“Industrial Democracy” vs. “Economic Liberty”

In Economic Planning, Economics, History and Politics, Inequality, Liberalism, Political Ideology, Politics, Politics of Policy, Progressivism, Public Policy, Regulation, Social Democracy, Social Policy, Taxes on April 11, 2010 at 10:00 pm


Every so often, there are trial balloons floated about the idea of uniting progressives and libertarians as a political bloc on issues as diverse as gay rights, marijuana legalization, the wars in Iraq and Afghanistan, and the civil liberties abuses of the “war on terror.” You can see it in the alarming number of progressive folks who suddenly evinced admiration for Ron Paul “because he agrees with us on the war and pot!” or in calls for the creation of “liberaltarianism.”

The problem with these moves is that there is a fundamental barrier to any such alliance – and that is the issue of economic liberty. Luckily for us, economic liberty has recently been debated repeatedly throughout the progressive blogosphere (see here, here, here, here, here and here for discussions on Crooked Timber, and here on Yglesias’ blog) in ways that I think shed some light on why the idea of liberty, economic or political, positive or negative, is so contentious.

What Does Economic Liberty Mean to Libertarians?

To historians of American political and economic thought, that the idea of “economic liberty” should be such a sticking point is no mystery – arguably, the source of division between liberals and libertarians on an intellectual level can be traced back to late-19th century disagreements over the meaning of economic liberty, whether government regulations were perceived as either an attack on economic liberty or a means of guaranteeing it, or whether the rise of corporations was viewed as the exercise of economic liberty or the potential source of its downfall.

Today, I would argue that for libertarians, “economic liberty” and indeed liberty itself means one thing – property. I have no intention of strawmanning here; libertarian Murray Rothbard defined freedom as “non-aggression against anyone’s person and property” and argued that “there are no rights but property rights.” Libertarians Robert Nozick and Walter Block were so committed to the principle that they argued that the abolition of slavery was a restriction on the individual’s liberty to sell his property in himself.  Nozick has also argued in favor of feudalism as a structure that enshrines liberty through the privatization of political power through voluntary contracts. We can see the emphasis on property above all other freedoms also in the recent writings of Bryan Caplan, Jacob Hornberger, and Arnold Kling in which they defended the proposition that the 1880s were freer than today on the explicit grounds that the wider protection of property rights outweigh the lack of freedoms for women or non-whites.

The libertarian emphasis on property above all else becomes even more clear when you look at the point of view that libertarians use when describing government interference with economic liberty – the emphasis is overwhelmingly on businessmen, entrepreneurs, and employers being told what they can and can’t do, or on property-owners being told what they can and can’t do.

What Does Economic Liberty Mean to Progressives?

The Progressive view of economic liberty arose in the half-century after the Civil War, when the industrialization of the American economy rapidly kicked off, the nation shifted into a majority-urban society with large numbers of immigrant workers, and the corporation began to emerge as the dominant form of American capitalism. This forced a lot of people who had previously thought of themselves as “classical liberals” to rethink their assumptions, and come to a new understanding of liberty. This new understanding – still grounded in the liberal and republican ideologies of the Founding Fathers, contrary to Glen Beck – can be understood as grounded in three propositions:

  • Coercion and threats to economic liberty can come from the private sector as well as the state

The first thing that changed Progressive attitudes towards economic liberty and liberty in general is the historical experience of slavery, the Civil War, and Reconstruction. Here was a case where private entities – individuals as well as vigilante groups – used private violent coercion, the threat of same, and the use of private economic power to attack the liberties of blacks and their white allies. Before the Civil War, Northern opinion  – even among those who did not support abolitionism – was greatly disturbed by the fact that the rights of abolitionists to freely speak out against slavery, or to publish anti-slavery writings, and the security of their persons and property were routinely violated by violent lynch mobs throughout the upper and lower South.

Reconstruction hammered the point home. Throughout this period, white employers and landowners sought to restrict the economic liberty of the freedmen through the construction of labor contracts and sharecropping contracts that, among other things, forbade them from leaving the land without permission of their employers, forbade them from seeking or accepting alternative offers of employment, allowed employers to deny wages without compensation if the harvest failed, to obey their employers “the same as in slavery time,” and reached into every aspect of private left – forbidding workers from entertaining visitors or holding meetings, swearing and “impertinence,” or even mandating that workers should bow or salute their employers. Both public and private coercion was used to enforce this private tyranny – states passed vagrancy and labor contract laws, and at the same time, the first victims of vigilante violence were always those freedmen who bought or tried to buy their own land, or who advocated refusal of labor contracts.

Control over land, credit, and employment were crucial tools in this conflict: white landowners refused en masse to sell to blacks or to rent on non-coercive terms; debts incurred through sharecropping or crop-lien contracts were used to either restrict the economic liberty of black workers (by requiring them to work only for the holders of their debts, for example), or to deny their freedom outright by imprisoning them and then buying their prison labor contract from the state;  landowners also used their positions as monopsony employers to blacklist potential troublemakers and impose below-market wages.

As Reconstruction ended and all barriers to private coercion of farm workers and sharecroppers ended, the rise of corporate capitalism also showed the extent of private coercion faced by workers outside of the South. The massive wave of labor strife seen in the last 25 years of the 19th century – the Great Railroad Strike of 1877, the Southwestern Railroad Strike of 1886, the Homestead Strike of 1892, and the Pullman Strike of 1894  – invariably saw the use of private police forces and private espionage used to destroy the rights of workers to freely associate or to freely refuse their labor. The Pinkerton agency was the most famous of these private armies, but the Baldwin-Felts Agency (infamous in the Colorado and West Virginia Coal Wars), the Thiel Agency, and others were close competitors for employment as corporate “gunthugs.” The rise of company towns – a place where a single corporation owns the land, the buildings, the utilities and public services, as well as the banks and stores – created the condition where any exercise of civil liberties could be met with unemployment and eviction. The use of company scrip further denied economic liberties to workers by denying them access to the market outside of company stores. In short, the 19th century saw the creation of industrial police states on the local level. The blacklist and the yellow dog contract – crucial for excluding pro-union workers and preventing employees from exercising their rights to free association – were acts of private coercion.

  • The critical point-of-view for considering economic liberty is that of workers and minorities

As I have argued before, the workplace is the least free place in America, even today. “Because one can be fired for any reason whatsoever, at-will employment creates a situation in which the worker has no rights. If you can be fired for speaking your mind, you have no freedom of speech. If you can be fired for refusing a cavity search or if your workspace or your locker can be searched without your knowledge or consent, you have no right to privacy or freedom from warrant-less searches. If you can be denied access to a bathroom, or denied breaks to eat or rest during the day, you have no right to be treated with dignity or to control over one’s own body.  And if all of this can happen at the arbitrary pleasure of a foreman or superior, with no necessary adherence to any rules and no independent advocate on your behalf, there is no rule of law, no equal protection  and no due process. The truly odd thing is that in a society that claims to be so committed to the idea of individual liberties and equality before the law, in a country where citizens are so fiercely defensive of their rights and interests that they will sue anyone for anything at the drop of a hat, that we so blithely accept the idea that there should be this enormous space in American life where democracy does not apply.”

What emerged from the 19th century among laborite progressives was the understanding that economic liberty looks very different from below. The right to unrestricted use of one’s property and the right to unrestricted liberty of contract on the part of the employer, in the hands of either Southern landlords or robber baron corporations, becomes the right to tyranny. In its place, laborite progressives sought to establish a new meaning of economic liberty – which they called industrial democracy – that focused on the rights of workers to free speech and free association, to bodily autonomy and privacy, to the rule of law, equal protection, and due process, against their employers.

Likewise, the rise of the Civil Rights Movement – which fundamentally transformed American progressivism from the New Deal onwards – saw a realization among civil rights advocates that the Jim Crow system was far more than the “de jure” racial inequalities established through segregation statutes. While the conservative re-writing of the Civil Rights Movement would dearly like us to forget this fact, but the rebirth of the Civil Rights Movement in the 1950s began with an attack on private coercion: the Montgomery bus boycott was directed against National City Lines, Inc., a private holding corporation owned by G.M, Firestone Tire, Standard Oil and other corporate titans, and the Greensboro sit-ins were directed against lunch counters owned by Woolworth.

The ultimate structure of segregation – both in the South and the North – relied intimately on private power. The separation of the labor market into jobs for blacks and jobs for whites was initiated and maintained by employers; the physical separation between whites and black homes and businesses was orchestrated by realtors associations, developers, and property owners, who orchestrated private racial covenants that restricted the economic liberties of both blacks who would try to purchase homes in segregated areas and whites who would sell to them. The KKK and its more “respectable” front group, the White Citizens Councils, and all their ilk used private coercion, either through violence, threat of violence, intimidation, or economic retaliation to uphold this system. While the 400-odd Jim Crow laws passed between 1865 and 1967 and the use of police violence to enforce them were core foundations of segregation, the system relied as much upon private means (and public tolerance of private means) to keep it going.

The irony here is that, while libertarians quite often talk of the potential threat that the (poor) majority pose to the (propertied) minority (which underlies libertarian ambivalence or antipathy to universal suffrage), they do not incorporate the historically documented threat that racial majorities posed to racial minorities – because otherwise they would have to recognize that there is private coercion and that property rights can be used as an instrument of coercion.

  • Therefore, state action can enhance freedom

In one light, the history of American government from the Progressive Era through to the 1970s can be understood as the history of a movement to use state action to prevent or roll back private coercion and expand the boundaries of freedom. Beginning with the Clayton Anti-Trust Act (which declared unions to be legal institutions rather than criminal conspiracies in restraint of trade), the Norris-La Guardia Act (which banned the yellow dog contract and federal injunctions), and the Wagner Act (which prohibited employers from interfering with “freedom of association, mutual aid or protection, self-organization, to form, join, or assist labor organizations, to bargain collectively for wages and working conditions through representatives of their own choosing, and to engage in other protected concerted activities with or without a union,” among other things) – the progressive movement has sought to expand the economic liberties of American workers against their employers.

Likewise, the state-building efforts of Progressives – from the creation of the Interstate Commerce Commission and the Pure Food and Drug Act through to the New Deal – have always been conceived by Progressives as expansions of economic liberty by giving workers and consumers a “countervailing force” against the power of monopolies to interfere with the economic liberties of the individual.

Reconstruction – including the Freedmen’s Bureau with its schools, courts and labor contract authority, the Federal Army, and Federal voting registrars – was a massive mobilization and expansion of state power than enhanced the freedom of millions of Americans. The expansion of civil rights during the Kennedy and Johnson Administrations similarly saw the use of Federal power to protect and expand, rather than harm, freedom for millions more. This is one of the reasons why I have never felt that Barry Goldwater deserves the slightest amount of respect as a “principled” opponent of civil rights. When he voted against the Civil Rights Act, he knew that the Federal intrusions into state affairs were intrusions against state discrimination and state violence against their citizens and that the Federal interference in the right of private persons to do business or not with who they choose was an interference with the rights of landlords, employers, realtors, bankers, and others to exercise the right to tyranny. Moreover, when Goldwater ran for president in 1964, he knew exactly what he was doing when he accepted the support of Strom Thurmond and Jesse Helms.

As a matter of historical fact, progressives have realized that the simple construction of the state as the source of all coercion and the private as the source of all freedoms does not work.  The state can and has expanded freedom just as easily and as often as it has done the reverse.


What is fascinating about the libertarian blind spot when it comes to the private sector is that the reality of power and coercion in the private sector so closely mirrors the imagined world of power and coercion in the public sector, and yet they don’t care. A video camera set up over a public street constitutes intolerable state surveillance if it’s owned by the state, but is an expression of economic liberty if it’s owned by a private security company; wholesale restrictions on the right to free speech and freedom of the press are tyranny if they are directed at a soapbox speaker on a public street corner, but not if they are directed against a union organizer in the lunchroom of a factory.

Ultimately, this is why liberaltarianism is not a workable proposition, because libertarians cannot accept that liberty must be protected against both forms of coercion, and because liberals and progress cannot deny the existence of both without denying our historical roots and our moral purpose.

  1. […] “Economic Liberty vs. Industrial Democracy,” I raised the issue the progressive sense of “economic liberty” is actually […]

  2. […] “Economic Liberty vs. Industrial Democracy,” I raised the issue that the progressive sense of “economic liberty” is actually […]

  3. […] social policy that seeks not merely to make poverty less painful, but also to empower workers against corporations through the provision of independent economic security and the protection of their rights. Social […]

  4. Wow, talk about the road to serfdom!

  5. […] feel protected enough to speak up for themselves, to finally end the state of affairs that the workplace is the least free place in America (outside of the prisons). Only when workers are free to express themselves can they begin to […]

  6. […] I think it’s about actually experiencing freedom on a day-to-day basis. As I wrote a long time ago, the workplace is one of the least free places in America. And the people who fought […]

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