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E. Infrastructure
One form of contemporary government intervention that Tucker almost entirely ignored was transportation subsidies. This
seems odd at first glance, since "internal improvements" had been a controversial issue throughout the nineteenth century,
and were a central part of the mercantilist agenda of the Whigs and the Gilded Age GOP. Indeed, Lincoln has announced the
beginning of his career with a "short but sweet" embrace of Henry Clay's program: a national bank, a high tariff, and internal
improvements. This neglect, however, was in keeping with Tucker's inclination. He was concerned with privilege primarily as
it promoted monopoly profits through unfair exchange at the individual level, and not as it affected the overall structure
of production. The kind of government intervention that James O'Connor was later to write about, that promoted accumulation
and concentration by directly subsidizing the operating costs of big business, largely escaped his notice.
At the end of the previous section, we noted that the failure of the trust movement reflected the insufficiency of railroad
subsidies, tariffs and patents alone to maintain stable monopoly power. But without the government-subsidized "internal improvements"
of the nineteenth century, it is doubtful that most national-scale industrial firms would even have existed, let alone been
able to make attempts at collusion.
Adam Smith argued over two hundred years ago for the fairness of internalizing the costs of transportation infrastructure
through user fees.
It does not seem necessary that the expense of those public works should be defrayed from that public revenue, as it is
commonly called, of which the collection and application is in most countries assigned to the executive power. The greater
part of such public works may easily be so managed as to afford a particular revenue sufficient for defraying their own expense,
without bringing any burden upon the general revenue of society....
When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll
in proportion to their weight or their tonnage, they pay for the maintenance of those public works exactly in proportion to
the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such
works. This tax or toll too, though it is advanced by the carrier, is finally paid by the consumer, to whom it must always
be charged in the price of the goods....
It seems not unreasonable that the extraordinary expense which the protection of any particular branch of commerce may
occasion should be defrayed by a moderate tax upon that particular branch; by a moderate fine, for example, to be paid by
the traders when they first enter into it, or, what is more equal, by a particular duty of so much percent upon the goods
which they either import into, or export out of, the particular countries with which it is carried on.90
But that's not the way things work under what the neoliberals like to call "free market capitalism." Spending on transportation
and communications networks from general revenues, rather than from taxes and user fees, allows big business to "externalize
its costs" on the public, and conceal its true operating expenses. Chomsky described this state capitalist underwriting of
shipping costs quite accurately:
One well-known fact about trade is that it's highly subsidized with huge market-distorting factors.... The most obvious
is that every form of transport is highly subsidized.... Since trade naturally requires transport, the costs of transport
enter into the calculation of the efficiency of trade. But there are huge subsidies to reduce the costs of transport, through
manipulation of energy costs and all sorts of market-distorting functions.91
Every wave of concentration of capital in the United States has followed a publicly subsidized infrastructure system of
some sort. The national railroad system, built largely on free or below-cost land donated by the government, was followed
by concentration in heavy industry, petrochemicals, and finance. Albert Nock ridiculed the corporate liberals of his time,
who held up the corruption of the railroad companies as examples of the failure of "rugged individualism" and "laissez-faire."
It is nowadays the fashion, even among those who ought to know better, to hold "rugged individualism" and laissez-faire
responsible for the riot of stock-waterings, rebates, rate-cutting, fraudulent bankruptcies, and the like, which prevailed
in our railway-practice after the Civil War, but they had no more to do with it than they have with the precession of the
equinoxes. The fact is that our railways, with few exceptions, did not grow up in response to any actual economic demand.
They were speculative enterprises enabled by State intervention, by allotment of the political means in the form of land-grants
and subsidies; and of all the evils alleged against our railway-practice, there is not one but what is directly traceable
to this primary intervention.92
The modern telecommunications system goes back to the Bell Patent association, organized in 1875; the various Bell systems
were consolidated as AT&T in 1900. Without the government's enforcement of its huge arsenal of patents on virtually every
aspect of telephony, a centralized communications infrastructure would have been impossible on anything like the present scale.93
And that is leaving out entirely the role of government franchises and right-of-way grants in the rise of the AT&T monopoly.
The next major transportation projects were the national highway system, starting with the system of designated national
highways in the 1920s and culminating with Eisenhower's interstate system; and the civil aviation system, built almost entirely
with federal money. The result was massive concentration in retail, agriculture, and food processing.
The most recent such project was the infrastructure of the worldwide web, originally built by the Pentagon. It permits,
for the first time, direction of global operations in real time from a single corporate headquarters, and is accelerating
the concentration of capital on a global scale. To quote Chomsky again, "The telecommunications revolution... is... another
state component of the international economy that didn't develop through private capital, but through the public paying to
destroy themselves...."94
The centralized corporate economy depends for its existence on a shipping price system which is artificially distorted
by government intervention. To fully grasp how dependent the corporate economy is on socializing transportation and communications
costs, imagine what would happen if truck and aircraft fuel were taxed enough to pay the full cost of maintenance and new
building costs on highways and airports; and if fossil fuels depletion allowances were removed. The result would be a massive
increase in shipping costs. Does anyone seriously believe that Wal-Mart could continue to undersell local retailers, or corporate
agribusiness could destroy the family farm?
It is fallacious to say that state-subsidized infrastructure "creates efficiencies" by making possible large-scale production
for a national market. The fact that a large, centralized infrastructure system can only come about when the state subsidizes
or organizes it from above, or that such state action causes it to exist on a larger scale than it otherwise would, indicates
that the transaction costs are so high that the benefits are not worth it to people spending their own money. There
is no demand for it by consumers willingly spending their own money, at the actual costs of providing the services, risks
and all, without state intervention.
If production on the scale promoted by infrastructure subsidies were actually efficient enough to compensate for real
distribution costs, the manufacturers would have presented enough effective demand for such long-distance shipping at actual
costs to pay for it without government intervention. On the other hand, an apparent "efficiency" that presents a positive
ledger balance only by shifting and concealing real costs, is no "efficiency" at all. Costs cannot be destroyed. Shifting
them does not make them any less of a cost--it only means that, since they aren't being paid by the beneficiary of the service,
he profits at someone else's expense. There Ain't No Such Thing As A Free Lunch.
Intellectually honest right-libertarians freely admit as much. For example, Tibor Machan wrote in The Freeman that
Some people will say that stringent protection of rights [against eminent domain] would lead to small airports,
at best, and many constraints on construction. Of course--but what's so wrong with that?
Perhaps the worst thing about modern industrial life has been the power of political authorities to grant special privileges
to some enterprises to violate the rights of third parties whose permission would be too expensive to obtain. The need to
obtain that permission would indeed seriously impede what most environmentalists see as rampant--indeed reckless--industrialization.
The system of private property rights--in which... all... kinds of... human activity must be conducted within one's own
realm except where cooperation from others has been gained voluntarily--is the greatest moderator of human aspirations....
In short, people may reach goals they aren't able to reach with their own resources only by convincing others, through arguments
and fair exchanges, to cooperate.95
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