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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

Friday, May 30, 2008

Chapter Thirteen Draft

A new draft chapter in the anarchist organization theory project:

Chapter Thirteen. Dissolution of the State in Society
A. Revolution vs. Evolution
B. Dialectical Libertarianism and the Order of Attack
C. The "Free Market" as Hegemonic Ideology
D. Gradualism and the "Magic Button"
E. "Dissolving the State in the Economy"
F. Counter-Institutions
G. Counter-Institutions and Counter-Economics
H. The Two Economies and the Shifting Correlation of Forces
I. Privatizing State Property

Tuesday, May 27, 2008

Chapter Fifteen Excerpt

An excerpt from an extremely rough draft from the anarchist organization theory project.
Chapter Fifteen: The Social Organization of Production
E. Peer Production
F. The Social Economy and the Crisis of Capitalism

* * *

E. Peer Production

Peer production first emerged in information industries: software, entertainment, etc. But its transferability to the world of physical production is a matter of great interest. Open source hardware refers, at the most basic level, to the development and improvement of designs for physical goods on an open-source basis, with no particular mode of physical production being specified. As Stallman might put it, open source hardware means the design is free as in free speech, not free beer. Although the manufacturer is not hindered by patents on the design, he must still bear the costs of physical production. As Edy Ferreira described it,

any piece of hardware whose manufacturing information is distributed using a license that provides specific rights to users without the need to pay royalties to the original developers. These rights include freedom to use the hardware for any purpose, freedom to study and modify the design, and freedom to redistribute copies of either the original or modified manufacturing information.

In the case of open source software (OSS), the information that is shared is software code.In OSH, what is shared is hardware manufacturing information, such as hardware definition language descriptions, and the diagrams and schematics that describe a piece of hardware. ["Open Source Hardware," P2P Foundation Wiki.]

At the simplest level, a peer network may design a product and make it publicly available on an open-source basis; it may be subsequently built by any and all individuals or groups who have the necessary production machinery, without coordinating their efforts with the original designer(s). For example, Vinay Gupta has proposed a large-scale library of open-source hardware designs as an aid to international development:

An open library of designs for refrigerators, lighting, heating, cooling, motors, and other systems will encourage manufacturers, particularly in the developing world, to leapfrog directly to the most sustainable technologies, which are much cheaper in the long run. Manufacturers will be encouraged to use the efficient designs because they are free, while inefficient designs still have to be paid for. The library could also include green chemistry and biological solutions to industry challenges, for example enzymatic reactions that could be used in place of energy, and chemical-intensive processes or nontoxic paint pigments for cars and buildings. This library should be free of all intellectual property restrictions and open for use by any manufacturer, in any nation, without charge. ["Facilitating International Development Through Free/Open Source," Quoted from Beatrice Anarow, Catherine Greener, Vinay Gupta, Michael Kinsley, Joanie Henderson, Chris Page and Kate Parrot, Rocky Mountain Institute, "Whole-Systems Framework for Sustainable Consumption and Production." Environmental Project No. 807 (Danish Environmental Protection Agency, Ministry of the Environment, 2003), p. 24.]

One item of his own design, the Hexayurt, is

a refugee shelter system that uses an approach based on "autonomous building" to provide not just a shelter, but a comprehensive family support unit which includes drinking water purification, composting toilets, fuel-efficient stoves and solar electric lighting." ["Hexayurt," P2P Foundation.]

The basic construction materials for the floor, walls and roof cost about $200. [Hexayurt.Com]

One of the most ambitious attempts at such an open design project for village development is Open Source Ecology. Here's a list of the design categories and individual projects, from their Wiki:

HABITAT PACKAGE: CEB Press - Sawmill - Living Machines - Modular Housing Units - Modular Greenhouse Units - Solar Turbine CHP System - AGRICULTURE PACKAGE: Modular Greenhouse Units - Orchard and Nursery - Electric Garden Tractor - Organoponic Raised Bed Gardening - Agricultural Microcombine -Bakery -Dairy - Energy Food Bars - Agricultural Spader - Well Drilling Rig - Freeze Dried Fruit Powders - Hammer Mill - ENERGY PACKAGE: Solar Turbine CHP System - Compressed Fuel Gas - Inverters & Grid Intertie - Electric Motors/Generators - Fuel Alcohol - FLEXIBLE INDUSTRY PACKAGE: Multimachine & Flex Fab - Metal Casting and Extrusion - Plastic Extrusion & Molding - TRANSPORTATION: Open Source Car - Electric Motors/Generators - Electric Motor Controls - MATERIALS: Aluminum Extraction From Clays - Bioplastics [Main Page, Open Source Ecology]

One project that's reached the prototype stage, the Compressed Earth Block press, can be built for $5000--some 20% the price of the cheapest commercial competitor. ["CEB Phase 1 Done," Factor E Farm Weblog, December 26, 2007.]

Karim Lakhani describes this general phenomenon, the separation of open-source design from an independent production stage, as "communities driving manufacturers out of the design space":

The rise of open source software is a clear example of users innovating and developing products that can out compete traditional manufacturers. But this effect is not just limited so software. In physical products ranging from snowboards to electronic microscopes, users have been shown to be the dominant source of functionally novel innovations. Communities can supercharge this innovation mechanism. And may ultimately force companies out of the product design space. Just think about it - for any given company - there are more people outside the company that have smarts about a particular technology or a particular use situation then all the R&D engineers combined. So a community around a product category may have more smart people working on the product then the firm it self. So in the end manufacturers may end up doing what they are supposed to - manufacture - and the design activity might move to the edge and into the community. [Karim Lakhana, "Communities Driving Manufacturers Out of the Design Space," The Future of Communities Blog, March 25, 2007.]

Michel Bauwens, of the P2P foundation, provides a small list of some of the more prominent open-design projects:

The Grid Beam Building System, at http://www.p2pfoundation.net/Grid_Beam_Building_System

The Hexayurt, at http://www.p2pfoundation.net/Hexayurt

Movisi Open Design Furniture, at http://www.p2pfoundation.net/Movisi_Open_Design_Furniture

Open Cores, at http://www.p2pfoundation.net/Open_Cores and other Open Computing Hardware, at http://www.p2pfoundation.net/Open_Hardware

Open Source Green Vehicle, at http://www.p2pfoundation.net/Open_Source_Green_Vehicle

Open Source Scooter http://www.p2pfoundation.net/Open_Source_Scooter

The Ronja Wireless Device at http://www.p2pfoundation.net/Twibright_Ronja_Open_Wireless_Networking_Device

Open Source Sewing patterns, at http://www.p2pfoundation.net/Open_Source_Sewing_Patterns

Velomobiles http://www.p2pfoundation.net/Open_Source_Velomobile_Development_Project

Open Energy http://www.p2pfoundation.net/SHPEGS_Open_Energy_Project

[Michel Bauwens, "What kind of economy are we moving to? 3. A hierarchy of engagement between companies and communities," P2P Foundation Blog, October 5, 2007.]

A more complex scenario involves the coordination of an open source design stage with the production process within a large peer organization, with the separate stages of physical production distributed and coordinated by the same peer network that created the design. Dave Pollard provides one example:

Suppose I want a chair that has the attributes of an Aeron without the $1800 price tag, or one with some additional attribute (e.g. a laptop holder) the brand name doesn't offer? I could go online to a Peer Production site and create an instant market, contributing the specifications, a bunch of technical links available online about just what makes this chair so special, and, perhaps a maximum price I would be willing to pay. People with some of the expertise needed to produce it could indicate their capabilities and self-organize into a consortium that would keep talking and refining until they could meet this price -- and, if not, they might counter-offer something close. Other potential buyers could chime in, offering more or less than my suggested price. Based on the number of 'orders' at each price, the Peer Production group could then accept orders and start manufacturing....

As [Erick] Schonfeld suggests, the intellectual capital associated with this instant market becomes part of the market archive, available for everyone to see, stripping this intellectual capital cost, and the executive salaries, dividends and corporate overhead out of the cost of this and other similar product requests and fulfillments, so that all that is left is the lowest possible cost of material, labour and delivery to fill the order. And the order is exactly what the customer wants, not the closest thing in the mass-producer's warehouse. [Dave Pollard, "Peer Production," How to Save the World, October 28, 2005. ]

The most ambitious example of an open-source physical production project is the Dutch open source car.

Can open-source practices and approaches be applied to make hardware, to create tangible and physical objects, including complex ones? Say, to build a car?...

Markus Merz believes they can. The young German is the founder and "maintainer" (that's the title on his business card) of the OScar project, whose goal is to develop and build a car according to open-source (OS) principles. Merz and his team aren't going for a super-accessorized SUV—they're aiming at designing a simple and functionally smart car. And, possibly, along the way, reinvent transportation. [Bruno Giussani, "Open Source at 90 MPH," Business Week, December 8, 2006. ]

In either case, whether physical production is coordinated with the design stage or organized independently, it may take place in comparatively heavily capitalized factories (likely owned by workers' cooperatives in a post-capitalist society), by outsourcing the production of specific parts to more modestly capitalized small shops, or to even cheaper fabbers and other emerging desktop production facilities, or to a combination of some or all of the above.

Clearly, as we saw in Chapter Fourteen, the emergence of cheap desktop technology for custom machining parts in small batches will greatly lower the overall capital outlays needed for networked physical production of light and medium consumer goods.

The availability of modestly priced desktop manufacturing technology (coupled with the promise of LETS systems, mutual banks, and other forms of alternative credit) has led to a considerable shift in opinion in the peer-to-peer community, as evidenced by Michel Bauwens:

I used to think that the model of peer production would essentially emerge in the immaterial sphere, and in those cases where the design phase could be split from the capital-intensive physical production sphere. Von Hippel's work is very convincing in showing how widespread the model of built-only capitalism already is.

However, as I become more familiar with the advances in Rapid Manucturing (see http://www.p2pfoundation.net/Rapid_Manufacturing)and Desktop Manufacturing (see http://www.p2pfoundation.net/ Desktop_Manufacturing), I'm becoming increasingly convinced of the strong trend towards the distribution of physical capital.

If we couple this with the trend towards the direct social production of money (i.e. the distribution of financial capital, see http://www.p2pfoundation.net/ P2P_Exchange_Infrastructure_Projects) and the distribution of energy (http://www.p2pfoundation.net/P2P_Energy_Grid); and how the two latter trends are interrelated (see http://blog.p2pfoundation.net/combining-distributed-energy-with-distributed-money/2007/05/06), then I believe we have very strong grounds to see a strong expansion of p2p-based modalities in the physical sphere. See also Kevin Carson's book manuscript about trends in decentralized production technology (http://mutualist.blogspot.com/)
[Michel Bauwens post to Institute for Distributed Creativity email list, May 7, 2007.]

Kevin Kelly argues that the actual costs of physical production are only a minor part of the cost of manufactured goods.

....material industries are finding that the costs of duplication near zero, so they too will behave like digital copies. Maps just crossed that threshold. Genetics is about to. Gadgets and small appliances (like cell phones) are sliding that way. Pharmaceuticals are already there, but they don't want anyone to know. It costs nothing to make a pill. [Kevin Kelly, "Better Than Free," The Technium, January 31, 2008. ]

This is essentially a restatement of Tom Peter's gushy observation that the bulk of product price is "ephemera" or "intellect," rather than nuts and bolts and labor. Or as I put it, much less nicely, most of the price of manufactured goods is rent on artificial property like "intellectual property." When physical manufacturing is stripped of the cost of proprietary design and technology, and the consumer-driven, pull model of distribution strips away most of the immense marketing cost, we will find that the portion of price formerly made up of such intangibles will implode, and the remaining price based on actual production cost will be an order of magnitude lower.

In any case, there is a common thread running through all the different theories of the interface between peer production and the material world: as technology for physical production becomes feasible on increasingly smaller scales and at less cost, the less disconnect there will be between peer production and physical production. Franz Narada writes:

You [Michel Bauwens] are right that there should be a sharp distinction between cooperatives and p2p production, but at the same time it is imagineable that cooperatives work out arrangements that lead to a circulation of material goods and therefore enable mutual supply in a circular process, to some degree eliminating the need for monetary income. This economy would work in a biomorphical way, the surplus on one point being the input on others....

Once we really get a grasp of really efficient home production, the rules of the games will change drastically. In this respect I share Stefan Mertens optimism, although I hate to bring it all down to the notion or image of the fabber. There are very interesting intermediate schemes which work at community level - technologically possible, but neglected from the point of view of capitalist production. [Michel Bauwens, "Franz Nahrada: Can we produce for physical abundance or sufficiency?" P2P Foundation Blog, January 14, 2008. ]

F. The Social Economy and the Crisis of Capitalism

As Michel Bauwens describes it, it is becoming increasingly impossible to capture value from the ownership of ideas, designs, and technique--all the "ephemera" and "intellect" that Peters writes about--leading to a crisis of sustainability for capitalism. [Michel Bauwens, "Can the experience economy be capitalist?" P2P Foundation Blog, September 27, 2007.]

This system is now facing serious barriers that are a function of the finiteness of the natural resource base that is our planet, and global warming is one example of it. One of the meanings of global warming, coupled with the general trend of globalization, is that our growth-system now covers the whole planet, there is no more outside. What this means is that the limits of an extensive development are being reached....

This is no trivial affair, as the failure of extensive development is what brought down earlier civilizations and modes of production. For example, slavery was not only marked by low productivity, but could not extend this productivity as that would require making the slaves more autonomous, so slave-based empires had to grow in space, but at a certain point in that growth, the cost of expansion exceeded the benefits. This is why feudalism finally emerged, a system which refocused on the local, and allowed productivity growth as serfs had a self-interest in growing and ameliorating the tools of production.

The alternative to extensive development is intensive development, as happened in the transition from slavery to feudalism. But notice that to do this, the system had to change, the core logic was no longer the same. The dream of our current economy is therefore one of intensive development, to grow in the immaterial field, and this is basically what the experience economy means. The hope that it expresses is that business can simply continue to grow in the immaterial field of experience.

However, Bauwens writes, this is not feasible. The emergence of the peer model of production, based on the non-rival nature and virtually non-existent marginal cost of reproduction of digital information, and coupled with the increasing unenforceability of "intellectual property" laws, means that capital is incapable of realizing returns on ownership in the cognitive realm.

1) The creation of non-monetary value is exponential

2) The monetization of such value is linear

In other words, we have a growing discrepancy between the direct creation of use value through social relationships and collective intelligence (open platforms create near infinite value through the operations of the laws of Metcalfe and Reed), but only a fraction of that value can actually be captured by business and money. Innovation is becoming social and diffuse, an emergent property of the networks rather than an internal R & D affair within corporations; capital is becoming an a posteriori intervention in the realization of innovation, rather than a condition for its occurrence; more and more positive externalizations are created from the social field.

What this announces is a crisis of value, most such value is ‘beyond measure’, but also essentially a crisis of accumulation of capital. Furthermore, we lack a mechanism for the existing institutional world to re-fund what it receives from the social world. So on top of all of that, we have a crisis of social reproduction: peer production is collective sustainable, but not individually.

Thus, there are two simultaneous crises: first, the failure of artificial abundance through subsidized inputs and externalization of cost, endless supplies of natural resources for appropriation (aided by state favortism), and the availability of new markets as outlets for surplus capital and output; and second, the failure of artificial scarcity in the cognitive realm. Taken together, this means that while markets and private ownership of physical capital will persist, "the core logic of the emerging experience economy, operating as it does in the world of non-rival exchange, is unlikely to have capitalism as its core logic."

In another article, in which he develops these themes at greater length, Bauwens writes that capitalism's successor system is likely to have a significant role for markets, but that the two structural presuppositions of existing capitalism--artificial abundance of resources and artificial scarcity of information--will be replaced by the reverse.

We live in a political economy that has it exactly backwards. We believe that our natural world is infinite, and therefore that we can have an economic system based on infinite growth. But since the material world is finite, it is based on pseudo-abundance.

And then we believe that we should introduce artificial scarcities in the world of immaterial production, impeding the free flow of culture and social innovation, which is based on free cooperation, by creating the obstacle of permissions and intellectual property rents protected by the state.

What we need instead is a political economy based on a true notion of scarcity in the material realm, and a realization of abundance in the immaterial realm. [Michel Bauwens, "Peer-to-Peer Governance, Democracy, and Economic Vision: P2P as a Way of Living---Part 2," Master New Media, October 27, 2007.]

In addition, capitalism faces a crisis of realization in another regard that Bauwens does not directly address. For over two centuries, as Immanuel Wallerstein observed, the system of capitalist production based on wage labor has depended on the ability to externalize many of its reproduction functions on the non-monetized informal and household economies, and on organic social institutions like the family which were outside the cash nexus.

Historically, capital has relied upon its superior bargaining power to set the boundary between the money and social economies to its own advantage. The household and informal economies have been allowed to function to the extent that they bear reproduction costs that would otherwise have to be internalized in wages; but they have been suppressed (as in the Enclosures) when they threaten to increase in size and importance to the point of offering a basis for independence from wage labor.

The rapid growth of technologies for home production in the twentieth century, based on small-scale electrically powered machinery and new forms of intensive cultivation, have led to a major shift in the comparative efficiencies of large- and small-scale production. The comparative efficiencies of the two systems were pointed out, as we have seen, by Ralph Borsodi almost eighty years ago, and have continued since.

The result is a singularity, of sorts, in which it is becoming impossible for capital to prevent a shift in the supply of an increasing proportion of the necessities of life from mass produced goods purchased with wages, to small-scale production in the informal and household sector. The upshot is likely to be something like Vinay Gupta's "Unplugged" movement, in which the possibilities for low-cost, comfortable subsistence off the grid result in exactly the same situation, the fear of which motivated the propertied classes in carrying out the Enclosures: a situation in which the majority of the public can take wage labor or leave it, if it takes it at all, the average person works only on his own terms when he needs supplemental income for luxury goods and the like, and (even if he considers supplemental income necessary in the long run for his optimal standard of living) can afford in the short run to quit work and live off his own resources for prolonged periods of time. It will, in short, be the kind of society Wakefield lamented in the colonial world of cheap and abundant land: a society in which labor is hard to get on any terms, and almost impossible to hire at a low enough wage to produce significant profit.

Thursday, May 22, 2008

Open Capitalist Network

Microlending has received a great deal of attention in the alternative economy movement. Grameen is the first and most notable of these projects. In the West, social lending services include Prosper.Com: The P2P Lending Marketplace, and Zopa: Loans from People, Not Banks.

Zopa describes itself this way:

Zopa loans – unsecured and very personal
Personal Loans and Car Loans are amongst the most popular uses for our lenders' money. Our interest rates are set by our lenders - ordinary people, just like you. The typical rate is 7.6%APR on a £5,000 loan over 3 years in the A* market.
Top 5 loan types
Personal Loan
Car Loan
Consolidation Loan
Home Improvement Loan
Short Term Loan

What the countereconomy needs, especially, is social lending of the type that Grameen pioneered: the provision of capital for production in the household, subsistence, self-employment and cooperative sectors.

In the peer-to-peer field, a major topic of discussion is the organizational forms necessary to organize physical production on a peer basis. There are a number of proposals for peer governance models, for example, at the P2P Foundation.

In this light, Darren Vandervort's Open Capitalist Project seems quite promising. It's a networking project to put potential contributors in contact with those who need startup capital. Here's the general idea of how it works:

The goal of Open Capitalist is to provide a framework for the creation of socially responsible companies. Furthermore, we want to provide a place where individuals can contribute to projects they believe in and earn a profit doing what they enjoy.

Traditionally someone starting a company would require a substantial capital investment to pay for the services and equipment that the start-up requires. We want to drastically reduce this start-up capital requirement by providing a way for contributors to supply the required services in exchange for compensation. Due to the nature of these companies, compensation will vary greatly, and can be provided in various ways. But the form of compensation will be clearly stated. The purpose of this is to make it very visible if someone is merely trying to make a huge profit based on the labor of others.

In the interest of full disclosure, the projects will also clearly state the intended distribution of profits. There is not a set limitation on where these profits can go. You can state that you will take all profits, and offer zero compensation to the contributors that help get your start-up going. What would be expected though, is that you would not receive much help from contributors; therefore, this would be the regulating factor. The end result is that the community determines what is a fair amount of profit taking.

In order to create a self-sufficient system, some consideration should be given back to other projects that are in the formative development stages. For example, I have posted a project describing a web-based remote machining company. This company makes a profit by charging an hourly fee for the use of the machines to prototype their designs. One of the stated distributions of profit is back to other Open Capitalist Projects in the form of free prototyping services. If there is a Project that is designing a mechanical product, free prototyping would be a huge benefit, making them all the more likely to succeed.

Possible methods of contribution include not only the donation of money, but participation in the projects, and bartering of one's own services. As an example of the latter, one of Vandervort's proposals is a web-based prototyping and machining project, which offers its services free to contributors. Some of the other projects can be found here.

Monday, May 05, 2008

Review: The Mind of the Market, by Michael Shermer

Michael Shermer. The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics (New York: Henry Holt and Company, 2008).

If you can get past the flaws in Shermer's book (things others might prefer to think of as my fixations, hangups, and dead horses), it's quite an enjoyable read.

But given my obsession with the ubiquity of vulgar libertarianism, comparable to Captain Ahab's with Moby Dick, I can't refrain from pointing out the flaws.

Before I say a lot of nasty things about Shermer's ideological assumptions, I have to make the disclaimer up front that he comes across as thoroughly decent and likeable on a personal level. That he takes for granted certain ideological assumptions that I have long since declared war on is no reflection on him as a human being. Shermer states, as one of his fundamental guiding principles, a dictum of Spinoza's: "I have made a ceaseless effort not to ridicule, not to bewail, not to scorn human actions, but to understand them." I'll try to keep to that spirit as closely as I can in discussing my caveats about Shermer's book.

Nevertheless, Shermer displays a considerable vulgar libertarian element in his background assumptions. His writing, over and over, tacitly equates the phenomena of existing corporate capitalism to the "free market." He constantly uses things like Bill Gates, Wal-Mart, and other transnational corporations to illustrate the principles of the "market," and treats them as living embodiments of Adam Smith's invisible hand. He equates "the market" to the existing corporate economy, quoting attacks on the evils of corporate power and then "proving" they can't be right because "that's not how the market works." Implicit in his rejection of The Corporation, of Chomsky and Zinn, is the assumption that the present system, the one they're attacking, is the market.

A parallel theme is alleged popular hostility or resistance to "free market economics," which he assumes is motivated by irrationality. A particularly atrocious example (I'm tempted to call it a howler) occurs on page 16:

Folk economics leads us to disdain excessive wealth, label usury a sin, and mistrust the invisible hand of the market. What we do not understand we often fear, and what we fear we often loathe. (As one New Yorker cartoon featuring two people in conversation reads: "I hated Bill Gates before it became so fashionable.")

There you have it: invisible hand=excessive wealth=Bill Gates. Anybody who has problems with Bill Gates and excessive wealth must harbor an irrational fear and/or hatred for "the invisible hand of the market." After all, it's not like Gates could have gotten so rich by any other means, like the visible hand of the state's "intellectual property" [sic] monopoly, could he? And we know all those other billionaires got rich through the operation of the "free market." I mean, we hear it from neoliberal politicians and commentators at MSNBC every friggin' day, so it must be true. This all reminds me of Dick Cheney in 2000 boasting, of Halliburton's wealth, that "Government had nothing to do with it."

The public mindset isn't really all that irrational, if you keep in mind that their hostility is not so much to free markets, as to what has been called "free markets" by the usual gang of corporate apologists.

I'm about as close to a free market fundamentalist as you can get. But if I thought the "free market" meant what Tom Friedman and other neoliberal politicians and talking heads meant by it, I'd hate it more than anybody.

The average person sees Wal-Mart, Microsoft, downsizings, oil company profits, offshoring, and all the other unsavory phenomena of the corporate global economy defended in "free market" language, and his response is "if that's the free market, then the free market be damned." It's essentially the same reaction as Huckleberry Finn's. Huck lacked the conceptual apparatus to make an effective critique of the legitimizing ideology of slavery, or to debunk the Widow Douglas's "property rights" in Jim. He took the slave system's ideological self-justification at face value--and then said "All right, then, I'll go to hell." The average American, likewise, looks at the inequalities and injustices of our corporatist economic system, made possible by massive state intervention on behalf of organized capital, and sees it defended as the "free market." And his response is the same: "If this is the free market, I'll go to hell."

Shermer asks why people reject Adam Smith's theory of economics, despite its being so profound and proven. The answer just might be that the rhetoric of free markets, so closely associated with Adam Smith, has been misappropriated to defend a system of corporate power far closer to what Smith condemned than to what he supported. Adam Smith, like the other early classical liberals, was a revolutionary thinker who attacked the entrenched privileges of the landed oligarchy and the mercantile capitalists. It's almost impossible to go to a mainstream "libertarian" website these days without seeing the thought of Adam Smith misappropriated to defend the modern institution most closely resembling the landed interests and privileged monopolists of the Old Regime: the giant, state-subsidized, state-protected corporation.

As I suggested earlier, most people who display egalitarian reactions against existing inequalities and concentrations of wealth may well believe that what they hate is the "free market." But that's only because the rhetoric of "free markets" has been perverted, for the most part, by apologists for those concentrations of wealth which result from privilege and other forms of state intervention. What they hate, they rightly hate. They're wrong to believe that what they hate is the "free market." But it's hard to blame them, when you can't turn on the TV or read an editorial page without seeing a fundamentally statist economic system of special privilege and protection for big business and the rich described as "our free market system."

In fairness to Shermer, he sometimes tips his hat to the existence of things like corporate welfare, but for the most part he treats it as a minor deviation from a corporate economy that is, on the whole, a pretty close approximation of the "free market." If you eliminated the subsidies to military contractors and agribusiness, what you'd wind up with is, in all its essentials, something pretty much like the economy we actually have: a global economy dominated by a few hundred corporations.

For example, he condemns the popular, zero-sum view of foreign trade as an "abandonment of free market principles." And he cites Nobel laureate Edward Prescott on the foolish popular belief that it's "government's economic responsibility to protect U.S. industry...."

But in fact, the overwhelming bulk of the transnational corporate economy is a zero-sum game.

For starters, the main purpose of the World Bank and foreign aid over the past sixty years has been to subsidize the export of capital and offshoring of production from the West, by funding the transportation and utility infrastructure necessary for capital investment overseas to be profitable. The bulk of the U.S. military budget is taken up by the Navy, whose primary purpose is to keep the sea lanes open. No less an authority than Adam Smith argued that such expenses should be borne by those actually engaged in foreign trade. The United States has systematically intervened over the past century to keep landed oligarchies in power, to thwart land reform, and generally--whether by coup or by death squad-- to make the world safe for Enclosure. Between this, and the helpfulness of authoritarian regimes in keeping labor docile, supplying sweatshop industry has been supplied with a labor force eager (or rather desperate) to work on whatever terms are offered.

But if that's for starters, it's still barely a start. The elephant in the living room is the role of "intellectual property" [sic] in the transnational corporate economy. Despite Prescott's exasperated lament quoted above, the central function of government in the present system of global trade is to protect transnational capital from competition. One of the most important functions of the GATT Uruguay Round's industrial property provisions, with their long patent terms, is to lock Western TNCs into control of the current generation of production technology, and thus to prevent the emergence of native-owned competition and lock Third World countries into a permanent position of supplying sweatshop labor and raw materials. It's also probably not a coincidence that all the profitable sectors in the corporate global economy are those whose business models are dependent either on IP (entertainment and software), direct subsidies (armaments and aviation), or both (agribusiness, biotech, electronics). "Intellectual property" serves exactly the same protectionist function, for transnational corporations in today's global economy, that tariffs served for the old national industries.

The corporate global economy, in other words, is a statist construct to its very core, and has no more to do with "free markets" than Stalinism had to do with workers' power. And Shermer explicitly refers to agreements like CAFTA as examples of "free trade." The primary practitioners of the "mercantilist zero-sum protectionism" he decries are the transnational corporations themselves. It's no wonder the public hates "free trade," if it hears it identified with such practices.

Fortunately, given my background as both a dissident free market libertarian and a dissident libertarian socialist, I'm pretty good at "eating what I want and spitting out the rest," even when it's embedded in an ideological framework I disagree with. I've had to do this with thinkers ranging from Marx to Mises. And once you get past my hangups, there's a lot of useful and fascinating material in Shermer's book, presented in a very engaging manner.

If you enjoy the work of Desmond Morris and similar evolutionary approaches to human social behavior, you should thoroughly enjoy this book. Shermer discusses the apparent irrationalities of human economic behavior, and how the same behavior would make perfect sense from the standpoint of the behaviors selected for in a small primate hunter-gatherer group.

I especially enjoyed his discussions of egalitarianism and reciprocity, and found much of it relevant to the material I posted earlier in draft Chapter Eleven: The Abolition of Privilege.

My main disagreement with Shermer on this subject is with his assumption that such predispositions are contrary to the ideally rational behavior of a utility-maximizing market actor.

He is not entirely wrong on this, of course. There are some ingrained human cognitive biases that do result in irrational behavior.

But for the most part, I believe human instincts for reciprocity and egalitarianism work entirely with the grain of a genuine market. The real-world phenomena that people condemn, on the basis of values of reciprocity and egalitarianism, in fact result from violations of genuine market principles.

In Chapter Eleven, I discussed why I believe a genuine market, absent the zero-sum effects of privilege, would result in a comparatively egalitarian outcome. The human instincts for reciprocity and egalitarianism do not operate at cross-purposes to the market, but are the behavioral basis for it. Reciprocity and equal exchange are the normal outcomes of a market operating free from interference. People are most likely to say "That's not fair" precisely when equal exchange has been thwarted, and a zero-sum situation created in its place, by state intervention on behalf of the privileged.

A good example comes immediately after the Bill Gates howler quoted above.

In most countries, [consternation over income polarization] leads to political policy to raise the poor and lower the rich, because during our evolutionary tenure we lived in a zero-sum (win-lose) world, in which one person's gain meant another person's loss....

Today, however, we live in a nonzero world....

Um, no. We would live in a nonzero world, if we actually had a free market. What we have, however, is a system of political capitalism in which the state has systematically intervened in the market to raise the rich and lower the poor; to subsidize the operating costs of big business; to enforce artificial property rights like patents and copyright, and absentee titles to vacant and unimproved land that ought to be open to homesteading; and otherwise to protect giant corporations from the competitive dangers of a genuine market. In such an environment, it's entirely reasonable to believe that fortunes in the billions or hundreds of millions have been acquired at somebody's expense. It's entirely reasonable, when you see a turtle on a fencepost, to suspect he didn't climb up there on his own.

I hope my Van Helsinglike fixation on the vampire of vulgar libertarianism hasn't obscured the real value of this book. Even if I just can't let the neoliberal ideology go, it's really not central to the book. What is central is the evolutionary roots of human economic behavior, a subject on which Shermer provides a wealth of information. The information itself, for the most part, can stand by itself without regard to Shermer's ideological framework. I found much of it, particularly the parts on reciprocity and egalitarianism, to be quite useful--although perhaps not for the purposes the author intended. At any rate, I thoroughly enjoyed reading it. And if I could enjoy it, with my neurotic obsessions, surely any normal person will enjoy it that much more.