Political capitalism (government run for a capitalist elite) has been a great evil. Everyone can see that, no matter what their rhetoric. But the evil has been in the politics and not in the capitalism. Without understanding that, the vast majority look to politics for the solution, for the weapon they believe they need to fight capitalism.
"The Libertarian Partisans and the anarcho-capitalists insist that there's no difference between the terms 'capitalism' and 'free market'. I, on the other hand, am devotedly in favor of a free market and not so hot on capitalism."
So begins my first attempt at a BlackCrayon essay on the difference between freedom and capitalism.
"If a 'market' is a system of exchange," I continue, "and 'free' means that it is voluntary, that is to say, uncoerced, then a 'free market' is a system in which all voluntary exchanges are permissible and all involuntary exchanges are impermissible."In other words, the free market is an ethical concept -- not an economic one. I was attempting to disentangle the moral concept of uncoerced exchange from the semantic mire of connotations attached to the C-word.
To quote the father of anarcho-capitalism, the late Murray N. Rothbard,
It so happens that the free-market economy, and the specialization and division of labor it implies, is by far the most productive form of economy known to man, and has been responsible for industrialization and for the modern economy on which civilization has been built. This is a fortunate utilitarian result of the free market, but it is not, to the libertarian, the prime reason for his support of this system. That prime reason is moral ... [emphasis added]
Many advocates of capitalism -- perhaps following the lead of Ayn Rand, the infamous minarchist behind the "Objectivist" cult of personality -- contribute to the mire by deliberately conflating ethical, political, and economic concepts, collapsing them all into the term 'capitalism' and setting it against the evils of 'collectivism' and 'statism' in the 20th-century Cold War dichotomy.
As a result of this polarizing map, Miss Rand reflexively defended any target of collectivist or leftist attack. Most notably, she denied the harmful effects of pollution and exalted "Big Business" as morally courageous and unjustly maligned. Similarly collapsing the concepts of selfishness and self-interest, the Objectivists have probably done more harm than good to free-market advocacy.
Even if we are to defend some form of capitalism, we can't do so by ignoring or resisting useful distinctions. Without semantic precision we cannot hope to understand the complexities of the world or to choose our positions wisely.
So why did I write that I was "not so hot on capitalism"?
There are two main reasons. One was ignorance of economics. I will not, in this essay, attempt to summarize free-market economics, and the role that capital and capitalism play. I will, however borrow economic vocabulary in addressing the second reason for my reluctance to embrace capitalism: bad semantics.
As I say in the BlackCrayon dictionary,
"The term 'capitalism' is as semantically unstable as the term 'liberalism' and will rarely mean the same thing for two people in an argument -- or even an agreement -- or even for one person in a private monolog from one moment to the next."
So it has proven to be with my own private monologs, as I explore different meanings of the term, as well as the cases for and against the various forms of capitalism.
My first definition, offered with conviction in the original essay, was as follows:
"The term 'capitalism' ... is about capital -- a surplus of stored value in a system of commerce."This definition is incorrect, and came from the general confusion caused by the use of the term 'capital' to designate money, particularly investment moneys. (Isn't the capitalist, after all, the guy with all the money?)
Actually, the most useful definition of 'capital' is the one given to us by Karl Marx: capital is "the means of production". Communism and state-socialism are based on the belief that capital should not be privately owned.
Marx was not against the private ownership of all property. Personal possessions (the ends of production) were acceptable, but the means of production -- what Marx called "bourgeois property" -- had to be held publicly.
Benjamin Tucker summarized the Marxist distinction (which Tucker rejected) as follows:
To the individual can belong only the products to be consumed, not the means of producing them. A man may own his clothes and his food, but not the sewing-machine which makes his shirts or the spade which digs his potatoes. Product and capital are essentially different things; the former belongs to individuals, the latter to society.
-- "State Socialism and Anarchism: How far they agree, and wherein they differ."
Ideologically, then, the term 'capitalism' can be understood to mean the rejection of the Marxist thesis. Ideological capitalism is the position that private individuals can legitimately own the means of production: sewing machines and spades, tractors and factories. By this meaning, ideological capitalism is solidly in keeping with philosophical individualism, which rejects the very existence of "society" as the sort of entity that could own anything. Collective ownership -- in the ideological sense -- depends on philosophical collectivism.
Based on Tucker's rejection of socialist property theory, then, we should expect Tucker to have considered himself an ideological capitalist. But we would be wrong. Even if anarcho-capitalists are right to claim Tucker as part of their ideological ancestry, we can't assume he would have embraced all his offspring.
Tucker not only rejected the legitimacy of capitalism, but even labeled himself a socialist -- albeit an anti-state socialist. In fact, Tucker claimed that anarchism -- even strictly and narrowly defined as the rejection of coercive government -- was a form of socialism.
How can Benjamin Tucker have defended the private ownership of capital (which is how I have here defined 'ideological capitalism') and rejected capitalism? The answer lies in a three-part distinction I would like to introduce in this essay:
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Ideological capitalism, to repeat myself, is the ethical position either that (a) private individuals can legitimately own capital, or (b) only private individuals can legitimately own capital.
Political capitalism is my term for what anarcho-capitalists call "State Capitalism" -- government run for the benefit of private capitalists. (I use the term 'political capitalism' in part to contrast political means with economic means, and in part to avoid confusion with the term 'State Capitalism' as it was used by anti-Soviet leftists, who claimed that the Soviet Union could not properly be seen as communist or even anti-capitalist because the state monopoly had taken over the role of the capitalist in exploiting the proletariat, rather than abolishing the role and liberating the proletariat.)
Political capitalism is anti-competitive because established capitalists use the coercive power of the State to suppress entrepreneurial competition, both at home and abroad. Notice that political capitalism is incompatible with a free market!
Economic capitalism is a free market in privately held property titles, including titles for "infrastructural capital" (technology) and "natural capital" (land).
It is often called "laissez-faire capitalism" or sometimes "pure capitalism" or even "true capitalism" by those who want to tie the economic concept back to the ethical position of ideological capitalism.
Whether or not economic capitalism is compatible with even a minimal "night watchman" government is the issue debated by libertarian minarchists and anarchists. Minarchists, representing the majority view of classical liberalism, claim that a minimal coercive government is necessary for enforcement of contracts and protection of property rights. Free-market anarchists claim that anything that is provided by monopoly can better be provided by competition.
Either way, economic capitalism is based on private property, meaning the de jure ownership of transferable property titles (as opposed to de facto property based on occupation and use).
Among free-market anarchists, the divisive issue is the recognition of land as de jure private property. Mutualist anarchists, following Pierre-Joseph Proudhon and Benjamin Tucker, claim land cannot be bought and sold. Land can be legitimately possessed through occupation and use (e.g., "squatting"), but cannot be purchased, cannot be sold or otherwise transferred, and cannot therefore be used as collateral in a loan or investment. Under mutualist anarchism, land cannot be willed or inherited, since such transfers involve de jure property titles. If you want to give your land to your children, they'll just have to occupy it after you're gone.
The mutualists are the strange wedge in anarchism between advocates of socialism and advocates of capitalism. Mutualism is not socialism in the centralized-planning sense of state socialism -- you cannot be an anarchist and advocate coercive central planning -- but the mutualists are ideological opponents of economic capitalism, while remaning staunch defenders of the free market as an ethical concept of voluntary exchange. It is in this anti-economic-capitalism sense of the word that Benjamin Tucker embraced socialism. Anarcho-communists, in contrast with their mutualist comrades, reject the market because they reject all forms of competition, and see all forms of trade as exploitative: someone wins and someone loses. To a communist anarchist, the very term 'free market' is self-contradictory.
The concept of private property rights (a combination of ideological- and economic capitalism) comes not from the anarchist tradition, but from classical liberalism. The rift between mutualist anarchism and private-property liberalism was epitomized by the public debates, in mid-19th-century France, between Proudhon and Frédéric Bastiat. Contemporary advocates of economic capitalism -- including anarcho-capitalists -- owe more of their philosophy to Bastiat, the minarchist[note], than they do to Proudhon, the anarchist.
A side-note for those who are trying to keep track of the family tree: Bastiat pronounced Gustave de Molinari his ideological successor. Molinari advocated a competitive free-market even in the legal and security services currently monopolized by the State and generally used to defend the necessity of its existence. Molinari's proposed system, which takes laissez faire to its logical extreme, later came to be known as anarcho-capitalism, or sometimes just "market anarchism".
For the sake of precision, however, we cannot accept 'market anarchism' as a synonym for capitalist anarchism, since not all free-market anarchists accept the private-property (or 'propertarian') requirements of capitalism.
Tucker's brand of mutualist market anarchism rejected land-as-property but accepted the Molinarian thesis that legal services (courts, contracts) and security services (police, military) could be produced better, cheaper, and more justly in a competitive market than they are under statist monopoly.
Anarcho-capitalism can be seen as the result of accepting those aspects of Tucker's anarchism that resembled Bastiat's and Molinari's liberalism while rejecting both the Labor Theory of Value and Proudhon's famous dictum: "Property is theft!"
Of course Benjamin Tucker did not reject Proudhon's pronouncement. The anarcho-communists of his era called Tucker a "liberal anarchist". (For communists, then as now, 'liberal' is a dirty word.) Tucker accepted the label as accurate: he saw individualism and free-market advocacy as essentially liberal; but he rejected the classical liberal concept of land-as-property and also rejected the legitimacy of capitalist profits.
How can Tucker have defended the private ownership of capital (i.e., ideological capitalism) while rejecting the legitimacy of profits (i.e., economic capitalism)? The reason is actually straight-forward, if we're tracking the distinctions: Tucker believed that profit was impossible without the coercive intervention of the State (i.e., political capitalism).
I started this website when my reading of Robert Anton Wilson (among others) led me to read Benjamin Tucker. Wilson's Tuckerite definition of capitalism, featured in Hagbard Celine's Definitions and Distinctions is
"That organization of society, incorporating elements of tax, usury, landlordism, and tariff, which thus denies the Free Market while pretending to exemplify it."
Clearly the Wilson/Celine use of the term refers to what I call 'political capitalism' -- the long-standing partnership between Big Government and Big Business.
Most leftist attacks on capitalism are based in this same (often unconscious) conflation of economic capitalism with political capitalism. We think of imperialism and monopoly and call these things capitalism. A hundred years ago it was bankers and railroad tycoons pulling the strings of government; now it's Halliburton and the oil industry. (Though bankers are still at it!) The rich and the poor are not equal citizens, no matter what the laws say. But what is the source of the problem? Inherent inequities in the market, or the coercive power of the State? Which is the cause and which the symptom?
Too few make the distinction well enough or consistently enough to even ask.
It is certainly not impossible to distinguish the two and still object to both: Marxism is based in an exploitation theory of economic capitalism, and does not require government intervention to justify its opposition (although it does predict such intervention).
To briefly recap the theory, which is more thoroughly covered in a previous essay: economic "value" was thought to result from the labor put into the final products. This is the Labor Theory of Value (LTV) and while the socialists hold onto it, it was originated by British classical liberals, perhaps a consequence of the Protestant Work Ethic.
If the value of a product is a result of the labor put into it, then how do we explain profits?
If I buy something from you for $10, then sell it to someone else for $40, what accounts for the $30 difference? My buying and selling can't have added three times the labor originally involved in producing the object. Either I didn't pay you enough, or I charged the other guy too much. At least one of you has been cheated ... exploited. My profit is the result of that exploitation.
Similarly, if you borrow $100 at 10% as investment money to create something, and then sell your product for $120, you and the money-lender each make $10. Yours is the product of your labor. Where did his come from? It must have also been the product of your labor, which means he's cheating you out of half your product.
Marx and Tucker agreed with each other on this description of economic exploitation. For Marx, the collectivist, the market created the problem, and the capitalists' power over governments was just a symptom. For Tucker, the individualist, a free market in private individual exchange cannot have created the problem: the State -- through the granting of various monopoly privileges -- must be the source of the exploitation. For Tucker, the profits are merely a symptom of the deeper political causes.
Tucker may have been wrong in his prediction that capitalist profits depended on government privilege (and he claimed that his objections rested entirely on those economic predictions), but his objection to land-as-property would still keep him outside the fold of economic capitalism.
For the past hundred years or so, the LTV has been displaced by subjective value theories, which treat supply and demand as the joint source of economic value. Most of us now take it for granted that the market is driven by supply and demand, and that profits are generated by those who direct the level of supply to the level of demand.
But in our political thinking, we're still stuck somewhere between 19th-century objective theories of value and the subjectivist theories of the 20th century. We are similarly confused about the symptom-and-deeper-cause questions behind interventionism and poverty.
Any position on capitalism, whether advocacy or ardent opposition, that fails to account for the distinctions offered here, is doomed to a debate without the possibility of progress. If, as I claim, the problem with discussing capitalism is that it is "semantically unstable" then we must stabilize both it and ourselves in order to move forward.
As I have repeatedly stated elsewhere, decisions can be made for principled reasons or for practical reasons, and we have to distinguish the two paths. The ethical concept of the free market is compatible with the principles of ideological capitalism: individual private ownership of the means of production. It is also compatible with, but still distinct from economic capitalism, which is a strategy for maximizing wealth and the distribution of wealth. We must address it pragmatically, as either a good or bad strategy toward those stated goals. (And it is arrogance and folly of the worst kind -- and I myself have been guilty of it for years -- to believe that the strategy can be assessed without an understanding of the study of economics.)
Unfortunately, most of us don't make our decisions based either on principled or on practical concerns -- though we talk as if we do. Most of us make our decisions symbolically -- based on connotations, old reflexes, associations and emotional alignments. We talk as if we care about right and wrong (ethics), or about what happens to whom (pragmatics), but what really seems to drive many of us are these questions:
It has taken me years -- decades -- to get to the point where I can disentangle free-market capitalism from the leftist exploitation theory, statist history (the Industrial Revolution, American Imperialism, the Great Depression), Big Business Corporate Capitalism, and the Reagan/Bush Republican Party.
If you are interested in what lies beyond those semantic entanglements and emotional barriers, I recommend beginning with Henry Hazlitt's Economics In One Lesson. Also helpful are Jim Cox's The Concise Guide to Economics, and the Foundation for Economic Education.
Murray Rothbard is particularly helpful for reviewing economic and political history.
For more on mutualist anarchism, see Kevin Carson's website: www.mutualist.org.
French libertarian,
François-René Rideau writes:
I'm not sure you're well-founded to call Bastiat a minarchist.
He just didn't actively partake in the anarchist/(min)archist debate.
One can but speculate what his take would have been if he had lived longer.
Certainly, the notion of anarcho-capitalism didn't scandalize him,
since he considered Molinari as his successor after having most probably
read Molinari's 1849 essays on the production of security, and perhaps even
after having discussed with Molinari on these topics before publication.
He might have disagreed, for whatever reasons.
But it is wrong to claim that we know for sure that he did. We don't.
He certainly wasn't enthusiastic enough about them to write on the topic.
He wasn't scandalized enough to publicly reject them either.
So what we know for sure is that the question was just not on his radar,
as he was struggling with more basic notions.
To many libertarians/classical liberals, the question of government
is indeed secondary as compared to the question
of individual (property) rights and all it entails.
[return to context]