Stephen Harper campaigned for a majority so that his government could end judges’ discretion in sentencing and make criminals serve full jail terms. Even though crime rates in Canada have been steadily declining, and California and other U.S. states are concluding that filling prisons to overcrowding does little to reduce crime and is an unacceptable drain on public finances, Harper continues to insist that this is a priority of the Conservative majority.
An explanation is provided by a surprising source. Bernard E. Harcourt is a professor of law and political science at the University of Chicago-which has long been identified with neoconservative market extremism. In an earlier book, The Illusion of Order, the False Promise of Broken-windows Policing, published in 2001, Harcourt had marshaled evidence to show that more aggressive policing had no significant impact on crime rates in New York. Harcourt, early in his career, had practiced law in Birmingham, Alabama, representing prisoners facing capital punishment. He continues to act pro bono as an attorney for prisoners on death row.
In his latest book, The Illusion of Free Markets, Punishment and the Myth of Natural Order, Harcourt discusses the relation of unregulated markets and repressive policing. He points out that no markets are actually unregulated. They are either regulated by governments, in theory for the people, or by dominant firms, in practice in their private interest. He then goes on to make the case that markets directed by and in the interests of the wealthy lead to widening disparities and heavier repression not to expanding freedom.
Harcourt begins by examining the Chicago Board of Trade and the New York Stock Exchange. These exchanges are widely viewed as epitomes of the free market, but they are actually self-regulated private monopolies protected by legislation. Their rules are made by member firms and policed by internal committees that determine the methods and time of trading as well as who may participate. As should be expected, the rules favor those who make them.
The Chicago Board of Trade forbids outsiders from engaging in after-hours trading. However, the insiders who control the Board, when they agree among themselves, can modify the rules, giving themselves opportunities for exceptionally profitable trades. The Chicago Board of Trade and the New York Stock Exchange allow brokerage firms to restrict retail buyers (outsiders) from reselling for periods of 30 to 90 days. “But the same brokerage firms may allow large institutions to dump their stock in the after-market at any time.” In New York, “members of the stock exchange may get together and fix the commission rates on stock transactions of less than $500,000,” but they can “freely negotiate commissions for larger stock transactions” — which they dominate.
In Chicago, when parties are in dispute, the Board’s Office of Investigation and Audits may investigate. Where its decisions are challenged, the Commodity Futures Trading Commission may get involved. If disputes are unresolved, the U.S. Attorney’s office can initiate civil or criminal actions. The point is that these “free markets” are minutely regulated, first by the dominant insiders and then by civil and criminal law.
Stock exchanges are not exceptions. Markets from the local to the global are dominated by firms with the largest market share, who typically have privileged access to supplies, technologies, marketing networks and credit.
It is no revelation to point out that when a few are allowed to make the rules, they will direct markets in their own interests. Nonetheless, in mainstream economic opinion it is now taken for granted that it is preferable for markets to be directed by dominant corporations than to be regulated by governments. This was not always so.
Before the rise of industrial capitalism, industries were self-regulated-by Guilds that were usually dominated by wealthy merchants. Seeing this, political thinkers from the Scholastics to the Enlightenment generally held that governments had a responsibility to intervene to curb speculation, price gouging, and hoarding, to keep the prices of necessities low, to police the quality of goods and services, and to maintain public hygiene.
Mainstream economists now teach that support for free markets can be traced back to Adam Smith in the late 18th century and Jeremy Bentham in the early 19th. Harcourt notes that Smith and Bentham did view self-interest in the market as generally beneficial, but he points out both also wrote of circumstances in which government intervention was clearly required to curb the self-interested power of great merchants and masters.
Harcourt also questions the prevailing view that the late 19th century was a time of laissez-faire policies. While industrial production did expand dramatically, governments played critical roles in the accumulation of capitalist wealth. To expand their countries’ shares of global trade, governments organized and financed shipyards and railway construction. They spent lavishly on navies and armies and colonial wars. Each empire restricted access to captive markets through imperial preferences and tariff walls.
However, the claim that control of markets should be left to the rich has an historical precedent. Harcourt draws our attention to France before the 1789 revolution and the Physiocrats — so called because they advocated rule by natural laws. Most economic histories now dismiss Physiocrats for having insisted that land alone is the source of exchange value. In France in their time, that was not so controversial: land still was the main source of great wealth. In their time, what distinguished the Physiocrats was the claim that private property and unregulated markets were in accord with laws of nature and that the role of government was to vigorously repress criminal acts against this natural order.
Physiocrats held that absolute monarchy, by placing government in the hands of the largest landowners, was the natural form of government. Leading Physiocrats-Francois Quesnay, Samuel Du Pont de Nemours, and Le Mercier de la Riviere-were prominent in the Court of Louis XV. For them it was natural to oppose government restriction on profit-making. They likewise viewed it as natural to advocate repressive policing and onerous penalties for thieves, the idle, the disorderly and anyone else who could interfere with their natural order. Le Mercier, as governor of Martinique — then one of the wealthiest French slave colonies-gained notoriety for his heavy-handed policing which even plantation owners came to be believe was provoking disorder among the slave population.
Although slavery, landed aristocracies, and absolute monarchies have largely passed into history, the ideology of natural order — freedom for the rich and powerful, and repression for the dispossessed and disaffected — still resonates with the very rich and their supporters. That is at the root of the current neo-conservative reaction.
The institutionalization of democratic and human rights in the late 19th and early 20th century encouraged more people to demand that governments serve the people. Communist revolutions, the rise of Fascism and anti-colonial movements were threatening the dominance of Euro-American capitalism. After World War II most capitalist countries had adopted Keynesian welfare state policies.
Meanwhile, University of Chicago economists Milton Friedman and Friedrich Hayek, began campaigning to return to old ruling class verities. By the 1970s, they had a powerful constituency: the super-rich. Long hostile to Keynesian policies, and frustrated that domestic profit-making opportunities were decreasing, corporate oligarchs and the wealthy heirs of great family fortunes were smitten by arguments that economic rewards and decisions are best left to private wealth-holders. Funds from corporations and the foundations of wealthy families flowed to advocates of Chicago School economics.
By the early 1980s, neo-conservatives like Margaret Thatcher, Ronald Reagan and Brian Mulroney were elected in the U.K, U.S. and Canada. By the late 1980s a global Washington Consensus called for the deregulation of markets, cuts to the taxes paid by corporations and the wealthy, privatization of public utilities and cuts to social services.
Although some of the advocates of unregulated markets call themselves libertarians, the widening disparities that followed anti-Keynesian policies were accompanied by more repressive state power.
Freeing the rich to do as they choose in the markets they dominate allows them to appropriate more of total income. Among the masses, some benefit from a trickle down. Of those with declining income and employment, some find comfort in knowing that at least a few have more wealth than can be imagined. Others go on strike, organize boycotts, or participate in unauthorized protests. A few turn to petty criminality. In countries where people are generally dispossessed and impoverished, some lash out with what weapons are available. In response or in anticipation, the privileged demand more aggressive policing, more onerous criminal sanctions and more punitive military actions abroad.
In short, states that reduce their intervention in markets come to rely on escalating repression and violence elsewhere.—Al Engler
Allan Engler is a Vancouver writer and long-time trade unionist. His Economic Democracy, the working-class alternative to capitalism was published by Fernwood in 2010.