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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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Location: Northwest Arkansas, United States

Monday, October 10, 2005

"The World Turned Upside-Down."

That's the title of a piece by Monbiot. But given the breathtaking heights of illogic in the piece, a more fitting description might be (as I've argued before) "Ass-Backward."

A week ago, I would have said that if it is too late, then one factor above all others is to blame: the chokehold big business has on economic policy. By forbidding governments to intervene effectively in the market, the corporations oblige us to do nothing but stand by and watch as the planet cooks. But on Wednesday I discovered that it isn’t quite that simple. At a conference organised by the Building Research Establishment, I witnessed an extraordinary thing: companies demanding tougher regulations, and the government refusing to grant them.

Precisely, I repeat, ass-backward. The government is intervening effectively in the market, on behalf of big business. Current levels of energy and resource consumption, and greenhouse gas emission, reflect poor cost internalization by the market actors engaged in those behaviors. And government is, primarily, a creator of externalities. As Murray Rothbard put it, "our corporate state uses the coercive taxing power either to accumulate corporate capital or to lower corporate costs."

Monbiot continues:

Environmental managers from BT and John Lewis (which owns Waitrose) complained that without tighter standards that everyone has to conform to, their companies put themselves at a disadvantage if they try to go green. “All that counts”, the man from John Lewis said, “is cost, cost and cost.” If he’s buying eco-friendly lighting and his competitors aren’t, he loses. As a result, he said, “I welcome the EU’s Energy Performance of Buildings Directive, as it will force retailers to take these issues seriously.”....

The only thing surprising about this is Monbiot's surprise. Capitalists have been acting through the state to establish cartelized industry standards ever since, well, there have been capitalists. This is a phenomenon noted by Marx almost 150 years ago, in the chapter of Capital vol. 1 on the ten-hour day. With competition unlimited by the state, the issue of working conditions presents a prisoner's dilemma for the individual capitalist; it is in the interest of the capitalist class as a whole that the exploitation of labor be kept to sustainable levels, but in the interest of the individual capitalist to gain an immediate advantage over the competition by working his own labor force to the breaking point.

These acts curb the passion of capital for a limitless draining of labour power, by forcibly limiting the working day by state regulations, made by a state that is ruled by capitalist and landlord. Apart from the working-class movement that daily grew more threatening, the limiting of factory labour was dictated by the same necessity which spread guano over the English fields.

Marx referred, later in the same chapter, to a group of 26 Staffordshire pottery firms, including Josiah Wedgwood, petitioning Parliament in 1863 for "some legislative enactment"; the reason was that competition prevented individual capitalists from voluntarily limiting the work time of children, etc., as beneficial as it would be to them collectively: "Much as we deplore the evils before mentioned, it would not be possible to prevent them by any scheme of agreement between the manufacturers.... Taking all these points into consideration, we have come to the conviction that some legislative enactment is wanted." Attempts by employers to limit the workday voluntarily to nine or ten hours, in their collective interest, always came to nought because the individual employer found it in his interest to violate the agreement. State regulation, essentially, amounts to capitalists acting through the state to enforce a cartel among themselves.

In any event, in the case of eco-friendly lighting the principle doesn't hold true. If the energy savings from eco-friendly lighting are great enough to pay for its cost, then the market incentive alone will be enough to convince rational actors to switch. The fact that the savings are not great enough reflects either the fact that all the costs of providing energy are not fully internalized in price, or perhaps that it's just not worth it. And if it's not worth it, it's not worth it, regardless of state intervention. State intervention can make someting artificially profitable at everybody else's expense, but it can't transform a net social loss into a net social gain.

When all costs and benefits of economic activity are fully internalized by the actor, market price is the best way to determine whether a given form of conservation, as Thoreau put it, "costs more than it comes to." For years, I've based my decision on whether to participate in local recycling programs on the savings that are passed on to me. If a given form of recycling really does result in a net reduction in social cost compared to consumption of virgin material, then the local sanitation company will be able to pass its savings on to the customer. So when a local trash operation offers free curbside pickup of recyclables, and allows me to pay by the bag for pickup of non-recyclables, I jump at the chance to save money. But when I'm expected to bundle the stuff up and transport it at my own cost to some recycling center out of a sense of "social responsibility," I figure it's probably a net social loss.

This was not, I now discover, the first time that the corporations have demanded regulation. [Gasp! Maybe he'd better sit down to read Gabriel Kolko.] In January the chairman of Shell, Lord Oxburgh, insisted that “Governments in developed countries need to introduce taxes, regulations or plans … to increase the cost of emitting carbon dioxide.” He listed the technologies required to replace fossil fuels, and remarked that “none of this is going to happen if the market is left to itself.”

Yes it will. If the market is left to itself, and the price of fossil fuels includes all the real costs of providing them, then the market price will in effect be a "carbon tax." And the rising market price of fossil fuels will by itself be enough to make alternative technologies more attractive.

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Anonymous Anonymous said...

Kudos! Another fantastic post!

October 10, 2005 7:36 PM  
Blogger Bill said...

I'm not so sure internalising costs would resolve the problem adequately.

Two reasons, without thinking too hard about it.

1)A firm with comparitive advantage (i.e. technical or rental - for whatever reason - could continue to pay for a useful resource at a higher rate compelling competitors to pay the higher price or quite the market. That could sustain quite high prices and merely mean that instead of regulating use we simply had to pay tribute to resource providers - compare with a punitive tax.

2) The theory of differential rent suggests when a natural resource cost starts to rise new supplies will come online (from harder to reach sources) which could mean that rising prices could in fact see more usage, rather than less, as more would be dragged out of the marginal grounds...

October 11, 2005 8:10 AM  
Blogger Kevin Carson said...

Thanks, Brad.


Wouldn't even firms with rent from some comparative advantage still have a market incentive to use the most economical inputs? A firm might be favorably situated with respect to its market, for example, and still prefer the least costly form of transportation, all other things being equal. And the increased supply brought out in response to higher prices, arguably, would still be more expensive than newer forms of alternative energy.

October 11, 2005 8:25 AM  
Blogger Bill said...



October 12, 2005 3:56 AM  
Anonymous Anonymous said...

I've mentioned before that, as things now stand, Social Security as implemented in the developed world is a proxy for Vagrancy Costs without however changing the externalities that make the labour market fail to clear properly. That's why, at http://member.netlink.com.au/~peterl/publicns.html#AFRLET2 and the other items on that page, I have suggested one possible Pigovian solution. Of course, taken in the long term, it would be better to handle it as the first step of a transition towards some modern analogue of Distributism with individuals owning their own base resources. But I won't go into details here for reasons of space.

October 12, 2005 6:23 AM  
Blogger Kevin Carson said...


I think Kolko's position was that the federal regulatory state performed both functions. He has a lot of material on the instability of oligopoly markets before they were cartelized by federal regulation, and the stabilizing effect of such regulations in insulating large firms from competition. But he also describes the political move to centralism as a defensive action against populist coalitions in the state legislatures (much like the Federalist coup of the 1780s).

October 14, 2005 9:30 AM  

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