Wednesday, September 15, 2010

Neoliberalism's Perversion of the Natural Law

Neoliberal doctrine asserts that the individual is the engine of our economy and, applying principles of natural law, asserts the primacy of that individual's liberty in maximizing economic growth.  Milton Friedman, for example, always refers to the individual as the only actor in our economy, while Mises always refers to the entrepeneur as fulfilling that role.

This has led neoliberal followers, the masses of libertarians who frequent "liberty porn" sites like, to believe that neoliberal doctrine refers to each of them as the individual in question.

The neoliberal elite understand, however, that the "individual" described by neoliberal doctrine is not a human being but a corporation.  The corporation is, in fact, a collective of shareholders, and it manifestly is not natural.  Rather, the corporation is a fictional creature born of and backed by the state.  Legally, of course, this fictional creature is treated as an individual for the purposes of contract, but that does not change the fact that the corporation does not exist independently of the collective it represents.  The corporation has no voice, no body, no life, no mind of its own.  Certainly, in spite of Rand Paul's hyperbole, BP has no throat upon which the state can put its boot.

As implied by Adam Smith's formulation of the Invisible Hand (as opposed to neoliberal's perversion of it), human beings are bound by laws and other standards of conduct that flow from the natural law, even in business.  Natural law concepts of liberty and freedom are the source of the Invisible Hand's legitimacy.  If society and the state do not respect the rights of the individual they run afoul of natural law.

Corporations are not guided by this Invisible Hand because they are not bound by the standards of conduct that hold our society together.  As Milton Friedman once famously said, "[o]nly people can have responsibilities," and the only social responsibility of a corporation is to increase profits.  A corporate executive in his role as corporate agent is likewise freed from his responsibilities to society.

Because the corporation is unnatural, because it is the creature of the state, because it is a collective and not an individual, natural law concepts of individual liberty and freedom cannot and do not apply to it.  A corporation cannot eschew all of the responsibilities of a free society and yet expect to receive all of its privileges (and more!).  If a group of individuals chooses to conduct business behind a corporate veil to enjoy the benefits of limited liability, they should expect their business to be subject to countervailing detriments to ensure that human beings in business for themselves are not disadvantaged. 

The goals of "free trade" and "free markets" asserted by the neoliberals are not possible when the state acts to give one set of participants an undue advantage. Yves Smith made this point earlier today with respect the extreme example of the state-supported "private" banking system, but I think it applies more generally to the corporate form, which alone confers numerous and substantial economic benefits to a corporation's owners.

Herein lies the essence of neoliberalism's double truth doctrine: the "free markets" they envision require heavy state support of business through benefits conferred by corporate form at the expense of the liberty and freedom of actual human beings. 

To be clear, I have no problem with the concept of limited liability corporations.  In fact, I own and operate one.  The problem is that any collective can threaten the freedom and liberty of an indivdiual, and the corporation within the neoliberal paradigm is the primary threat.