Some reflections on the concept of a “free” market. Part 1: Markets…A Creature Of Law?

Even A Randian Can Stumble Upon A Gem Once In A While…

Many months ago, I was watching some anarchist videos on youtube regarding the issue of defense in an Anarchist society and stumbled on one which happened to be a response to a video made by an objectivist called “Anarchism Is Stupid“.  The defense video was made by an anarchist who identifies himself as a mutualist, much like myself.  However, as frequently happens with me when I am surfing youtube videos, I end up stumbling upon something which causes me to seriously reflect on some other point unrelated to what I was originally researching, and very often it is a simple comment made by the uploader that doesn’t have a whole lot to do with the main “thrust” of the video.  In this case the objectivist is actually attempting to make the point that having competitive defense organizations will result in one of them seizing power and ending up creating a new totalitarian state. This is something I had heard a million times, so I watched the video, muttered “yeah, whatever” and moved on without thinking much about it. Months after this, I had e-mailed both the defense video and the original video to my good friend PunkJohnnyCash, which prompted me to watch the videos again. This time, what the objectivist said starting at 1:47 struck me in a way it hadn’t before. That’s when the sentences that I will be focusing on throughout the rest of this rant stood out:

“‘The market’ is a creature of the law CREATED BY GOVERNMENT.”

and at the end of the video he repeats:

“The market is a creature of law. It is not a floating abstraction or a flower or a tree that you can just take out of the middle of nature and use. It is an institution of law.”

So what’s the big deal? He’s wrong, right? My knee jerk reaction as someone who has used the term “market anarchist” to describe himself at times was to simply dismiss this charge as a big stack of “Bovine Scatology” on video format and move on.

Well, today I have to say he was not completely wrong. I think his reasons for saying this are wrong, but the part about “the market” being a creature of law is very instructive I think.

I Don’t Smoke, My Cigar Does

Ask yourself this question, reader: what in the hell is a “free market” anyway?  Am I “free” to take your stuff at gunpoint and sell it to the highest bidder? I think market anarchists/”anarcho”-capitalists/voluntaryists would say “No, because that violates the non-aggression principle”.  Ok, so there’s one regulation I supposedly can’t violate as part of a free market. How about if you saw your neighbor take someone else’s stuff at gunpoint and then try to sell it to you? Has your neighbor’s aggression then been “laundered” and that makes it ok when he transacts with you on a voluntary basis? I think most sane people would also say no. However, this is pretty much what happens in capitalism when we buy chinese goods from Wal-mart that were made by prisoners: someone else committed an act of aggression, then the product changed hands a couple of times before you bought it at a very low price. What type of “market incentive” would we be creating in a stateless society if we considered this to be an acceptable practice? We simply farm out the dirty work to a third party, have the product “cleansed” by a distributor then sold to the general public?

If you’re interested in the honest truth rather than “winning” a debate, I think you’d concede that the Smithian concept of the “division of labor” needs to operate within certain boundaries in order to prevent an incentive towards using violence in an attempt to lower prices, which is what capitalism is based on (i.e. exploitation or “capitalizing” upon others). Failure to do so violates the original intent behind markets which is to provide a method of peaceful interaction for people to have their needs met. So in a society that obtains its products through exchange rather than “planning” could we then concede that the community engaged in trade will want to limit the division of labor to what they can reasonably observe to be in line with the other principles that they value, such as the non-aggression principle?  If your answer is “we only care about efficiency” will you then allow for slavery in the case of mundane and undesirable tasks that can’t be automated at the present time if slavery in those cases is found to be “most efficient”?

What I began realizing in my mind is not that the “market” concept is wrong per-se, but simply that the idea of a market being “free” is something that can only exist in a hypothetical vacuum if you are using the word “free” in an arbitrary sense. To this day, the idea of individual artisans and cooperatives producing and exchanging goods and services is still my preferred mode of organizing the economic aspect of a free society, but it’s very important to realize that one CANNOT organize a society itself on the basis of “the market”, because markets operate within the boundaries of a how a society is organized.  Market principles are simply the application of logic to understand what is taking place as exchanges occur over a large scale, what this does to the prices and availability of goods and services, and what information this communicates to both producers and consumers. Failure to apply this logic can result in a myriad of problems for said society, but no economic system can decide what a society’s values are, and since economics is logic-based, it is up to a society to decide what presuppositions that logic is based on.

This point strikes a blow to the arguments made by capitalists (“anarcho” or otherwise) against the concept of social justice.  If a society values the “lowest price” without any other qualification whatsoever, then we will automatically have a society that accepts a certain amount of violence, and the only question would be, how much violence is acceptable, what kinds of violence, and towards whom? There is no way around this.  If your regulating principle is “as long as it’s voluntary, it’s fine” then you can easily turn a blind eye toward quite a bit of violence as you would only need a middle-man to aquire goods obtained by involuntary means and then sell them to you on a “voluntary” and therefore “kosher” basis. I consider myself a “voluntaryist”, but if we were to liken a free society to a table, voluntaryism is simply one “leg”… it’s necessary, but such a society will not stand for any reasonable amount of time without at least a couple more legs, preferably a few more.

Once we understand this, we realize that it is perfectly valid to at least question such things as rent, interest, wage labor, and landed property, even if we conclude that some or all of them are still valid. This idea that we somehow are not allowed to question whether these things should exist based on the idea that they “come from the market” is an abstraction. What market? The “free” market? Even the most extreme anarcho-capitalist would tell you we do not at this time have a “free” market.

“BUT, BUT, BUT….”

“But if someone wants to borrow money voluntarily from someone else at a compounding percentage rate? Shouldn’t they be allowed to if they want to?”

That’s a stupid question. How so? Well, how seriously would you take me if I went around saying, “I think that in a free society, if I want to beat my own skull in with a hammer, that’s my right”? I suppose that’s technically true, but how much time would you spend in forums arguing with people and cranking out youtube apologetics videos defending the right to beat your own head in with a hammer?  If you had the choice between a loan instrument where you paid a small “maintenance fee” at certain intervals, a system where you sell IOUs at slightly below face value for set terms in order to obtain investment funds, or a fucking mastercard with a compounding ass-rape of 21.99% per annum, which would you choose? All “us regular folk” know that in our current society, the third option is the only “choice” which makes it no choice at all.

As Fugazi would say, “here comes the argument”.

The anarchocapitalist, immediately after telling us that the reason life-saving medications are so damn expensive is all the fault of the FDA, patents, and other government regulation, will defend the banks to the death and tell us compounding interest exists and is “valid” because “the market” said so. Forget the fact that the money monopoly/legal tender, the banking system, and other government regulation restrict the amount of possible exchange media to a trickle of what it ought to be. Choice architecture is no choice at all, and therefore doesn’t prove squat about whether compounding interest is justified.

Markets Outside Of Any Context Will Always Die Of Suicide

This brings forth another interesting question… can a “market” based on who can make the most profit survive indefinitely? I don’t believe it can, simply because it would have to remove certain checks and balances in the name of “efficiency” in order for those profits to be sought. Once a society values so-called “efficiency” over freedom itself, any semblance of a “free market” dies. Aggression must set in, simply because the society has decided to turn a blind eye to it in the name of “efficiency”.  Any goods aquired through these means then become cheaper by, pardon the pun, “forces” outside the “free” market, which will out-compete those produced in a manner consistent with libertarian principles. This in turn creates a significant wealth inequality, which in turn creates an incentive to protect this higher income. What other incentive does it create? Well… if you obtained your “market” advantage via force, either directly or via contract with those who committed the violent acts for you, you very well can’t have someone with more access to force take that from you, can you?

Enter “The State, version 2.0″, and this time, they’re not gonna even pretend it’s democratic.

Anyway, long story short: while markets are a valid way for people to associate in my opinion, what they are not is a basis on which to organize society. Society determines what “the market” will look like, not the other way around.

In Part 2, I will be discussing the flawed definition of “market” that is frequently used by Anarcho-capitalists and Voluntaryists which leads to flawed reasoning, and in the end, to a defective anarchism.