ICICI Bank has filed a complaint with the police and is planning to approach regulators regarding “malicious” rumor mongering that some brokers and websites have supposedly indulged in-
“The concerted effort to spread malicious rumours could be a new form of economic terrorism (akin to counterfeit currency being put into circulation), the complaint said. According to the complaint, one of the SMSes read, “Kindly withdraw all your deposits and cash in account with ICICI Bank as ICICI Bank has already rushed to RBI for insolvency.”
KV Kamath has issued multiple clarifications on the issue, the credit rating agencies Moody’s and S&P’s have reconfirmed their ratings, a RBI report says that the bank’s CAR is better than that of SBI, and the Indian government has told some of its companies (public sector undertakings) to “increase their deposits in the bank”. A similar thing happened sometime in 2005-2006 when there was a run on some of the bank’s Gujarat-based branches, but things came back to normal pretty soon. Basically, ICICI is “too big to fail”, and even if something goes horribly wrong, there is no way Chidambaram (the Indian government) is going to let the bank go under – its the country’s second-largest bank for god’s sake; we are no Iceland, and we are not a laissez-faire economy either. That said, the situation is similar to the March 2008 rumors about Halifax Bank of Scotland (HBOS) – short sellers and their trash ‘n’ cash strategy.
Well, this post is not about ICICI Bank, or the credit crisis – let Chidambaram, the RBI and the Indian banking sector deal with the headache – but about free speech. If you had asked me about this a week back, I would have said rumor mongering, slander, libel, defamation – anything that results in damage to someone’s reputation (and therefore business) is not covered by free speech, and that action should be taken against the “perpetrators”. But, today, I feel that there is no such thing as a “right to one’s reputation”. Sure, if someone slanders me, it will make me very angry and if I had the time and money to traverse through the minefield that is the Indian Justice System, I might even be tempted to get the law involved. But I am now convinced that slander is not a legitimate exception to freedom of speech. The right to free speech, if it is to mean something, has to be an absolute one.
In For A New Liberty: The Libertarian Manifesto (pdf), Murray Rothbard writes-
It has generally been held legitimate to restrict freedom of expression if that speech has the effect of either falsely or maliciously damaging the reputation of another person. What the law of libel and slander does, in short, is to argue a “property right” of someone in his own reputation. Yet someone’s “reputation” is not, and cannot be “owned” by him, since it is purely a function of the subjective feelings and attitudes held by other people. But since no one can ever truly “own” the mind and attitude of another, this means that no one can literally have a property right in his “reputation”. A person’s reputation fluctuates all the time, in accordance with the attitudes and opinions of the rest of the population. Hence, speech attacking someone cannot be an invasion of his property right and therefore should not be subject to restriction or legal penalty.
It is, of course, immoral to level false charges against another person, but once again, the moral and the legal are, for the libertarian, two very different categories.
Rothbard goes on to say that if laws on libel did not exist, people would be less willing to believe a particular piece of gossip unless it was supported by evidence. The existence of the laws only makes them believe in gossip because, if it were false, “why doesn’t he sue for libel?” is the question they ask. It thus becomes a case of guilty until proven innocent as far as public opinion is concerned. According to him, the law discriminates against the poor because the rich can use it to suppress genuine free speech – poor people don’t have money to hire lawyers and fight court cases to prove their innocence. While specifically addressing the case of banks, he writes-
It is also illegal, under our banking laws, to spread rumors about the insolvency of a bank—an obvious case of the government’s extending special privileges to banks by outlawing freedom of speech in opposition to their use.
In Law, Property Rights and Air Pollution (pdf), Rothbard writes-
Legal and political theory have committed much mischief by failing to pinpoint physical invasion as the only human action that should be illegal and that justifies the use of physical violence to combat it. The vague concept of “harm” is substituted for the precise one of violence.
In the law of torts, harm is generally treated as physical invasion of person or property. The outlawing of defamation (libel and slander) has always been a glaring anomaly in tort law. Words and opinions are not physical invasions. Analogous to the loss of property value from a better product or a shift in consumer demand, no one has a property right in his “reputation”. Reputation is strictly a function of the subjective opinions of other minds, and they have the absolute right to their own opinions whatever they may be. Hence outlawing defamation is itself a gross invasion of the defamer’s right to freedom of speech, which is a subset of his property right in his own person.
In his post on “Freedom of Speech”, K.M. says that speech “is just a form of action. There is nothing about speech that does not apply to other actions.” Only those actions that result in an initiation of force (contractual fraud is initiation of force; shouting “fire!” in a theater is an initiation of force against the property of the owner) can be subject to government regulation. About the impossibility of outlawing lies, he writes-
The initiation of physical force (whether direct or the violation of a contract) is an objective standard. There can be no honest disagreement about whether a particular case involves the initiation of physical force in the presence of witnesses or evidence. Truth is often not an objective standard legally nor does it apply to all statements. A statement such as “X is incompetent to complete project Y on time.” is a matter of individual judgement and a prediction about the future. Truth does not apply to it. (Update: Look at the comments below for more on this) A statement such as “Candidate X believes in sorcery” cannot be judged objectively as there is no way to either prove or disprove it. A legal system that allows laws without objective standards will soon disintegrate into an arbitrary rule of men. (emphasis not mine)
In a reply to a comment on his post, K.M. clarifies that the “concept ‘objective’ as applied to law means ‘demonstrably true’, not ‘corresponding with reality’”, and that it is only in the presence of “concrete physical evidence” that a conviction (retaliatory use of force by government) can be made. What about lies – false assertions? This is what he has to say on the subject-
There are two positions on punishing false assertions that I can think of:
1) A person making a false claim should be punished if the claim results in damage to others
2) A person making a false claim should be punished irrespective of whether it causes damage.
I believe you are in favor of the first. Evaluating whether a false claim resulted in damage and determining the extent of damage necessarily involves a judgement (in the sense of my previous comment). The judgement involved becomes even more non-objective (in a legal sense) if you include emotional damage or damage by a chain of consequences. It is impossible (even in principle) to have an objective implementation of laws that punish such damage.
The second position that any objectively false claim should be punished implies that men has a legal responsibility to always speak the truth. I will not go into detail here, but this position is absurd.
I think that in the face of all these (convincing) arguments, laws that penalize slander, libel, defamation, rumor mongering or any action that is not an initiation of force are nothing but a restriction on freedom of speech and expression, and are therefore unjust.