There are two questions that I would like to ask Prof. Buchanan that are tangentially related to labour politics. The first question would be, how would he explain the second and third wave of democratization? Ths is in part, due to his allusion to democratic transitions and consolidation literature.
Secondly, the one that I’m more particularly interested in is, what does he think about libertarians? Two friends of mine, one here and here, are self-proclaimed libertarians (both also have economic backgrounds) and sometimes when they write from a libertarian perspective, I tend to go, “woah there a sec”. Now, I’m not a very good libertarian so I hope they can enlighten me a bit. But, everything I have encountered in the Political Science department seems to fly against libertarian notions of “small government” and completely free markets.
Don’t get me wrong; I’m not a socialist. I believe that the free market is definitely a more efficient mechanism for distribution in specific contexts. But the literature seems to imply that the state has a big and necessary role to play — larger than any notion of a limited state.
First is the slippery slope of the limited state: how limited is it? The nightwatchman state as a concept of limited government is clearly untenable in an age of open globalization. Furthermore, When the state enters into corporatist tripartite or concertation agreements, doee that count as against libertarianism (the state overstepping the boundaries of limited since the state actively intervenes in society) or for libertarianism (on the other hand, the state does not dominate labour or capital by coercive force)?
Secondly, the excesses of capitalism seem to be manifold (like Karl Polanyi and Esping-Anderson) and the market has few mechanisms to help ameliorate or curb the inequalities that free-market capitalism tends to exacerbate. For example this Christopher Leo piece, though I’m not sure how to interpret it. He writes about poor city planning, on how slums are made by government withdrawal and by catering only for expensive housing only. One reading is that too much market forces simply can’t cater to everyone, especially the poor with little purchasing power. But like Dr. Buchanan said, whatever your political persuasion is, capitalism generates conflict because of the inequalities of income and inequalities of the relations to to the means of production (which in turn produce different interests and different capabilities to protect those interests).
Thirdly, because of the uncertainties from the cyclical nature of capitalism, I think there is a sort of game-theoretic Nash disequilibrium that prevents libertarianism from becoming a major political force. That is to say, given the choices of other actors in society, most societal actors would rather choose the expansion of government than the shrinking of government. You know how Prof. Buchanan said a few weeks ago that governments have to step in to regulate the ratio of consumption over investment in order to prevent an economic meltdown? Or how workers turn to government to shield them from the cyclical nature of capitalism? That’s what I’m talking about.
A further note about the cyclical nature of markets. I’m beginning to think that the worse excess of free capital markets is overspeculation. I see similarities in the current economic crisis with the last Asian Financial Crisis. While the mechanisms that brought economies down are different, but the root stays the same. The positive feedback is this: investors simply put money in a bubble that continues to rise because people continue to put money into it. Then some exogenous factor kicks in, and suddenly some people wise up and quickly pull out before the bubble bursts (these people are the winners in this game). Then because they pull out, they burst the bubble and everyone else who still stays in the game are the losers — including the government.
In the Asian Financial Crisis, it was “hot money” in Thailand, Malaysia and Indonesia economies that western banks put into the respective economies expecting their economies to soar. For the American Subprime Crisis, it was property prices that were expected to continue to rise. Not to mention that the whole world is constantly held hostage by oil price booms as well.
Granted that speculation is a problem, what can we do about it? Is there a market solution that counteracts (international) overspeculation? Or is it primarily the duty of the government?
The next few weeks are going to be crunch periods for me with possible multiple deadlines a week. If I can, I’ll update the Lympho blog and pre-write a student society piece and schedule it for tomorrow.