Thursday, September 14, 2017

The New Road to Serfdom

In the traditional liberal, free-market school of economics, few hold a loftier position than Friedrich A. Hayek.  In the 1930s and early 1940s he wrote and published one of the best known books on economics and society.  He chose to call it The Road to Serfdom.  His thoughts were controversial at the time.  He was writing when the dominant themes of the day were driven by the rise of totalitarian regimes in Russia, Germany and Italy.  The three nations did not follow identical paths with Germany and Italy were grouped together as fascist states, and the most common opinion viewed fascism as a case where capitalism had gone wrong.  Hayek disagreed and concluded that totalitarianism in all three cases was a result of a move away from liberal, market-driven economic regimes to a more socialist approach.  In his view, socialism always leads to totalitarianism and will leave populations in a state of servility—or to use his word, serfdom.

“For at least twenty-five years before the specter of totalitarianism became a real threat, we had progressively been moving away from the basic ideas on which Western civilization has been built.  That this movement on which we have entered with such high hopes and ambitions should have brought us face to face with the totalitarian horror has come as a profound shock to this generation, which still refuses to connect the two facts.  Yet this development merely confirms the warnings of the fathers of the liberal philosophy which we still profess.  We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.  Although we had been warned by some of the greatest political thinkers of the nineteenth century, by Tocqueville and Lord Acton, that socialism means slavery, we have steadily moved in the direction of socialism.  And now that we have seen a new form of slavery arise before our eyes, we have so completely forgotten the warning that it scarcely occurs to us that the two things may be connected.”

Hayek was born in Vienna but spent most of his professional life in England and the United States.  He apparently was a wise man who deserved the Nobel Prize he ultimately received for his body of economic work.  However, his claims about socialism and serfdom missed the mark.  An inevitable conclusion, based on the above quote from his book, was that England was inexorably developing into a fascist state.  That nation has performed in a peculiar fashion at times over the years but no one has ever concluded it was a fascist state.

Hayek used the word slavery twice in the above quote, yet he chose the term serfdom for use in his title.  That is a curious choice.  Consider a dictionary definition of the term serfdom’

“A person in a condition of servitude, required to render services to a lord, commonly attached to the lord's land and transferred with it from one owner to another.”

The term serfdom is most often used in the context of feudalism, an economic system in which landowners agreed to allow serfs (peasants) to work that land.  There was an agreement in place that the landowner (lord) would receive a share of the earnings from the land and that each participant in the system had additional responsibilities concerning the functioning of the lord’s domain.  The terms of that agreement could vary widely.  In some instances a serf’s fate could be little different than slavery, but the serf had entered into a contract with a private entity more akin to a modern company than to a public entity such as a nation.  Words such as “servility” and “slavery” might have been more consistent with the point Hayek wished to make.

This splitting of hairs on terminology arose because Samuel Freeman produced an interesting document titled Illiberal Libertarians: Why Libertarianism Is Not a Liberal View.  Freeman believes that libertarian philosophies, which are often associated with economic liberalism, are actually illiberal and have as their goals ends that are inconsistent with the thinking of classical liberals such as Hayek.  In fact, current libertarian thinking, according to Freeman, is leading us back to a form of feudalism.  If that is the case, the serfs of the future will arise from a perversion of capitalism not that of socialism—just the opposite of what Hayek had predicted.

One must be careful to not confuse liberal social and political views with liberal economic beliefs.  In economics, the term liberal refers to belief in laissez-faire, market-driven economic systems.

Freeman tells us that classical liberals believed in market-driven economies, but they also recognized that markets could lead to unstable social conditions due to very uneven accumulation of wealth.  Consequently, some mechanism for social maintenance and redistribution of wealth must be available.  The government has a role to play.

“Major proponents of classical liberalism include David Hume, Adam Smith and the classical economists (most of whom were utilitarians), and contemporary theorists such as David Gauthier, James Buchanan, and Friedrich Hayek. I use the term 'classical liberalism' in the Continental sense to refer to a liberalism that endorses the doctrine of laissez-faire and accepts the justice of (efficient) market distributions, but that allows for redistribution to preserve the institutions of market society.”

“Liberalism evolved in great part by rejecting the idea of privately exercised political power, whether it stemmed from a network of private contracts under feudalism or whether it was conceived as owned and exercised by divine right under royal absolutism. Libertarianism resembles feudalism in that it establishes political power in a web of bilateral individual contracts. Consequently, it has no conception of legitimate public political authority nor any place for political society….”

Libertarianism has become an entirely different beast.

“By 'libertarianism' I primarily mean the doctrine argued for by Robert Nozick, and also in differing accounts by Jan Narveson, Ayn Rand, Murray Rothbard, John Hospers, Eric Mack, and others.”

“It is commonly held that libertarianism is a liberal view. Also, many who affirm classical liberalism call themselves libertarians and vice versa. I argue that libertarianism's resemblance to liberalism is superficial; in the end, libertarians reject essential liberal institutions. Correctly understood, libertarianism resembles a view that liberalism historically defined itself against, the doctrine of private political power that underlies feudalism. Like feudalism, libertarianism conceives of justified political power as based in a network of private contracts. It rejects the idea, essential to liberalism, that political power is a public power, to be impartially exercised for the common good.”

Is Freeman correct in claiming that dominant libertarian philosophies are generating an economy that begins to resemble feudalism?  Jonathan Taplin certainly believes so.  He invoked Freemen’s association with feudalism in describing the effect technology platforms are having in changing the relationship between employers and workers.  Taplin’s views are presented in his book Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy.

Taplin’s title is derived from a quote attributed to Mark Zuckerburg:

“Move fast and break things.  Unless you are breaking stuff, you aren’t moving fast enough.”

Some might read that statement and be impressed by the speed with which the tech empires, such as Facebook, Google and Amazon, have created dramatic changes in society.  In Taplin’s view, Zuckerburg was issuing the advice that to succeed in the tech world you had to move fast enough that you could break laws and trash ethical norms before anyone could catch you.  Once you established yourself no one would be able to stop you from doing whatever it is you wanted to do.  It is this elitist view that those who are the drivers of technology should be able to do whatever technology allows them to do that aligns the tech titans with the Koch brothers philosophically.

“….the Kochs are important because they financed the rise of the libertarian political framework that Peter Thiel, Larry Page, Jeff Bezos, and Mark Zuckerburg used to get rich.  Without the political protection of the Koch network, none of the Internet empires would exist at its current scale.”

“By 2013 both Google and Facebook followed Koch Industries and joined the American Legislative Exchange Council (ALEC)….ALEC states that its current goal is to further ‘the fundamental principles of limited government, free markets, and federalism’.”

Google and Facebook had, in effect, announced that they believed in the same economic policies as the Koch brothers.  Blowback from the more socially liberal community in which the companies were embedded eventually forced them to withdraw from the ALEC cabal, but the point had been made.

Taplin’s association of tech libertarians with the path to feudalism is best represented by what he refers to as the “Uber-izing of human labor.”  By insisting that its workers are independent contractors rather than employees, Uber plans on eliminating any government interference in the interactions with its workers.  There is only the collection of bilateral agreements between Uber and each of its workers who only have the rights Uber chooses to allow.  The drivers are now the serfs, the Uber managers are the Lords, and the computer platform Uber provides is the equivalent of the land the serfs were allowed to cultivate.  The insidious cleverness of Uber-izing is that labor is broken down into microtasks with accompanying micropayments.  No money is wasted on benefits and the rate of rent collected from the sea of workers can be changed arbitrarily.

The method of treating labor as microtasks to be farmed out, hopefully to the lowest bidder, has obvious advantages to employers and is growing in importance.  It is referred to as “crowdwork.” One only needs the appropriate tech platforms to connect with laborers.  As experience has demonstrated, a successful platform will generate network effects that make it difficult to mount competition.  And the profit to be made can be so substantial that any competitors that might appear are easily bought out.

Workers once spent a century struggling for the right to come together and demand to be paid living wages.  Progress has taken us to a point where individuals now collude in a system that encourages workers to be the lowest cost bidder for microtasks with micropayments.

Yes, we are now—finally—on the road to serfdom.

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