Libertarianism – Not a Defence of the Rich

One of the fundamental mistakes people make when they attack libertarianism is to view it as an ideology that defends or promotes the interests of the wealthy and the powerful. It is a critique you hear far too often and really shows that the person who makes the claim has no idea what libertarianism is.

The problem starts, usually, with the erroneous assumption that we live in a capitalist society. We do not. If this is capitalism then libertarians aren’t capitalists. What we experience is corporatism – as huge a gulf from true capitalism as socialism is. Corporatism defends the interests of the rich and the wealthy, Corporatism – as Mussolini said, is a brand of fascism, big business and the state leaning on each other, propping each other up over the interests of the ‘normal’ people.

Libertarianism is about true free markets, a system we have never, ever, had before. Those that believe libertarians are defending the rich do not understand what free markets are, and why free markets mean free people – not concentrated wealth.

In Britain today we have had only one new bank set up in the past 150 years, something that almost didn’t happen according to the founders, due exclusively to excessive regulation. In America Goldman Sachs and other big financial institutions was one of the big donors to both the Romney and the Obama campaigns – not to Gary Johnson. The wealthy and the powerful do not owe their positions to free markets, they owe them to the Government, to the special favours that the state gives them. Bankers are so wealthy because FSA and BoE regulation means that no new banks can be set up – competition isn’t possible so profit is huge. Train companies, bus companies, supermarkets, financial institutions, law firms, private health firms and pretty much any big company you can think of benefit from the corporatism system we have. High taxes and complex regulation means that it is very expensive and very hard (if not impossible) for new entrants to enter the market. Which means existing firms can consolidate their position, and reap in huge rewards.

In a libertarian system you wouldn’t have the super wealthy, because they wouldn’t be able to protect their position with the awesome power of the state. The current corporatist system is like a feudal lord or King who gives favours to his courtiers – allowing certain favoured ones the sole rights to sell or trade certain precious commodities. A free market removes the favour-givers; without anyone to ask favours from, businesses have to compete and as we see the rare times that happens, former giants that fail to adapt die off or shrink. HMV is a great modern example of something that looked like it was dominant and failed to change to meet new competition. Other examples include MySpace, Ask Jeeves, Yahoo, Motorola, Dell, Kodak, Sony and even Microsoft, all formerly dominant in their field and now either collapsed, waning, trying to change or severely reduced.

The current system favours the rich; complicated tax laws mean it is the rich who can afford to find ways not to pay. Complicated regulation means it is the rich who can afford to pay people to understand it or work around it. Small business doesn’t have a chance, swamped in paper work rather than being able to serve customers and bled dry by taxes. It is no surprise that it is some of the biggest businesses that call for more regulation, or support membership of regulatory bodies like the EU. The more regulation there is, the more tax there is, the more government there is – the more their position is entrenched.

Libertarians are no fan of the wealthy elite, who get to where they are not by hard work or innovation, but by having government contacts and stamping out competition. Libertarians are not apologists for the powerful, who get their power via the state and use their power to keep themselves where they are. And libertarians are not defenders of the current system that keeps the wealthy and powerful in place and sees the state bail out and lobby for big business while the little guy is simultaneously stomped on and foots the bill. A libertarian hates the bankers as much as anyone, for relying on public money to back up their gambles, for using their elite positions to bet on both horses in political races to guarantee themselves special treatment (why else do you think they donate so heavily to both sides of a campaign?)

True free markets would see the huge regulatory barriers to entry broken down; entrenched firms forced to compete for the first time in their lives would either adapt or die. Competition would force down prices, force down the bloated wages of the fat cats and push up quality of products and services. Government attempts to do this have failed – government-run systems have, ever since they began thousands of years ago, seen the cosy elite supported at the expense of the rest of us. Libertarianism is not a defence of the rich and powerful; it is the only way to fight them.


  1. Much as I enjoyed Hayek’s “The road to serfdom”, I would have to say George’s “Progress and poverty” is far more insightful on a fundamental level.
    Almost all libertarians seem to be quite happy for people to exercise property rights over land, and a large subset feel the same about intellectual property. Until that is understood to be massively, intrinsically problematic for equality of opportunity libertarianism will be “an ideology that defends or promotes the interests of the wealthy and the powerful”.

    • ‘The Road To Serfdom’ is basically ‘1984’. You are comparing apples and oranges. Basic economics to possible political futures.

      50% IS NOT almost all ! At least 50% of libertarians reject Rothbard’s position on land. Before Rothbard Albert Jay Nock was the most well known individualist anarchist libertarian and a geoist.

      I would say that most libertarians favour IP reform because they understand that ideas are not created in a vacuum and thus need to re-enter the public domain after a reasonable time.

  2. I thought this was an interesting counter argument to some of the comments about how even without a state there would be similar problems: “In a freed market, who will stop markets from running riot and doing crazy things? And who will stop the rich and powerful from running roughshod over everyone else?” –

    Also Gemma, I feel you probably overstate economies of scale. Many economies of scale exist precisely because state regulation makes bigness appear more efficient. For example, recent research suggests that it can cost an SME up to 16 times what it costs a large company, proportionate to income, to comply with state regulation.

  3. The government is not the only thing that can keep rich people rich, capitalism can do that on its own. The way it occurs is through economies of scale, this is why it’s easy for small organisations to be wiped out by large organisations because the bigger you are the cheaper it is to acquire resources (bulk discount) which reduces your costs compared to a smaller competitor and makes you more profitable which makes it easier to grow. When it is easier to get bigger when you are already big this leads to a few very large organisations taking over the market. Even without any government regulation economies of scale would still apply even if there were technically no such thing as corporations any more (as they are government legal constructs).

    • Your analysis is very wide of the mark. History is littered with big companies that had scale but were too inflexible to compete. The co-op used to be massive compared to its upstart competition, not so any more. Tesco, Asda and the rest all out competed it. Apple is bigger now than IBM. Small companies can compete on the free market because without the (dead weight costs of taxation and regulation imposed on them from the state) they can be more innovative, flexible and responsive. It is not the 1950s, rapid technological change favours the small and flexible over the large and inflexible more now than ever.

      The real problems with current capitalism are monetary (a global fiat currency regime that is creating global fictionalisation of the economy) and fiscal (taxation that favours the rich because it doesn’t fall mainly on land). It is these monetary and fiscal reasons that capitalism currently moves wealth from poor to rich.

      • The only thing that has been capable of dislodging market dominance by a few players without government intervention has been technological change (but many industries don’t have rapid technological change). Internet based business is still a relatively new industry this is why you see competition but this will eventually slow down as the market is colonised by larger corporations and competition will reduce (similar in the way that mass extinctions can cause a burst of evolutionary change).

        On the internet there are also the network effect which causes concentration of service users among a small number of dominant players (these may be Google and Facebook), an example of this is that any competitor to Facebook will have a barrier to entry because people are unlikely to use a social network which none of their friends use and any potential competitor to Google would have to compete against a company which not only already has masses of data on their potential customers (and so can provide more relevant search results than a new entrant) it can also remove their site from search results and flag their emails as spam.

  4. I think oil will always be an important form of energy consumption , it seems the libertarian is a little too influencing on people creating their own wealth and a little too lax on border control. We need banks as much as they need us but obviously with more regulatory controls in place.

  5. […] this article ads and helps those willing to open their minds about what Libertarians believe. Libertarianism – Not a Defence of the Rich – The Backbencher It argues reasonably that the Free Market, which yes we have never had, would not produce the […]

  6. I agree with your analysis. I want to comment on one point. I think there would still be super-rich, but the difference between super-rich and the rest would not be nearly as great as it is now, and their number would be smaller. For instance, J.K. Rowling would still be super-rich, but Warren Buffet, George Soros, and Carl Icohn probably would not be. The computer giants (Bill Gates, Larry Ellison, Jeff Bezos, Larry Page, Sergey Brin, Steve Ballmer, Paul Allen, Michael Dell, etc.) would also certainly be much less rich than they are today, although they would probably also be “super-rich” in the lesser way that Rowling would be. The WalMart family would likely not be on the list at all. The Koch brothers would still be there, but I believe oil would be less important than it is in a corporate society, because alternative energy sources would already have made greater strides.

  7. Whilst wholeheartedly agreeing with the sentiment of this article I wonder why Olly ignored Metro Bank. I do know the founder has said that it was almost impossible to gain the banking licence and that he would not try the same again.

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