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Bits & Pieces on Free Market Anti-Capitalism: Is this all just a semantic debate?

I’d like to close my remarks with some considerations about why we need to even have this discussion. When a libertarian like Gary or Sheldon comes out for free markets, but against capitalism, he’s often met with the charge that he’s just playing with words, or trying to change the vocabulary of our [sic] message in a misguided ploy to appeal to people who do not share our [sic] economic views.[1] There is not much to say to that, except to point out that the use of capitalism really is more complicated than that. There are several meanings attached to the word, which have coexisted historically. Those meanings are often conflated and confused with each other, and capitalism1, the peculiar technical use of the term by pro-capitalist libertarians to refer strictly to free markets — free markets in the very broadest sense, markets as spaces of unbounded social experimentation) is only one of these among many, neither the original use nor the use that’s most commonly used today. Free market anti-capitalists aren’t trying to change anything; we’re using the word capitalism in a perfectly traditional and reasonable sense, straight out of ordinary language, when we use it to describe the political privileges we’re against (capitalism2) and the nasty structural consequences of those privileges (capitalism3).

But the worry at this point may be whether it’s even worth it to fight over that particular patch of ground. To be sure, equivocal uses and conflation of terms is a bad thing — it’s important to distinguish the different meanings of capitalism, to be clear on what we mean, and to get clear what our interlocutors mean, when we use the term. But once you’ve done the distinguishing, is it worth spending any great effort on arguing about the label capitalism, rather than just breaking out the subscripts where necessary and moving on? If the argument about capitalism has helped draw out some of the economic and historical points that I’ve been concentrating on in these remarks, then that may be of some genuine use to libertarian dialogue. But once those points are drawn out, aren’t they the important thing, not the terminological dispute? And aren’t they something that nominally pro-capitalist libertarians would also immediately object to, if asked? All libertarians, even nominally pro-capitalist libertarians, oppose corporate welfare, government monopolies, regulatory cartels, and markets rigged in favor of big business. So why worry so much about the terminology?[2]

I certainly sympathize with the impulse — I’m an Analytic philosopher by training, and subscripting is one of the favorite tools of my trade; if I have to choose between debates about the word capitalism and debates over the state-corporatist interventions I’ve been discussing, I think the latter is always going to be a lot more important. Further, when we are trying to understand what other people have said about markets or capitalism, it’s important to remember that considerations of charity absolutely call for this kind of approach — when a libertarian writer praises capitalism meaning freed markets, or when a libertarian writer condemns capitalism, meaning capitalism2 or capitalism3, the best thing to do is just take them on their own terms and interpret their argument accordingly.

But there’s a lot to argue about here that’s not just about labels, and it’s not always clear that that’s something that we all readily agree on. What about when it’s not clear that the writer has really consistently held onto the distinction between free markets and actually-existing capitalism?[3] What about when we’re not just talking about single positions on isolated policy proposals, but talking about the bigger picture of how it all works — not just the individual pieces but the gestalt picture that they form when fitted together? When, that is, it really starts to matter not only how a writer would answer a list of questions if asked, but also which questions she thinks to ask in the first place — which features of the situation immediately come to mind for analysis and criticism, and which features are kept as background or afterthoughts?

To put a finer point on it, let’s consider not only how we should understand others’ word choices (which calls for interpretive charity, in part, because it’s not up to us), but also how we ourselves should choose words to describe our own position (which certainly is). Rhetoric is a complicated art, and intimately related to the context of the particular conversation you’re having. I haven’t had space in my remarks to survey all the considerations, or even most of the important ones, about the rhetorical question of which meaning of capitalism to favor, or whether simply to abandon the term. But before I leave off, I do want to touch briefly on one consideration — the question of paradigm cases, of what sorts of examples we take as typical, or characteristic, or especially illustrative of what free markets are and how they work.[4] When we’re looking at the broader picture, at how political and economic structures play off of each other, we’re talking about a structure that has a foreground and a background — more important and less important features. And one of the important questions is not just what may be encompassed by the verbal definitions given for our terminology, but also what sorts of paradigm cases for markets and voluntary society the terminology might suggest, and whether the paradigm cases that it suggests really are good paradigm cases — whether they reveal something important about free societies, or whether they conceal or obscure it. I would argue that identifying a free market position with capitalism — even if you are absolutely clear that you mean capitalism1, that this encompasses all kinds of market exchange and all kinds of voluntary social experimentation outside the cash nexus — offers a particular picture of what’s important about and characteristic of a free society, and that this picture tends to obscure a lot more than it reveals.

This is where the question of labels and terms move beyond mere semantics, and has some real cognitive import. The question is how we picture freed-market activity — whether our model is something that looks a lot like business as usual, with a few changes here and there around the edges, or whether our model is something radically different, or radically beyond anything that currently prevails in this rigidified, monopolized market. Do we conceive of and explain markets on the model of a commercial strip mall: sanitized, centralized, regimented, officious, and dominated by a few powerful proprietors and their short list of favored partners, to whom everyone else relates as either an employee or a consumer? Or do we instead look at the revolutionary potential of truly free markets to make things messy — how markets, without the pervasive control of state licensure requirements, regulation, inspections, paperwork, taxes, fees, and the rest, so often look more like traditional image of a bazaar: decentralized, diverse, informal, flexible, pervaded by haggling, and kept together by the spontaneous order of countless small-time independent operators, who quickly and easily shift between the roles of customer, merchant, contract laborer, and more?[5] When we choose a term that is historically so closely attached to workplace hierarchy and big business, and a term which linguistically connected with the business of professional capitalists (that is, people in the business of renting out accumulated capital), this naturally influences the kind of examples that come to mind, fetishizing the business of professionalized capitalists at the expense of more informal and simply non-commercial forms of ownership, experimentation and exchange. It tends to rig the understanding of markets towards an exclusive focus on the cash nexus; and it tends to rig the understanding of the cash nexus towards an exclusive focus on the most comfortably capitalistic — hierarchical, centralized, formalized and businesslike — sorts of enterprises, as if these were so many features of the natural landscape in a market, rather than the visible results of concerted government force.

Freeing the freed market from the banner of capitalism, on the other hand, and identifying markets with the opposition to mercantile privilege, the expropriation of labor, and the resulting concentrations of wealth in the hands of a select class, brings a whole new set of considerations and examples into the foreground. These new paradigm cases for free markets are deply important if they encourage a wider and richer conception of what’s in a market, a conception which doesn’t just theoretically include mutualistic alternatives and social experimentation outside the cash nexus (as some sort of bare possibility or marginal phenomenon), but actually encourages us to see how these forms of free association and exchange might take on a prominent, even explosive role in an economy freed from the rigged markets and many monopolies of state-supported corporate capitalism. The free market anti-capitalist holds that it’s precisely because of those rigged markets that we have the strip mall rather than the bazaar, and precisely because we have the strip mall rather than the bazaar that so many working-class folks find themselves on the skids, confined to ghettoes, caught in precarious situations, and dependent on a highly rigidified capitalists’ market.

Since this cruel predicament is so central to how most people experience the market in everyday life, it’s vital that advocates of free markets take a position that clearly reveals, and marks out as important, different, positive, disruptive possibilities for the kind of free society that we advocate. If we choose terminology that highlights this reality rather than obscuring it, which makes it clear that the problem is not the fact of market exchange but rather the deformation of market exchange by political privilege to actually existing capitalists, at the expense of dispossessed workers, and which suggests paradigms that revolutionary transformations that freed markets without those privileges, we’ll have chosen well.

That’s the end of my remarks; I’ve already said more in these than I was actually able to say in person at APEE (since I stuck to the major points I covered in the talk, but included footnotes and asides that were in the text but had to be clipped from the talk itself). But there is a lot more to say on all these topics, and on several others that I had been thinking and writing about in the lead-up to the talk, but which didn’t get aired in the presentation. I hope to build on what I have said here,and come around to a number of these points, and to and on some of the questions and conversations that these Bits & Pieces have helped draw out. Until then…

  1. [1]Jackson Reeves, quoted by Walter Block in Capitalism Yesterday, Capitalism Today, Capitalism Tomorrow, Capitalism Forever.
  2. [2]I’d be more happy with this suggestion if it actually seemed to be going both ways — that is, if the people calling for us to move away from mere semantics actually were willing to split the difference and let each side have their terminology, as long as they are clear about it. What actually tends to happen, though, is that nominally pro-capitalist libertarians often use complaints about semantics to insist that readers understand what they mean by capitalism (capitalism1), but then turn around and start bickering as soon as some nominally anti-capitalist writer uses capitalism as a term of criticism, rather than actively trying to figure out whether they might be criticizing capitalism2 or capitalism3, or showing any willingness themselves to subscript and move on when it’s a question of appreciating what nominal anti-capitalists might be saying with the terminology that they are accustomed to use. Without that willingness, the complaints about semantic arguments look more opportunistic than principled, and that suggests that there may be something more at stake here than the complainants would like to let on.
  3. [3]For examples, see the critical discussion in Roderick Long (2008-11-10) Corporations Versus the Market, Kevin Carson, Vulgar Libertarianism Watch, Part 1 et seq., GT 2005-03-23: El pueblo unido jamás será vencido! etc.
  4. [4]In grammar, a paradigm (from the Greek, to show beside) is an illustration of a grammatical rule by using an example — e.g. when a student learning Spanish is taught how to conjugate -ar verbs by giving her the a series of parallel examples (hablar: hablo, hablas, habla, hablamos, habláis, hablan; tomar: tomo, tomas, toma, tomamos, tomáis, toman, etc.); the purpose of the examples is to illustrate the principle so that the student can apply it by analogy with other stems.
  5. [5]The images of the strip mall and the bazaar are taken from my concluding paragraph in Scratching By: How Government Creates Poverty as We Know It. Those images were inspired by and modified from Eric Raymond’s use of The Cathedral and the Bazaar to explain and defend hacker culture and open-source software.

Bits & Pieces on Free Market Anti-Capitalism: What about them poor ol’ bosses? What about gains from trade and economies of scale?

These are remarks that I gave as part of my presentation at the Free Market Anti-Capitalism? panel at the Association of Private Enterprise Education on 13 April 2010. The final instalments will be coming out over the next few days.

  1. By way of introduction or apology
  2. With apologies to Shulamith Firestone
  3. Two meanings of markets
  4. Rigged markets, captive markets, and capitalistic business as usual
  5. The Many Monopolies
  6. What about them poor ol’ bosses? What about gains from trade and economies of scale?
  7. Is this all just a semantic debate?

I’ve spent a fair amount of time in these remarks discussing the general outlines of the thesis that the cash-nexus is artificially expanded, and forcibly deformed, into the patterns of actually-existing capitalism, by means of government privilege to big players; and discussing the many monopolies (once the Big Four; now the Big Nine, at least) that provide some of the most pervasive and intense points of force that dispossess working people, favor big, centralized forms of business, and coercively favor capitalistic, formalized, commercialized uses of resources over non-commercialized alternatives.[1] One of the objections which may have occurred to you by now is that government intervention in the economy goes in more than one direction. It may be true that the monopolies Tucker and I have named tend to benefit entrenched players and conventionally capitalistic arrangements. But what about government regulations that benefit poor people (such as government welfare schemes) small players (such as, say, Small Business Administration loans), or which are supposed to regulate and control large-scale, concentrated forms of enterprise (such as antitrust legislation)?

I would respond, first, that this kind of response seems to suggest an unusual faith in the efficacy of government regulation and welfare state programs to achieve their stated ends. In fact, as I’ve already suggested, much of the "progressive" regulatory structure, supposedly aimed at curbing big business, has largely served to cartelize big business, and to create large fixed costs which tend to drive out potential competitors from the rigged markets in which they have entrenched themselves. Historical work by Gabriel Kolko (in The Triumph of Conservatism) and Butler Shaffer (In Restraint of Trade) has, I think, convincingly shown that these regulatory measures mainly served to rigidify the positions of existing market incumbents and to bail out failing cartelists so as to prevent freedom from disrupting a well-regulated market. And there are good a priori reasons – from the public choice analysis of the incentives faced by politically-appointed regulators — to believe that such regulatory efforts will always be highly prone to capture by the concentrated interests of market incumbents, to be wielded against the dispersed interests of consumers, workers, and would-be start-up competitors.

Second, it is important to keep in mind questions of priority and scale. While I object to SBA loans, antitrust legislation, social welfare programs, and other government interventions as much as any other free marketeer, I think that in this age of trillion-dollar bank bailouts it ought to be clear that, even if government is putting its finger on both sides of the scale, one finger is pushing down a lot harder than the other.

You may also be concerned that I have had so little to say, so far, about some of the conventional explanations that free market economists have offered for the efficiency and scalability of capitalistic arrangements – arguments based, for example, on the division of labor, or on economies of scale, or the gains from trade. But I am not denying the value of either the division of labor, or gains from trade; I am suggesting that labor and trade might be organized along different lines than they are currently organized, in alternative forms of specialization and trade such as co-ops, worker-managed firms, or independent contracting, with comparatively less centralization of decision-making, less hierarchy, less management, and, in many cases, more trade and entrepreneurial independence among the workers involved. Centralized, capitalistic forms of organization are only one sort of cash nexus among many others. And the cash nexus itself is only one way of facilitating a division of labor and a mutually-beneficial exchange can take place; returning to the broader sense of markets as a space of social experimentation, there are all kinds of other social experiments, not necessarily based on quid pro quo exchanges or on cash media, that provide places for people to meet, work and swap.

It is also common for pro-capitalist libertarians to point to economies of scale as an economic reason for believing that large, centralized corporations, industrial agribusiness, et cetera would survive even without the government subsidies and monopolies they currently enjoy. But while I’d hardly deny the importance of economies of scale, I think it is important to remember that economies of scale represent a trade-off between gains and losses. There are diseconomies of scale, just as there are economies of scale – as scale increases, so do the costs of communication and management within the larger workforce, the costs of maintaining heavier equipment, the difficulty of accounting and efficiently allocating resources as more transactions are internalized within the firm, and the difficulty of regearing such a large mechanism to respond to new challenges from new competitors and changing market conditions.[2] The question is not whether or not there are economies of scale; there are, and there is also a point at which the economies of scale are outweighed by the diseconomies. The question is where that point is; and whether, in a free market, the equilibrium point would tend to shift towards smaller scales, or towards larger scales. When government monopolies and rigged markets artificially encourage large, consolidated, bureaucratic forms of organization — organizations which can better afford the high fixed costs imposed by regulatory requirements, can better lobby for subsidies, can better capture regulatory bodies and use them to advance their own interests, etc. — that shifts the balance by forcing up the rewards of scale. When the same measures punish small competitors in favor of market incumbents, and especially when it punishes informal, small-scale community or personal uses of scarce resources, in favor of formalized commercial uses, government forcibly pushes the diseconomies of scale down, by suppressing competitors who might eat the eggs of the political-economic dinosaurs. In both cases, the most pervasive and far-reaching forms of government economic intervention tend to deform economic life towards formalization, commercialization, consolidation, hyperthyroidal scale and the complex hierarchy that’s needed to manage it. Not because these things are naturally demanded by economies of scale, but rather because they grow out of control when the costs of scale are socialized and the competitive pressures and alternatives burned out by government monopoly.

  1. [1]For more on the last point, see Three notes for the critics of the critics of apologists for Wal-Mart.
  2. [2]For a detailed discussion of the diseconomies of scale, see Kevin Carson (2007), Economic Calculation in the Corporate Commonwealth.

Bits & Pieces on Free Market Anti-Capitalism: the Many Monopolies

I concluded my earlier remarks on rigged markets and captive markets by offering this quick gloss on the free-market anti-capitalist thesis: that the recognizable patterns of capitalist economics result from the fact that certain key markets – importantly, the labor market, housing rental market, and other key markets are rigged markets – and in particular, indirectly-created captive markets, in which working-class folks in need of houses or jobs are driven into a market where they are systematically stripped of resources and alternatives, faced by artificially high costs, and generally constrained to negotiate with incumbent market players who have been placed in an artificially advantageous position over them through repeated government interventions in their favor.

Claims like this – that big government tends to disproportionately benefit big business at the expense of ordinary workers, by creating rigged markets and concentrating access to resources – may be controversial in libertarian circles now; but they are hardly unusual in the long view of libertarian history. Before the 20th century coalitions against the New Deal and Soviet Communism, libertarian writers, from Smith to Bastiat to Spencer, had little interest in tailoring their politics to conservative or pro-business measurements. They frequently identified capitalists, and their protectionist policies, as among the most dangerous enemies of free exchange and property rights. The individualist Anarchist Benjamin Tucker, writing in 1888,[1] called for Absolute Free Trade ... laissez faire the universal rule, while describing this doctrine of complete laissez faire and free competition a form of Anarchistic socialism. Let’s bracket discussion of that semantic decision for the moment; the important contribution is Tucker’s identification and analysis of four great areas where government intervention artificially created or encouraged class monopolies – concentrating wealth and access to factors of production into the hands of a politically-select class insulated from competition, and prohibiting workers from organizing mutualistic alternatives. The Big Four monopolies Tucker identified as central to the Gilded Age economy were:

  1. The Land Monopoly – government concentration of ownership of land and natural resources through the enforcement of legally-fabricated land titles (such as preferential land grants to politically-connected speculators, or literally feudal land claims in Europe). Since Tucker, the land monopoly, already key to the Gilded Age economy, has radically expanded – with the frequent nationalization of mineral and fossil fuel resources throughout, and the emergence of local zoning codes, complex housing construction codes, land-use restrictions, "Urban Renewal," municipal "development" rackets and Kelo-style eminent domain seizures, and a host of local policies intended to keep real estate prices high and permanently rising. In a freed market, land ownership would be based entirely on labor-based homesteading and consensual transfer, rather than on military conquest, titles of nobility, sweetheart "development" deals, or eminent domain seizures, and land would tend (ceteris paribus) to be more widely distributed, with more small individual ownership, dramatically less expensive, with more ownership free and clear, and could as easily be based on sweat equity and homesteading of unused land, without the need for any commercial cash exchange.

  2. The Money Monopoly – government control over the money supply, artificially limiting the issue of money and credit to a government-approved banking cartel. Tucker saw this as the source of both monopoly profits for the incumbent banks, and the artificial restriction of access to capital to those large, established businesses which the large, established banks preferred to deal with, while suppressing competition from mutual credit associations and other means by which workers might be able to pool their own resources and access credit on more advantageous terms than those offered by commercial banks. Tucker, in 1888, was writing about the Money Monopoly before the Federal Reserve or the conversion to a pure fiat currency, before the SEC, FDIC, TARP, banking holidays, bailouts, or the myriad other means by which government has insulated big bankers and financiers from market consequences, or erected regulatory barriers to entry which insulate politically-approved business models from market competition.

  3. The Patent Monopoly – government grants of monopoly privileges to patent-holders and copyright holders. Tucker argued that patents and copyrights did not represent a legitimate private property claim for their holders, since it did not protect any tangible property that the patent-holder could be deprived of, but rather prohibited other market actors from peacefully using their own tangible property to offer a good or service that imitated or duplicated the product being offered by the holder of the so-called Intellectual Property. These prohibitions, enforced with the explicit purpose of suppressing market competition and ratcheting up prices, in order to secure a long period of monopoly profits for the IP-holder, now constitute more or less the entire business model of Fortune 500 companies like General Electric, Pfizer, Microsoft, or Disney, and have only gotten longer and harsher in their legal sanctions, as IP monopolists have insisted on the need for more and more insulation from free market competition.

  4. The Protective Tariff – Tucker identified the tariff as a monopoly in the sense that it artificially protected politically-favored domestic producers from foreign competition. While the tariff has declined noticeably in political and economic importance since the 1880s, tariffs remain a distorting force within limited domains (for example, agriculture), and the specific mechanism of import tariffs is much less important, for Tucker’s purposes, than the overarching aim of protecting connected incumbents – whether through tariffs on incoming foreign goods, export subsidies to outgoing domestic goods, through political manipulation of fiat currency exchange rates, or through other means.

As I’ve tried to indicate, Tucker’s Big Four remain pervasive, and at least three of those four have in fact dramatically expanded their scope and invasiveness since Tucker’s original description of them. If we were to try to make a similar list of all the major ways in which local, state, federal and foreign governments now intervene to protect incumbent interests and place barriers to entry against potential competitors, there’s no knowing how many monopolies we’d be dealing in; but I think that there are at least four new major monopolies, in addition to Tucker’s original four, which are worthy of special notice for their pervasiveness and importance to the overall structure of the state-regulated economy.

First, the agribusiness monopoly: since the New Deal, an extensive system of government cartels, subsidies to ratchet up prices for sale in American markets, more subsidies to artifically lower prices for export, surplus buy-up programs,[2] irrigation projects, and the like have tended to ratchet up food prices for local consumers, to make importing and exporting produce over tremendous distances artificially attractive, to distort agricultural production towards the vegetable and animal products that can most successfully attract subsidies and government support projects, to favor large-scale monocrop cultivation over smaller-scale farming, and generally to concentrate agriculture into factory farming and industrialized agribusiness.

Second, the security monopoly: because of government’s massive expansion of standing military forces, and paramilitary police forces, the past century has seen the creation of a gigantic industry full of monopsonistic, government-driven rigged markets, with nominally private companies subsisting largely or entirely on tax-funded government contracts – companies like Lockheed-Martin, General Dynamics, Raytheon, the rest of the military-industrial complex, and the growing number of companies (such as Taser) who cater primarily to government police forces or other Homeland Security agencies.

Third, the infrastructure monopoly: that is, federal, state, or local government monopolization, tax subsidies, and allocation of access to transportation and communications infrastructure. So, for example, the monopoly offers a benefit to big-box retailers like Wal-Mart, whose business models are enabled by, and dependent on, government subsidies to road-building and maintenance, and the resulting artificially low costs of long-haul trucking. Similarly, incumbent media companies have built empires in part because access to broadcast bandwidth has been restricted and politically allocated through the FCC, while access to cable, telephone, and fiber-optic bandwidth has been tightly controlled and restricted through local governments’ monopoly concessions to incumbent cable and telecommunications companies.

Fourth, we might add regulatory protectionism: the proliferation of commercial regulations, government bureaucracy and red tape, business license fees, byzantine tax codes, government-enforced professional licensure cartels and fees (for everything from taxi-driving to hair braiding to interior design) – all of which, cumulatively, tend to benefit established businesses at the expense of new upstarts, to protect those who can afford the fees and lawyers and accountants necessary to meet the requirements from competition by those who cannot, and generally to the poor out of enterpreneurial opportunities, independent professions and more autonomous alternatives to conventional wage labor.

In addition, we should also mention the structural effects of mass criminalization, incarceration, and deportation of socially or economically marginalized people. Activist libertarians have often condemned, on a moral level* the government’s War on Drugs, or Border Apartheid, or other government efforts to criminalize the poor and subject them to imprisonment for victimless crimes. As well they should — these government wars are nothing more than massive violence and cruelty directed against innocent people. But there has not yet been enough recognition of the structural, economic by-products of government policies which, for example, lock 1 out of every 3 African-American men in a cage, potentially for years at a time, taking away years of their working life and permanently stigmatizing them as they try to reenter the labor market and civil society, or which constantly threaten undocumented immigrants with the threat of arrest, imprisonment, and exile from their homes and livelihoods. Such massive government violence, dispossession, and constraint on livelihoods is sure to have massive impacts on the conditions under which many poor and legally-vulnerable people enter into labor markets, housing markets, and all other areas of economic life.

This is, of course, only the beginning. You could easily subdivide some of these monopolies into smaller monopolies; and there are no doubt many more broad classes of monopoly which could be mentioned. But I think that Tucker’s Big Four, which are still present and have mostly grown in their size and importance since Tucker’s day, and these new Big Five, alongside them, get us a lot closer to understanding why so many markets work the way they work. They are, in any case, enough to make the point, and also to raise some likely objections from conventionally pro-capitalist libertarians, which we had better deal with before we spend too much time elaborating on the subject.

I’ll be turning to some of those objections in the next instalment.

  1. [1]State Socialism and Anarchism: how far they agree and wherein they differ
  2. [2]In particular, the USDA’s massive buy-up programs for school lunches and the military.

Bits & Pieces on Free Market Anti-Capitalism: Rigged markets, captive markets, and capitalistic business as usual

Like I said in the previous instalment, one of the things that we need to do, and don’t do often enough, is to carefully distinguish the broad meaning of markets as the sum of all voluntary exchanges, and the narrow meaning, and connotations, of markets as the cash nexus, and the particular forms of relationship and mediation which that brings along with it. The importance of consensual society, to any libertarian theory worthy of the name, is obvious. But the social and economic value of the cash nexus, as a social relationship, depends entirely on the context. What is positive and productive in a context of free exchange easily becomes an instrument of alienation and exploitation when it is forced on unwilling participants through government coercion.

In particular, for free-market anti-capitalists, there are at least three specific mechanisms we might mention — mechanisms that are especially important and especially pervasive, by which incumbent big businesses, and capitalistic arrangements broadly, benefit from rigged markets, at the expense of workers, consumers, taxpayers, and mutualistic alternatives to the statist quo:

  1. Government monopolies and cartels — in which government penalties directly suppress competition or erect effective barriers to entry against newcomers or substitute goods and services;

  2. Regressive redistribution — in which property is directly seized from ordinary workers by government expropriation, and transferred to economically powerful beneficiaries, in the form of tax-funded subsidies and corporate welfare, taxpayer-backed sweetheart loans, Kelo-style eminent domain transfers, &c.; and

  3. Captive Markets — in which demand for a good is created, or artificially ratcheted up, by government coercion — which can mean a direct mandate with penalties inflicted on those who do not buy in; or a situation in which market actors are driven into a market on artificially disadvantageous terms as an indirect (perhaps even unintended) ripple-effect of prior government interventions.

As an easy example of a directly-imposed captive market, consider the demand for corporate car insurance. When state governments mandate that every driver to purchase and maintain car insurance from bureaucratically-approved insurance companies, they necessarily shrink the scope of voluntary exchange, but they also dramatically bulk up a particular, fetishized form of cash exchange – by creating a new bill that everyone is forced to pay, and a select class of incumbent companies with easy access to a steady stream of customers, many of whom might not pay for their services but for the threat of fines and arrest. As an example of an indirectly-imposed captive market, consider the demand for professionally-certified accountants. CPAs perform a useful service, but it’s a service that far fewer people, and indeed far fewer businesses, would need, except for the fact that they need help coping with the documentation and paperwork requirements imposed by the government’s tax code. A CPA is essentially someone trained in dealing with financial complexity, but finances are much more complex than they would be in a free society precisely because of government taxation and the bizarre requirements and perverse incentives tend to make things much more complex than they would otherwise be. Although government has no special interest in benefiting the bottom line of CPAs, it is nevertheless the case that CPAs are able to get far more business, and at a far higher rate, than they would in a market without income tax, capital gains tax, sales tax, and the myriad other taxes that demand specialized expertise in accounting and interpretation of legal requirements.

A quick way to gloss the free-market anti-capitalist thesis, then, is that we hold that many of the recognizable patterns of capitalist economics result from the fact that certain key markets – importantly, the labor market, housing rental market, insurance and financial markets, and other key markets are rigged markets. And, in particular, that they are often indirectly-created captive markets, and that the extent to which these needs are met through through conventionally commercial relationships under the heading of the cash nexus — rather than being met through other, possibly radically different sorts of social relationships, like co-ops, homesteading, sweat equity, informal exchange, loosely reciprocal gift economies, grassroots mutual aid networks, and other mutualistic alternatives — has little to do with people’s underlying desires or preferences, and a great deal to do with the constraints placed on the expression of those desires or preferences. Commercial relationships and the cash nexus grow fat because working-class folks in need of houses or jobs are driven into a market where they are systematically stripped of resources and alternatives, where they are constantly faced by artificially high costs, and where they are generally constrained to negotiate with incumbent market players who have been placed in an artificially advantageous position over them through continuous government interventions in the incumbents’ favor.[1]

  1. [1]See also Scratching By: How Government Creates Poverty as We Know It.

Bits & Pieces on Free Market Anti-Capitalism: two meanings of “markets”

In order to get clear on the topic in a conversation about Free Market Anti-Capitalism, the obvious points where clarification may be needed are going to be the meaning of capitalism, the meaning of markets, and the meaning of freedom in the market context. We left-libertarians have spent a lot of time, and raised a lot of controversy talking about the first topic — whether capitalism is really a good name for the sort of thing that we want, the importance of distinguishing markets from actually-existing capitalism, and the possibility of disentangling multiple senses of capitalism.[1] There’s been a lot of argument about that, but here I’m happy to just defer to what my fellow panelists and other left-libertarians have already said. What I’d like to focus on is the less frequently discussed side of our distinction — not the meaning of capitalism, but the different strands of meaning within the term market. As absolutely central as this idea is to libertarian economics, I would argue that there are at least two importantly distinct senses in which the term is used:

  1. Markets as free exchange — when libertarians talk about markets, or especially about the market, we often mean to pick out the sum of all voluntary exchanges — any economic order based, to the extent that it is based, on respect for individual property, consensual exchange, freedom of association, and the freedom to engage in entrepreneurial discovery.

  2. Markets as the cash nexus — but we often also use the term in a different sense — to refer to a particular form of acquiring and exchanging property — that is, to refer to commerce and quid pro quo exchanges, typically mediated by currency or by financial instruments denominated in units of currency.

Of course, one of the central points of libertarian economics is that these two senses are interrelated: when they takes place within the context of a system of free exchange, social relationships based on the cash nexus – producing, buying, and selling at market prices, saving money for future use, investing money in productive enterprises, and the like are positive, even essential features of a flourishing society.

But while linked, they are conceptually distinguishable, and it’s important to see, first, that markets in the first sense (the sum of all voluntary exchanges) include the cash nexus – but also much more than the cash nexus. Family sharing is part of a free market; charity is part of a free market; gifts are part of a free market; informal exchange and barter are part of a free market. Wage labor (renting labor in return for cash), rent, corporate jobs, corporate insurance and the like can be part of a free market, but so are alternative arrangements – including many arrangements that clearly have nothing to do with capitalism3, and fit awkwardly, at best, with any conventional usage of the term capitalism: worker co-ops and consumer co-ops are part of the market; grassroots mutual aid associations and community free clinics are part of the market; so are voluntary labor unions (based on free association and the right to protest or quit), consensual communes, narrower or broader experiments with gift economies, and other alternatives to the prevailing corporate-capitalist status quo. To focus on the specific act of exchange may even be a bit misleading; it might be more suggestive, and less misleading, to describe a fully free market, in this sense, as the space of maximal consensually-sustained social experimentation.

The question, then, is whether, when people are free to experiment with any and every peaceful means of making a living, the sort of mutualistic alternatives that I’ve mentioned might take on an increased role in the economy, or whether the prevailing capitalistic forms would continue to predominate as they currently do. To be sure, the capitalistic arrangements predominate now – but that, of course, is no reason to conclude that the market has spoken. It would be enough if the predominance of capitalistic arrangements were the product of revealed preferences in a free market; but since we don’t have at present have a free market, it will, at the very least, take some further investigation – in order to determine whether those capitalistic alternatives prevail in spite of the unfreedom of actually-existing markets, or if they prevail, in part, because of that unfreedom.

Which brings us to the market as cash nexus. It is important here to see not only that the cash nexus doesn’t exhaust the forms of voluntary exchange and economic experimentation that might emerge within a freed market, but also that a cash nexus may exist, and may be expansive and important to economic life, whether or not it operates under conditions of individual freedom. Markets in our first, voluntary-exchange sense exist only where people really are free to produce and exchange – free market, in the voluntary-exchange sense of market, is really a tautology. But a market in the cash-nexus sense may be either free or unfree; cash exchanges are still cash exchanges, whether they are regulated, restricted, subsidized, taxed, mandated, or otherwise constrained by government action.

When free marketeers turn from the formal discussion of voluntary exchange, toward a substantive discussion of actually-existing economic relationships and financial arrangements, our analysis has to discuss more than just limitations on market activity. We often speak of market exchange and government allocation as cleanly separate spheres, as if they were two balloons, set one next to the other, in a closed box, so that when you blow one of them up, the other has to shrink to the same extent. That’s true enough about markets as social experimentation, but the relationship between cash-nexus exchange and government allocation is really more like two plants growing next to each other. When one gets bigger, it may overshadow the other, and stunt its growth. But they also climb each other, shape each other, and each may even cause some parts of the other plant to grow far more than if they had not had the support.

Any discussion of the cash nexus in the real world, then, needs to take account not only of the ways in which government limits or prohibits market activity, but also the ways in which government, rather than erasing markets, creates new rigged markets – points of exchange, cash nexuses which would be smaller, or less important, or radically different in character, or simply would not exist at all, but for the intervention of the state.

Thus, the social and economic value of the cash nexus, as a social relationship, depends entirely on the context. Kinds of interaction that are positive and productive in the context of free exchange easily become instruments of alienation and exploitation when they are forced on unwilling participants, in areas of their life where they don’t need or want them, through coercive government. The growth of markets as spaces for social experimentation is always a liberating development — but these social experiments may be mediated by the cash-nexus, or may be mediated by entirely different social relationships. The growth of markets as cash-nexus exchanges, on the other hand, may be liberating or violating, depending on whether those relationships come about through the free interplay of social forces, or through the direct or indirect ripple-effects of government force and the coercive creation of rigged markets.

I’ll be turning to the analysis of that context, and the way that free market anticapitalists apply it to the real-world business-as-usual, in the next instalment.

  1. [1]For examples, see my Anarquistas por La Causa and What’s in a name?, Roderick Long 2006-04-08 and 2008-06-27, Steve Horwitz 2009-12-31 and 2010-01-07, Gary Chartier 2010-01-19, Kevin Carson 2010-03-06, Sheldon Richman 2010-03-02 and 2010-04-16, etc.
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