Monday, August 10, 2009

Spontaneous Market 8: Facebook and Liberty

Facebook, Google, Yahoo and other free web and social networking services, are among the best examples of the free market system and individual liberty. Zero tax money, zero government borrowings, and no State bureaucracy to create and sustain them. Like most private enterprises, they exist to give utmost service to the public, free services to the majority in fact, and only those who are convinced there is value for their money, place ads and other revenue-making services to them. The whole arrangement is purely voluntary among the service providers and consumers. No coercion, no mandatory subscription, and other forcible arrangements that characterize government service.

Facebook is the world’s top social networking service. It rose to that height at the expense of other private enterprises in their sector. Like Friendster, Multiply, Tagged, and similar online networking services. But that’s the reality in capitalism and the free market system. All real entrepreneurs understand and appreciate that reality. It allows them to be creative, it forces them to become innovative, and it removes complacency and irresponsibility from their work habit. But there are lazy and shrewd capitalists who do not like that arrangement, so they run to the government to create various barriers to competition and protect them.

Currently, millions of Filipinos are hooked up, some are “addicted”, to Facebook. From gamers to hobbyists to advocates of certain public policies, they use Facebook to post the things that occupy their minds or hands at the moment. The most recent example is the death of former President Cory Aquino.

Most Filipino readers of this article can attest that their Facebook accounts were peppered with postings of personal grief, personal reflections, and hope of unity from the day Cory died to the day she was buried. Or any other stuff that are mostly very personal which they wish to blurt out in public, at least to their friends. For me it’s the most effective, most interactive, and most spontaneous communication and networking among people. Zero external censorship, not even by the owners and administrators of the online service. Only the individual can exercise self-censorship, which among his/her ideas and feeling would he/she share with other people, and which ones to keep.

I wrote two personal notes in my Facebook acount about the Cory funeral, one when her body was transferred from La Salle Greenhills to the Manila Cathedral, and one on her funeral march and motorcade to Manila Memorial Park. Both notes are with pictures, and both attracted a number of comments from my friends, even from some people I do not personally know but stumbled on it. One of them later became my friend.

My other friends in the free market and liberty-oriented groups and institutes both here and abroad, use Facebook to post good quotes from respected intellectuals, mostly from the past. One such friend is Larry Reed, currently the President of the Foundation for Economic Education (, a free market think tank in the US. Here are among the quotes that Larry posted, all of which have attracted plenty of comments from among his friends.

• "The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 19th century French economist, statesman and philosopher.

• "The only constructive idea that I can in all conscience advance, then, is that the individual put his trust in himself, not in power; that he seek to better his understanding and lift his values to a higher and still higher level; that he assume responsibility for his behavior and not shift his responsibility to committees, organizations, and above all, to a superpersonal state." -- Frank Chodorov, July 1949.

• "The worst evils which mankind has ever had to endure were inflicted by bad governments. The state can be and has often been in the course of history the main source of mischief and disaster." -- Ludwig von Mises, greatest economist of the 20th Century.

• "The natural effort of every individual to better his own condition ... is so powerful, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations." -- Adam Smith, The Wealth of Nations, 1776

I made a comment to this posting by Larry. I wrote, “Yes, about 95 percent of all time, laws = prohibitions. More laws, more prohibitions. Rule of law = rule of prohibitions. For rule of law to prosper, there should be very few laws (like laws against killing, stealing). Then humanity will be off to self-driven improvement and growth.” My article last week, “Rule of Law and the Lawless State” is related to this.

Anyone in Facebook can post his/her political and philosophical ideas – libertarian or statist, liberal or conservative, capitalist or socialist – and post good quotes from other authors that summarize those ideas. All of which are expressions of individual liberty.

The big irony though, is that it is those private enterprises like Facebook – receiving zero tax funding and hiring zero government personnel – that allows and encourages those spontaneous expressions of personal opinions and feelings to all people around the world who would bother to read those opinions and feelings. Compare this to government agencies and institutions that live off on tax funding and hire a multitude of personnel and bureaucrats, are engaged in hiding certain public information, and in a number of cases, harrass people and declare external censorship about their ideas and opinions.

And this brings us to one painful realization. Government is force. It is a monster institution of coercion. From taxes that are coercively removed from our pockets and savings account, to bureaucrats and politicians that we were coerced to select and sustain, even if some of us do not believe in the necessity of creating and sustaining the various political offices and agencies that employ and give power to those politicians and bureaucrats.

Why is this so? Read again the quotes from Frederic Bastiat and Ludwig von Mises above.

Meanwhile, a related paper I wrote last month,

Capitalism and Individual Liberty

The profit motive in capitalism in a competitive environment is perhaps the best antidote to global poverty and large-scale personal and governmental irresponsibility.

This is because in an economic environment of level and open competition among private enterprises, individuals and corporations can only make profit if they are able to satisfy certain needs and wants of their customers and clients. If they will not take care of their customers, others will. And their previous customers will make their current competitors become richer and bigger.

In a sense, all other things being equal, the level of profitability of a company is a proxy for its usefulness to society, an indicator of its efficiency and a reward for the hard work of the people working in that company. Looking at the other side, lack of growth if not bankruptcy of a company, is a proxy for its near uselessness in society, an indicator of its wastefulness and inefficiency, and a punishment for the complacency and irresponsibility of the people working in that company. .

Without profit, not a single bus company or airline, shipping line, taxi line, restaurant, barber shop, etc. will survive and continue giving us the services that we need for our daily and long-term existence. Internet giants and big capitalist enterprises Yahoo and Google are themselves driven by profit, they give us free services like free Yahoo Mail and Gmail, free Yahoo Groups and Google Groups, free Google Maps and search engines, and still they become big, rich and successful.

Adam Smith is so correct. It is the pursuit of their own corporate interest, the search for sustained and long-term profit and other civic pursuits which are the “invisible hands" that guide those capitalist firms, big and small, like Yahoo Google and mom-and-pop stores, to provide the various needs of the public, regardless of their nationality, gender, skin color, religious and cultural belief, and geographical location.

Capitalism's hunger for profit can drive capitalists to become greedy. But since our premise is that there is a level playing field and open competition among many enterprises, so other capitalists that may be equally greedy as the incumbent players, will "invade" the market and clients of the previous capitalists by offering better services and/or lower price. The competition among capitalists provides the "invisible hand" that lead to public welfare.

Any private enterprise or non-profit organization can become arrogant and insensitive to the public if it is a monopoly or a member of the oligopoly.

Imagine how arrogant Jollibee staff and how expensive their food products will be if there are no Mcdonalds, Burger King, Mang Donald, Pizza Hut, and other competing capitalist food enterprises, big and small. Imagine how arrogant Toyota people and expensive their cars will be if there are no Honda, Kia, Ford, Hyundai, GM, BMW, Mazda, etc. which are more than willing to provide different car models to different car buyers with different transportation needs and different budget.

Imagine how expensive and arrogant Yahoo will be if there are no Google, AOL, Hotmail, Naver, etc. to provide the public with alternative free online services.

With the "anarchy" of capitalist competition, we consumers benefit. We have the option to use free internet services and live a cosmopolitan life, or to live a hermit life in the mountains, no coercion involved.

Under free market capitalism, consumers do not make any distinction or discrimination between a local and multinational company. Consumers just pursue their own self-interest – finding the best clothing design, the most user-friendly cell phone or laptop, the tastiest pasta or vegetable salad, the most sturdy running shoes, the most durable hand tractor or fishing boat engine, etc., at a particular budget that they can afford. And dozens, if not hundreds, of suppliers from different cities or countries would come to present their products even to the most inquisitive customer who can afford their price.

Instead of demonizing multinationals, we should welcome them. From Coke and Pepsi, McDo and Jollibee, Hyundai and Toyota, Samsung and Nokia, Nike and Fila, Apple and HP, etc. Multinationals expand the range of goods and services that local industries and capitalists cannot sufficiently produce. It's us consumers who effectively dictate what the producers should supply. If local producers cannot supply the things that we need both in quality, marketing and price, multinationals come in. We consumers decide whether we buy from multinationals or not. There is no coercion involved, unlike big State taxation and regulations that thrive mainly on coercion.

Poverty can be eliminated by personal responsibility, ambition and hard work, all other things being equal. A social and economic system that rewards hard work and penalizes laziness is the best antidote to mass poverty. By then, to become poor and remain poor is mainly a matter of personal choice. When a person chooses to just party everyday and work as little as possible, then it is a self-imposed poverty and governments, the UN, the WB, ADB, USAID, and other multilateral or bilateral institutions that dream of “a world without poverty” with full hypocrisy should keep out and shut up.

It is also axiomatic that in a society where individual liberty is fully assured and fully protected by the rule of law, that social inequality will increase and sharpen. Not mainly because “the poor becomes poorer”, but mainly because there is nothing we can do to people who are super-ambitious, super-talented, super-efficient and super-hard worker. If a group of such guys can develop medicines that can kill AIDS virus 100 percent in just one year, the ingredients of their medicines just come from the leaves of the most common trees in a particular continent, then those guys will become super-super-rich. Even if they will bring down the price of their medicines to just 1/5 or 1/10 of the price of the most popular incumbent medicines against AIDS that can only keep the virus at bay but never really kill it.

* See also:
Spontaneous Market 6: Removing Pork Barrel, December 16, 2007
Spontaneous Market 7: Price Control is Price Dictatorship, November 01, 2008


kentigar said...

I am a huge fan of the libertarian movement, and so I thank you for bringing their name into discussion. It is true that the concept of free market (in which we do not function at the moment, as you should know, being that the government uses subsidies to buoy up certain goods in our countries, and as we use watchdogs like the SEC to ferret out [or not] bad guys like Bernie Madoff) is one which theoretically would permit the rise and fall of new and leaner gladiators in today's economy.

However, your laudatory analysis of the virtuousness of these websites is a bit misguided. The entrepreneurs at Facebook created the company, as you said, because they wanted to make a lot of money -- not because they give a damn about freedom of expression. And let's be clear about one point: Have you read their privacy policy? They are not restricted in sharing any information you put on their website with ANYONE. They can sell this information (still smart entrepreneurs!)to anyone who will buy it.

Who would most benefit from free access to the personal information of a vast majority of people in the First World countries today?

I leave you with that thought. The people at Facebook are not those who will liberate us and give us a free voice in the world. The smart consumer, who uses his money and abilities to inform himself at all times in order to eventually make the government one day irrelevant, will do this for himself. Joining an online community which can turn around and sell our information to the government is not the way to illustrate that we're smart enough to make these right choices yet.

Bienvenido Oplas Jr said...

Thanks Katherine, points well-taken. Yes, there are trade-offs in freebies. So the "no free lunch" reality almost always applies.

And not only the owners of facebook, all users of facebook also use the pictures and information by other people for their own purposes. I copy and save some pictures posted by my friends, they do the same.

At the end of the day, everything in facebook, google, yahoo, etc. become "public" resources and "private" ownership of some guys. So it's up to us users of those free social networking sites which of our pictures and personal information we are willing to share with anyone, and which ones to keep for ourselves. I think there is a lot of leeway for personal freedom and personal responsibility to be practiced and observed there.