Tuesday, July 08, 2014

Against "Mixed Economy"1

The United States and many other countries are often said to have a "mixed economy". This term is supposed to locate the United States on a spectrum whose ends consist of a planned economy, as in the former Soviet Union, and a laissez-faire economy. But where can an example of a laissez-faire economy be found2? In this post, I argue for dropping the term "mixed economy", since laissez-faire is an unachievable utopia. Any attempt to create such will ultimately devolve to some combination of crony capitalism with social-democratic institutions.

I outline two arguments for my conclusion.

First property rights are not exogenous givens, provided by nature for all times and places. They are defined by law3. Any tweaks to property rights by changes in law benefit some and harm others. Those with wealth and power will want to influence these changes so as, at least, to maintain their place in society. And in a non-stagnant society, changes in law will need to be made. Thus, something that can be called crony capitalism will arise.

Second, under capitalism, labor(-power) and natural resources are treated as commodities, to be traded on markets. But such treatment ignores important dimensions of these commodities, such as the impossibility of separating the worker from the delivery of his commodity. Nobody has yet demonstrated that a society organized around self-regulating markets can exist, and the historical experience is in the negative. Some sort of limits to markets will out of necessity be imposed by society. This is the argument, as I recall it, of Karl Polanyi in The Great Transformation: The Political and Economic Origins of Our Time (1944). Polanyi explains why near laissez-faire forms in the nineteenth century could not survive.

What term could then be used for the economy in the United States? How about "actually existing capitalism"?

  1. This post is partly inspired by the nonsense spouted by the challenger in my district to the incumbent in the Republican primary for the United States House of Representatives. This vicious reactionary claimed to be for laissez faire, not crony capitalism, and also whined about the incumbents supposed "liberalism", as demonstrated by his support from the Chamber of Commerce.
  2. The "third way" is another term to locate an economy somewhere in the middle of a spectrum. I think this term was originally applied to Sweden, but later expropriated during the Clinton and Blair administrations.
  3. I have pointed this out before.


Unlearningecon said...

The US is a shining example of actually existing capitalism: although it was founded on minimal government and as isolationist, over time both of the processes you outline have led to the establishment of social programs and an interventionist foreign policy. This is despite it never facing any real existential threat, unlike most other existing capitalist (and socialist) countries. It is as close as we can get to a lab experiment for what a 'pure' capitalist country turns into.

Robert Vienneau said...

Thanks for the comment. Peter Boettke has now come out in favor of crony capitalism.