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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Tuesday, November 15, 2005

Ivan Janssens' Critique

A thoughtful criticism of some of my ideas in Austrian and Marxist Theories of Monopoly Capital: A Mutualist Synthesis, at Ivan Janssens' blog.

Although the author does not use these words (preferring the term mutualist) I think his idea’s can best be described as “free market communism” (or maybe “free market marxism” is an even better term). A system where through the workings of a genuinly free market the producers/laborers get the full value of their labour.

Actually, although I borrow a lot of ideas from both the Marxists and the Austro-libertarians, the framework I use is neither; it's the "petty bourgeois socialism" of Proudhon, and of the American individualist anarchist tradition from Warren to Spooner and Tucker. Certainly the Marxists have coopted the classical socialist tradition, to the extent that any rhetoric about the exploitation of labor or the exploitative nature of capitalism causes most people to think instinctively of Marx. But Marx didn't invent that tradition. As Benjamin Tucker argued in "State Socialism versus Anarchism," the central doctrines of socialism were arrived at independently by Proudhon, Warren, and Marx:

From Smith’s principle that labor is the true measure of price... these three men made the following deductions: that the natural wage of labor is its product; that this wage, or product, is the only just source of income (leaving out, of course, gift, inheritance, etc.); that all who derive income from any other source abstract it directly or indirectly from the natural and just wage of labor; that this abstracting process generally takes one of three forms, – interest, rent, and profit; that these three constitute the trinity of usury, and are simply different methods of levying tribute for the use of capital; that, capital being simply stored-up labor which has already received its pay in full, its use ought to be gratuitous, on the principle that labor is the only basis of price; that the lender of capital is entitled to its return intact, and nothing more; that the only reason why the banker, the stockholder, the landlord, the manufacturer, and the merchant are able to exact usury from labor lies in the fact that they are backed by legal privilege, or monopoly; and that the only way to secure labor the enjoyment of its entire product, or natural wage, is to strike down monopoly.

Marx saw state control of the economy as the way to "put labor in possession of its own," whereas in the view of Proudhon and Warren the best way to secure to labor its full product was to pursue the laissez-faire doctrines of the Manchesterians to their logical conclusion.

Apart from the lack of a blueprint i think it’s unfortunate that the author does not offer an answer to to Stiglitz-critique (in Wither Socialism ?) on "market socialism".

I must confess that I lack the mathematical apparatus for reading most 20th century academic economics; that's one reason why my treatment of the neoclassical tradition in Mutualist Political Economy stopped with Marshall, and I focused on the Austrian tradition in my attacks on the subjectivists. But from the reviews of Stiglitz that Janssens links to, I gather that his critique of market socialism applies mainly to the Lange-Taylor model, and to the Yugoslav economic experiments, and focuses on the need for state intervention to correct inefficiencies resulting from imperfect information and imperfect competition. I tend to take a Rothbardian view on such questions: so long as there are no state barriers to market entry, the market will produce an optimal level of competition; and given a set of costs for acquiring information, the distribution of information in the market will reflect the market actors' own judgments as to what the information is worth. In other words, let the market decide what levels of competition and information are appropriate. I also tend to view the state as the main creator of externalities, and the main barrier to proper cost internalization and market efficiency.

And it strikes me that the problems of imperfect information and imperfect competition would be reduced considerably in a decentralized economy of small firms producing for local markets. The models of "market socialism" Stiglitz refers to tended to accept many of the assumptions of "orthodox economics" on the efficiencies scale, and to be based on much larger sized enterprises than would exist in the kind of market economy envisioned by the individualist anarchists. The Eastern European model of market socialism also had a considerable role for the state in allocating financial resources between enterprises--a circumstance quite different from a credit system based on mutual banks and voluntary pooling of resources through bottom-up association.

Neither does the author adress the possibility that with the advent of globalization and the deployment of information technology, capitalism is entering a new phase in it’s existence. By breaking down the power of both private monopolies and the modern capitalist welfare state these forces can bring us closer to a genuine free market capitalism (of which the author contends that it never existed, and probably never will).

I don't deny that possibility. In fact, the pamphlet that Janssens links to has a section devoted to the unsustainability of state capitalist intervention in the market, and the likely breakdown of the state capitalist system from assorted crises of inputs. But to the extent that technological change and other developments are undermining the statist basis of privilege, they are necessarily undermining the capitalist nature of the system. My claim that "free market capitalism... never existed" is a matter of definition: the present system is "capitalist" precisely to the extent that it deviates from a free market. Like most of the classical individualist anarchists, I consider capitalism by definition to be a statist class sytem, in which the state intervenes in the market on behalf of capitalists. A free market, in contrast, is the opposite of capitalism: a system in which the state no longer intervenes to guarantee monopoly returns to land and capital, and as a result labor receives its full product as a wage.

[The twentieth century was] different because in a large part of the world we found the holy grail of economic growth.... And it’s in large part thanks to the big capitalists and thanks to democracy that at least many in the West and more in more in Eastern-Asia are living a live in luxury. Ask any Chinese if he or she wants to work for a foreign multinational company or in the domestic sector, and the large majority of them will choose the former. (The point being of course that many of them don’t have that choice yet: it’s precisely thanks to multinational companies that they at least have the possibility to get outside of the fence.)

As P.M. Lawrence, a frequent commenter on this blog, has argued, it's unfair to compare the standard of living of employees of the large corporate sector to either the existing subsistence sector in the Third World, or to the state of affairs before corporate globalization. Such a comparision neglects 1) the extent to which the present corporate system crowded out alternative paths to economic growth and innovation, along both more genuinely free market and more cooperativist lines; and 2) the extent of survivor bias. Simply saying that Third World workers prefer corporate employment to "the alternative" also neglects the issue of involvement by those very same multinational companies in limiting what range of alternatives was available in the first place (as I pointed out in the inaugural post of this blog, "Vulgar Libertarianism Watch"). In many places, the transnational corporations are in active collusion with the governments that build the fence: they're engaged in providing crutches to the people whose legs they broke.


Anonymous P.M.Lawrence said...

You've got a few typos here that need fixing, including how you spell my own name.

Also, you omit one of my larger continuing themes: the role of externalities in muddying the waters when considering the value of development. When globalists point to how much better off the new employees are, they are often correct even when they are only comparing with what they previously had, never mind what they would otherwise have had. It's just that taking resources usually makes the real marginalised worse off.

The survivor bias only comes in by not measuring the genuinely marginalised; it's not a driver of the problem, just a failure to assess the situation accurately. And the externalities are not always governmentally created - though governments generally do create them via unhypothecated taxes - but rather existing small problems of former arrangements that have been locked in and don't provide properly for the enforced changes mediated by foreigners and compradores.

To see what I mean, consider the Irish Penal Laws. Those actually froze in inappropriate measures that had been cultural norms, things like partitioning land holdings among descendants. That didn't matter before the rest of the system of exploitation was in place, but then it made things worse and tended to make agriculture unviable. (Earlier Irish lifestyles had a mixed pastoral/agricultural base.)

November 16, 2005 9:44 PM  

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