Monday, September 20, 2010

The Impossibility of Anarcho-Capitalism

Take that, Lew Rockwell, Walter Block, et al.

From Center for a Stateless Society: Anarcho-”Capitalism” is impossible by Anna Morgenstern

Many anarchists of various stripes have made the claim that anarcho-capitalists aren’t really anarchists because anarchism entails anti-capitalism. I happen to think this is actually backwards. If they genuinely wish to eliminate the state, they are anarchists, but they aren’t really capitalists, no matter how much they want to claim they are.

People calling themselves “anarcho-capitalists” usually want to define “capitalism” as the same thing as a free market, and “socialism” as state intervention against such. But what then is a free market? If you mean simply all voluntary transactions that occur without state interference, then it’s a circular and redundant definition. In that case, all anarchists are “anarcho-capitalists”, even the most die-hard anarcho-syndicalist.

Defining capitalism as a system of private property is equally problematic, because where would you draw the line between private and public? Under a state, state property is considered “public” but as an anarchist, you know that’s a sham. It’s private property owned by a group that calls themselves the State. Whether something is owned by 10 people or 10 million doesn’t make it more or less “private”.

Going a bit deeper, there may be issues about how property rights are defined, and the nature of ownership between different sorts of anarchists. Obviously, anarcho-capitalists do not want the government to decide who owns what property. So even at their hardest of hard-core propertarianism, they are still effectively anarchists; they just have a different idea of how an anarchist society will organize itself.

But the focus on goals, I think, is very much over-emphasized in anarchist communities, at the expense of looking at means. Goals sometimes lead people toward certain means, but it is the means that determine results, not the goals. And if the anarcho-capitalists follow anarchist means, the results will be anarchy, not some impossible “anarcho-capitalism”.

Anarchy does not mean social utopia, it means a society where there is no privileged authority. There will still be social evils to be dealt with under anarchy. But anarchy is an important step toward fighting those evils without giving birth to all new ones.

My take on the impossibility of anarcho-capitalism is simply as follows:

* Under anarchism, mass accumulation and concentration of capital is impossible.
* Without concentration of capital, wage slavery is impossible.
* Without wage slavery, there’s nothing most people would recognize as “capitalism”.

The first part of this, that mass accumulation and concentration of capital is impossible under anarchism, has several aspects.

One big one is that the cost of protecting property rises dramatically as the amount of property owned increases, without a state. This is something that rarely gets examined by libertarians, but it’s crucial.

One reason for this is that large scale property ownership is never all geographically massed. A billionaire doesn’t have all his property in one small geographic area. In fact, this sort of absentee-ownership is necessary to become a billionaire in the first place. Most super-wealthy own stock in large corporations that have many factories, retail outlets, offices and the like all over the place. Leaving aside whether joint-stock companies are even likely in anarchy for now, this geographical dispersion means that the cost of protecting all of this property is enormous. Not only because of the sheer number of guardians necessary, but because one must pay those guardians enough that they don’t just decide to take over the local outlet. You could hire guardians to watch the guardians, but that in itself becomes a new problem…

But the property needs to be protected not only from domestic trespassers, but from foreign invasion as well. Let us imagine that an anarcho-capitalist society does manage to form, Ancapistan, if we will. Next to Ancapistan is a statist capitalist nation, let us call it Aynrandia. Well, the Aynrandians decide “hmm, Ancapistan lacks a state to protect its citizens. We should take over and give them one, for their own good of course.” At this point the billionaires in Ancapistan must either capitulate, welcome the Aynrandians, and Ancapistan is no more, or they must raise a private army to repel the Aynrandians. Not only will the second option be ridiculously expensive, for the reasons I’ve outlined above, but a lot of property will get destroyed if the Aynrandians decide to engage in modern total warfare. Ahh but what about all the middle class people in Ancapistan, won’t they form a militia to defend themselves? Well yes, but they won’t form a militia to defend a bunch of billionaires’ property.

The anarcho-capitalists often have a nonsensical rosy picture of the boss-worker relationship that has no basis in reality. Almost no one wakes up and goes in to work thinking “thank the heavens for my wonderful boss, who was kind enough to employ a loser like me”. When external invasion arrives, the middle classes will defend themselves and their own property. But they’re not going to risk their lives for Wal-mart without getting a piece of the action.

So, due to the rising cost of protecting property, there comes a threshold level, where accumulating more capital becomes economically inefficient, simply in terms of guarding the property. Police and military protection is the biggest subsidy that the State gives to the rich. In some sense the Objectivists are correct that capitalism requires a government to protect private property.

Furthermore, without a state-protected banking/financial system, accumulating endless high profits is well nigh impossible. The police/military state helps keep the rich rich, but it is the financial system that helped them get rich in the first place, at everyone else’s expense.

First off, state-chartered banking creates a limited supply of sources from which one can receive banking services. This cartelization allows them to get away with a fairly large amount of fractional-reserve banking, in which more is loaned out than actually exists. By increasing the in-use money supply in a one-sided manner, this creates a situation where the people who take out loans are effectively stealing from everyone else. Companies that finance expansion force their competitors to do so or fail, by bidding up the price of resources. By raising the cost of entry, this limits and reduces the amount of competitors in every industry, driving wages down.

And the current fiat money/central banking regime, by constantly inflating the money supply, destroys the ability of people to save, thus forcing them to borrow in order to start or expand a business, to buy a home or a car. It literally and directly concentrates the supply of capital in the hands of a smaller and smaller group of people, destroying savings and feeding effective purchasing power to those with higher credit ratings. This drives down wages and makes people dependent on those who still have large amounts of capital to hire them.

Under anarchy, anyone could lend money to anyone, there would be no special thing known as a “bank” per se (or to put it a different way, anyone could put up a shingle that said “bank”). Without legal tender and the ability to create large amounts of money out of thin air (the threat of “bank runs” and/or devaluation of bank notes would effectively limit this to a very small level, enough to minimally pay for itself at most), the money supply would no longer be in the hands of a cartel. Borrowing would become rare, and saving would become widespread, distributing capital more and more widely, rather than more and more narrowly, thus diluting the price of capital. Under such a system, any shift in demand would be met by a vast array of competitors, driving profits back down to the average.

Obviously, under anarchism, such a thing as “intellectual property” wouldn’t exist, so any business model that relies on patents and copyrights to make money would not exist either. This would contribute to the dilution I mentioned above.

As the price of capital is diluted, the share of production that goes to the workers increases. What we would eventually see is essentially, a permanent global labor shortage. Companies would compete for workers, rather than the other way around.

What is likely, judging from history, is that something like a private syndicalism would arise, where owners of value-producing property would lease it out to organizations of workers, simply because it would be easier for them than trying to hire people on a semi-permanent basis.

Mining was organized like this for quite a while, for instance, until the advent of bank-financed joint stock mining companies, which bought out most of the prospector/owners in the 1800s.

So we see, even assuming an “anarcho-capitalist” property regime, anything recognizable as “capitalism” to anyone else could not exist. In fact the society would look a lot like what “anarcho-socialists” think of as “socialism”. Not exactly like it, but much closer than anything they’d imagine as capitalism.

However, under anarchism, even such a strict property regime is not guaranteed. There is no way to impose it on a community that wants to operate a different way. I predict there will lots of different communities and systems that will compete for people to live in them and whatever seems to work the best will tend to spread. There’s nothing the anarcho-capitalists could do to prevent people from agreeing to treat property in a more fluid or communal manner than they’d prefer. Nor is there anything the anarcho-socialists could do to prevent a community from organizing property in a more rigid or individualistic manner than they’d prefer.

For, just as anarcho-capitalism is impossible, anarcho-socialism is also impossible, depending on how you define things. In reality all of us who are opposed to the state, as that great fiction that some people have a special right to do things that anyone else doesn’t, are anarchists, and what will happen under anarchy? EVERYTHING.

C4SS Contributing Writer Anna O. Morgenstern has been an anarchist of one stripe or another for almost 30 years. Her intellectual interests include economic history, social psychology and voluntary organization theory. She likes piña coladas, but not getting caught in the rain.

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