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Free Market Alternatives to Statutory Law
A Case for Free Market Solutions to Socio-Economic Problems and the Abolishment of Compulsory, State-Mandated, Statutory Law
By: Anthony Knittel
Embry-Riddle Aeronautical University — Worldwide
In partial fulfillment of the requirements for MGMT 533 Legal, Ethical, and Regulatory Bases of Management Practices
Dr. Hamilton
December 20, 2007
Free Market Alternatives to Statutory Law
“The law perverted! And the police powers of the state perverted along with it! The law, I say, not only turned from its proper purpose but made to follow an entirely contrary purpose! The law become the weapon of every kind of greed! Instead of checking crime, the law itself guilty of the evils it is supposed to punish!” (Bastiat, 1998, p. 1).
Claude FrД©dД©ric Bastiat (June 30, 1801 — December 24, 1850) was a French classical liberal theorist, political economist, and member of the French assembly. I have invoked Bastiat’s words above because the same situation exists in America today as the France of 1849. The same socialist-communist ideas and plans that were then adopted in France are now sweeping America. The explanations and arguments then advanced by Mr. Bastiat are—word for word—equally valid today. Bastiat maintained a deep distrust of all government, in any form, and worked all his life to demonstrate that government control of private individuals and regulation of private industry was inefficient, economically damaging, and morally wrong. Bastiat asserted that the only purpose of government is to defend the right of an individual to life, liberty, and property. From this definition, Bastiat concluded that the law cannot defend life, liberty and property if it promotes socialist policies inherently opposed to these very things. In this way, he says, the law is perverted and turned against the thing it is supposed to defend (Bastiat, 1998). This paper examines several areas of current statutory law within the United States that Bastiat would have considered “legal plunder”, or in modern vernacular-“legalized theft”.
Anti-Trust Law
Let’s begin by examining current anti-trust law. The claim by many is that a Federal statutory scheme on the restraint of trade became necessary due to changes in the structure of the U.S. economy. According to Jennings (2006):
“During the last half of the nineteenth century, the United States experienced a tremendous change in its economy. A primarily agricultural economy changed to an industrial economy. Law on business combinations was largely undeveloped and unsuitable for the types of predatory business practices this new industrial age brought. Furthermore, because common law was the only source of law for dealing with these business problems, those laws that did exist were nonuniform. In reaction to the lack of laws and the public outcry over business abuses, Congress became involved, passing federal statutes on antitrust issues in the late nineteenth and early twentieth centuries. With some amendments and changes, this scheme still exists and applies today” (p. 658).
Congresses reaction to so called “predatory business practices” and the alleged “public outcry over business abuses” led to such laws as the Sherman, Clayton, and Robinson-Patman Acts. According to Jennings (2006), “the Sherman Act covers the horizontal restraints of price fixing, market division, group boycotts and refusals to deal, joint ventures, and monopolization” (p.661). But what exactly is monopolization?
When market freedom is advocated, one thought which springs to many minds is the fear of unchecked monopolies running amuck, trampling the rights of “the little fellow” and ruthlessly driving any would-be competitors to the wall. It is widely held that without strict government control such monopolies would proliferate and virtually enslave the economy. But according to Tannehill (1970):
“There are two kinds of monopoly—market monopoly and coercive monopoly. A coercive monopoly maintains itself by the initiation of force or the threat of force to prohibit competition, and sometimes to compel customer loyalty. A market monopoly has no effective competition in its particular field, but it can’t prevent competition by using physical force. A market monopoly can’t gain its ends by initiating force against anyone—its customers, competitors, or employees—because it has no legal power to compel people to deal with it and to protect itself from the consequences of its coercive actions.”
Tannehill (1970) contends that, “Not only are market monopolies no threat to anyone, the whole concept of monopoly, as commonly held, is in error” (p.28). A monopoly is supposed to be a business which has exclusive control of a commodity or service in a given market, or control that makes possible the fixing of prices and the virtual elimination of free competition. A market monopoly cannot prevent competition from entering its field because it cannot use coercion against would-be competitors and thus it can never have that exclusive control.
John D. Rockefeller and his Standard Oil company attempted to maintain a market monopoly during the late 19th century. As Ruwart (2003) explains, “In spite of Reckefeller’s maneuvering, however, the marketplace ecosystem protected consumers from monopoly exploitation.” While the marketplace ecosystem thwarted Rockefeller’s quest for monopoly, aggression-through-government worked in his favor. Most railroads were government subsidized. Had the marketplace ecosystem developed transportation alternatives naturally, oil transport would likely have been decentralized, to the benefit of Standard Oil’s competition.
The fear of ruthless, uncontrolled monopolies is a valid one, but it applies only to coercive monopolies. Coercive monopolies are an extension of government, not a product of the free market. Without governmental grants of special privilege, there could be no coercive monopolies (Tannhill, 1970).