policies are blamed on “unfettered” capitalism, increased government interventions promise to make the situation worse before it gets better, ensuring that we continue to cycle through bubbles and busts well into the future. If one side of the traditional, left-right political spectrum is more likely to accuse the other of being socialist, in practice both sides are equally wedded to using the big, heavy hand of government for their marginally different purposes.


          Still, there are reasons for hope. Ron Paul’s campaign for the Republican presidential nomination has raised the profile of our political philosophy significantly. Despite some controversy and infighting regarding certain of Paul’s positions and beliefs, many more people now have at least some knowledge of what it means to be a libertarian. That may not sound like a great victory, but we must remember that these are early days. Also, in addition to being more widely heard than ever before, the kinds of arguments raised against the libertarian position are often feeble and fallacious, which ultimately helps our cause rather than harms it. Finally, the rise of the libertarian-leaning independent voter presages better times ahead. It will not happen overnight, but in the vigorous marketplace of ideas that is flourishing in the Internet age, the truth will eventually out.

The Crisis Proves What?

          As evidence that the libertarian position is being heard, witness a recent article in Slate magazine by Jason Weisberg, chairman and editor-in-chief of the Slate Group, a version of which also appeared in Newsweek, entitled “The End of Libertarianism: The financial collapse proves that its ideology makes no sense.” Lest this title cause any fear, let me reassure the reader that Weisberg, unable to marshal any actual arguments against the libertarian position, limits himself to insults and smug dismissals. What is significant is that he felt the need to attack us in the first place.

          Here are the first two paragraphs of his article:

          A source of mild entertainment amid the financial carnage has been watching libertarians scurrying to explain how the global financial crisis is the result of too much government intervention rather than too little. One line of argument casts as villain the Community Reinvestment Act, which prevents banks from ‘redlining’ minority neighborhoods as not creditworthy. Another theory blames Fannie Mae and Freddie Mac for causing the trouble by subsidizing and securitizing mortgages with an implicit government guarantee. An alternative thesis is that past bailouts encouraged investors to behave recklessly in anticipation of a taxpayer rescue.

          There are rebuttals to these claims and rejoinders to the rebuttals. But to summarize, the libertarian apologetics fall wildly short of providing any convincing explanation for what went wrong. The argument as a whole is reminiscent of wearying dorm-room debates that took place circa 1989 about whether the fall of the Soviet bloc demonstrated the failure of communism. Academic Marxists were never going to be convinced that anything that happened in the real world could invalidate their belief system. Utopians of the right, libertarians are just as convinced that their ideas have yet to be tried, and that they would work beautifully if we could only just have a do-over of human history. Like all true ideologues, they find a way to interpret mounting evidence of error as proof that they were right all along.

          Like all true pragmatists, Weisberg, noticing that some people hold too fast to discredited ideologies, raises opposition to ideology into an ideology of its own. But everyone has an ideology, a world view; what matters is how successfully it describes and explains the real world. True pragmatists are merely opposed to trying to reconcile their conflicting, haphazard views into a coherent whole.

          Insults are no substitute for arguments, and Weisberg’s writing will convince exactly no one who does not already agree with him. Nor does he offer any arguments anywhere else in his piece. How exactly does our position “fall wildly short” of convincing? He does not say. Instead, he calls us “utopians of the right” and “ideologues,” and further along, “market fundamentalists.” As I have argued before, libertarians do not believe free markets are perfect, just that they are far superior to government control and planning. Contrary to Marxism, our ideas, in proportion to the extent that they are tried, do work beautifully. And far from suddenly “scurrying” to explain how the government caused this crisis, many libertarians have been predicting financial crisis because of government interventions for some time, as a quick search through Le Québécois Libre’s archives will demonstrate.

          Weisberg’s ace in the hole, such as it is, is to rag on Alan Greenspan, a supposedly avowed libertarian who has recently “admitted” he was wrong to think financial markets could regulate themselves. As Martin Masse writes elsewhere in this issue of Le Québécois Libre, Greenspan long ago abandoned any right to claim to be a libertarian. Furthermore, it is Greenspan’s inflationary policies that are most fundamentally to blame for the crisis, a “line of argument” Weisberg curiously neglects even to mention anywhere in his article.

          After damning us with faint praise for at least being “consistent” in opposing the government bailout—an approach which he snidely remarks “would deliver a wonderful lesson in personal responsibility, creating thousands of new jobs in the soup-kitchen and food-pantry industries”—Weisberg resumes his insults, which, I guess, makes him consistent, at least:

          The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from reading Ayn Rand novels in high school. Like other ideologues, libertarians react to the world’s failing to conform to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight and the capacity for pragmatic intervention constitute a recipe for disaster. They are bankrupt, and this time, there will be no bailout.

"Along with significant opposition to this massive government expenditure and power grab, there are other signs that suggest America is moving in a libertarian direction."

          Whose views are bankrupt, exactly, when this misleading, unsupported bluster is the best Weisberg can come up with? To clarify, the libertarian position is not that market actors can never be irrational; it is that when actors in a free market behave irrationally and misunderstand risk, they suffer the consequences of their foolish behaviour. If they persist in their foolishness, they go bankrupt, leaving wiser heads to prevail. The main effect of government interventions is to prevent these necessary corrections from taking place, and to encourage foolish behaviour where the market discourages it. If Weisberg can present flaws in this reasoning or evidence that undercuts it, he should do everyone a favour and do so. Barring such a demonstration, he only helps our cause by attacking it so feebly—as the mostly negative reader comments accompanying his article testify.

A Mainstream Libertarian Responds

          Weisberg’s attack also helps our cause by providing us with an opportunity to reiterate the main points of our case in response to his article, as I have done above and as D. W. MacKenzie has done in more detail on the Ludwig von Mises Institute’s website. (See “Has Libertarianism Ended?”) Even more significant for the spread of our ideas, however, is a response from Richard A. Epstein that appeared on mainstream Forbes magazine’s website, entitled “Strident and Wrong.”

          Epstein is a well-known professor of law at the University of Chicago and the author of many books, including 1995’s Simple Rules for a Complex World, and most recently, this year’s Supreme Neglect: How to Revive the Constitutional Protection for Private Property. By his own description a classical liberal rather than a more radical libertarian, Epstein has nonetheless recently begun a weekly column for entitled “The Libertarian.”

          Epstein is polite but devastating in his critique of Weisberg: “No fair and balanced account of the current meltdown can dwell exclusively on the failure of government to regulate credit-market derivatives. It must ask deeper questions about the antecedent events that brought credit markets to their knees. Weisberg offers no such account.” Summarizing the “government decision to subsidize home mortgages generally through low interest rates” and the “special Fannie and Freddie guarantees,” Epstein emphasizes that “[t]hese foolish decisions prompted market actors to react just as libertarians fear: to profit privately from public foolishness.”

          Epstein is careful to state that as a limited-government libertarian, he is not opposed to all government regulation. Minarchists like him, he writes, “have a presumption against government regulation, which can be rebutted by showing long-term social improvements. We know not only about the virtues of competitive markets, but of the challenges posed by asymmetrical information, public goods, prisoner’s dilemmas and market cascades.” Importantly, though, minarchists “are equally adamant that bad regulation can wreck credit markets. And we insist that governments must mend their lending habits to reduce the odds of credit trains going off the rails yet again. We also strenuously oppose using the credit crisis as a lever for introducing all sorts of senseless gimmicks to disrupt labor and product markets.” He sums up his piece by stating that Weisberg pathologically “overrates market failures and underestimates government ones,” a pattern libertarian readers will recognize as all too common.

The Rise of the Independent Voter

          The intemperate response of the American government to the current crisis—a mind-boggling $700-billion bailout bill, among many other smaller, but still huge, bailouts—is certainly a sign that the libertarian future is not right around the corner. But the American public’s reaction to the bailout plan was far from uniformly favourable. When framed as a government “investment” to keep “markets secure,” one poll showed that only 57% supported the bailout (with 30% opposing it). When another poll actually used words like “bail out” and “taxpayers’ dollars,” 55% opposed the rescue package.

          Along with significant opposition to this massive government expenditure and power grab, there are other signs that suggest America is moving in a libertarian direction. John P. Avlon, a senior fellow at the Manhattan Institute and the author of Independent Nation: How Centrists Can Change American Politics, recently wrote on the Wall Street Journal’s website that independent voters “are now the largest and fastest-growing segment of the American electorate.” Roughly 40% of American voters now identify themselves as independent.

          But what do these independent voters believe? Is there any consistent ideology that unites them, or are they just a motley crew? According to Avlon, there are some consistent trends: “Independents tend to be fiscally conservative, socially progressive and strong on national security.” Fiscally conservative and socially progressive—this sounds a lot like the quasi-libertarian “bobos” (bourgeois bohemians) identified by Brink Lindsey in his Age of Abundance, which I reviewed here last fall. As for being strong on national security, Lindsey wrote that the bobos “would part company with all grand ideological pipe dreams in the realm of foreign affairs (including pacifism as well as neoconservative adventurism), insisting instead that American power is a positive force in the world but one that ought to be used cautiously.”

          In a recent Weekly Standard article entitled “We Blew It: A look back in remorse on the conservative opportunity that was squandered,” P.J. O’Rourke laments the poor job conservatives have done promoting freedom. He ends his piece with a funny and eloquent defence of the free market:

          What will destroy our country and us is not the financial crisis but the fact that liberals think the free market is some kind of sect or cult, which conservatives have asked Americans to take on faith. That’s not what the free market is. The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate what you see when you step on the scale. ‘Jeeze, 230 pounds!’ But you can’t pass a law making yourself weigh 185. Liberals think you can.

          Conservatives have screwed up the free market brand. They have screwed it up by paying mere lip service to it, and they have screwed it up by wedding it to an intolerant, authoritarian sense of morality and a belligerent, imprudent foreign policy. But out of the ashes of conservatism will rise a better freedom movement. The swelling ranks of independent, quasi-libertarian voters do not want to tell you who you can marry or what you can do with your own body; they do not want to export democracy around the world at the point of a gun; and they do not think the laws of economics can be legislated out of existence.

          As I wrote at the outset, these are early days. Lindsey recognized in his book that the current bobo synthesis remains “an unspoken and unloved compromise rather than a well-articulated and widely embraced consensus.” In other words, there is still much work to be done. We must keep talking, writing, and arguing, nudging our friends and acquaintances to reconsider a point here, read an article there. Yes, free market ideas tend to get a raw deal during economic downturns, but things are very different today than they were in the past. Today, there is the Internet, itself both a free market for ideas and another piece of evidence for how beautifully markets work when they are allowed to. And at the risk of sounding triumphalist, the Internet changes everything. With increased exposure, ineffective criticism, and more and more independent voters who eschew the left-right divide, freedom is on the rise. No, it won’t happen overnight, but what will the world look like in five years? In ten or twenty years? Financial crisis fallout notwithstanding, my bet is that the future is libertarian.