Infrastructure’s Place in Hamiltonian Capitalism

We have introduced the Hamiltonian model of the three major economic systems:

  • Capitalism – Government actors set the common business environment without favoring particular private actors; individual private actors are then free to take any business action within the boundaries of the established environment.
  • Libertarianism – Private actors set the common business environment without favoring particular private actors; individual private actors are then free to take any business action within the boundaries of the established environment.
  • Liberalism – Government actors set the common business environment without favoring particular actors; government actors then decide on all individual economic actions within the boundaries of the established environment.

The model is named after Hamilton because he more than any other statesman defined in theory and practice what the relationship between the state and free market should be in a Capitalistic nation.

The main advantages of the model are, first, its flexibility across scenarios (the government actor-private actor relationship holds true as the situations handled by the model rise in complexity); second, the instructive context it builds around government projects and private initiatives.

Capitalists especially must clearly understand when government action is and is not appropriate because their position does not dismiss all government action as illegitimate as pure Libertarians do, which position was refuted by us here.  Nor do Capitalists hold to the pure Liberal position that all types of intervention are always legitimate.  If conservatives accept that Federal initiatives are at least sometimes permissible then they must be prepared to answer under what circumstances they should be allowed.

What little has been written by Conservatives about a positive role for government is inadequate.  This is a disservice to free market Conservatives.  Without exploring what government should do Conservatives are only partially prepared to distinguish the wisdom of Capitalism from Liberal recklessness.

To shed light on this matter for Conservatives we here apply the Hamiltonian state-private actor model to a situation when Federal Government action should take the lead over state action.

The example selected to illustrate this is Trump’s planned oil and gas infrastructure buildout.

In this case, the Capitalistic relationship dealt with by the model is: Federal Actor, State Actor, Private Actor.

Some objections to this project have been raised by Republicans, whose leanings are more Capitalistic than Libertarian, on grounds that these admittedly needed infrastructure improvements are best handled at the state level.

Is there merit to their objections?

To answer, we first establish what the energy projects of the incoming Trump administration are in general.

Simply, the planned infrastructure will facilitate the intermediary steps between the raw extraction of oil and gas and its delivery as a finished product ready for use by the consumer.  Some of these intermediary steps include the construction and maintenance of pipelines, processing raw materials into refined products, and storing and transporting raw and refined fuel to various steps on the production chain.

Does this warrant involvement by any kind of government, state or Federal?

In Hamiltonian Capitalism, economic intervention is justified when it establishes a business environment shared in common by all private actors without favoring a specific actor.  In the case of energy infrastructure, some of the described intermediary steps may be handled best by private actors such as fuel trucks owned by private companies.

Other steps, which would benefit energy companies commonly, such as the construction of pipelines and building of refineries, will need at least to be tightly coordinated with the Federal government because particular infrastructure might be cost prohibitive for individual companies to build on their own; the physical sites will at some points have to go through Federal land; facilities and operations must satisfy local and Federal regulations; and to meet other constraints.

A pure Libertarian might bring up the point that if there were no Federal regulations and all Federal land was privatized there would be no need for any Federal role.

While Federal land could be sold it would be impossible in Capitalism to have the government abandon all regulations of the energy industry because private energy companies would have an inherent conflict of interest between their responsibility to be profitable and their responsibility to regulate themselves and other companies.  It is easy to see situations in a pure Libertarian system where energy companies would cut back on common safety regulations governing the transportation of dangerous compounds to reduce their individual expenses, or set up the infrastructure chain to unfairly drive weaker competitors out of the market.

In Capitalism there must be some reasonable Federal laws and regulations.  To satisfy them energy projects will normally have to include the Federal government at some level.

Lastly, we come to the question of whether governmental involvement in the project should be handled only by the states or include the Feds.

A Federal role is justified easily under Capitalist theory because the energy project is meant to benefit the economy nationwide and because the actual infrastructure will cross multiple states.  By being interstate in nature, these facilities must also function as complete systems – it does no good to have a pipeline from Montana to Texas be completely finished in every intermediary state except, for example, Colorado where environmental regulations have stalled that state’s end of the project.

Since the infrastructure buildout is not localized to a particular state or a handful of states, there is nothing wrong with having the work nationalized under Hamiltonian Capitalism.

As far as Alexander Hamilton himself would be concerned, Trump’s energy projects would be in natural agreement with Hamilton’s vision of free markets.

Advertisements

One thought on “Infrastructure’s Place in Hamiltonian Capitalism”

Comments are closed.