Freemarket Anticapitalism

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= Free market socialists in the Hodgskinian and individualist tradition contend that capitalism has been a radical departure from genuinely free market principles, from its very beginnings. [1]


Citation

Charles Johnson:

"“Free market anticapitalism” is a term that raises eyebrows. Mainly because it doesn’t seem to make any sense. The reason I use it is because of the eyebrows it raises — not because I enjoy confusion or confrontation for its own sake, but because I think that existing ideas about the relationships between markets and capitalism are already confused, and that a superficial overlap in language tends to obscure the confusions that already exist. In particular, the term “capitalism” is used by almost all sides in economic debates as if it were obviously the ideal governing libertarian policy proposals, and is debated over both by nominal pro-”capitalists” and by nominal anti-”capitalists” as if it were perfectly obvious to everyone what it means." (http://bleedingheartlibertarians.com/2011/08/libertarian-anticapitalism/)


Historical Origins

Kevin Carson:

"The question remains: if labor is the source of normal exchange-value for reproducible goods, and the natural wage of labor in a free market is its full product, what is the explanation for profit in "actually existing capitalism"?

A central point of contention between Marx and the utopians was the extent to which the labor theory of value was a description of existing commodity exchange, or a prescription for rules of exchange in a reformed system. Marx criticized the utopians for erecting the law of value into a normative standard for a utopian society, rather than a law descriptive of existing capitalism. For him, the law of value described the process of exchange under capitalism as it was; the law of value was fully compatible with the existence of exploitation. His generalizations about exploitation assumed that commodities were exchanged according to their labor value; far from making profits impossible, exchange according to the law of value was presupposed as the foundation for surplus-value. Profit resulted from the difference in value between labor-power, as a commodity, and the labor-product; this was true even (or rather, especially) when all commodities exchanged at their value.

Some "utopians" (including Proudhon, the Owenites, and some Ricardian socialists), it is true, saw the labor theory as a call for a mandated set of rules (like Labor Notes, or modern proposals for government backing of a LETS system). For these, the law of value ruled out exploitation; but rather than seeing it as an automatically operating law of the market, they saw it as requiring the imposition of egalitarian "rules of the game."

But besides these two opposing theories, there was a possible third alternative that differed significantly from the first two. This third alternative considered all exploitation to be based on force; and the exploitative features of existing society to result from the intrusion of the element of coercion. Unlike utopianism, the third theory treated the law of value as something that operated automatically when not subject to interference. Unlike Marxism, it believed the unfettered operation of the law of value to be incompatible with exploitation. This school included, especially, the market-oriented Ricardian socialist Thomas Hodgskin, and the later individualist anarchists in America; they saw capitalism as exploitative to the extent that unequal exchange prevailed, under the influence of the State. Without such intervention, the normal operation of the law of value would automatically result in labor receiving its full product. For them, exploitation was not the natural outcome of a free market; the difference between the value of labor power as a commodity and the value of labor's product resulted, not from the existence of wage labor itself, but from state-imposed unequal exchange in the labor market. For them, the law of value was both the automatic mechanism by which a truly free market operated, and at the same time incompatible with exploitation.

It followed that the law of value was not something to be surpassed. Unlike the Marxists, who looked forward to an economy of abundance based on a principle of "from each according to his ability, etc.," the individualists and market Ricardians saw the link between effort and reward as fundamental to distributive justice. The defining feature of exploitation was the benefit of one party at the expense of another's labor.

...

The question ... is whether the existing market is free or competitive. To abstract production relations and patterns of property ownership from a theory of the exchange process, without first examining the role of coercion in those relations and patterns, is of course to render the paradigm irrelevant to the real world. Only when all the data is considered, is it a useful model for evaluating reality. Unfortunately, the more vulgar apologists for capitalism, as well as its more vulgar opponents, share the error of taking the present system as a proxy for the "market." The myth of the nineteenth century, or even the Hoover administration, as a time of "laissez-faire" is cynically adopted by both corporate propagandists and state socialists for their own reasons.

Marx and Engels vacillated a great deal in their analysis of the role of force in creating capitalism, and in their judgment of whether such force had been essential in its rise. In the Grundrisse, Marx repeatedly raised the issue of the "pre-bourgeois" or "extra-economic" origins of the capitalist economy, but never with an unambiguous answer. Marx understood that the existing situation, in which a propertyless worker confronted "the objective conditions of his labour as something separate from him, as capital..., presuppos[ed].

...

Unlike mainstream libertarians of the right, who typically depict twentieth century state capitalism as a departure from a largely "laissez-faire" nineteenth century idyll, Hodgskin, Tucker et al. were much more thorough-going. It was precisely the capitalism of the nineteenth century that Hodgskin and Tucker described as a statist system of privilege. Although the United States was well into the corporate revolution, and "internal improvements" and railroad subsidies were a large part of national economic life, at the time Tucker wrote, he dealt with these matters almost not at all. The four privileges he attacked--the money and land monopolies, tariffs, and patents--had been an integral part of capitalism from its beginnings. The last-named privileges, tariffs and patents, indeed played a large part in the cartelizing and concentration of the corporate economy during the latter part of the nineteenth century. But Tucker largely neglected their effects on the overall structure of capitalism. So Tucker's critique of capitalism as fundamentally statist was almost completely abstracted from the nascent capitalism of the Gilded Age. The capitalism which Tucker denounced for its statism was, rather, the very capitalism that conventional right-libertarians today point to as a "free market" utopia.

Besides the emergent monopoly capitalism of the late nineteenth century, Tucker's analysis likewise ignored the statist roots of capitalism in the so-called "primitive accumulation" process. Although Tucker treated existing absentee landlordism as a way for the landlord class to live off of other people's labor, he ignored the historical effects of expropriation of the land in initially creating the basic structure of capitalism.

In contrast to the confusion of Marxists as to the role of coercion in exploitation, then, we will proceed from this insight that force is essential to the process, and that the history of the state has been a history of intervention in voluntary relations between human beings in order to benefit one at the expense of another. This is the guiding principle from which Thomas Hodgskin and the American individualist anarchists started. Throughout history, the state has been a means by which the producing classes were robbed of their produce in order to support an idle ruling class. Without state intervention in the marketplace, the natural wage of labor would be its product. It is statism that is at the root of all the exploitative features of capitalism. Capitalism, indeed, only exists to the extent that the principles of free exchange are violated. "Free market capitalism" is an oxymoron.

Thomas Hodgskin, the greatest of the Ricardian socialists, argued that the exploitation of labor in his time resulted from the legal privileges of capitalists and landlords. His was a more radical version of Adam Smith's principle that, when the government undertakes to regulate the relations of masters and workmen, it has the masters for its counselors.

...

Although their work preceded that of Pareto, and they did not use such terms, free market socialists like Hodgskin and Tucker were quite familiar with the substance of Pareto-optimality and the zero-sum transaction. In an order of free and voluntary exchange, all transactions are mutually beneficial to both parties. It is only when force enters the picture that one party benefits at the expense of the other. Indeed, the use of force necessarily implies exploitation, since by definition force is used only to compel one party or the other to do something other than he would otherwise have done, were he free to maximize his utilities in the way he saw fit.

Benjamin Tucker wrote of coercion as the fundamental support of privilege, and of the violence privilege did to the natural harmony of interests.

...

This line of thought reached full development in the work of Franz Oppenheimer. Oppenheimer called himself a "liberal socialist": "a socialist in that he regard[ed] capitalism as a system of exploitation, and capital revenue as the gain of that exploitation, but a liberal in that he believ[ed] in the harmony of a genuinely free market." Unlike Marx, who recognized no legitimate role for monopoly in his theoretical system (which assumed cost price), Oppenheimer blamed exploitation entirely on monopoly and unequal exchange.26 Profit was a monopoly income, resulting from unequal exchange, accruing to the class which controlled access to the means of production.27 This control was made possible only by the state.

Oppenheimer contrasted "the State," by which he meant "that summation of privileges and dominating positions which are brought into being by extra-economic power," with "Society," which was "the totality of concepts of all purely natural relations and institutions between man and man...."28 He made a parallel distinction between the "economic means" to wealth, i.e., "one's own labor and the equivalent exchange of one's own labor for the labor of others," and the "political means": "the unrequited appropriation of the labor of others...."29 The state was simply the "organization of the political means."30 The state existed for an economic purpose, exploitation, which could not be achieved without force; but it presupposed the pre-existence of the economic means, which had been created by peaceful labor.

Oppenheimer criticized Marx for his confusion in not properly distinguishing between economic purposes and economic means.

...

We have already seen, in our examination above of Engels argument in Anti-Dühring, a clear example of the false conclusions resulting from such confusion.

The economic means to wealth were production and voluntary exchange. The political means were violent robbery.33 Or, as Voltaire defined it, the state was "a device for taking money out of one set of pockets and putting it into another."

This theory of the state as the agent of exploitation was developed by both Albert J. Nock, and by Murray Rothbard.

...


The chief act of coercion by which the state exploits labor, as our free market socialist school has understood it, is by restricting, on behalf of a ruling class, the laboring classes' access to the means of production. By setting up such barriers, the ruling class is able to charge tribute in the form of unpaid labor, for allowing access on its own terms. It is only because of the state's enforced separation of labor from the means of production that labor acquires the perverse habit of thinking, not of work as a creative activity performed by the worker with the help of the material prerequisites of production, but of a job that he is given. Work is not something that one does; it is a boon granted by the ruling class, of its grace." (http://mutualist.org/id58.html)

Discussion

Characteristics of Capitalism according to Freemarket Anticapitalism

Charles Johnson:

"The term “capitalism” is used by almost all sides in economic debates as if it were obviously the ideal governing libertarian policy proposals, and is debated over both by nominal pro-”capitalists” and by nominal anti-”capitalists” as if it were perfectly obvious to everyone what it means.

But really the term has a lot of different shades of meaning, which are distinct from each other, and some of which are even mutually exclusive.1 And as often as not it seems that debates about “capitalism” involve more than one of them being employed — sometimes because each person is talking about a different thing when she says “capitalism,” but they think that they are fighting about a common subject. And sometimes because one person will make use of the word “capitalism” in two or more different senses from one argumentative move to the next, without noticing the equivocation. At the expense of oversimplifying a very large and tangled literature,2 there are at least four major definitions that have been attached to the term:


  • Free Enterprise.

This is a relatively new usage (coming mainly from libertarian writing in the 1920s-1940s). “Capitalism” has been used by its defenders just to mean a free market or free enterprise system, i.e., an economic order — any economic order — that emerges from voluntary exchanges of property and labor without government intervention (or any other form of systemic coercion). This is the meaning that is almost surely most familiar to those who spend much time reading libertarian economic writing; it is offered as, more or less, a stipulative definition of the term in Friedman, Mises, et al.

  • Pro-Business Political Economy.

“Capitalism” has also been used, sometimes by its opponents, and sometimes by beneficiaries of the system, to mean a corporatist or pro-business economic policy — that is, to active government support for big businesses through instruments such as government-granted monopolies, subsidies, central banking, tax-funded infrastructure, “development” grants and loans, Kelo-style for-profit eminent domain, bail-outs, etc. Thus, when a progressive like Naomi Klein describes government-hired mercenaries, paramilitary torture squads or multigovernment financial institutions like the IMF and World Bank, as examples of the political economy of “disaster capitalism,” capitalism here must mean something other than markets left free of major government intervention. Rather, this is the state intervening, with a very heavy hand, to promote the interests of a particular class of economic players, or promoting a particular form of economic activity, as a matter of policy. This second meaning of capitalism is, of course, mutually exclusive with the first meaning — state-driven corporatism necessarily consists of projects funded by expropriated tax dollars, or regulations enforced from the barrel of a gun, and so to be a “capitalist” in the sense of a free marketeer means being an “anti-capitalist” in the sense of opposing the corporate state, and being “pro-capitalist” in the sense of state “growth” policy means coming out against “capitalism” in the sense of genuinely free markets.


  • The Wage-Labor System.

“Capitalism” has also been used to refer to a specific form of labor market, or a distinctive pattern of conditions facing ordinary working people — one in which the predominant form of economic activity is the production of goods or the performance of services in workplaces that are owned and managed, not by the people doing the work on the line, but by an outside boss. In this third sense, you have capitalism when most workers are working for someone else, in return for a wage, because access to most of the important factors of production is mediated through a business class, with the businessmen and not the workers holding legal titles to the business, the tools and facilities that make the shop run, and the residual profits that accrue to the business. Workplaces are, as a result, typically organized in hierarchical fashion, with a boss exercising a great deal of discretion over employees, who are generally much more dependent on keeping the job than the boss is on keeping any one worker. (This sense is most commonly seen in Marxian writing, and in older writing from the radical Left — including a great deal of pro-market writing from Anarchists such as Benjamin Tucker and Pierre-Joseph Proudhon.)


  • Profit-Dominated Society.

Finally, the term “capitalism” is very often used (outside of the debating circles of libertarian economists, this is in fact probably the modal use of the term) loosely to mean something like the commercialization of everyday life — that is, a condition in which social interactions are very largely mediated through, or reshaped by, overtly commercial motives, and most or all important social and economic institutions are run primarily on a businesslike, for-profit basis.

It’s important to note, then, that while “capitalism” in the first two senses — that of the freed market, and that of pro-business politics — are mutually exclusive, “capitalism” in the latter two senses are conceptually independent of the political oppositions involved in the first two senses of the term. In concept, a fully free labor market might develop in any number of directions while remaining a free market — you might have a market dominated by big corporations and traditional employer-employee relationships; or you might have worker co-ops, or community workers’ councils, or a diffuse network of shopkeeps and independent contractors; or you might have a pluralistic mish-mash of all these arrangements, without any one of them clearly dominating. (The most likely outcome will depend in part on pre-existing patterns of ownership, the strength and direction of people’s preferences, the direction of entrepreneurial innovation, etc. etc.) Similarly, interventionist states might intervene either against, or in favor of, “capitalism” in the latter two senses — when states adopt heavy-handed “growth” policies and prop up corporate enterprise, they are attacking the free market, but they may very well be entrenching or expanding workplace hierarchy, concentrations of economic ownership, or commercial motives and activities, at the expense of other patterns of ownership, or other forms of peaceful activity, that might be more common were it not for the intervention.

I point all this out, not because I intend to spend a lot of time on semantic bickering about the Real Meaning of the term “capitalism,” or because I think that (say) the disagreements between libertarians and progressives can all be cleared away by showing that one of them is using “capitalism” in the first sense, while the other is really using “capitalism” in the second, third or fourth. Rather, I think the distinction is worth making precisely in order to avoid semantic bickering, and thus to get clear on where the areas of substantive disagreement, and the best topics for productive argument, actually are. A lot of time to get to the real argument you first need to be willing to say, “OK, well, I see that you are complaining about ‘capitalism’ in the sense of the corporate status quo, but that’s not what I mean to defend. What I’m defending is the free market, which is actually radically different from the status quo; no doubt you disagree with that too, but for different reasons; so let’s get on with that.” (http://bleedingheartlibertarians.com/2011/08/libertarian-anticapitalism/)


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