bugs

Advocates of Freed Markets Should Support Capitalism

“Hogeye” Chartier

I. Introduction

Defenders of freed markets have good reason to identify their position as a species of “capitalism.”1 To explain why, I distinguish three potential meanings of “capitalism” before suggesting that people committed to freed markets should support capitalism in the first sense. Then I suggest using the correct word "corporatism" for the social arrangements to which libertarian capitalists should object.

II. Three Senses of “Capitalism”

There are at least three distinguishable senses of “capitalism”:2

  1. libertarian captalism - an economic system that features personal property rights ("private property") and voluntary exchanges of goods and services
  2. statist capitalism - an economic system that features a symbiotic relationship between big business and government aka corporatism or fascism
  3. conspiracy capitalism - rule of workplaces, society, and if there is one, the State, by capitalists (that is, by a relatively small number of people who control investable wealth and the means of production)3
Libertarian capitalism is a freed market with private property. This is the type of capitalism that libertarians and anarcho-capitalists and voluntaryists favor. But proponents of libertarian capitalism do object to statist capitalism and conspiracy capitalism.4 That follows from definition (1).

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Many people erroneously employ definitions that combine elements from these distinct senses of “capitalism.” Some enthusiasts but mostly critics of capitalism seem too often to mean something like “an economic system that features personal property rights and voluntary exchanges of goods and services - and therefore, predictably, also is ruled by capitalists.” But there's good reason to challenge the assumption that dominance by a small number of wealthy people is in any sense a likely feature of libertarian capitalism. Such dominance, I suggest, is probable only when force and fraud impede economic freedom.

III. Why Statist Capitalism and Conspiracy Capitalism are Inconsistent With Libertarian Capitalism

A . Introduction

Statist capitalism and conspiracy capitalism are both inconsistent with libertarian capitalist principles: statist capitalism because it involves direct interference with market freedom, conspiracy capitalism because it depends on such interference - both past and ongoing - and because it flies in the face of our general commitment to freedom.

B. Statist Capitalism Involves Direct Interference with Market Freedom

Statist capitalism is clearly inconsistent with libertarian capitalism, a freed market. Under statist capitalism, politicians interfere with personal property rights and voluntary exchanges of goods and services to enrich themselves and their constituents, and a favored minority of "crony" businesses influence politicians in order to foster interference with personal property rights and voluntary exchanges to enrich themselves and their allies.

C . Conspiracy Capitalism Depends on Past and Ongoing Interference with Market Freedom

There are three ways in which conspiracy capitalism might be challenged by libertarian capitalism. The first depends on a plausible, if contestable, view of the operation of markets. Call this claim Markets Undermine Privilege (MUP). According to MUP, in a freed market, absent the kinds of privileges afforded the (usually well-connected) beneficiaries of State power under statist capitalism, wealth would be widely distributed and large, hierarchical businesses would prove inefficient and wouldn't survive.

Both because most people don't like working in hierarchical work environments and because flatter, more nimble organizations would be much more viable than large, clunky ones without government support for crony businesses, most people in a freed market would work as independent contractors, individual entrepreneurs, or in partnerships or cooperatives or some other type of firm. There would be far fewer large businesses, those that still existed likely wouldn't be as large as today's corporate behemoths, and societal wealth would be widely dispersed among a vast number of small firms.

Other kinds of privileges for the politically well connected that tend to make and keep people poor - think occupational licensure and zoning laws, for instance - would be absent from a freed market.5 So ordinary people, even ones at the bottom of the economic ladder, would be more likely to enjoy a level of economic security that would make it possible for them to opt out of employment in unpleasant working environments, including big businesses. And because a free society wouldn't feature a government with the supposed right, much less the capacity, to interfere with personal property rights and voluntary exchanges, those who occupy the top of the social ladder in wouldn't be able to manipulate politicians to gain and maintain wealth and power in a freed market, so the ownership of the means of production wouldn't be concentrated in a few hands.

In addition to ongoing interference with market freedom, MUP suggests that conspiracy capitalism would not be possible without past acts of injustice on a grand scale. And there is extensive evidence of massive interference with property rights and market freedom, interference that has led to the impoverishment of huge numbers of people,in England, the United States, and elsewhere.6 Advocates of libertarian capitalism strongly object to conspiracy capitalism. Crony capitalists are able to rule only by virtue of State subsidies and large-scale, state-sanctioned violations of legitimate property rights.

D . Support for Libertarian Capitalism is Consistent with Support for the Underlying Logic of Freedom

Conspiracy capitalism might also be understood to be inconsistent with libertarian capitalism in light of the underlying logic of support for freed markets. No doubt some people favor personal property rights and voluntary exchanges - libertarian capitalism - for their own sake, without trying to integrate support for libertarian capitalism into a broader understanding of human life and social interaction. For others, however, support for libertarian capitalism reflects an underlying principle of respect for personal autonomy and dignity. Those who take this view - advocates of what I'll call Comprehensive Liberty (CL) - want to see people free to develop and flourish as they choose, in accordance with their own preferences (provided they don't aggress against others). Proponents of CL value not just freedom from aggression, but also freedom from the kind of social pressure people can exert because they or others have engaged in or benefited from aggression, as well as freedom from non-aggressive but unreasonable - perhaps petty, arbitrary - social pressure that constrains people's options and their capacities to shape their lives as they like. Policital correctness for example.

Valuing different kinds of freedom emphatically isn't the same as approving the same kinds of remedies for assaults on these different kinds of freedom. While most advocates of CL aren't pacifists, they don't want to see arguments settled at gunpoint; they unequivocally oppose aggressive violence. So they don't suppose that petty indignities warrant violent responses. At the same time, though, they recognize that it makes no sense to favor freedom as a general value while treating non-violent assaults on people's freedom as trivial. (Thus, they favor a range of non-violent responses to such non-violent assaults, including public shaming, blacklisting, striking, protesting, withholding voluntary certifications, and boycotting.)7

CL provides, then, a further reason to oppose conspiracy capitalism. Most people committed to CL find MUP very plausible, and thus will be inclined to think of conspiracy capitalism as a product of statist capitalism. But the understanding of freedom as a multi-dimensional value that can be subject to assaults both violent and non-violent provides good reason to oppose conspiracy capitalism even if - as is most unlikely - it were to occur in complete isolation from statist capitalism.

E . Conclusion

Statist capitalism and conspiracy capitalism are both inconsistent with libertarian capitalist principles: statist capitalism because it involves direct interference with market freedom, conspiracy capitalism because it depends on such interference - both past and ongoing - and because it flies in the face of the general commitment to freedom that underlies support for market freedom in particular.

IV. Why Libertarian Capitalism Advocates Should Call the System They Support “Capitalism”

Given the contradictory meanings of “capitalism,” some people think we should avoid using it at all. But “words are known by the company they keep”;8 so since this positive meaning of "capitalism" has been dominant since the mid-20th century, there is no good reason to use the older 19th century antiquated meanings. There are good reasons for advocates of freed markets - libertarian capitalism, especially those committed to CL, to use the word for what they favor.

  1. To Emphasize the difference between libertarian capitalism and the other fake capitalisms. Labels like “state capitalism” and “corporatism” aptly capture what is wrong with that system which leads to conspiracy capitalism. "Corporatism" perfectly encapsulates rule by crony capitalists and provides an explanation in terms of misbehavior of ruling politicians. It is reasonable to object to rule by politically connected businesses, in addition to challenging business-government collusion, but without assuming that most, or even the majority of businesses are crony firms. Libertarian capitalists know that it is impossible for more than a small minority of firms to be parasites on society without killing the host. Proudly calling ourselves "capitalists" and pointing out the differences between market capitalists and political capitalists will help educate the public.
  2. To Differentiate Proponents of Freed Markets from Proponents of Corporatism. Wave the “capitalist” banner enthusiastically, and refer to statist capitalists as "fascist" or "corporatists" rather than capitalists. Don't use antiquated socialist jargon! People who seem inclined to confuse support for freed markets with support for statist capitalism and conspiracy capitalism - socialists - ignore the reality and the problematic nature of both, perhaps even utilizing conspiracy capitalism to fund their socialist endeavors through taxation. Opposing corporatism helps to ensure that advocates of freed markets are not confused with proponents of existing elites and power politics as usual.
  3. To Emphasize That Libertarian Capitalism Really is an Unknown Ideal. Just like Ayn Rand said, it has never been fully implemented. It is not the actually existing system, but a goal we should work to achieve. Given the frequency with which the contemporary economic order in Western societies is mislabeled “capitalism,” we have to point out that it is actually a mixed economy, part fascist and part statist socialist. Doing so makes clear our opposition to conspiracy capitalism. Anyone who acknowleges the vast gap between ideals of freedom and an economic reality distorted by privilege and misshapen by past acts of violent dispossession will have good reason to oppose corporatism and support libertarian capitalism.
  4. To Challenge a Conception of the Market Economy that Treats Labor as the Only Factor of Production. There are multiple factors of production which contribute to the operation of a market economy. Socialists and communists have a "flat earth" one factor model that only considers labor. Entrepreneurship, machines and tools (capital), and knowledge/technology are also critically important. To refer to such an economy as “capitalist” is to imply, correctly, that capital plays a central role. Advocates of libertarian capitalism should make sure others, with less economic knowledge, are aware of this.
  5. To condemn statist socialism, as libertarian capitalist radicals should. Socialism is generally understood as opposition to freed markets, voluntary association such as employment, property, self-ownership, and basically everything that libertarian capitalists favor. Benjamin Tucker, in the late 19th century, saw socialism as any normative vision for society. He called his libertarian capitalist vision of freed markets "socialism!" My, how times (and terminology) have changed. Like any good libertarian capitalist, Tucker believed that ending the privileges conferred on economic elites by the state would be the most effective - and safest - way of achieving his liberating goal.9
  6. To Show that Capitalism is Good for Workers. If MUP is correct, the ability of big business to use the State to gain power and privilege over workers will disappear without the business-state collusion that is so inconsistent with libertarian capitalist principles. In Tucker's day, it was well-known among most workers that capitalism helped improve workers' well-being and standard of living. A century of corporatism has dumbed down workers and hidden that truth. Freed markets will prove by demonstration that capitalism is, contrary to what socialists say, a boon to labor.
  7. To Celebrate Capitalism and the Worldwide Division of Labor. Using “capitalism” is a way of identifying with ordinary people around the world who express their opposition to the plunder and imperialism of States, and to subsidized multi-national corporations - that is, corporatism. As Alex Tabarrok says, “Capitalism is a truly social system, a system that unites the world in cooperation, peace and trade.” For most people who think they oppose capitalism, objecting to “capitalism” doesn't really mean opposing freed markets and libertarian capitalism; it means opposing the corporatism which seems bent on misshaping their lives and those of others. Advocates of freedom have a golden opportunity to build common ground with these people, showing them the wrongness of many of the circumstances they confront is due to the State and its interference in the market, not to free market capitalism.

V. CONCLUSION

Thirty-five years ago, Karl Hess wrote: “I have lost my faith in capitalism” and “I resist this capitalist nation-state,” observing that he had “turn[ed] from the religion of capitalism.” Distinguishing three senses of “capitalism” - market order, business-government partnership, and rule by capitalists - helps to make clear why Hess said this: he was using the statist capitalism (or perhaps the conspiracy capitalism) definition rather than the modern libertarian capitalism definition. It makes sense for libertarian capitalism advocates to oppose both interference with market freedom by politicians and business leaders and the social dominance (aggressive and otherwise) of business leaders. But it also makes sense for them to name what they favor “capitalism,” if for no other reason than to prevent the same semantic surrender that the great Karl Hess made. Hess was a libertarian capitalist, just as Benjamin Tucker was.

I have been happy using capitalism in Rand's ideal sense as that which American libertarians advocate ... , which I think is true and I don't think represents such a severe intellectual, marketing, or historical problem as Long says...” - Karl Hess

Using the term "capitalism" calls attention to the freedom movement's radical roots, emphasizes the value of understanding society as an alternative to the state, highlights the difference between libertarian capitalist ideal and present reality, underscores the fact that proponents of freedom also object to non-aggressive as well as aggressive restraints on liberty, ensures that advocates of freedom aren't confused with people, such as politicians and corporatists, who use market rhetoric to prop up an unjust status quo, and expresses solidarity between defenders of freed markets and workers - as well as ordinary people around the world who use “capitalism” to mean freedom, prosperity, and a chance to improve their lives. Libertarian capitalism advocates should embrace “capitalism” in order to highlight their full-blown commitment to freedom and their rejection of alternatives that use liberty jargon to conceal acquiescence in aggression, plunder, and deprivation.

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Notes:

Hogeye Bill has taken Gary Chartier's essay Advocates of Freed Markets Should Oppose Capitalism and remixed it - turning it around. By mainly search and replace operations, the essay becomes pro-capitalist, since the logic of the essay is sound. It's preferrence for 19th century terminology, however, is bizarre.

1 For “freed markets,” see William Gillis, “The Freed Market,” ch. 1 (19-20), in this volume; for “free market anticapitalism,” see Kevin A. Carson, Mutualist Blog: Free Market Anticapital ism (n.p.) (Dec. 31, 2009).

2 Cp. Charles Johnson, “Anarquistas por La Causa,” Rad Geek People's Daily(n.p., March 31, 2005) (Dec. 31, 2009); Roderick T. Long, “POOT MOP Redux,” Austro-Athenian Empire (n.p., June 22, 2009) (Dec. 31, 2009); Fred Foldvary, “When Will Michael Moore Nail Land Speculators?,” The Progress Report (n.p., Oct. 19, 2009) (Jan. 18, 2010). “Capitalism” in Johnson's third sense refers to “boss-directed labor,” while Long's parallel expression, “capitalism-2,” de notes “control of the means of production by someone other than the workers - i.e., by capitalist owners.” Foldvary's parallel proposal is “exploitation of labor by the big owners of capital.” I am inclined to think that many of those who em ploy “capitalism” in the pejorative sense intend it to encompass the dominance by capitalists of all social institutions, and not just workplaces, though they doubtless see societal dominance and workplace dominance as connected. At any rate, supposing that they do may provide a slender justification for dis tinguishing my typology from the ones offered by Johnson, Long, and Foldvary. For an earlier discussion by a libertarian of the inherently ambiguous character of “capitalism,” see Clarence B. Carson, “Capitalism: Yes and No,” The Freeman: Ideas on Liberty 35.2 (Feb. 1985): 75-82 (Foundation for Economic Education) (March 12, 2010); thanks to Sheldon Richman for bringing this article to my attention.

3 While statist capitalism obtains whenever business and the state are in bed together, under conspiracy capitalism business is clearly on top.

4 It is unclear when “capitalism” was first employed (the Oxford English Dictionary identifies William Thackeray as the earliest user of the term: see The Newcomes: Memoirs of a Most Respectable Family, 2 vols. [London: Bradbury 1854-5] 2:75). By contrast, “capitalist” as a pejorative has an older history, appearing at least as early as 1792, and figuring repeatedly in the work of the free-market socialist Thomas Hodgskin: see, e.g., Popular Political Economy: Four Lectures Delivered at the London Mechanics Institution(London: Tait 1827) 5, 51-2, 120, 121, 126, 138, 171 (“greedy capitalists”!), 238-40, 243, 245-9, 253-7, 265; The Natural and Artificial Right of Property Contrasted: A Series of Letters, Addressed without Permission to H. Brougham, Esq. M.P. F.R.S. (London: Steil 1832) 15, 44, 53, 54, 67, 87, 97-101, 134-5, 150, 155, 180. The pejorative use occurs nearly eighty times throughout the thirty-odd pages of Hodgskin's Labour Defended against the Claims of Capital, or, The Unproductiveness of Capital Proved (London: Knight 1825). It is also possible to find “capitalist” employed in less-than-flattering ways by another noted classical liberal: see John Taylor, Tyranny Unmasked (Washington: Da-vis 1822).

5 For a devastating critique of rules - often supported by politicians beholden to wealthy and well connected people who expect to benefit from them - that systematically make and keep people poor, see Charles Johnson, “Scratching By: How Government Creates Poverty As We Know It,” The Freeman: Ideas on Liberty 57.10 (Dec. 2007): 33-8 (Foundation for Economic Education) (Jan. 2, 2010).

6 Cp. Albert Jay Nock, Our Enemy the State (New York: Morrow 1935); Kevin A. Carson, “The Subsidy of History,” The Freeman: Ideas on Liberty 58.5 (June 2008): 33-8 (Foundation for Economic Education) (Dec. 31, 2009); Joseph R. Stromberg, “The American Land Question,” The Freeman: Ideas on Liberty59.6 (July-Aug. 2009): 33-8 (Foundation for Economic Education) (Dec. 31, 2009).

7 Cp. Charles Johnson, “Libertarianism through Thick and Thin,” Rad Geek People's Daily (n.p., Oct. 3, 2008) (Dec. 31, 2009); Kerry Howley, “We're All Cultural Libertarians,” Reason (Reason Foundation, Nov. 2009) (Dec. 31, 2009).

8 I became acquainted with this phrase thanks to Nicholas Lash, Believing Three Ways in One God: A Reading of the Apostles' Creed (Notre Dame, IN: University of Notre Dame Press 1992); see, e.g., 12. But it appears, I have subsequently discovered, to have a legal provenance and to be a rough translation of the Latin phrase noscitur a sociis.

9 By Benjamin Tucker's terminology, libertarian capitalism could be called stigmergic socialism.

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