onsdag 3 december 2008

The flaw in the Libertarian argument.

There is just one flaw in the libertarian argument but it is fatal. It fails on the question of land rights. Nozick, one of the prophets of modern libertarianism, skirts over this key issue. There is a powerful critique of the position by Hillel Steiner, who wrote a piece called "The Libertarian Dilemma"

It can be illustrated by a couple of parables. A boatload of people lands on a fertile island. In the middle of the island is a chest containing the title deeds to all the land on the island. They share it out equally between them. A few minutes later another boatload arrives. Now that all the land is owned, there is nowhere they can go. Those who came on the first boat approach the newcomers with labour contracts. The latter have no option but to accept whatever terms are offered.

In the second parable, four people sit down and play Monopoly. When all the squares have been bought by one or other of the players, a fifth player joins the game and is given an allocation of money. But he quickly finds his money is disappearing. He complains to the other players that the game is unfair as he never had the opportunity to purchase any of the sites, and wherever he lands, he has to pay rent.

Therein lies the kernel of the fallacy of free markets. If land is enclosed and there is no free land available, there can be no free markets.

If on the other hand, all the rent of land was collected and distributed, the market would probably work quite well, because landowners would enjoy no special privileges. How this might be acheived in practice is explained.

It is unfortunate that "progressive" politics have rarely taken this policy on board, preferring to go for revolution, often violent, which in the end has achieved nothing.

Here is a counter argument...
Let's imagine the first settlers of the Fantasy Island hoarding all of the land for themselves, after which the second wave of settlers are reduced to the level of serfs. The problem with this thought experiment is that it assumes that the "serfs" are unable to save their money, start a small business (in rented premises of course), expand that business, accumulate capital and then purchase a piece of land for themselves from its original owner. On the fictional island, economic mobility is barred. In fact, in a libertarian society, the conditions for economic mobility - freedom - are abundant.

These thought experiments are very much a true model of reality. In the USA, the libertarian model held for just so long as there was land freely available - hence the exhortation "Go west, young man". Once the last state, Oklahoma, was distributed, there was no more new land and the island model was a true reflection of the situation.In practice, when land is fully enclosed, it is extraordinarily difficult for anyone to accumulate capital and savings because everyone is bidding up the rent against everyone else, so that earnings are driven down to bare subsistence. It is only exceptionally skilled operators that can climb out of the swamp filled with alligators snapping at their heels, which is what happens when market forces operate in an situation of 100% land enclosure.

The rent of land is a stream of wealth which owes nothing to the efforts of the land owners, since it is derived from the actions and presence of the community. Surely that is the community's entitlement?

In the UK situation, the most valuable land in the capital is owned by a handful of families whose estates were alienated from the monarch through fraud or other dubious processes. The US government just handed out land which had not previously been owned. This would be unproblematic so long as there was an infinite supply, but once the supply of land ran out, the stage was set for creating haves and have-nots due to inequality of opportunity.Furthermore, by handing out land free of obligations, the government was then obliged to fund its activities by robbing people, through the taxation of wages, of the fruits of their labour, something which I would have thought was contrary to the whole notion of libertarianism.Libertarianism is not about equality of outcome, but it is surely in favour of the notion that effort should be rewarded, idleness should go unrewarded and these demand equality of opportunity, so far as it is realistic to achieve this.

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