Markets are not voluntary

Democracy vs. Markets

In my 12 years’ experience debating libertarians, a common talking point rises above the rest, equal parts quantity and meme-quality: Taxation is Theft. "You see, Mr. Socialism, you cannot use coercive means to force me to pay a tax that I would not have otherwise paid. That is theft, and theft is wrong. The only just system is one based on voluntary free-market exchange." Mr. Socialism leaves the room, his head down and shoulders slumped in embarrassment.

In a debate on the role of the state and property rights, a statist libertarian stands on little ground because they commit to using state power and collective force to enforce various laws. This is why debates between small-state libertarians and leftists tend to focus on the empirical grounding of state policy. Yet, an anti-state libertarian can stand on uniformly principled ground. By markets, they mean everything, including the enforcement of contracts and security. Want to participate in a market? Better obtain income. Want to obtain income? Enter the labor market. Want to ensure your personal safety from exploitation and injustice? There’s a market-oriented law enforcement industry with security packages to choose from.

And the best part is, it’s all completely voluntary! There’s no coercion here like when Big Brother (the democratic state) holds a gun to your head and steals your money, but there's a big issue: the market imposes a collective will on the individual as the democratic state does, and markets are worse because, in decentralized interpersonal transactions, one side likely has a personal or structural power advantage. Mr. Libertarian is ready to point out that theft is not legitimized because a collective deems it good, but markets are collectives who, by their allocation of dollars, impose choices or circumstances on individuals who, despite their individual preferences, are often all but powerless to change.

Let’s say I demand the right to protection against employment discrimination on account of race. Unfortunately, we live in a deeply racist society, and the cost of protection against racist employment practices is prohibitively high, making protection against discrimination either unattainable or completely absent from the market. I am now forced, by collective will, to live in a market where actors may freely, and in practice do (given the hypothetical) discriminate against me based on race, and the very employment market I'm forced to use to earn income to pay for rights enforcement is now collectively suppressing both my demand for rights and my ability to achieve my demands. Thus, I am forced into a suboptimal level of utility, much like a state taxing an individual’s income for a purpose they do not find desirable. Each consumer has an ideal set of consumption, but the market does not provide the exact basket to any consumer, nor does it offer it at a price that is within their reach.

Market-worshippers might respond in a couple of ways:

1. The market is perfect, and it would not discriminate based on race. One’s race does not determine their inherent productivity, so it is the market, not democracy, that best addresses discrimination.

2. This is not coercion since no agent is directly responsible for causing coercion in this scenario. Whereas, under a democratic state, the collective directly votes to imprison people who disagree with the taxation they impose.

On the first argument, there are various points in history where market actors have decided to make business-level irrational decisions. It, of course, is irrational to refuse to hire an entire group of people because they happen to be of a certain race. Nonetheless, it happens. One could blame the state that enforces discriminatory policies, but that leads to my response on argument number two: collective society must make these enforcement decisions in one way or another.

When a Black man in Alabama attempts to obtain employment at the wrong factory’s job fair, it’s the market-provided security who enforces the discriminatory exclusion of the man from the event. The man is now left with a few, all coerced, decisions: (1) He could survey the market for rights enforcement agencies and purchase their services for a lawsuit. (2) He could start a violent revolution to segment or change society to fit his ideology. (3) He could abandon society altogether and attempt to form his own community, or (4) he could do nothing and let others discriminate against him. The first option presents a series of realistic, collectively determined, coercive choices forced upon the man. He might not have the income or the option to purchase protection against discrimination. Options two and three are, in theory and in practice, possible, but one-man revolutions are not historically successful, and good luck starting your own community from scratch in a world where you’re struggling to even survive on your current income. Options two and three still leave the individual’s ability to express their choices at the will of the masses.

These realities lead this person to option four: accept discrimination. The collective market has created not only the conditions for discrimination to occur, but it has also created the conditions for the discriminatory nature of the market to reproduce itself: victims of discrimination need market income to purchase rights enforcement, but bigots control most market power. The market determines that these victims cannot accumulate capital by way of a quality education, nor can they expect quality enforcement of their rights because they can only afford the dollar-store tier rights enforcement agency, locking the victims of oppression in a cycle of diminished capacity for growth, and, at the very least, an unjustifiably volatile existence, which would strain almost anyone’s sense of fairness and justice.

A democratic state enforcing discriminatory policies and a market enforcing discriminatory norms are not different because a market is voluntary and a state’s enforcement is not. They are both systems by which a collective enforces potentially coerced and involuntary decisions onto the individual. The key difference between a democratic state and the market is the method of decision-making. A democratic state, in an ideal world, makes decisions as a community of equals voting in policy based on some combination of collective and self-interest. A market, in an ideal world, is a system of exchange where individuals participate with some combination of collective and self-interest in mind. The question for us is: What makes a better system for determining the coercive institutions we face? Should individuals balancing priorities with resource constraints allow an eventual market standard to bubble up? Or should the same decentralized pool of individuals decide, by procedure and vote, the standard(s) for society?

Markets are unequal by their nature. Some people have less money and less ability to obtain money than others. So, rights and the enforcement decisions thereof are unequally allocated in markets because a market’s decision-making authority, the medium of exchange, is also unequally distributed. Contrary to this, democracy is a system where people, on equal footing, make decisions through equitable voting procedures.

An equitable decision-making process for society’s necessary and coercive institutions is preferable so as to avoid imbalances of power and achieve the best outcomes. Democracy is king. However, markets do a fine job of balancing individuals’ demands and senses of fairness in many circumstances. Having a democratic procedure for every aspect of society wouldn’t result in optimal outcomes, but arguing for markets based on their voluntary nature neglects the very real coercion markets induce. We need a more thoughtful analysis to determine whether a people, in equal standing under a democratic procedure, or a people, on unequal footing through a market mechanism, act most in accordance with justice, equality, fairness, and so on.