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Jan. 17, 2008 - Freedomain Radio - Stefan Molyneux
29:49
961 Why Libertarianism Fails Part 2 (audio to a video)

Why has libertarianism been such a constantly disappointing cluster-frack?

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Hi everybody, it's Stefan Molyneux from Freedom Aid Radio.
I hope that you're doing very well.
I come to you from the lovely city of Miami, Florida, where we are setting up for the very first Freedom Aid Radio symposium on Saturday, which is the 19th.
It's the 17th of January 2008, tonight.
And just before I head out to meet my wife, she's doing a little shopping.
And when I say a little, I mean...
So, as I talked about in my last video,
Poolside... The question really has a lot to do with empathy, with being able to turn around your perspective and see the world from somebody else's viewpoint and fully accept that individual as somebody with his own capacity and self-interest and his own choices and his own desire for his own advantage and the advantage of those he cares about and so on.
And if we can do that, we are much closer, obviously, to understanding rational free market economics and, to some degree, the futility of political action.
But, as I'll talk about a little bit later in this video, we're a hell of a lot closer to having better relationships within our own lives as a whole.
So let's have a look at a scenario that is often put forward as a reason as to why, oh God, why free market economics can never work, that the free market is unjust, and why we need a government,
and so on. And just as we talked about in the last video, this requires that, you know, to go back to, because we're all about, you know, high-definition props here at Free Domain Radio, to go back to looking at the palm actor and the finger and thumb actors,
that only the palm actor in any interaction is the one who has any power and capacity to impose his will upon everyone else, and nobody else has any particular power To reimpose their will back or to make alternative decisions that are going to frustrate the palm actor.
Let's take a look at a scenario that's often brought up as to why free market economics cannot work, and even if people accept that you can't end up with a big monopoly or a sort of societal spanning monopoly, that you could end up with a monopoly In a small town.
And this example is something that we've all heard if we've debated economics, and I'll go over a couple of obvious, I think, refutations of that perspective, and then we'll talk about how these beliefs seem plausible when they're so clearly not plausible.
We've heard that if you put forward the argument and say, well, here's why you can't have a monopoly in a societal sense or in a sort of larger geographical sense, and they'll say, ah, yes, but, my friend, what about the monopoly that's going to show up in a small town?
So if you have the only grocery store in a small town...
By God, you can just jack up the prices as high as you want and there'll be no way that anybody can interfere with your business because there's not any room in that small town for another grocery store and so on and so on and so forth.
And this is all pure nonsense, of course, but it seems, for reasons which we can go into in a little bit, it seems vaguely compelling, though of course it's not even remotely true.
One of the ways that people end up making these kinds of mistakes is they assume that these situations just pop into existence out of nowhere.
You know, out of nowhere. Bing!
You know, like some cardboard town is magically created out of nothing, wherein there is only one grocery store and everyone buys from that store and so on.
And this, of course, is nonsense.
As we all know, when a grocery store comes into, or anything comes into existence from an economic standpoint, it's had a whole bunch of people looking at it and evaluating it and deciding whether to do it and whether not to do it and so on.
So let's say that there is a town that is gathering because some new factory or mine has opened up and the town is sort of bubbling up.
And we say, gee, it would be great to open a grocery store here.
And we're not multi-billionaires because if we were, our primary business venture probably would not be the opening up of a grocery store in a small town.
So let's say that we're part of this town and we say, wow, this place really needs a grocery store and so on.
Well, the first thing that we're going to need to do is we're going to need to go and get investors because it costs a lot of money to open up a grocery store.
Because you've got to build the damn thing, which is hundreds of thousands or millions of dollars.
You have to pre-order all of the food.
You have to hire all of the people.
You have to do the advertising.
You have to buy or rent the land.
Even in a perfectly free market, there are a billion and one expenses that would make the opening of a grocery store at least a couple of hundred thousand dollars, if not more.
So where are we going to get this money from?
Well, we're either going to come up with it ourselves somehow, take out a second, third mortgage on our house, or we're going to dump our savings into it, or we're going to go to the bank.
So if this is the case, and this of course happens in a larger context as well, we're just talking about this particular situation.
So if this is the case, then what happens is, let's say we go to the bank and we sit down with the bank manager and we say, we want to open this grocery store, blah, blah, blah, blah, blah.
And he's going to say, oh, okay, well, why don't you show me how it is that if we lend you a couple of hundred thousand dollars, we're not going to lose our investment, right?
So they want to look at their profit and loss statements and so on.
Now, if your profit says...
That, well, I'm going to charge $50 for a liter of milk, right?
This is 2008. It doesn't cost that much yet, in case you're watching from the future.
Then, obviously, the bank manager is going to say, well, that's just way, way overcharging.
People won't buy from you.
It's like, ah, but they have to because they're going to be coming to this town, and I've got the only grocery store.
I have a monopoly, blah, ha, ha, right?
So I can charge them anything that I want.
And the bank manager will say, well, these kinds of prices are going to ensure that your business is going to fail because somebody else is going to come along and we're not going to give you the loan.
It's too risky. Someone's going to come along and undercut you.
People will order groceries over the internet.
People will grow their own vegetables.
Farmers will bring in farmer's market stuff.
Every Saturday. I mean, this is just not going to work.
There'll be ways in which you simply won't be able to sell your groceries at this price.
So it's too risky. I mean, yeah, it'd be great if you could.
Who wouldn't want to charge $50 for a liter of milk?
It'd be fantastic, right?
Lots of money. But people won't do it.
And that's just part of flipping yourself.
And any good investor and any good business person has to do this, fundamentally has to do this to be successful.
Right? You have to sort of sit there and say, okay, well, if you go in and charge $50 for a liter of milk, what are people's responses going to be?
They're not just going to sit there and say, oh, okay, here's your money, right?
I mean, they're going to say, well, I'm not paying $50 for a liter of milk.
What are my alternatives going to be?
And so the bank manager is simply not going to give you the money.
And if you are going to put your own money in, of course, you're going to be even more hesitant about charging these, quote, predatory prices because it's just not going to work.
It's just not going to work.
And if you just sort of magically get through this phase of the business, and you sort of manage to convince the bank manager to give you the money, and then you start to jack up prices...
Well, there's lots of ways in which people can react to that to make life unpleasant for you, right?
We're talking about a small town, right?
That's the setup. So, it's a small town.
Well, what happens if you have cornered the market, got your supermarket going, and you just start jacking up the price of food?
Well, you are part of a closed economy in here.
And we're not talking about the free market as a whole, because that can be dismissed with other arguments.
We're talking about a closed market.
Within a particular geographical location, a town or whatever, that's what's been set up.
So if I just start screwing everyone with $50 a liter milk, then what's going to happen?
Well, I am part of this economy as well.
I need a doctor.
I need a plumber.
I need an electrician.
I need people to run electricity to my house.
I need water. I need, you know, I guess, I mean, water for my lawn and stuff.
I need to fill my tank with gas.
I need to participate in this localized economy.
So what's going to happen?
What would you do if you were the gas station down the road and I began screwing everyone by tripling or quadrupling my prices?
What would you do? You'd say, well, you've got us by the short and curlies, my friend.
You can do that, but I'll be damned if I'm going to let you fill up at my gas station.
Well, you're living in the town too, because it's a closed economy, right?
We're not talking about, right?
It's a closed economy. That's the only way that, because the general monopolies we've already talked about, we're talking about the monopoly in a small town, you still have to live there.
What if you call up the doctor and you say, my kid has a sore throat, and the doctor just came back from your grocery store where you had to pay $300 for five years of corn?
He's going to say, nope.
No, no, no, no, no.
Sorry. Not interested.
Not going to come and talk to you. I mean, you are going to be a pariah in this town.
Your kids are going to get mocked at school, and maybe the school would expel them, right?
The school would just say, no, I'm sorry, we're not going to...
I'm not going to have your kids come here.
You're gouging us all with these ridiculously inflated prices.
Forget it. I'm not going to do business with you.
Nobody's going to do business with you if you cheat them.
Other people have the capacity to react and make choices of their own depending on your actions.
When you make a choice, You are sending out ripples in a stream, and there are a million other ripples in that stream of other peoples.
Think of them as dropped pebbles, right?
You don't get to drop a pebble and just make your ripples dominate the whole stream.
Other people get to drop their own pebbles, make their own decisions in reaction to yours.
The social environment that we work and make choices and act in is a complex, complex ecosystem where everyone is making their own choices, where we are...
Where we are the most important factor in our own calculations and other people are lesser factors.
I mean, economic, not sort of familial or romantic.
But we're just one tiny sliver of other people's economic calculations.
So, if I have taken all of this, if I've got a life in this small town, I've invested hundreds of thousands of dollars into building this grocery store, I start overcharging people, they just stop doing business with me.
Because when you have that local small town economy, everyone knows everything.
I worked in some of these towns when I was younger after high school.
I worked as a prospector and a gold panner in Northern Ontario and Saskatchewan and Manitoba for about 18 months off and on.
I mean, these small towns, everybody knew everybody's business.
Everybody knew everybody's business.
If you start screwing people from a business standpoint in a small town, they will simply stop interacting with you.
They will stop doing business with you.
You will be ostracized. Your children will no longer get playdates.
You will no longer be able to get gas or, you know, people will simply say, hey, I'm no longer going to supply water or electricity to your house or whatever, right?
There are a million different ways that people can respond in a sort of closed economy, single town situation.
To ensure that you get punished for these things.
This idea that one person can just make a decision and no one else can make a decision back or fight back in any way, shape, or form, is not the case.
Let's take another example, if you don't mind, just before we toodle along.
I'm not saying that I've clinched that case.
There's a million different ways that this could be responded to.
But let's look at the situation where you have a town Where there's a factory, right?
And the factory is producing widgets.
And it employs 80%, 50% of the people in the town are employed at this one factory.
Well, and they've all bought homes, and their kids are all friends, and they're embedded socially and economically into this environment.
Well, because I am by far the greatest employer of people in this town, in fact, it's the core of the town's economy, Why don't I just drive down the wages?
Just start saying 10% less, 10% less, 10% less.
If people are stuck here, they're embedded, they're just going to have to shut up and take it, right?
No, no, no, no, no.
It's not how the free market works, even remotely.
It's how public education works.
God help you, I bet it's how your family worked.
It's probably how your siblings worked with you, but it's not how freedom works.
And if we don't get this distinction, we're forever going to remain enslaved.
So let me sort of explain what I mean by that this is not how it works.
So if I'm evil Mr.
Burns capitalist guy, and I have a factory...
Where I'm paying my workers $20 an hour.
And I say, gee, you know, I'm the sole hirer here.
I can just drive these people down to $15 an hour because there are no other jobs in town, right?
Well, that won't work.
It simply won't work. You have to remember that in any free market, there is a massive amount of investment capital that is just waiting to pounce.
On economically productive situations where it can squeeze a buck out of existing circumstances.
That there's this floating sort of Damocles which is waiting to fall down on any economic inefficiency and make money from making that more efficient.
So if you've ever hired and trained people, and I have in about 15 years in the software industry, if you've ever hired and trained people, you know that for the first...
I don't know. A couple of weeks to a couple of months, they're useless as tits on a ball.
They're just learning stuff and they don't know what's going on.
They haven't melded into a team.
And a certain percentage of them, depending, 10% to 20%, they're just not going to work out.
You're going to invest all that time and energy into them.
They're either going to get another job or they're going to get pregnant or they're going to not be interested in this or they're going to, I don't know, get religion, go join a cult somewhere.
So, whenever you hire people, and there's a huge amount of effort and training that goes into them, and sometimes that works out and sometimes it doesn't.
So when you are a factory owner and you have a factory that is humming along where you've got the relationships are sorted out, the conflicts are low, the team is cohesive, everybody knows their job, you have a huge amount invested, millions upon millions of dollars invested in that workforce that they then have as power over you.
Right? Because, again, we're talking a small town, not some border town with six million people passing through every day where you could just take your pick of workers.
Because people talk about this sort of closed economic system.
So, if I'm this evil capitalist guy and I say, well, I'm going to bang these people's wages down from $20 to $15 an hour...
I'm going to piss them off, right?
My workers are going to be unhappy, and they're going to talk to people, and other people are going to talk to people, and maybe I've got a board, or maybe I've got a bank, because you need a capital lifeline when you've got a capital intensive business.
You can't just sort of say, well, we'll fund everything based on our revenues, right?
You have to have sort of cash in the bank.
So, what's going to happen is, let's say that I can just push this through.
Well, I have a very unhappy workforce that is now earning 25% less than it was before, and they're tight, and they're cohesive, and they understand the business, and they know their machinery, and so on.
Well, what's going to happen is, there is going to be a massive economic incentive for my competitor to come and build a factory in the same town.
Right? It's going to be a massive economic incentive for my competitor to come in and build a factory in the same town.
Why? Because he will be able to transplant my pre-trained, pre-synced workers from my factory to his factory, and he's going to get a fully assembled set of workers who are skilled and cohesive and productive right off the bat.
That saves him millions of dollars, it costs me millions of dollars, and it is almost certainly going to drive me out of business.
So he saves money, it costs me money, and he eliminates a competitor.
And he gets a very grateful and happy workforce.
So that's simply not going to happen.
The other thing is that, again, when we look at the development of these sorts of towns, situations, these little town situations, Well, I'm sorry.
And the person who comes in to buy out the factory could easily be one of the workers, the foreman, right?
Goes to the bank and says, look, this guy is screwing us.
He's not paying us enough.
We're all going to go on strike.
We're going to shut him down.
We're going to shut him down and he's going to hemorrhage money and then we'll buy it back for 80 cents on the dollar and then we've eliminated the overhead and so on.
And so that's another way that it could be done.
The banker is going to take that for sure.
Or... It could happen, you say, well, if everyone goes on strike, he'll just ship all these new workers in.
Well, but that's not the case, because the new workers are going to say, wait a minute, I've got to come all the way to this one town to be sort of at your economic mercy, so to speak, and your workers are all on strike because you just screwed them?
Thanks, but no thanks, right?
I don't think I'm going to come.
Because when you screw a whole bunch of workers, the other workers aren't going to want to come and uproot themselves and come into your factory and so on, right?
So, there are all of these ways in which the options, when you screw people, they have the chance to screw you back and the opportunity to screw you back.
And all of that stuff is so foundational and essential to understanding how a free market works.
But it takes a leap of empathy.
It takes a leap of empathy to say that when I move a chess piece, somebody else moves a chess piece.
And I don't control the chess board.
I'm just one actor in a wide and incredibly and almost infinitely complex economic system.
I don't get to just order things around like God or something, right?
I make a decision.
Other people make a reacting decision.
And so there's no way to get all of this stuff done.
The other thing, too, is that if we look at and remember that these sort of factory towns don't pop out of nowhere, if you say, okay, well, some desert in Nevada is a great place to build my factory, you've got to lure people there, right? You've got to lure people there.
And how are you going to lure people there?
Well... You're going to lure people there by giving them long-term contracts where you guarantee them 3% or 4% or 5% raises every year, assuming production goals are met and this and that and the other.
So you give them a legal contract and you put money in a pool and says, if I ever break this contract, you guys get all this money and it's out of my hands and here's the notarized third party who's going to manage that and so on.
Because you have to lure people to come to work in your factory, to come and live in your town, the town that you want to create.
So, it doesn't make any sense when people talk about some factory owner being able to shaft all of his workers, even if we look at it in a small-town environment.
As soon as you've got a disaffected and unhappy workforce, that is a massive opportunity for other people to come in and scoop up that pre-trained and cohesive and productive workforce, saving millions upon millions of dollars, getting rid of a competitor.
And strikes can work, and all of these kinds of good things can work.
So, anyway, that's just sort of an example.
If we look at the philosophies that do the most damage in the world, they're all predicated on this belief, on this philosophy.
Fantasy that there is a single actor, there is a one prime palm actor, and everybody else just gets screwed by that person and there's nothing they can do.
And because we have this one actor who can do everything and impose his will on everyone else...
We need a government to counteract that, right?
So you get, you know, the unstoppable force and the immovable object.
All the guns in the world that are trained on people by governments are justified because it's believed to be this one prime actor that's going to screw everyone.
And so to balance that out, we need this other prime actor, the state with the fist, to control this guy.
But this guy's power is purely illusory.
In a free market. This guy's power is purely illusory.
If you look at...
Marxism. Marxism is the idea that the evil stovepipe hat-wearing capitalists have complete control and can screw the workers and grind them down and beat them up and do whatever they want to them.
And so because there are these capitalists with this evil power, you need this massive state to counteract the evil capitalists.
And it's all just this mad fantasy.
And it could only come out of a corrupt cult like Judaism.
That's just inevitable, right?
When you have these kinds of religious cults, fascism could only grow out of Catholicism.
Communism could only grow out of Judaism.
And the imperialistic The bloodthirsty Christianity...
Sorry, the imperialistic bloodthirsty U.S. could only come out of Christianity, right?
I mean, this is inevitable, right?
Whenever you have these fantasies, whether it's God or a particular class where there's just one person who has all the power, then you have this fantasy that if we create another group with opposing power, somehow this is going to balance out.
But it never works that way at all.
So... We talked sort of briefly in the last video about how it is that people end up with this idea that there is this one palm actor who gets to run roughshod over everybody else.
If we can crack that nut, then we are doing a hell of a lot.
I would say we're doing more than anything else to advance the cause of liberty in the world.
And for those who are relatively new to my video series, this is something that I've been working on for years now.
Which is to remind people that in their relationships with others, there is no palm actor who gets to say and do whatever they want, and we all just have to roll over and let it happen.
There is no core palm actor, unless we believe there is, in which case it's just made up, right?
I mean, if I believe in God, it doesn't mean there is one, it just means I believe in it, and I'm going to obey this mad fantasy.
And so, I continually tell people, and hey...
Why not tell you now? I continually tell people, look, this palm actor, this mad guy, mad woman, or man, or god, or mother, or father, or sibling, or boss, or race, or class, this mad palm actor who gets to run roughshod over you, Only exists within your mind.
I'm not talking about the guns of the state.
I'm talking about your particular social familial environment.
Your particular social and familial environment.
If your parents are bullying asshole palm actors, don't see them.
Don't see them. I mean, that's what I call freedom, right?
And this is the way that we move libertarianism forward, is we stop acting as if there's a central core palm actor in our life who can just do whatever they want and we just roll over and say, hit me baby one more time.
We make those choices.
To undo this fear or this fantasy of this all-powerful monopoly.
We get rid of the concept of God within our own minds and we stop obeying these mad priests and we get rid of the concept of the state and we stop obeying the fantasies of patriotism and we still have to obey the state because they've got the guns and they can shoot holes in us.
But we give up the fantasy of patriotism and allegiance to country, and we recognize the military for the costumed hitmen that they are.
And we just get rid of these illusions.
And more particularly, we attempt to bring this level of freedom and voluntarism to our own personal relationships.
And that means that if you are a woman being beaten up by your husband, you leave him.
You don't let him be a palm actor to you or to your children.
If your mother is a manipulative witch and you loathe and your skin crawls when you see her, don't see her.
I mean, that's freedom.
That's choice. That is actually moving the debate of libertarianism forward because when we act in a way that is truly, deeply free according to valid, rational, logical, moral ethics...
When we act in a way that is really free, that is how we really spread freedom.
Libertarians will want to argue these questions of monopoly and who builds the roads and how the poor get educated.
We'll argue this until our children's children's children's bones are rotting in the last gulag of the last state.
And it's not going to do a goddamn thing to get rid of or undermine the power...of the state.
And the only way that we can get rid of, undermine, and undo the power of the state, this vast, massive, multi-generational project that is absolutely essential and guaranteed will get schools named after you in the future.
Private schools, that is. The only way that we can do that is to recognize that there is no palm actor in our life except what we make up ourselves.
That if you enjoy spending time with your brothers, your sisters, your cousins, your parents, if you enjoy and you find that a rich and wonderful, great experience, wonderful, fantastic.
But if you don't, then you are not obligated to serve that.
You are not obligated to serve the fantasy of parental virtue any more than you're obligated to serve the fantasy of state virtue or patriotic virtue or military virtue or any of these sorts of things.
And the moment that we rationally assess and act Independent of the whims of this palm actor.
Then we do an enormous amount.
We do the most fundamental and powerful thing to move the debate of freedom forward.
Much more so than just arguing about monopolies and roads and schools and so on.
But once we recognize and accept that there are no unchosen, accidental, positive obligations like family or country in us, and that our only allegiance is to the truth and to virtue...
Then we really do begin to solve the problems that libertarianism has always faced.
Because we then can show people, not debate with people, we can show people what a free life truly looks like.
And that will have the weight of 10,000 perfect, flawless economic arguments.
One day, one hour, one minute.
In the orbit of a truly free soul will do so much more to free the world than reading all of von Mises, God bless his genius soul, from cover to cover, all the Rothbard, all the Rand, all the Hop, everyone on the planet that you can imagine.
Reading all of those people, becoming perfectly well-versed in those arguments, will do nothing To accelerate the cause of freedom, and we know because it hasn't in the last couple of hundred years since Adam Smith and since Socrates.
It doesn't do a damn thing.
We just turn into polysyllabic windbags.
But when we actually live free, we radiate freedom to those around us.
And then they will actually be able to think for themselves why monopolies wouldn't work because they don't work on us.
Thank you so much for listening and watching.
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