On Criticising Private Businesses and the State

On Criticising Private Businesses and the State

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A common mischaracterization of the libertarian position is that it is either indifferent to or supportive of all kinds of unethical activities conducted by businesses and individuals in the private sphere. Although this appears to be more of an attempt to stigmatize libertarianism than to carefully assess it, it’s true that its proponents exert far more of their energy to protest State activity than anything going on in the private sphere. I’ve elaborated in detail in previous articles why I think this prioritization is justified, for reasons such as the State creating barriers of entry against competitors in the market; generally accelerating antagonism between the rich and the poor in the private sector; slowing down innovation and economic progress; using plunder and extortion as their primary means for financing; and having completely illegitimate philosophical foundations. Having written many critiques of the State, however, I will here take up the question to which degree libertarians, as well as others, should also view private businesses with skepticism and call them out when they do wrong.

First of all, it’s important to recall that both the private sector and the State are run by human beings and that the primary cause of the differences between these spheres is the incentive structures which encourages or discourages particular activities. Accordingly, people can act unethically whether they’re the owner of a private business or a politician. The mafia, Bernie Maddoff, and Enron are notable examples of this, all of which have received a major degree of notoriety. Given that there is already widespread agreement on the improprieties conducted by such individuals and institutions, however, there aren’t many people left to persuade over to such a position, and thus a more useful activity would likely be to expose less well-known wrong-doing, whether done by the State or other private businesses (or a cooperation thereof). In the case of private businesses, in contrast to the State, customers who become aware of unethical activities can respond by “voting with their dollars” by stopping to shop their goods and services and rather going over to the competitors.

Though it may sound like many libertarians explain this as an automatic process, it clearly requires that the customers become more familiar with the businesses and their products and act accordingly. To provide a less-extreme example of this, imagine a village with ten different grocery stores, four of which someone named Sarah is familiar with. Of those four stores, there may be one which she primarily uses, which may be much due to geographical convenience. Though the store most of the time has all the groceries she pursues, the prices of these products may be higher and the quality lower than that of a competitor, indicating that she could save money and/or get higher quality services if she shopped elsewhere. If Sarah at one point decided to become a more “conscious consumer”, she could do a bit of investigation and discover some of the six other grocery stores she wasn’t previously familiar with, and compare prices and quality between their products.

Naturally, it would take quite a bit of effort to conduct such a thorough investigation, and extra-price costs such as geographical distance would have to be taken into account, but if we extrapolate the example of Sarah to look at the hundreds to thousands of people that may live in the area and have tried various companies, we get more of an idea how the “market” tends to self-correct so effectively. For instance, John has a history of buying X both at companies A and B and informs his friends and family that B has the best price for its quality, and Frank responds to John that he considers another company C to supersede B in this respect. The examples are virtually endless, and in this way, personal observations and reputation based on such spread of information can at an aggregate level significantly affect the actions of the consumers, working as a powerful system to filter out the businesses which do the worst job in satisfying the wishes of the public given that the State doesn’t interfere significantly through bailouts, subsidies, regulations, and other special privileges.

This is the power of decentralized information, which Friedrich von Hayek elaborated remarkably well in The Use of Knowledge in Society and showed that any attempt to centralize the economy would end up in trouble with acquiring and navigating all this information spread throughout society. Becoming a conscious consumer isn’t something everybody needs to do for the “market” to self-correct, but as long as it’s relatively unhampered, it generally tends to do so as a result of the decentralized information network. By doing so, however, one could personally benefit greatly in the long run through cumulative growth by more cost-effective purchases, as well as one’s associates by making them aware of such opportunities.

One of the most relevant cases of business criticism today is Big Tech. The censorship and political bias often experienced at sites like YouTube, Google, and Facebook today have made conservative populists view with scorn libertarians who don’t want the government to hold such companies “accountable”, although they receive hundreds of millions of dollars in subsidies and have contracts in cooperation with governmental entities such as the Pentagon, the military and NATO. “In fact,” Defense One reports, “defense contractors and high-level U.S. intelligence officials say that social network data has become one of the most important tools they use in the collecting intelligence.” It is true that many libertarians contend that such “private” companies can make decisions in violation of the wishes of the public if they so wish, but a more potent case to make on the issue would be to make more people aware of the collusion by Big Tech with the government, and to transition to more preferable platforms not engaged in such unethical conduct (like Gab, Minds, Steemit, Parler, Bitchute, etc.).

Libertarians may differ in their balance of criticism against the State and private businesses; and although the prioritization of the State in this respect can be well justified, it’s important to recognize the responsibility each and every one of us has in contributing to the market self-regulation process by promoting the good and condemning the bad. It is certainly not obligatory to praise Enron or Maddoff to be a libertarian; quite the contrary, to denounce such companies and figures is to participate in the very process that one tends to argue makes the free-market such a remarkable system.


Stefan is a Norwegian high school student studying economics in his spare time, with aspirations of eventually taking a Ph.D. in economics and afterward contributing to growth in the private sector. He’s a follower of the Austrian School of Economics, drawing inspiration mainly from Claude-Frédéric Bastiat, Ludwig von Mises and Murray Rothbard, and blogs regularly about thoughts on a variety of topics, mainly economics and politics, but also philosophy, psychology, and history.

This article was sourced from Mises Revived.

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