Our Word is Our Weapon

It’s funny, but in almost the same breath that that they have been using to denounce (with what seems to be increasing urgency and even desperation) John Kenneth Galbraith as irrelevant AND a threat to the western civilization AND a commie-lover, the blogosphere’s free-marketeers can’t help but remind me how right he was about many things (though certainly not all) and how relevant he remains.

Take the twin anti-May Day rants unleashed by the Adam Smith Institute and Tim Worstall. First Madsen Pirie informs us without qualification that is only “the wealth-generating power of capitalism” that has improved workers’ lots, presumably as opposed to all that nasty freedom-stifling stuff like paid holidays, maternity leave, workplace safety regulation, pensions, anti-discrimination laws and so forth.

At least Tim Worstall is a little more honest, if only by accident: after lengthily explaining how only markets can be given any credit for “the enrichment of that very working class over recent centuries”, he can’t help but add a rather important proviso:

Free markets make us all richer all the time. Note, please, that “free” in there. We do indeed have to be vigilant about encroachments upon that free part. The creation of monopolies over the supply of an item, whether it be labour, capital, land, goods, whatever, need to be guarded against.

Right, so only free markets enrich everyone. So, that wouldn’t include a market characterised by monopsony in motion, asymmetrical information and high search costs, then? The labour market, in other words?

The funny thing is, Tim has basically explained exactly why labour unions were and are needed, and why they have achieved so much. Because the labour market is so far from being free that it gives bosses the power to bully, rip off and exploit workers. The rational response to such concentrations of power is for workers to band together to get what’s coming to them. Which is just what happened.

Now, what’s this got to do with JK Galbraith? Well, unions are a very good example of a reformist institution that moves us further away from a ‘free’ market but, crucially, also makes actual Marxist / communist / socialist revolution that much more unlikely by improving the lives of workers ‘within’ the system. And this is a process that Galbraith describes very well in his “History of Economics“:

The Marxian system itself had obvious points of vulnerability, and these were to prove serious and decisive. There was, first of all, the threat posed to it by reform, the possibility that the hardships of capitalism would be so mitigated that they would no longer arouse the revolutionary anger of the workers … In an extraordinarily logical response to Marx, the later development of the welfare state, the support for mass education, the abolition of child labour and the Keynesian attack on the capitalist crisis would all address the points of capitalist vulnerability he identified. All of these steps against Marx, it might be added, would in their time be accorded a measure of condemnation as being themselves Marxist.

Quite. Nothing wins support for revolution like genuinely unfettered capitalism. Instead of loudly denouncing Galbraith and his reformist ilk, the free-marketeers should really be grateful for being saved from a fate even worse than social democracy.