Cory Massimino

Book Review: Markets Not Capitalism

July 31, 2014 by Cory

This article was originally published by the Center for a Stateless Society.

Markets not Capitalism is a wonderfully compiled set of readings spanning 150 years of the market anarchist tradition. We must first commend Gary Chartier and Charles Johnson on their work in bringing all this great literature together and bundling it in a fantastic book for those interested in what market anarchism truly has to offer, as stated by its most ardent supporters of both past and present.

It’s hard to believe the number of genius thinkers who have writings in Markets not Capitalism: Benjamin Tucker, Pierre-Joseph Proudhon, Voltarine de Cleyre, Karl Hess, Roy Childs, William Gillis, Kevin Carson, Roderick Long, and Sheldon Richman to name a few. The compilation truly blends together the 19th century individualist anarchist tradition with the modern left libertarian thinkers who are following in the former’s footsteps.

Since this book has so many great readings, I will only go over some of my favorite ones here.

First, the introduction itself, written by Gary Chartier and Charles Johnson, is a fantastic and concise overview of what market anarchism truly stands for. They write,

The social relationships that market anarchists explicitly defend, and I hope to free from all forms of government control, are relationships based on: ownership of property…contract and voluntary exchange…free competition…entrepreneurial discovery…spontaneous order.

That’s it. Those five things are fundamentally what market anarchism is about. It is about letting people be free to use their own property as they choose and cooperate with others in order to create the kind of society they want. Those five principles allow for a society free of control and domination. They birth a society of liberation and bottom-up organization with individuals in control of their own lives.

Following the introduction, the book is separated into eight sections. I’ve spontaneously decided to go over a reading from each.

Part 1: The Problem of Deformed Markets

Pierre-Joseph Proudhon’s “General Idea of the Revolution in the Nineteenth Century” paints a picture of the kind of economy that is painfully obvious to recognize today. Except he identified the problems in 1851. Perhaps with an unnecessary amount of capitalization (in the grammar sense, not the economic sense), Proudhon was, nonetheless, the doctor who most aptly diagnosed the economy as one controlled and dominated by corporate capitalists, banksters, and statist legislators.

The trio conspired (conspires is more accurate) against the common man and extracted surplus value from workers, borrowers, and renters through the privilege of capital over labor granted by the state, the artificial concentration of credit by advantaged and usurious banks, the artificial restriction of land through state ownership and direction, and general state-enacted plunder. Sound familiar?

Proudhon believed the economy ought to be guided by the natural economic forces of competition and the division of labor, rather than the state and capitalists. “To suppress competition is to suppress liberty itself.”

But because of statist intervention, competition “is today a matter of exceptional privilege: only they whose capital permits them to become heads of business concerns may exercise their competitive rights.” As a result,

[competition]…instead of democratizing industry, aiding the workman, guaranteeing the honesty of trade, has ended in building up a mercantile and land aristocracy a thousand times more rapacious than the old aristocracy of the nobility.

I don’t want to think of how much more rapacious today’s aristocracy is.

Due to the state created capitalist ruling class, Proudhon came to reject capitalism in addition to government. He explains,

In the same way the wage-worker of the great industries, had been crushed into a condition worse than that of a slave, by the loss of the advantage of collective force.

There is hope according to Proudhon though,

But by the recognition of his right to the profit from his force, of which he is the producer, he resumes his dignity, he regains comfort; the great industries, terrible organs of aristocracy and pauperism become, in their turn, one of the principle organs of liberty and public prosperity…

Part 2: Identities and Isms

In “Advocates of Freed Markets Should Oppose Capitalism” Gary Chartier makes a compelling case that goes against nearly 100 years of libertarian rhetoric: friends of freedom ought to also be anti-capitalists.

The kind of anti-capitalism that Charter supports is, he argues, a truer representation of libertarian and anarchist principles. He is not opposed to private property, voluntary exchange or markets. This kind of anti-capitalism harkens back to the arguments and rhetoric of the 19th century individualist anarchists, such as Pierre-Joseph Proudhon and Benjamin Tucker.

Chartier distinguishes between three senses of the word “capitalism”:

1. An economic system that features personal property rights and voluntary exchanges for goods and services.
2. An economic system that features a symbiotic relationship between big business and government.
3. Rule – of workplaces, society, and (if there is one) the state, by capitalists (that is, by a relatively small number of people who control investable wealth and the means of production).

Capitalism, in the second sense is obviously against libertarian principles. Chartier also argues capitalism, in the third sense is also against libertarian principles because it 1) requires coercion and state interference to be maintained and 2) such a system is antithetical to the kinds of commitments to personal autonomy and sovereignty libertarian generally hold.

Obviously if capitalism is meant in the first sense, it is merely synonymous with a freed market, and therefore, it would make no sense for market anarchists to oppose it. But words and labels are a tricky business. He lists seven reasons to be anti-capitalist generally:

1. To emphasize the specific undesirability of capitalism in sense 3
2. To differentiate proponents of freed markets from vulgar market enthusiasts
3. To emphasize that the freed market really is an unknown ideal
4. To challenge the conception of the market economy that treats capital as more fundamental than labor
5. To reclaim “Socialism” for freed market radicals
6. To express solidarity with workers
7. To identify with the legitimate concerns of the global anticapitalist movement

In short,

Freed-market advocates should embrace “anti-capitalism” in order to encapsulate and highlight their full-blown commitments to freedom and their rejection of alternatives that use talk of liberty to conceal acquiescence in exclusion, subordination, and deprivation.

Part 3: Ownership

Roderick Long’s “A Plea for Public Property” is kind of like a slap in the face to many libertarians. Long uses three traditionally libertarian arguments to justify the existence of public (not state owned, but rather owned by the “unorganized” public) property in a libertarian society. Contrary to many libertarians’ claims that in a free society, all property will be private, Long contends it is both coherent and desirable for there to be public property as well.

In line with the Lockean defense of private property as an extension of an individual who homesteads previously un-owned things, Long writes,

Since collectives, like individuals can mix their labor with un-owned resources to make those resources more useful to their purposes, collectives, too, can claim property rights by homestead.

Long uses the example of people slowly clearing a way for a path over time through their combined efforts of walking through it.

Many libertarian use a line of argument that goes something like private property is needed for the realization of personal autonomy. Without a place to really call your own, your autonomy is very limited. This is true as far as it goes but the argument extends to public property as well. What about the autonomy of the property-less? Those without the means to have property certainly won’t have any sense of autonomy in the propertarian world. Having spaces that are publicly owned alongside private property allows people of small means to retain their autonomy somewhat.

Private property is also often defended on grounds that public property suffers from the tragedy of the commons. That is, a space that is publicly owned will be overused and depleted because no one using it has a stake in it and no incentive to leave anything for anyone else. But, as Long points out, this only applies to actually rivalrous goods and not things like ideas or the internet. There is also good reason to think in some cases there is a “more-the-merrier” effect. He points to arguments made by Carol Rose and David Schmidt that in addition to the tragedy of the commons, there is also a “comedy of the commons” that makes public space benefit from more people (like a free town fair).

Long continues through some common objections and concludes,

Ultimately, these problems will have to be resolved by a libertarian legal system, through evolving common-law precedents…An all private system can be oppressive, just as an all public one can be; but a system that allows networks of private spaces and public spaces to compete against each other offers the greatest scope for individual freedom.

The importance in Long’s piece is that libertarian are often depicted, sometimes accurately, as propertarians. But this shouldn’t be true at all. Libertarian arguments provide a robust defense of real (that is, not state owned) public property.

Part 4: Corporate Power and Labor Solidarity

In “Economic Calculation in the Corporate Commonwealth,” Kevin Carson applies Mises’ calculation problem and Hayek’s knowledge problem to private firms. While the two ideas have been historically used to criticize state planning, and Mises denied the calculation problem applied to businesses, Carson argues the two provide resounding arguments against the viability of large, hierarchical companies in a freed market.

The calculation problem, in short, states that “a market in factors of production is necessary for pricing production inputs so that a planner may allocate them rationally.” Mises showed this to be the fatal flaw of Socialism since the abolition of private property, and therefore prices, destroys any opportunity for the rational allocation of resources. Simply, Socialism is just not possible.

But firms are islands of central planning themselves. There are no prices within firms themselves. Carson writes,

The basic cause of calculational chaos, as Mises understood it, was the separation of entrepreneurial from technical knowledge and the attempt to make production decisions based on technical considerations alone, without regard to such entrepreneurial considerations as factor pricing.

But that isn’t the end of the story, Contra Mises, Carson explains,

But the principle also works the other way: production decisions based solely on input and product prices, without regard to the details of production also result in calculational chaos.

That is, Mises’ calculation argument actually does apply to private firms in addition to governments.

Then Hayek came along with another death blow for central planning: “Not generation or source of data, but the sheer volume of data to be processed.” Carson applies Hayek’s discovery to the firm,

The large corporation necessarily distributes the knowledge relevant to informed entrepreneurial decisions among many departments and sub-departments until the cost of aggregating that knowledge outweighs the benefits of doing so.

As the firm becomes larger and larger, it is more prone to knowledge problems and loses its ability to rationally allocate resources within the firm.

But this seems like a non-problem. After all, Carson explains firms will “distribute information until the cost of distributing knowledge outweighs the benefit of doing so.” He writes later,

The calculation problem may or not exist to some extent in the private corporation in a free market. But the boundary would be set by the point at which the benefits of size cease to outweigh the costs of such calculational problems. The inefficiencies of large size and hierarchy may be a matter of degree, but, as Ronald Coase said, the market would determine whether the inefficiencies are worth it.

The problem is there is no free market. This was the problem diagnosed in part one of Markets not Capitalism. Carson explains the myriad of ways in which state intervention makes calculation in the corporate commonwealth a real problem,

By state capitalism, I refer to the means by which, as Murray Rothbard said, ‘our corporate state uses the coercive taxing power either to accumulate corporate capital or to lower corporate costs,’ in addition to cartelizing markets through regulations, enforcing artificial property rights like ‘intellectual property,’ and otherwise protecting privilege against competition.

The kinds of policies that Proudhon identified in 1851, and are unfathomably more pertinent, widespread, and harmful today, prop up large, hierarchical corporations by socializing their losses. State intervention artificially raise the point where firms will stop distributing knowledge and creating hierarchy, making the kinds of firms we see in today’s corporate capitalism profitable. Whereas, in a freed market, they would be crushed by competition.

What makes “Economic Calculation in the Corporate Commonwealth” such a breath of fresh air is that libertarians have, for one reason or another, become apologists for corporations. In trying to defend free market principles, libertarians have often fallaciously become supporters for all things not directly run by the state, including corporations. But this is a mistake, as Carson notes, because the biggest corporations are also the biggest parasites. He takes modern libertarianism to task for misunderstanding the role of the state in propping up big business and vice versa. Big corporations rely on state power to retain influence and money, to deny alternative forms of business, and to oppress the common person. Rather than pinnacles of the free market, big corporations are spawns of leviathan.

Part 5: Neoliberalism, Privatization, and Redistribution

There’s a delicious irony in this book featuring an article by the founder of modern anarcho-capitalism. “Confiscation and the Homestead Principle” shows us a different side of Murray Rothbard. One that supports “[turning] over ownership to the homesteading workers in the particular plants” at the time owned by General Dynamics.

In one of Rothbard’s most underappreciated and least well known pieces of writing, he takes issue with the fervent anti-communists of his day failing to ever provide an actual mechanism by which we could un-socialize. Noticing this failure, Rothbard offers a solution by which libertarians (synonymous with anarchists for him) can end the reign of state owned property and put that property in the hands of actual homesteaders.

Unfortunately, it’s impossible to return state property back to its original owners since we can’t effectively determine which stolen tax dollars belonged to whom. Instead, Rothbard offers the next best solution and uses public universities as an example. Since the tax payers can’t be justly compensated, turning public property over to those who use it, and thereby homestead it, is the next best solution. In the case of universities, the facilities and buildings should be turned over to faculty and students who have effectively homesteaded the property.

But Rothbard doesn’t stop there. He recognizes the existence of state capitalism and understands how it blurs the line between “public” and “private” property. General Dynamics is a beneficiary of the military industrial complex and receives over half it’s funding from the state (stolen money). Clearly this company, and others that similarly receive most of their funding from the state lack a just claim of ownership.

They, too, need to be dismantled and the property transferred to the people homesteading it. In the case of General Dynamics, and most corporations, this is the workers. Since the owners of the corporation are merely an extension of the state, the actual workers have the best claim on the property.

Rothbard concludes,

What we libertarians object to, then, is not the government per se but crime, what we object to is unjust or criminal property titles, what we are for is not “private” property per se but just, innocent, non-criminal private property. It is justice vs injustice, innocence vs criminality that must be our major libertarian focus.

Too often libertarians become apologists for so called “private” property and, in the process, become defenders of the statist quo. Rothbard is correctly pointing out libertarianism is a truly radical philosophy concerned with just property claims, not one that picks a side between the “public” vs “private” false dichotomy.

Part 6: Inequality and Social Safety Nets

One of the major tasks of this book, and the market anarchist project in general, is to demolish the false choice of freed markets or equality. Too often these two things are posed as conflicting ideals. That you must tolerate inequality to support freed markets or you must tolerate state control and intervention to support equality. Even libertarians fall into the trap of seeing the two as competing visions and not recognizing the levelling power of markets. In “Let the Free Market Eat the Rich: Economic Entropy as Revolutionary Redistribution” Jeremy Weiland takes this false worldview to task.

Now “eat the rich” might sound like dirty liberal or socialist rhetoric. But a proper understanding of state capitalism and the kinds of institutions that make up modern economic systems leads one to understand why eating the rich is both desirable and libertarian. As Rothbard explained in the last section, state capitalism blurs the line between “public” and “private” property. But why does it do this? Because the state is controlled by the rich. It is a tool the powerful, politically entrenched elite use to create large sums of wealth not through voluntary exchange and the free market, but through exploitation and state intervention. The common framing that it’s the state vs big business and the rich is completely wrong. On the contrary, the state and the rich are partners in crime, and often one in the same. To be anti-state is to be anti-rich (in the world as we know it, not anti-rich in a conceptual sense). In the words of Roderick Long, “Libertarianism is the true proletariat revolution.”

Jeremy Weiland explains, “The modern corporation is a legal entity chartered by the state.” It benefits from a huge variety of intervention including fiat entity status, personhood, and limited liability. All of which tilt the market in favor of well established, large corporations at the expense of smaller competitors and would be market participants. Simply put, “In a free market, corporations would not be able to rely on the state for their very existence.” Absent the state intervention, the true levelling forces of the market would come to fruition.

What about personal estates? The state created benefits don’t stop at just corporations. Weiland argues, “The biggest subsidy enjoyed by the wealthy lies in government regulation of finance.” After all, regular joes don’t “pay” for that service in proportion to their deposits. Low income people with less investments and deposits subsidize the rich through virtually all central bank regulation and FDIC policy. Barriers to entry in banking make it even worse by preventing workers from forming their own mutual banks and being forced to participate in the capitalist controlled banking sham.

Property protection itself is tilted in favor of the wealthy. Not only are the rich more likely to game the “justice” system (because the state monopoly answers to no one as long as there is no competition in arbitration), the rich are again subsidized by the poor through police protection. Wealthy people obviously have much more property than lower income people and need a much higher quantity of protective services (as well as a higher quality of protection since they are more likely to be targeted by thieves). But there is no market for property protection. Instead everyone pays through taxes and the rich use a higher proportion of police protect than anyone else…subsidized by the poor.

Weiland points out,

A truly free market without subsidized security, regulation, and arbitration imposes cost on large aggregations of assets that quickly deplete them.

He concludes,

Perhaps authentic libertarian means of genuinely free markets, taken to their logical conclusion, can effect far more egalitarian and redistributionist ends than we ever dreamed – not as a function of any central State, but rather as a result of its absence.

Part 7: Barriers to Entry and Fixed Cost of Living

A large part of the market anarchist project is showing ways in which the state harms the worst off among us and how freed markets truly help the poor, thereby melding our commitment to freedom and non-violent egalitarianism. As explained above, liberty and equality are not conflicting ideals. Rather, they are complementary. It is statism and equality that are simply incompatible. Charles Johnson’s “Scratching By” serves as a concise list of way in which statist interventions, often touted as egalitarian, actually make the poor worse off.

Welfare schemes tend to keep poor people dependent on the state, creating an endless cycle of poverty. But in addition to fostering a culture of subservience, they also prevent a different kind of culture from taking the place of statism and coercive, inefficient anti-poverty measures. Johnson explains,

But in a free market – a truly free market, where individual poor people are just as free as established formal-economy players to use their own property, their own labor, their own know-how, and the resources that are available to them – the informal, enterprising actions of poor people themselves would do far more to systematically undermine or completely eliminate, each of the stereotypical conditions that welfare statists deplore.

Of course the housing crisis of the 2000s not only led to a horrible crash crippling many poor peoples’ lives (and leaving the rich fine and dandy with bailouts and quantitative easing), it also created a system where renters and other low income people were subsidizing the housing of the better-off. Yes, housing subsidies did provide options for housing to people who otherwise wouldn’t have had it (of course, that, itself, is the fault of government land ownership, eminent domain, zoning laws, and credit policy). But those subsidies to homeowners was coming from non-homeowners, who tend to be poorer. This redistribution scheme was directly shifting money from the bottom of the economic ladder to the middle and top…and following the 2008 crash, the big banks were free to seize the homes, pushing the homeowners back to dire situations and leaving the original subsidizers still poor.

Johnsons also goes into depth about the scam of urban homesteading and how housing codes and regulations make it much more difficult for people to actually acquire property of their own, forcing them to remain dependent on landlords. Licensures, despite being promoted as consumer safety measures, actually impede competition and keep poor people out of the market. Costly (meaning both time and money) licenses lock poor people out of certain jobs and artificially restrict their employment options. He writes,

Government regimentation of land, housing, and labor creates and sustains the very structure of urban poverty.

Rather than the cure for poverty, the state is the cause. The war on poverty would be more aptly named as the war on the poor.

Part 8: Freed Market Regulation: Social Activism and Spontaneous Order

Roderick Long’s “Platonic Productivity” is a fascinating article that forces libertarians to rethink a lot of their arguments but also examine their commitments. Libertarians and defenders of the market often point out that employees will be paid according to their marginal revenue product (MRP). Therefore, the fact that women are paid on 75 cents for every dollar a man is paid is a sign of a real difference in productivity between the sexes. After all, if it wasn’t, the gap would be whittled away from competition. So, the libertarian concludes, the market is working fine! There is no need for government intervention here.

But, as Long, points out, there is merely a tendency for workers to be paid according to their MRP. For reasons Mises pointed out, the market never reaches equilibrium. Instead, it is always approaching equilibrium. The same goes for workers being paid according to their MRP.

Furthermore, since firms are, at their core, islands of central planning separated from the price mechanism internally, determining a worker’s MRP can be difficult. There is no easy way to figure out a worker’s MRP from within a firm so even “well-meaning,” profit driven employers not looking to discriminate can create a persistent wage gap. Long also points out discrimination can act as a consumer’s good for employers, allowing actual discrimination to persist. Instead of buying brand new carpeting for their office, an employer might spend those profits (or more accurately, never earn those profits) from discriminatory hiring practices.

Despite seemingly looking like an indictment of the market and begging for government intervention, Long points out why asking the state to solve this problem is misguided.

There’s no reason to think transferring decision-making authority from employers to the State would bring wages into any better alignment with productivity. People in government are crooked timber too, and (given economic democracy’s superior efficiency in comparison with political democracy) they’re even less constrained by any sort of accountability than private firms are.

Rather than a reason to give up our commitment to markets, Long’s argument is merely a reminder that the market is, itself, made up of fallible people with biases and imperfections. The market isn’t God. But of course, neither is the State.

Long finishes by pointing out,

Once we see why the productivity theory of wages, though correct as far as it goes, goes less far than its proponents often suppose, it does not seem implausible to suppose that this sexism plays some role in explaining the wage gap, and such sexism needs to be combated… But that’s no reason to gripe about “market failure.” Such failure is merely our failure. Instead, we need to fight the power – peacefully, but not quietly.

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