The Death of Libertarianism?

The Death of Libertarianism?

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In the wake of the 2008 financial crisis, some commentators proclaimed the death of libertarianism due to the deregulation in the Greenspan era that they saw as intimately connected to the 2008 crisis. Jacob Weisberg of Slate noted: "Like other ideologues, libertarians react to the world's failing to conform to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight and the capacity for pragmatic intervention constitute a recipe for disaster. They are bankrupt, and this time, there will be no bailout."

On one level, these commentators couldn't be more wrong. After the financial crisis, libertarian attempts to blame the financial crisis on implicit government guarantees that led market participants toward taking excessive risk seem to have been moderately successful, especially given the relative failure of mainstream economics in forecasting the crisis. Ron Paul's fourth-placed finish in the 2012 Republican Presidential nomination race was the most successful and public showing by a libertarian-leaning Republican in a major national election since Barry Goldwater, and the Libertarian Party candidate in the 2012 election, Gary Johnson, garnered more votes than any other Libertarian candidate in history. Libertarian populism is talked of increasingly as a potential future electoral strategy for Republicans in an America that has become more socially liberal.

Yet these successful libertarian attempts to gain the spotlight by among other things offering some (at least superficially) convincing explanations for the financial crisis seem to have sown greater future problems for libertarianism. Proclamations by libertarians including Ron Paul of imminent soaring inflation — up to 50% by 2013 — have proven horribly wrong. This is a significant problem for libertarian and the Austrian economic theories widely disseminated by libertarians such as Paul, which declares attempts to reinflate the economy following a crisis as certain to lead to the destruction of the currency by inflation. Meanwhile, inflation projections of mainstream economists like Janet Yellen and Ben Bernanke who proclaimed inflation would remain low and stable have proven right.

The event that may truly herald the death of modern libertarianism is not something as discrete as a financial crisis, or a series of failed inflation projections. It is simply that society may have become more tolerant of and hungry for larger scales of government intervention.  Government spending as a percentage of GDP has gradually increased:

FRED Graph

This increase has not been marked by widespread opposition beyond the contrarian fringes. In fact, some polls find widespread support — up to 58% — for greater government activity.

Perhaps one reason for this is that sometimes the state can be more entrepreneurial — taking more economic risks that lead to economic reward — than the market. As Mariana Mazzucato has asked: "Where would Google be today without the state-funded investments in the internet, and without the US National Science Foundation (NSF) grant that funded the discovery of its own algorithm? Would the iPad be so successful without the state-funded innovations in communication technologies, GPS and touch-screen display? Where would GSK and Pfizer be without the $600bn the US National Institutes of Health has put into research that has led to 75% of the most innovative new drugs in the last decade?".

Additionally, the state appears to be able to run certain amenities such as healthcare and infrastructure more efficiently and at lower costs than the market. One only has to look at the costs of market-based American healthcare against the costs of European state-run healthcare to see  this:

Of course, libertarians are strongly opposed to the less costly state-run healthcare, which as. Jamelle Bouie suggests puts libertarians far outside the political mainstream. And furthermore it remains unproven that any kind of widespread free market economy is even possible without a state-created legal and infrastructural framework. What preceded the advent of the modern state was not a harmonious libertarian utopia, but a rigid feudal economy. These facts taken together — along with the failure of markets to bring down the unemployment rate following the financial crisis — strongly imply that we will not see libertarian ideas extending far beyond the contrarian fringes in the near future.

Yet that is still not the death of libertarianism. In the 20th century — in the context of the growth of the leviathan states we see today — libertarianism existed predominantly not as a popular or widespread political ideology, but as a fringe movement far outside the political and economic mainstreams consisting predominantly of people who didn't want to be governed. A return to the fringes would be a return to the movement's roots. 

In the longer run, the upsurge in libertarianism seen in the last five years has come about as a result of the decentralisation of mass media, through the growth of the internet which has allowed libertarian and libertarian-leaning voices to be heard more widely. The 2008 and 2012 Paul campaigns were driven by online co-ordination and fundraising to a huge degree. As more decentralised technologies proliferate — for example, decentralised energy like solar and wind, decentralised finance like Bitcoin, and decentralised manufacturing like 3-D printing — more people may be drawn toward libertarian ideologies of self-government and decentralisation. In fact, in a genuinely superabundant society — something that our society remains relatively distant from, many (although probably not all) of the functions of the state — especially those related to redistribution and economic management — may simply be eroded away. And even if that does not occur, it seems likely to me that the first private space colonists — individuals like Elon Musk and his intellectual descendants — may be motivated by that same libertarian ideological desire for self-government. 

So while there may be no life in libertarianism as a political ideology for the mainstream in the near future, there may be a good deal of life in it otherwise, and even more so deeper into the future. Reports of its death seem shockingly premature.


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