Saturday, September 11, 2010

My reservations about three libertarianish policy preferences

There are three policy preferences that, I imagine, libertarians tend to support and that I have reservations about. (So in other words, the contents of this blog post are more or less reflected in its title.) They are free trade, an "open borders" immigration policy, and what I call a "robust liberty of contract regime." Before I go further and define what I mean by these terms and my reservations, I'll add the following caveats: some non-libertarians probably support some or all of these policy preferences; I imagine some libertarians might oppose all, or at least some, of these policy preferences; I call them "libertarian" 1) because I've noticed that posters on libertarian-oriented blogs tend to advocate such policy preferences and 2) because they seem to me to be very consistent with the what I understand to be the fundamental assumptions or preferences of libertarianism (a preference for individual "liberty" as free as possible from state coercion and a preference for "markets" provided that "market failures" be managed or curtailed).

  1. Free trade. I understand this to be the policy that nation states ought to permit its citizens/subjects/denizens to trade with the citizens/subjects/denizens of other nation states with minimal interference. In other words, a "free trade" regime would be one in which tariffs and non-tariff barriers to trade are minimized. My understanding for the justification of this policy is that it enables each nation-state to develop its "comparative advantage" (a concept that I understand but dimly) and enables robust, welfare maximizing economic growth globally.
  2. "Open Borders" Immigration Policy. I understand this policy to be a preference for more or less unrestricted immigration, or, put another way, a preference for labor to have the ability to be mobile. The justification offered for this policy preference is, in my understanding, similar to that offered for free trade: the benefits of free trade, which generally allows for the mobility of capital and trade goods, are enhanced with an open borders regime, in which workers can find work where their work will be valued at a price the workers will accept. A collateral reason for an "open borders" policy that I understand to be "libertarian" is that a closed borders, or highly restrictive, immigration policy puts the restricting state in the position of being an intrusive element in people's lives. A restrictive policy regime creates a class of people who are deemed "illegal" by their very presence, and yet their labor is valued enough that they can find work, but under the fear of arrest and eventual deportation (or worse, prison time).*
  3. Robust "Liberty of Contract" regime. The term "liberty of contract," at least to the extent that I am familiar with it, stems at least as far back to the liberalizing reforms by the UK parliament in the 1840s and 1860s (reforms that, not incidentally, also promoted free trade and perhaps (I don't know, actually) welcomed immigration. The "liberty" is the liberty of any one individual to contract his or her labor as they see fit. (My use of the plural pronoun is deliberate, and I swap "he or she" and "they" without apology....but I will point out that "liberty of contract" was often interpreted androcentrically, see Muller v. Oregon, the US Supreme Court case that ruled maximum hours/ minimum wages laws could apply to women because of their special role as society's procreators; in other words, "liberty of contract" did not apply to these workers whereas other workers, like male bakers in New York City, in Lochner v. US, did have this "liberty" and could not have it taken away by maximum hours legislation.) One libertarian objection to the denial of "liberty of contract" is that legislation that sets maximum hours, minimum wages (i.e., working conditions in general) puts an artificial and competition reducing constraint on labor (in other words, doing so makes it harder, among other things, to get a job). A robust liberty of contract regime would, therefore, eschew as much as possible government regulation of workplaces and working conditions (although it might allow for some safety oriented regulations....I don't mean to characterize the pro-robust liberty of contract regime argument as completely heartless even if it might at first glance rub against people's sensibilities). Such a regime would also decouple the state's involvement with union recognition--in the US, the Wagner Act, as amended by the Taft-Hartley Act and subsequent legislation, compels employers to recognize and negotiate in good faith with unions that receive a majority vote of acceptance by the workers; in the US, this compulsory process is supplemented, in some states, by laws that make it legal for a union to negotiate what is called a "union shop" contract, in which membership in the union is a necessary condition for keeping one's job (in practice, this means that workers' paychecks received automatic deductions for union dues). I call this regime "robust" to distinguish it from the present "liberty of contract" regime that I believe, still characterizes the way the United States and, to a lesser degree, the other western democracies look at the individual's relationship to the state and to each other. I say this in spite of the disrepute into which this term has fallen since the New Deal court precedents overturned the more strident announcements of this doctrine and in spite of innovations in labor law and business regulation that have limited it.
Here are my reservations in no particular order:
  • Free trade and an open borders immigration regime may in the long run produce exactly the desired effects, but it seems to me that 1) the "long run" might be very long indeed and 2) the optimal effects, it seems to me under what I understand to be the theories that promote these policies, come about only when every, or nearly every, nation-state adopts these regimes. For example, if the US adopted a more open-borders oriented regime, such a policy would probably benefit the immigrants would otherwise be "illegal," the employers who need their cheaper labor, and, perhaps, even the national economy assuming a critical mass of labor is necessary, eventually, to create another strong economy. However, if the US adopts an open borders policy and other nation-states do not follow suit, the immediate benefits arguably accrue to the immigrants and their employers. (I say "arguably" because I am ignorant of the economics, of the facts, and haven't really researched any of the specifics), and those in the country legally might suffer displacement and have no easily attainable labor market to migrate to.
  • To continue the previous example (but to add another bullet-pointed paragraph in order to keep 'em short and readable), a free trade regime works best, I assume, when all or nearly all participate in it. A unilateral declaration of free trade means that goods can come into the country under low tariffs, but they enter other countries' borders presumably under higher, more protectionist tariff. (I'm not sure how many, if any, such declarations there are or have been, to be honest....even the UK's declaration of free trade policies in the 19th century might not necessarily have been so unilateral, especially given that they had reciprocity treaties with Belgium and Germany.) Therefore, such policies seem to work best when everyone adopts them, and there might be dislocation if a given nation-state adopts open borders or free trade unilaterally. (I'm not saying, by the way, that libertarians don't try to account for this nor that there aren't some benefits that accrue to the unilaterally acting nation-state regardless of what other states do. But I'm not as yet convinced that it's best for all, or most, people in the unilaterally acting nation state to adopt one policy without some reciprocity.)
  • It's probably better for workers to have the option of moving to a different labor market than it is for them to not have the option, especially if capital has the option to move. However, an open borders policy is only a partial solution. Moving is hard, even when there are not state-imposed obstacles in the way. It is well established in the literature on immigration history that most immigration occurs through some sort of "chain migration" phenomenon. In other words, it's not just a question of hordes of people simply choosing to make the journey to America (or anywhere else). It's usually necessary, or at least it makes it easier, to have some sort of connections to the place you're moving to in order to move there. Some of the more strident supporters of open borders immigration emphasize the benefits to workers and almost seem to suggest that it compensates for the problems posed by the mobility of capital. But my point is that if one loses one's job to a free trade regime or to competition from undocumented workers, the option of simply moving is not, by itself, going to remedy the situation. Time might, and so might "retraining," but that's a difficult prospect for someone approaching their twilight years. (In fairness to the libertarian perspective, I know of few libertarians who claim that open borders policies are the be all and end all. They mostly seem to claim that it's a better policy, in general, than a closed borders regime. But I think they--in particular I'm thinking of Ilya Somin at the Volokh Conspiracy--overemphasize the benefits and discount the potential costs.)
  • To my knowledge, we have never really had a regime that has fully followed all three of these policy preferences, and especially haven't had one in the recent past. The US did have something approaching an "open borders" regime in the late 19th century (yet even then, the US had nominal restrictions on immigration from East Asia), but since the 1924 Immigration Act, the policy has been closed. "Free trade" is in some senses a chimera. Even if a nation state reduces tariff barriers, it is unlikely to fully dismantle the multitude of regulations that in practice act as non-tariff barriers to trade. (For example, automobile safety standards in the US will have to be met on any automobile produced outside the US if the producer wants to sell in the country.) "Liberty of contract" has not been fully implemented, even in its supposed heyday of the late 19th century (not only did the US Supreme Court early on uphold some state-level workplace and hours regulations, such as Utah's 8-hour law for miners and smelter workers in Holden v. Utah (1898?), but states have traditionally inserted itself into its subjects' abilities to enter into contracts of most sorts.) None of this is a convincing argument that such libertarian-oriented reforms are bad, but we should be cautious of any unexpected consequences of such policy changes if drastically implemented, or even if they're implemented piecemeal. I do realize that if it is right to do something, it should be done or attempted regardless of the unintended consequences (otherwise, we'd still have separate lunch counters and bathrooms for whites and blacks), but it is necessary to keep in mind that some consequences are almost guaranteed to arise that won't have been expected.
  • A robust liberty of contract regime would weaken state enforcement of union agreements that limit competition. This alone is not reason to oppose such a regime, because one affect would be to open up jobs to people who are willing to work for less than a union wage (and in some cases, such as the skilled building trades, unions have a lot of say on who can even apply for certain jobs, although that control seems to be breaking down). But worker representation does have a valuable role, especially in lesser-skilled jobs** (although I'd add that unions, at least in Chicago, appear happy to avoid organizing some of the more obvious, to my mind, shops like fast food establishments). This role is to serve as a check against well organized management that often has its own interests. I'm not saying that "the interests of labor and capital are inherently incompatible" because there are points where workers, managers, and owners share similar interests (if the employer goes out of business, the workers have no one to employ them), but the interests aren't always the same. Sometimes, the only effective way of creating this check against management is through legally enforced union contracts, and one of the most effective ways of obtaining these contracts is for the state to compel employers of a certain size to recognize unions. I'm not convinced that this is the only way to have a check against management power, and I think that unions have often fallen into the trap of using the state as a crutch instead of building a strong pro-union culture. I also have a lot of personal animosity to the rah-rah pro-unions at any cost, which sometimes descends into an ugly vilification of anyone that dares question unions. But my personal views aside, I'm not sure that doing away with state enforcement of at least some union prerogatives.
  • A robust liberty of contract regime, even if in the long run it's the best option we can come up with, will favor those who already have a lot of advantages in society. A lesser skilled worker who does not speak standard English, for example, is at an obvious disadvantage in contracting his or her labor than someone who has the social capital of a strong education or the real capital of a highly desired skilled. Some people have the entrepreneurial spirit and some don't; some people have an aptitude for doing construction work and others will never be as good at it. Sometimes what someone is good at is not valued by the market, and while the market might be the best construct to maximize everyone's potentialities, there will still be winners and losers. (Again, I am expressing reservations about the robust liberty of contract regime and not claiming that my arguments against it are dispositive.)
I realize that this is a long, perhaps convoluted, blog post. I take these libertarian positions seriously and think they offer a potentially useful critique of the type of state action that I, as someone who leans toward liberalism, tend to favor. But I write merely to express some reservations about these policies.

*A restrictive immigration regime need not necessarily focus on the receiving state. Many states of Europe before World War I, such as Germany, Austria-Hungary, and France, put restrictions on emigration, usually in the form of restricting the right of labor recruiters to entice their subjects to leave. A similar phenomenon was practiced in the Jim Crow era American South, in which individual U.S. states took measures to discourage the emigration of blacks.

**I say "lesser skilled" to indicate that these jobs require few, or fewer, formally acquired skills (either through apprenticeships or formal education). I do not mean to say that these jobs don't require skills. They do require their own skill set and in my view it's an insult to those workers to say otherwise.


James Hanley said...

I should have posted my thoughts when you actually wrote this post (which is when I actually read it), but perhaps better late than never. So here's my two cents, for whatever that's worth.

1. Free trade. You write:
"A unilateral declaration of free trade means that goods can come into the country under low tariffs, but they enter other countries' borders presumably under higher, more protectionist tariff. .. Therefore, such policies seem to work best when everyone adopts them, and there might be dislocation if a given nation-state adopts open borders or free trade unilaterally."
Most free trade theorists would argue you've made the mistake of focusing on exports, instead of imports. The difference is that an export-focus is a focus on jobs, while an import-focus is a focus on consumption, and from the classical perspective, markets are about satisfying the needs of consumers, not providing jobs. (I ask my students to assume two diametrically opposed states: one where everyone has a job but no one has any goods; the other where everyone has all the goods they want, but no one works. Ideal markets move us closer to the latter.)

So unilateral free trade would be good, because you're making more goods available at low cost to consumers, which means they can afford yet more of those goods (and services). Closing the borders in response to other countries doing so simply ratchets up the price for consumers. It's beggaring thyself to spite thy neighbor.

One might ask--as people do--what about the jobs destroyed by imports? In a dynamic economy they are replaced by other jobs, because the number of jobs is limited only by the number of people in the country (human wants are limitless, and are satisfied by creating jobs that meet those wants). The process of transition can be ugly, and there's no doubt we're in one of those ugly periods, but we're always better off after we get through them (e.g., the shift to industrialization).

2. Open Borders. I ideally believe in open borders, for two reasons, one noble and one crass. The noble reason is that nobody should be denied freedom of movement, and in particular no one should be denied life, liberty, and the pursuit of happiness because s/he was born on the wrong side of an arbitrary line in the sand. The crass reason is that efficient markets need resources to flow efficiently, and closed borders prevent that.

But mass immigration creates social disruptions that only a foolish ideologue would ignore. It's legitimate to have concern about the people whose lives, society and culture is dramatically disrupted. But even if we don't have concern for them, we can pragmatically recognize that they will only accept so much change, or only at not too great a rate, or they are likely to respond with violence. The only legitimate role I see for border control is to manage the pace of influx and change to a level that prevents really serious political problems. I think we've been bumping up against the limit on that in regards to Latino immigration. I'd prefer to loosen it up a bit, but pragmatically that would be a mistake.

But I like what the EU is doing. They're mostly open-borders now, but with some temporary restrictions on labor flow from the less developed countries.

3. Liberty of Contract. Uh, probably too philosophical for me to say anything sensible. 12 years ago I might have been able to, but I'll exercise some discretion and keep my mouth shut on this one.s

Pierre Corneille said...

Mr. Hanley,

Thanks for your comments.

Concerning freer trade, I certainly dropped the ball on the "unilateral declaration" argument when it comes to consumer goods (and producer goods for that matter, I imagine). I do still wonder if there isn't a value to be gained from cultivating certain industries within the nation-state (as a historian of the late-19th and early 20th centuries, I've been studying people who believe so and probably even absorbed some of their arguments, fallacies and all). But I certainly neglected what I had learned, or should have learned, in freshman macroeconomics.

Concerning open borders immigration policies: I think I support and share your "noble" reason almost entirely.

I'm a bit more skeptical about the "crass" reason. I do think that, despite the great gains in human capital and other resources "our" economy enjoys from immigration, I'm still not convinced that the short-term costs, which I assume to be more certain than the long-term gains, are negligible. (I'm not accusing you of saying they are negligible, but I think that's one unvoiced assumption behind the statement that "immigrants only do jobs Americans are unwilling to do." The aphorism has some merit, but I find it hard to believe that at least in the short-term, wage levels are not driven down and jobs are not made scarcer. Of course, there are other interferences with the labor market, such as minimum wage laws and compulsory union bargaining, that affect such things).

I should add that when it comes to trade policy and immigration policy, I try (and sometimes fail) to see them as spectra. I find it hard to realistically imagine a world where trade is completely free (or restricted) and immigration is completely open (or closed).

As for liberty of contract, you probably know much more than I, but I, in the tradition of Socrates's discussion partners insist on speaking whereof I know not!

James Hanley said...

"I do still wonder if there isn't a value to be gained from cultivating certain industries within the nation-state"

Well, even Adam Smith made an exception for industries crucial to national defense. And there might be something to be said for an industry that promotes other conditions for economic productivity. I'm not sure of any examples of the latter, except I have a recurring concern about how few scientists and engineers of our own we produce. We probably can't keep importing science, math and engineering grad students--then hanging onto them when they graduate--forever.

"I find it hard to realistically imagine a world where trade is completely free (or restricted) and immigration is completely open (or closed)."

No disagreement there. If we consider it as a continuum from totally closed to totally open, it gets harder and harder to imagine as it gets ever closer to totally open. Perhaps I'm a pessimist, but I don't have as hard a time imagining moving toward mostly closed.

Pierre Corneille said...

Mr. Hanley,

Thanks for your second comment.

One thing I think that corresponding with you (both here and at theonebestway/positiveliberty) has done for me is force me to clarify my own thinking about libertarianism.

I think the chief area in which I see things differently from you and from a goodly number of thoughtful libertarians, is that I tend to see the short-term costs of any policy (except, apparently, the Health Insurance Reform) as more swift and certain than the long-term benefits. And I'm sometimes afraid that after the damage has been done in the short term, the polity will revert to a non-libertarians policy.

Of course, saying that libertarianism is hard to implement, or that it comes with costs, does not mean that it is wrong. Just because something is hard to do doesn't mean it isn't the right policy.