Libertarianism and the "Crony Capitalism" Dodge

On Tuesday, I wrote about libertarianism’s battle with history utilizing the insights of the famed Karl Polanyi. In some of the responses to my post, the universal libertarian retort became unsheathed once again. If you track these debates, you know it by now: “that’s just crony capitalism, man.”

You see, for many libertarians, when their back is to the argumentative wall, they fall back on this crutch that says any empirical or historical critiques or insights you might have against their system are invalid because whatever you are criticizing somehow isn't real libertarianism. Or as one commenter with suspicious capitalization practices put it “we have virtually no trace of true Capitalism.”

Interestingly, Karl Polanyi actually wrote about this exact retort back in 1944, meaning this old saw even predates the Fonzi of Freedom himself. Writing on the disastrous Great Depression, Polanyi notes that the proponents of laissez-faire capitalist markets “argue that the incomplete application of its principles was the reason for every and any difficulty laid to its charge.” Boy, does that sound familiar!

Polanyi continues (note he writes “liberalism” where today we’d probably write “libertarianism”):

This, indeed, is the last remaining argument of economic liberalism today. Its apologists are repeating in endless variations that but for the policies advocated by its critics, liberalism would have delivered the goods; that not the competitive system and the self-regulating market, but interference with that system and interventions with that market are responsible for our ills. [...] The root of all evil, the liberal insists, was precisely this interference with the freedom of employment, trade and currencies practiced by the various schools of social, national, and monopolistic protectionism since the third quarter of the nineteenth century; but for the unholy alliance of trade unions and labor parties with monopolistic manufacturers and agrarian interests, which in their shortsighted greed joined forces to frustrate economic liberty, the world would be enjoying today the fruits of an almost automatic system of creating material welfare.

Polanyi’s response to this argumentative bludgeon relies heavily on the double movement idea discussed in the prior post. It is certainly the case that when the horrors of unfettered market capitalism seep into and threaten the fabric of human society, there is a countermovement to protect society against destruction. This countermovement is not some misguided intellectual turn of events: it is a very real and spontaneous movement of a diverse set of groups against the negative social consequences they actually feel on the ground. And it happens literally everywhere. That this countermovement against unfettered capitalism happens always and everywhere is not some sign that unfettered capitalism never had its shot; rather, it is a dead obvious sign that unfettered capitalism is so perilous to society that no nation can or ever will put up with it for long.

We have a pretty substantial record of country after country going through the great transformation into a market economy. Without fail, the social terror caused by certain aspects of that experience cause every single country and people to undertake countermovements to protect themselves from the nihilistic maw of unfettered market expansion into everything. This countermovement — which again happens literally everywhere market capitalism is tried — does not disrupt some serene and awesome laissez-faire world; it happens because that world is horrible. The libertarian “crony capitalism” dodge uses the fact that unfettered capitalism is so insufferable that it never lasts for long to somehow argue that there is no empirical evidence proving that the libertarian system is terrible. But that is the empirical evidence that proves the system is terrible: people hate it so much that they universally abandon it as soon as they can!