By Javier Paz García

Image credit: Libertad.org

 

It is common to describe classical liberalism (in its European sense, not American) as a movement in favour of employers and against employees. Marx maintained this and socialist movements have done the same ever since. It is true that liberalism values the importance of the capitalist entrepreneur as a fundamental agent of innovation and development; it is true that it considers private property as an indispensable institution for the preservation of freedom and economic growth. But it is not correct to affirm that liberalism privileges the capitalists.

Ludwig von Mises (1881 – 1973), in his book Liberalism affirms that “historically liberalism was the first political orientation that concerned itself with the welfare of all and not with that of certain social strata”. As Mises himself points out, it is also not true “that businessmen and capitalists have a particular interest in preferring liberalism. Their interest in preferring liberalism is identical to that of any other individual. And like any other individual, association or guild, they try (when allowed) to obtain privileges from the State. Business guilds seek subsidies from the state, protection against foreign competition, preferential interest rates, state credits that they often do not pay, monopolies and other benefits whose granting is to the detriment of the rest of the population. The phrase “privatizing profits and socializing losses” is synonymous with this common exploitative and anti-liberal attitude of businessmen.

Left-wing movements have done a good job in selling this situation as liberalism and it must be admitted that the political movements of supposedly liberal tendency have collaborated in reinforcing this conceptual error. Liberalism condemns these practices, just as it condemns any sectoral or corporate privilege.

This criticism does not attempt to condemn them, nor to take the simplistic attitude of classifying them between good and bad businessmen. Rather, it seeks to point out that the institutional framework affects the behaviour of individuals. The same attitude that, under a certain institutional framework, makes the entrepreneur an agent of innovation and development, under other institutional conditions makes him a seeker of rents and privileges at the expense of others. To pretend that the entrepreneur (and almost anyone on the planet) does not think about profit is to deny its nature. But this search for wealth can be beneficial or harmful to society, depending on the institutions that society itself builds. In reality, there is no reason to limit the analysis to the entrepreneur. The same attitude applies to workers, professionals, peasants, teachers or any sector. These sectors also seek sectoral privileges to the detriment of the rest of society.

The problem is not that certain sectors try to obtain privileges from the State, but that they have an institutionally weak State that is inclined to grant such privileges.

 

This article was published by Libertad.org on September 18th, 2019. Reproduced on Political Hispanic with authorization from said source. Also translated by Political Hispanic.
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