Anarchists (left-libertarians and anarcho-capitalists for the purpose of this discussion) speculate about what a stateless society might look like. That is, if society would trend more towards socialism or capitalism. A number of left-libertarians assert that society would trend towards socialism. Kevin Carson argues this position in his essay “Who Owns the Benefit? The Free Market as Full Communism.”

 

Before beginning the critique, providing a definition of capitalism is in order. “Capitalism” simply refers to that system where all scarce goods (including land and the means of production) are subject to private ownership given they are acquired via original appropriation (first user and claimant of an un-owned resource) or voluntary exchange.  To own something means to have the exclusive right to use, employ, or occupy it free of aggressive interference. Aggression (for the purposes of this critique) is defined as the uninvited initiation of physical interference with the persons or property of others, and threats thereof.[1]

 

In this particular piece, Carson suggests that the market has trended towards capitalism as a consequence of state intervention.  He proposes that absent such state intervention, the free market would deviate from capitalism in favor of socialism.

 

Carson argues:

 

Just about everything we identify as problematic about corporate capitalism — the exploitation of labor, pollution, waste and planned obsolescence, environmental devastation, the stripping of resources — results from the socialization of cost and risk and the privatization of profit.

 

Insofar as costs are socialized, the economy deviates from capitalism.  Thus claiming that the socialization of costs and risks are drawbacks of capitalism is misleading and erroneous.  Socialized costs are, instead, drawbacks of the State and they only stem from its interference in the economy, which drives it further from capitalism.


Also what does “exploitation of labor” mean exactly? If he simply means depriving someone of something due him, then why not just say “theft”?  The term “exploitation” introduces a body of obscure theoretical work. You could ask what one has against synonyms, especially ones with valuable nuance, however “valuable nuance” is very nearly an oxymoron.  Synonyms are great, except the only reason to introduce one here is to smuggle something in without explicitly offering it as a proposition. Terms such as “exploitation” are used fluidly by leftists so as to avoid susceptibility to incisive critique that otherwise clear and precise language would invite. This speaks to why left-libertarians are so fond of terms like “exploitation” — they don’t have to expressly define them, they just leave them out there implicitly defined as “any economic arrangement the terms of which I find unsatisfactory.”


In regards to pollution, its production is inevitable.  As such, the goal is to mitigate but not eliminate it.  The best way to manage it is to uphold private property rights which are the essence of capitalism.  It’s because the State allows the vague notion of the economy’s “greater good” to trump private property rights that pollution has prevailed to the degree it has. Once more, this constitutes a deviation from capitalism. Carson fails to understand that just because the U.S. economy falls closer to the capitalist end of the socialism-capitalism spectrum, this does not mean that all the current economy’s faults are due to capitalism.  All faults referenced by Carson to this point emanate from State interventions.[2]

 

Why haven’t the cybernetic revolution and the vast increases in productivity from technological progress resulted in fifteen-hour work weeks, or many necessities of life becoming too cheap to meter? The answer is that economic progress is enclosed as a source of rent and profit.

 


This seems to be the main premise of his article: that capitalism is fueled by planned obsolescence, due to profit seeking, which in turn causes consumers to buy “too much,” which in turn causes people to work longer than they “should.” This ignores two major points:

1) Society’s demands are infinite. Just because we satisfy what people want today, doesn’t mean they won’t want more, or better, or less expensive goods tomorrow.
2) It also ignores the fact that most consumption isn’t due to planned obsolescence but rather technological advancements, improved efficiencies, new functionality, and improved quality. Consumers didn’t replace 2 GB hard drives to store their photos of little Timmy because they failed by planned obsolescence, but instead because technology made it possible to buy smaller, larger capacity, stateless drives for less money. People are buying 4k TVs because technology developed to the point where their production was possible and their price affordable, but not because they were duped by some sinister capitalist plot to make standard definition TV’s obsolete.

 

The poor of today enjoy far more luxuries than the poor of 50 years ago, and still more than the poor from 100 years ago.  And, it is because of State-enforced legal tender laws/central banking, regulations, mandatory licensure, intellectual property laws, taxes, limitations on the freedom of contract, welfare, military industrial complex, outright prohibitions, and legally granted monopolies that goods are not more plentiful and cheap than they are! All of these are State interventions which violate private property rights which are the essence of capitalism.  Thus, it is due to the deviations from capitalism that many goods and services are as expensive as they are relative to a free market capitalist environment. Yes, libertarians, capitalism and free markets are not mutually exclusive.[3]  Some would like to see “capitalism” understood as free trade in all goods.  However, as an economist, I find a lot of utility in careful definitions. I advocate capitalism, but that doesn’t mean I think the word should be defined as “all the stuff I like.” Capitalism is a necessary but insufficient condition for those things. If I want to talk about free markets, I have “free markets” for that. Free markets imply capitalism only in that they imply secure property rights. Capitalism falls under the free market umbrella. It refers to an environment where the means of production are privately owned.

 

The natural effect of unfettered market competition is socialism. For a short time the innovator receives a large profit, as a reward for being first to the market. Then, as competitors adopt the innovation, competition drives these profits down to zero and the price gravitates toward the new, lower cost of production made possible by this innovation (that price including, of course, the cost of the producer’s maintenance and the amortization of her capital outlays). So in a free market, the cost savings in labor required to produce any given commodity would quickly be socialized in the form of reduced labor cost to purchase it.

 

First off, Carson never explains what the catalysts were for this reduction in labor cost. The scenario presented with reduced profit margins currently exists in most mature industries. In Carson’s ideal socialist world, there wouldn’t be any reduction in labor costs. Profits are used to expand business, improve efficiency, and fund the development of new technologies. Reducing profits to zero leads to stagnation in the array and quality of goods/services available to us.

 

Second, there’s no guarantee a given innovator will earn anything, let alone a “large profit” for his inventions. One can almost guarantee that in the real world, profits will not reach zero for an entire sector. Said innovations may not impact costs of production. Finally, prices are determined by the subjective valuations of consumers, and the capital goods required for their production are in turn given value based on their relative scarcity and ability to produce said consumer goods. This process is known as value imputation.

 

It is also amusing to watch Carson dance around saying a free market would raise wages and lower prices.  Rather than say a free market would raise real wages and lead to real falling prices he says, “the cost savings in labor required to produce any given commodity would quickly be socialized in the form of reduced labor cost to purchase it.” But he can’t just say what he means without undermining his disdain for wage labor. Because he’s Kevin Carson.
Left market anarchists (in the Carsonian sense) detest falling prices as much as Keynesians, because “it’s bad for debtors!” Carson wouldn’t dare speak of falling prices, nor would he openly admit that automation leads to falling wages in some industries and rising wages in others: The taxi drivers lose their cushy protected jobs as Uber comes on the market. The buggy whip producers who refuse to retrain get less and less work and make ever less money.

 

What Carson is describing is a capitalist process. He describes it fairly accurately, yet labels it erroneously by calling it a socialist one (it is interesting Carson doesn’t talk about factors of production, nor does he define “socialism”). Drawing a comparison between free market abundance and the “Marxist vision of full communism” is absurd; the communist wet-dream just so happens to be what capitalism works towards. This is obvious. Pointing out that the ostensible goals of capitalism and socialism are the same is like pointing out two opposing sports teams both want to win the game. In a rich industrialized country you may not care if someone pockets your lighter at a party. People take lighters and leave them. Economics fundamentally concerns scarcity. Likewise, scarcity provides the impetus for property. Property norms are needed to the degree scarcity exists, but I don’t foresee factories or cars ever becoming superabundant. Even things that seem very close to superabundant, like, as Carson goes into much later in his article, the commons-based peer-produced Linux will always require hardware to be run and programmers to improve and operate it. The cost won’t reach zero until we can program and acquire Linux as easily as we can acquire air.

 

That is, rather than being forced by competition to price her goods at the actual cost of production (including her own livelihood), she can target the price to the consumer’s ability to pay.

 

At what point can you separate one’s “own livelihood” from his profits? If sales increase and you increase your own salary, is that profit? Is that acceptable in this ideal socialist society? If not, who gets to determine what an acceptable salary is? If it is, then that profit can always be viewed as someone’s salary. Perhaps the owner of a company decides to increase his salary and use a portion of his personal money to re-invest in the company to expand. If left-libertarians are fine with that, and only take issue when someone increases his cash balances by investment only, then they are condemning people to work even harder and cut back their current consumption to fuel expansion at a later date risking their own money (instead of taking an investor’s money). This has the exact opposite effect of what Carson postulates (15 hour work week).

 

There are two types of prices: ones that you set and ones that the market sets (based on supply and demand). The producer can set the price to whatever he wants, but if it doesn’t match the market price, the discrepancy will be revealed by a shortage or surplus of his inventory. The goal for the producer is not to price his goods “at cost,” rather it is to price them such that the number of consumers willing to purchase them is equivalent to the number of units being sold. Such a price is known as the “market clearing price” or “market equilibrium price.”

 

Only when the state enforces artificial scarcities, artificial property rights, and barriers to competition, is it possible for a capitalist to appropriate some part of the cost savings as a permanent rent.


What is Carson talking about?  All aggressive barriers to competition are deviations from capitalism, not effects of capitalism. I’m assuming artificial=aggressive or something which deviates from the private property ethic listed above.  

 

That form of enclosure, via “intellectual property,” is why Nike can pay a sweatshop owner a few bucks for a pair of sneakers and then mark them up to $200. Most of what you pay for isn’t the actual cost of labor and materials, but the trademark.

 

Nike operates on a 11.55% profit margin. If they were going to price their goods at the cost of production, then their profits would effectively drop to 0. If Nike wants to have $20/hour employees doing the very basics, then the cost of production will increase along with the retail price of the shoes.

It bears repeating that “intellectual property” (IP) is a deviation from legitimate property rights which only apply to scarce goods. That is to say, enforcing IP would entail a corresponding abridgement of someone’s right to do what he will with his own private property (above and beyond not using it to aggress against the persons or property of others). Hence, IP constitutes a deviation from the private property ethic and capitalism, as opposed to being an effect of capitalism as Carson insinuates.[4]

 

But artificial scarcity, based on the private enclosure and holding out of use of vacant and unimproved land, or on quasi-feudal landlord rights to extract rent from the rightful owners actually cultivating arable land, is an enormous source of illegitimate rent — arguably the major share of total land rent.



In this context Carson uses the term “artificial” in a different way than he had previously, i.e., he is equivocating. Whereas before he apparently likened it with aggression and statist interference, now he’s comparing it to holding land as savings without actively “improving upon” (whatever this arbitrary criteria means) or occupying it. So long as an individual was the first to use and claim/originally appropriate a plot of un-owned land, it becomes his. A practical condition of this is that he create a physical effect on the land that a 3rd party can recognize as evidence of his relation to it…this is what constitutes a “superior objective link” relative to any latecomers. Exactly what kind of a physical mark must be made is subject to customs which may develop organically in the market or from the policy a given title registry implements, etc. The point is, once ownership has been established there is no sound reason that the owner must meet any additional burdens (such as occupying or using this land in some way) in order to retain said ownership. At that point his title will only be relinquished if he explicitly revokes it, exchanges it, or dies without a named heir. Finally, Carson says most landlord/leasee relationships are “illegitimate”, i.e., Carson favors limitations on the freedom of contract. Carson rattles off a slew of state interventions whose definitions have to be guessed at with the knowledge that he’s a leftist (“artificial” property rights) but the rest of the statement is standard monopoly analysis.

 

We favor, as well, opening up the supply of credit to unfettered market competition, abolishing entry barriers for the creation of cooperative lending institutions, and abolishing legal tender laws of all kinds, so that market competition will eliminate a major portion of total interest on money.

 

Anarcho-capitalists want most of those things too, but let’s look at the conclusions he draws from it. He thinks it will eliminate the majority of interest? Interest is ridiculously low. Artificially low. The Federal Reserve has generated money out of thin air to buy bonds, increasing the money supply and lowering interest rates. How will interest rates be abolished or even lowered? In reality, interest rates will most likely be higher. It follows the same rules of supply and demand. Interest is essentially the price of money. Thus, when the artificial excess supply is eliminated higher interest rates will follow ceteris paribus. Just as Carson has difficulty understanding the pricing of capital goods and commodities, so too does he have difficulty understanding the origin and setting of interest rates.


But while demanding the socialization of rent and profit may be frowned upon by capitalists as “class warfare,” they’re totally OK with the socialization of their operating costs.


This constitutes yet another prime example of false equivalence so often employed by left-libertarians. A given “Capitalist” may prefer to have his costs socialized if possible, but this does not mean that “socialized costs” are in any way a characteristic of capitalism. He is conflating the term “capitalist” (someone who privately owns some means of production) with the economic system “capitalism” which has fixed characteristics as defined in the beginning of this critique. As public choice economics has already pointed out ad infinitum, businesses are often the strongest advocates of inhibitory legislation as a means to curb their competition. This is an indictment of cronyism not capitalism.    



In a society where waste and planned obsolescence were no longer subsidized, and there were no barriers to competition socializing the full benefits of technological progress, we could probably enjoy our present quality of life with a fifteen-hour work week.

 

Again more equivocation from Carson.  The way in which he uses “socializing” here is not the same as the term that is used in an economic context: abridging private ownership of the means of production in favor of “social” ownership. (whatever this means, is it supposed to include everyone in the world, on a continent, in a 30 mile radius?)


Taken together, these two outcomes of free market competition in socializing progress would result in a society resembling not the anarcho-capitalist vision of a world owned by the Koch brothers and Halliburton, so much as Marx’s vision of a communist society of abundance.



I am unaware of any Anarcho-capitalist who has a vision of a world “owned” by a small handful of mega corporations or elite families.  In fact there are characteristics of capitalism which place natural limitations on the size of firms. Moreover, a monopoly is not merely a single provider of a good or service (as far too many believe), it is instead an exclusive legal privilege to produce a given good or service. Such privileges are necessarily antithetical to capitalism, as they entail an abridgment of private property rights.

 

The natural effect of unfettered market competition is capitalism. “Capitalism” is private ownership of the means of production. Whereby “private” I mean individual, by “ownership” I mean an exclusive legal right to use or control the use of the thing owned, and by “means of production” I mean land, labor and (especially, in this context) capital.” Without secure property titles nobody could produce on any meaningful scale and virtually everyone would live in abject poverty. Does a left-libertarian society use money and prices? Are property titles assigned by a totally-non-state committee, or by usufruct norms, or some other way? Who would determine the scope of such norms and whether they have been violated? It depends on which leftist you are asking. By now it should be clear that a Carsonian world would result in residents having to work harder & longer, stifled innovation, and a general stagnation in economic productivity.

When people can securely own things and trade them freely, sound market prices manifest. Various left-libertarian ideas imply the eradication of such prices. Some would have prices but they would be informed by less secure (how much less is anyone’s guess) property titles, and so on.

Markets would trend toward capitalism: Per Say’s Law, production is always antecedent to consumption — one needs to produce in order to consume. Production on any scale compatible with life requires capital, which is man-made (it doesn’t “grow on trees”). To have an incentive to produce capital you have to be able to make use of and/or sell it, and for either of those you have to be able to control and keep it — same for the incentive to buy it. To have any confidence that you will still control it tomorrow, you need a legal regime that assigns exclusive rights to control — that is, you need the ability to privately own the means of production. You need capitalism.

 

 

 

 

 

[1] Property, Contract, Aggression, Capitalism, Socialism: A Theory of Socialism and Capitalism by Hans-Hermann Hoppe
[2] Environmentalism: A Spontaneous Order: The Capitalist Case For A Stateless Society by Christopher Chase Rachels
[3] Marxist and Austrian Class Analysis
[4] Against Intellectual Property by Stephan Kinsella

 

 

More on the libertarian left.