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The Fallacy of ‘Free Market Capitalism’

Laszlo Zapacik Featured 4 Comments

Today, while browsing around various debate sites, this article (http://blogs.telegraph.co.uk/news/danielhannan/100127395/crony-capitalism-is-failing-lets-try-the-real-thing/) was brought to my attention by yet another right-winger trying to persuade me of the supposed virtues of ‘real’ or ‘free market’ capitalism. This was just one of many similar encounters I’ve had recently, in which the system we currently have is continually referred to as either ‘crony capitalism’ or more often, ‘corporatism’ – this is however an argument that is suddenly dropped when they want to talk about the ‘achievements/prosperity of capitalism’.

What many socialists tend to do in this kind of debate is accept their opponent’s stance as an advocate of ‘free market capitalism’ and debate that, usually from a moral perspective. I feel this is a mistake. While I totally agree that such a system would be unjust and wrong, this argument requires much more time, effort and more complex philosophical discussion – especially with establishing certain concepts, such as what socialists mean by ‘private property’. The much simpler argument to make is whether such a system as ‘free market capitalism’ is even possible.

Free-marketeers generally accept the problems of corruption, state-granted privilege, etc, that exist in the current system, but here the problems begin.  Their solution to these problems is generally simply something along the lines of ‘get rid of them’ so that we could then have some sort of perfect ‘free market’. However, they have no real plans of how to do this. The few ideas that they do have generally involve working within the state system. Murray Rothbard, the founder of ‘anarcho-capitalism’, could come up with no better idea than to campaign for ‘smaller government’. In recent years, many on the ‘free market’ right, particularly in the United States, have taken up the cause of Ron Paul as the supposed answer to all problems, but there are many ‘anarcho-capitalists’ who reject even this weak way of trying to achieve a cause. Their reason behind not backing Paul or other ‘libertarian’ candidates is that they consider voting to be a mark of supporting the state, which is fair enough, but leaves them with precisely nothing in the way of strategy. Many of this group of pro-capitalists seem to be under the impression that simply being against the state and providing arguments as to why is somehow beneficial to the cause of liberation from the state.

But that’s enough about the advocates of free markets for now, let’s discuss their actual feasibility. There are two main proposals for their existence. The first is the type of society advocated by people such as Milton Friedman, Friedrich Hayek and Ludwig von Mises; a ‘minimal state’ that would merely handle law and order, while the rest would be left to the market with no state intervention. A cursory glance at history indicates no such society has ever existed or come close to existing. And it doesn’t take much to figure out why. Advocates of free markets are often very quick to tout the supposed miracles of the ‘profit motive’ and ‘risks of investment’, but fail to recognise that its exactly these concepts which cause state intervention in the first place – businesses believe certain state action will bring them greater profits, and view their contributions to politicians and media as investments. This business-state collusion has occurred all the way through history.

The second proposal for ‘free market capitalism’ is that proposed by Murray Rothbard and the ‘anarcho-capitalists’. They propose that the potential for the state to be corrupted, as highlighted above, can be removed by removing the state from the picture altogether. This is a less obviously problematic scenario, but it still has its problems. For a start, the market. As David Graeber in his fantastic book Debt: The First 5,000 Years, market economies historically originated as a result of certain state action, usually to do with having to have large amounts of professional state employees (usually soldiers). As he put it in an interview about the book on RT (http://www.youtube.com/watch?v=SnOqanbHZi4), “Societies that don’t have states generally don’t have markets.”  So a ‘free market’ stateless society seems unlikely.
Also, property. This is an endless source of disagreement in arguments about capitalism, but suffice it to say for now that there are certain forms of property relations that only occur within state societies. One of the pillars of capitalism, private ownership of land, is one of these. Stateless societies generally do one of two things with regard to land ownership:
1. Consider the land owned by either ‘no-one’ or ‘everyone’.
2. Consider land owned by certain individuals, but unlike in state societies, make no distinction between the owner of the land and the occupier or farmer of it.
With that in mind, ‘free-market capitalism’ would also seem to be impossible in a stateless society.

Earlier, I noted the problems of the strategy, or rather lack thereof, of the free market right. This may not seem too much of a problem to the anarchist movement – maybe ‘anarcho-capitalists’ and the like have got it wrong, but surely they can still be of use in the battle against the state? No, far from it. They fail to realise the power structures inherent in the state, preferring to see the state as some sort of unfortunate accident that humanity has stepped into. Many will indeed acknowledge that big businesses and the finance industry are in bed with the state, benefit hugely from state intervention and are huge supporters of the state. However, when the obvious next step that these business powers that prop up the state are just as worthy a target of our anger as the state itself, they suddenly jump ship and become apologists for big business. If we take that attitude, we can never hope to eradicate power.

Thanks for reading.

Laszlo ZapacikThe Fallacy of ‘Free Market Capitalism’

Comments 4

  1. TheStatelessWonder

    Daniel Hannan is the English Ron Paul. A true Tory Free Marketeer after the tradition of Margaret Thatcher… quit blaspheming!  More Laissez-Faire, less lazy fairies!!!!   :-P

    “Till there be property there can be no government, the very end of which
    is to secure wealth, and to defend the rich from the poor” ~ Adam Smith

  2. MerlinYoda

    Well written piece. I’ve found that part of the trade off of  having a state in place to protect the life, liberty, and property of its citizens is for those same citizens to keep that state in check so that it doesn’t grow so big and influential/powerful as to cause the collusion between select private sector parties (e.g. “big business”) and the state. Unfortunately, over time, we as citizens have and are still slowly failing to prevent our society from slipping into a corporatist nightmare (i.e. say goodby to small business and entrepreneurs ).

    I primarily fault the creation of state entitlements which stretched beyond protection of citizen’s rights offered by the state that were put in place … for exampale, to “take care of” the elderly, infirm and down trodden. These enitilements are often created (especially nowadays) by labeling something as a “right” that is merely something that is widely and greatly desired but is not and cannot be an innate right (e.g. health care). It is natural to want security in one’s life and affairs, but the cost of this supposed “security” was greater than most realized at the time of the enacting of the state mechanisms that would offer that “security” (at least those that didn’t have a healthy amount of foresight).

    As it has been so aptly said in the past: eternal vigilance is the price of liberty.

  3. Justen Robertson

    I think you may be unfairly making a straw man of thoughtful market anarchism. For one thing, you are committing market anarchy the classic statist false dichotomy of “participate in the state or do nothing”. The fact is that there not only *exists* a strategy for market anarchy, it is one of the most popular economic systems on earth. Some call it agorism, some call it System D, some call it informal markets, some call it the black or gray market, but the fact is (or at least the facts as presented by a variety of academics and analysts) that over half the people on the planet make some or all of their living on it. In fact participating in the stateless markets is one of the easiest ways to improve your own life while depriving the state of power. You probably already do it – especially if you’re into anything overtly illegal like drugs, prostitution, or media “piracy”. This is one of the areas where Rothbard, Friedman, et al were most wrong – rejecting the dual power / hollow state strategy in favor of reformism or revolution. It’s not only possible, it’s one of the most successful strategies in alleviating human suffering, improving lifestyle and comfort, and undermining authority and hierarchy that humans have ever conceived.

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