I didn’t find this bit by Matt Yglesias as compelling as Julian seems to:
One point of dispute, though, is that to me the idea of state committed to neutral and effective administration of justice around laissez faire lines seems like an illusion. The alternative to reasonably effective democratic institutions and a viable left-wing political movement isn’t free markets but the capture of the state by large economic interests as during the Gilded Age or, indeed, the Bush administration.
Part of the problem with an argument of this sort is that it’s sufficiently abstract that it’s not clear how it cashes out in practical terms. Obviously, no political system is going to give you a political leadership that’s perfectly “committed to neutral and effective administration of justice,” laissez faire or otherwise. If that’s your standard, libertarian policies are going to be a failure, but so are any Matt would car to name. You’d be hard-pressed to find a government anywhere in the history of the world where a certain amount of back-scratching and petty corruption didn’t go on.
The good thing about the kinds of “anti-democratic” policies that libertarians tend to champion—separation of powers, spending limits and balanced budget amendments, judicial protection for property rights and economic liberties, etc—is that they reduce the magnitude of the damage the state can do once it’s captured by special interests. It’s true that governments in the 19th century was often in bed with concentrated economic interests. But their ability to help those interests was substantially constrained by a judiciary that regarded the defense of property rights and economic liberties much the same way that modern courts regard free speech and the separation of church and state. 19th century courts repeatedly struck down attempts by special interests to use the power of the government for their benefit. Similarly, the federal government’s ability to line the pockets of political supporters was sharply limited by the small overall size of the federal government.
To give a specific example, the abuse of eminent domain (and related subsidies such as tax-increment financing) has become a major means by which local governments redistribute money toward concentrated economic interests. Back when the courts took laissez faire economic ideas seriously, they would regularly strike down efforts by city governments to take property from one private party and give it to another. Although in some cases this undoubtedly impeded some genuinely meritorious urban development programs, I think the consequences of abandoning that principle in the 1950s has turned out to be much worse. In the 1960s, hundreds of thousands of low-income property owners, many of them black, were displaced to make room for white-elephant urban renewal projects that did nothing to reverse the causes of urban decline. By the 1980s, cities had almost completely dropped the pretense of fighting “blight” as they began to brazenly condemn ordinary middle-class neighborhoods to make room for shopping malls and big-box retail stores.
Now there have certainly been cases where grassroots efforts, some of them with a “left-wing” cast, have successfully organized to block such projects. But these efforts have been the exception rather than the rule. The organized interests behind eminent domain abuse are shrewd about choosing targets that are unlikely to have the organization or resources necessary to fight back. In most cases, residents don’t realize the gravity of the situation until it’s too late to do anything about it.
Libertarianism, then, isn’t a fantasy about a government that’s magically free of the corruption of concentrated interests. Rather, it’s about finding institutional arrangements in which the powers of government are constrained by clear rules limiting the damage they can do. It’s certainly unlikely that we’ll resurrect the strictly limited federal government of the 19th century. But there’s nothing crazy about seeking new limitations on government power that work in ways analogous to the constitutional and jurisprudential limits of the 19th century. Besides the limitation of eminent domain abuse, these limits could include tax and spending limitations, a balanced budget amendment, and meaningful judicial protections for the right to earn an honest living. These won’t eliminate corruption in government by any means, but on the margin, they reduce the damage that corrupt officials can do.