Rejoinder to Ed
Finn's Reform Capitalism or Scrap It?:
It's not just the climate that's damaged by capitalism
Introduction:
This paper will critically analyze Ed Finn's article
entitled Reform Capitalism or Scrap It?:
It's not just the climate that's damaged by capitalism, dated March
1, 2012 and available at:
I plan to analyze the article from a market anarchist or
anarcho-capitalist perspective in order to provide an original critique of this
article published by the Canadian Centre for Policy Alternatives. The article being criticized is clearly
written for an audience of Marxists, socialists, and social democrats. I suspect that few anarcho-capitalists will
ever read it because they most likely will reject the article as
radically-leftist propaganda, which distorts and misrepresents capitalism
deliberately in order to slander it. I,
however, have taken the article seriously.
I assume that the author is serious in his beliefs and arguments with no
evil or slanderous intentions in order to follow the approach taken by F. A.
Hayek;[i]
consequently, I try to remain as detached and objective as possible when
addressing critically the author's laundry list of allegations against
capitalism.
The major arguments addressed in my paper are as follows:
- My
paper begins with some introductory remarks on terminology in order to
address potential confusion over the term "capitalism." The term has multiple connotations; the
readers of my article will quickly see that "capitalism" from a
market anarchist point of view and "capitalism" from the point
of view of Ed Finn are completely different terms with completely different
meanings. In fact, from a market
anarchist perspective, capitalism does not exist in the current
world; instead, socialism is the only system in operation
today. Since capitalism and
socialism are defined from this point of view in terms of property
relations, then the conclusion that our world is, in fact, suffering
from rampant socialism will be seen as self-evident.
- Then,
my paper addresses the author's interpretation of "capitalist"
history in the twentieth-century.
The author paints a picture of twentieth-century economic history
that follows a simply chain of events of the form bad, good, and then bad
making a comeback in order to suppress the previous good. To clarify, the author perceives a
world of unbridled capitalism, which got too greedy, and this
"unchecked greed" then caused the Great Depression in the
1930s. Then, the good guys
intervene in order to rescued capitalism, apparently against its will, by
adopting the "caring and sharing" system of Keynesian
economics. The world was now a
better place; the forces of good beat those of evil. But then the forces of darkness
regrouped and nefariously overthrew the nirvana of Keynesian economics by
restoring the "rapacious" system of laissez-faire capitalism. Consequently, the current world
situation is once again laissez-faire capitalism, which is spiraling out
of control, once again, but the good guys will save the world from the
coming capitalist apocalypse of "global warming" by instituting
a world government. My article
argues that this interpretation of the history of the twentieth-century is
incorrect because laissez-faire capitalism was already effectively dead at
the beginning of the twentieth-century because of deliberate government
interventions designed to placate existing big businesses. The claim that Keynesian economics was
some sort of salvation for the little guy, a protection of the weak from
the strong, is addressed and attacked by examining the fact that Keynesian
economics is establishment economics with a built-in tendency to favor the
interests of both commercial and investment bankers.
- Playing
off the currently popular 1% versus 99% rhetoric, the author of the
article brings up the "concentration of wealth" issue, which he
will solve by transferring the resources of all the governments of the
world to one central world government.
I address the obvious logical contradiction of trying to solve one
"concentration" problem by creating an even larger one. Moreover, I point out why the author's
"one big cartel" solution is theoretically impossible; his
solution cannot work because it will lead to a rational economic
calculation problem. I conclude
this section by utilizing a historical illustration from the Soviet
Union's disastrous attempt to create the "one big cartel" in the
late 1910s.
- Then,
I address the numerous problems in the author's assertion that our current
global economy is, in fact, the paragon of free trade. The author of the article takes it for
granted that the current world is "obviously" an example of the
free-market mentality, which is out of control because the market has been
"unshackled" from its beneficial Keynesian restraints. From the market anarchist perspective,
the current situation is "obviously" not an example of
the free-market mentality; the current world is an "obvious
example" of conservative socialism and social democratic
socialism. The reason for the
confusion, as will be explained, is that the author of the article fails
to distinguish a bureaucratically managed trade system from a genuinely
free (i.e., voluntary, without government) trade system.
- The
author of the article then levels an extended attack against competition
by accusing it of causing numerous problems in the world, such as poverty,
war, wealth concentration, and waste of resources. Lurking in the background of the
author's article, I suspect, is a Marxist assumption that capitalists are
suicidal in their interminable drive to "accumulate"
capital. To starve off the day of
reckoning, i.e., to postpone all the nasty effects of
"competition," capitalists supposedly engage in wars and
imperialism.[ii] To address the author's claims against
competition, I begin by explaining why it is impossible to
eliminate competition so long as humans act, i.e., so long as
humans attempt to substitute a better state of affairs for a worse
one. Then, I address the
accusations made by the author of the article in a point-by-point rebuttal
format in order to show that the author's self-evident claims are not so
self-evident after all. I examine
how monetary policy manipulation--not capitalism--instigated economic wars
in the 1930s that then fomented the armed conflicts of World War II, how
American banking history from as early as the 1860s showed ongoing and
deliberate attempts to suppress competition through various forms
of government-granted privileges, why the highly dynamic and unpredictable
nature of a free-market made the maintenance and concentration of wealth impossible,
why free-markets were beneficial to the poor as illustrated by Robert
LeFevre's statistical study of wealth distribution before and after the
Industrial Revolution, and how a free market avoided warfare through the
implementation of the harmony of interests concept, which stands in sharp
contrast to the competing concept called the Montaigne dogma.
- I then
address the author's bizarre claim that capitalism is based upon the
assumptions of limitless growth and limitless resources. The author's claims are obviously meant
to imply that capitalism is destroying the earth by causing an
environmental catastrophe; this environmental apocalypse, which will
destroy civilization, can only be thwarted through the author's proposed
solutions of world government and curtailing economic growth. The author's argument is bizarre
because socialist propaganda has always proposed that it would create a
"world of plenty" (i.e., limitless growth of goods) if only
capitalist production with its "artificial scarcity" could be
halted. Capitalism cannot be both
simultaneously suppressing the supply of goods by creating scarcity
and overproducing the supply of goods by engaging in limitless
growth.
- Next,
I examine the author's "animistic" or "by design"
world view. He seems to think, not
surprisingly, that a capitalist conspiracy is afoot in the world
today. In reply, I examine the
history of early capitalism in order to stress that capitalism was born
not by deliberate design but by a spontaneous ordering in an anarchistic
environment.
- The
last issue I address is the author's inconsistent "moral high
ground" argument. Socialism,
the author's preferred solution, was born as a totalitarian reaction
against the liberalism of the French Revolution; thus, the author's
"self-evident" claim to a "moral high ground" is very
suspicious. I conclude by noting
the obvious self-refuting nature of the entire article. At the beginning of the article,
capitalism's collapse is inevitable, but by the end of the article,
deliberately organizing a plan to overthrow capitalism is now
needed.
Issues Regarding the Use of the Term "Laissez-Faire
Capitalism":
The fundamental essence of market anarchy is expressed by
Hans-Hermann Hoppe as "a pure private property society, an anarchy of
private property owners, regulated exclusively by private property law."[iii] From this perspective, capitalism and
socialism are defined in terms of property with
socialism being an
institutionalized policy of aggression against property, and capitalism
being an institutionalized policy of the recognition of property and
contractualism [i.e., non-aggressive relationships between property owners].[iv]
Contrary to the assertions of the author of the article,
this property-based definition does not imply that capitalism is biased
in favor of "big business."
Capitalism opposes what F. A. Hayek calls the socialists of "all
parties," including the privilege-seeking protectionist behavior displayed
by many big businesses. "There is
some justification," writes Hayek, "in the taunt that many of the pretending
defenders of 'free enterprise' [emphasis added] are in fact defenders of
privileges and advocates of government activity."[v] To grant any government privilege to anyone
(rich or poor) for any reason is to engage in private property
violations, i.e., to engage in socialism.
Given such a definition of capitalism, which certainly is
not how the term is construed by socialists,[vi]
one must conclude that capitalism does NOT exist in our current
world. The modern world is, by
definition, nothing but violations of private property rights because the
modern world is still populated by states and states are by definition property
violators. Murray N. Rothbard
summarizes the inherently anti-capitalistic nature of the state when he
writes that
the State necessarily lives by the
compulsory confiscation of private capital, and since its expansion necessarily
involves ever-greater incursions on private individuals and private enterprise,
we must assert that the State is profoundly and inherently anticapitalist.[vii]
The protection of private property is, in fact, illusory in
our statist world because each government continues to possess not only a
judicial monopoly over its territory but also the involuntary power to tax
property.[viii] Therefore, from a market anarchist
perspective, the author of the article is mistaken when he continually blames
all of the problems in the world on capitalism. Capitalism does not exist in the current world because the
existing institutional arrangements are inherently anti-property in their
nature; socialism, i.e., aggression against property, is what exists in
the current world.
Historical Problems Regarding the Interpretation of
the American Depression in the 1930s, Keynesian Economics, and the Post-World
War II Period up to the Present:
The author presents an interpretation of economic history,
beginning with the American Depression in the 1930s. The author's major points are as follows:
- Capitalism,
plagued by "avarice" [i.e., by "greed"] and financial
"knavery," caused the Great Depression of the 1930s
- Capitalism
was then "saved" apparently against its will thanks to the
"caring and sharing" concepts of John Maynard Keynes
- A
wonderful world was unleashed, which included income being more
"fairly" distributed, more labor unionization, better wages and
working conditions for labor, and more social programs financed by
"progressive" taxation
- But
the rapacious capitalists fought back by breaking their "Keynesian
shackles" and then re-established their "ruthless" system
of capitalism
- This
"ruthless" system of capitalism now is completely out of control
causing every conceivable calamity including a global environmental crisis
To begin, the author's assertion that capitalism was
"running amok" immediately prior to the Great Depression is
historically incorrect. In reality,
laissez-faire capitalism never existed in its pure form for the most part; a
quasi-version did exist but was intentionally suppressed starting in the
Progressive Era of American history, i.e., the suppression preceded the 1930s
by decades. Consider Gabriel Kolko's
reinterpretation of the Progressive Era in the United States, roughly covering
the period from the second half of the 1800s to 1916. Kolko states bluntly that "the federal government was always
involved in the economy in various crucial ways, and that laissez faire
NEVER EXISTED [emphasis added] in an economy where local and federal
governments financed the construction of a significant part of the railroad
system."[ix] In fact, the Progressive Era was dominated
by the leaders of big business deliberately suppressing free-market
competition. Continuing with Kolko,
the lesson from history is that large corporations seek and receive government
regulations as a form of protectionism because the existing large corporations
are afraid of capitalism in its pure form. Kolko notes that "although there was a formal commitment to
varieties of laissez faire economic theory in most of the academic world, big
businessmen developed their own functional doctrine very much opposed to
competition [emphasis added] as either a desirable mechanism or as a
goal."[x] The rest of Kolko's study explains how the
leaders of big business (including the big banks) went about deliberately
shutting down capitalism and replacing it with a government-protected monopoly
system. Because "competition was
unacceptable to many key business and financial interests,"[xi]
and because various voluntary attempts to restrict competition had all failed,[xii]
the leaders of big business deliberately turned to the government for a
political solution to their capitalist problem.[xiii] These observations pertaining to the
deliberate government sponsored suppression of competition were made again by
F. A. Hayek regarding the Great Depression when he writes that "anyone who
has observed how aspiring monopolists regularly seek and frequently obtain the
assistance of the power of the state to make their control effective can have
little doubt that there is nothing inevitable about this development."[xiv]
The period from roughly 1900 to 1930 was not a period
of unbridled capitalist greed characterized by unregulated markets. On the contrary, it was a period of
centralizing and consolidating power.
The end of the first World War brought about a shift from Marxist
ideology to a system of "planning."
Ludwig von Mises mentions this important turning point in the history of
the West when he writes that
the attitude of the German
"majority socialists" adopted in 1918 and 1919 marks a turning point
in the socialist movement in the countries of Western industrial
civilization. The nationalization issue
receded more and more into the background....With all other foes of the market
economy the party cry is now "planning."[xv]
Moreover, during this 1900-1930 period, centralized global
coordination of the economy began. The
most obvious example is the birth of central bank coordination between the New
York Federal Reserve and the Bank of England.
Writing about the coordinated control of the economies of both America
and Europe by their respective central banks, Murray N. Rothbard notes that
less well known is the fact that
close collaboration between Benjamin Strong, Governor of the Federal Reserve
Bank of New York, and Montagu Norman, head of the Bank of England, began much
earlier....As early as 1916, Strong began private correspondent relations with
the Bank of England, as well as with other European Central Banks.[xvi]
Thanks to all of these earlier government and central bank
interventions, the economic situation did not look even remotely like
laissez-faire capitalism on the eve of the American Great Depression. In fact, a centrally coordinated system in
banking existed domestically in the United States in addition to the global
coordination spearheaded by Benjamin Strong.
Murray N. Rothbard writes about the obviously anti-laissez-faire
economic situation that existed in the spring of 1929:
As Bernard M. Baruch explained in
an optimistic interview in the spring of 1929, they [i.e., the new tools for
central control] were (a) expanded cooperation between government and
business [emphasis added]; and (b) the Federal Reserve Act, "which
gave us coordinated control of our financial resources and...a unified
banking system [emphasis added]."[xvii]
Now compare this 1929 centrally coordinated banking system
to the pre-Federal Reserve System as described by Gabriel Kolko, i.e., a system
of relatively decentralized and competitive banking compared with what
happened later in American history.
Kolko describes the operation of a pre-central bank banking industry,
which was marked by a rise in choice and a decrease in the relative power of
New York banks:
But had the complete centralization
of capital been the dominant fact of the financial structure at the beginning
of this century [i.e., the twentieth century], the proliferation of new
entries into most industries and the failure of the merger movement to
establish industrial control [emphasis added] would be inexplicable. For central finance would have withheld
funds from undesirable competitors.
Clearly, a much more complex situation existed, and the extent of this
complexity has not been fully appreciated.
The crucial fact of the financial structure at the beginning of this
century was the relative decrease in New York's financial significance and the
rise of many alternate sources of substantial financial power [emphasis
added].[xviii]
Therefore, the author's assertion that capitalism existed in
the late 1920s and then caused the Great Depression in the 1930s is wrong
because capitalism never existed in a pure form and the relatively free-market
system that had existed was destroyed in the Progressive Era.
Continuing with the author's description of twentieth
century economic history, the claim that Keynesian economics was instituted out
of benevolent "caring and sharing" motives is rather shocking. Keynesian economics has nothing to do with
benevolent altruism as the author of the article seems to believe. The fact is that Keynesianism is "the
pure economics of power, committed only to keeping the Establishment-system
going."[xix] From roughly the 1930s to the early 1970s,
"Keynesianism rode high in the economics profession and in the
corridors of power in Washington [emphasis added]."[xx] The most obvious question is "why would
bankers and establishment players want Keynesian economics?" The most obvious answer is that they benefit
the most from perpetual deficit financing, i.e., large deficits during
recessions and smaller deficits during booms.[xxi] How do bankers benefit from the Keynesian
policy of interminable deficit financing?
The answer to this question is provided by Rothbard in a discussion on
why the interests of both commercial and investment banks are
advanced by statism and deficits.
Rothbard explains why the establishment players want Keynesian economics
when he writes that
bankers are inherently inclined
toward statism [emphasis added].
Commercial
bankers, engaged as they are in unsound fractional reserve credit, are, in the
free market, always teetering on the edge of bankruptcy. Hence they are always reaching for
government aid and bailout [emphasis added].
Investment
bankers do much of their business underwriting government bonds, in the United
States and abroad. Therefore, they
have a vested interest in promoting deficits [emphasis added] and in
forcing taxpayers to redeem government debt.[xxii]
Therefore, based on considerations of the self-interest of
commercial and investment bankers, the claim that Keynesian economics was
intended to further "shackle" capitalism is, in fact, correct. The stated 1936 goal of Keynesian economics
was to defend two untenable economic policies, namely, inflationism and labor
unionism; neither was conducive to capitalism.[xxiii] To accomplish these anti-capitalist goals,
Keynesian economics resurrected the old ideas held by the so called
"monetary cranks":
Keynes did not add any new idea to
the body of inflationist fallacies, a thousand times refuted by
economists. His teachings were even
more contradictory and inconsistent than those of his predecessors who, like
Silvio Gesell, were dismissed as monetary cranks. He merely knew how to cloak the plea for inflation and credit
expansion in the sophisticated terminology of mathematical economics.[xxiv]
The death of Keynesian economics was not caused by
some sort of capitalist conspiracy to reestablish the "rapacious"
system that supposedly existed prior to the Great Depression. Keynesian economics died in the 1970s
because reality demonstrated that the Keynesian theory was wrong; the
Keynesian theory was unable to explain what was happening in the real
world. "In the early and the late
1970s," writes Rothbard, "the wind was taken out of their sails by
the arrival of inflationary recession [emphasis added], a phenomenon
which they not only failed to predict, but whose very existence violates the
fundamental tenets of the Keynesian system [emphasis added]."[xxv] Rothbard explains the paradox of
Keynesianism when applied to the real world problem of an inflationary
recession:
For if the government was supposed
to step on the spending accelerator during recessions, and step on the brakes
during booms, what in blazes is it going to do if there is a steep recession
(with unemployment and bankruptcies) and a sharp inflation at the same time? What can Keynesianism say? Step on both accelerator and brake at the
same time [emphasis added]?[xxvi]
The author's thesis is, in the final analysis, simply of the
form: bad era, good era, and a return
to another bad era, with the good era consisting of big government intervening
in the economy perpetually and the bad eras consisting of a lack of government
meddling in the economy. What the
author of the article completely ignores is the fact that the economic history
of the twentieth century was influenced heavily by ongoing interventions in
the form of imposed monetary orders.
The claim that parts of the twentieth-century lacked regulations over
the economy is simply not true. The
world experienced a flip-flopping between two different and competing establishment
monetary systems, i.e., between the Keynesian and the Friedmanite monetary
orders. The world flip flopped between
the Keynesian fixed exchange rate system combined with international economic
coordination and a Friedmanite fiat money system with relative values of
currencies fluctuating in accordance with supply and demand but still a
governing central bank existed.[xxvii] Contrary to the author's claim, which
suggests that Keynesian economics is the salvation of the poor and destitute, both
systems are establishment systems, i.e., neither system is meant to help the
poor or working classes. Therefore,
the author's interpretation of the economic history of the twentieth century
has been exposed as spurious.
The Impossibility of the "One Big Global
Cartel" Solution to the Alleged Global Warming Crisis:
The author makes two contradictory claims.
- First,
he claims to be opposed to the concentration of power into the hands of a
few individuals by citing some examples of how the capitalists of today
have done so already. The
"plutocrats at Davos," "the top 1%" who refuse to
"share among the 99%," now possess "immense power."
- Second,
he claims to want to establish a world government in order to save
humanity from the global warming crisis allegedly caused by capitalism and
its "overproduction" of carbon dioxide emissions. He writes, "the world's
governments should be joined together, pooling their resources
[emphasis added], and making the campaign against global warming their top
priority."
The author has fallen into a classic trap of Marxism or
state socialism, namely, he wants to solve an alleged monopoly problem (i.e.,
the monopoly capitalist problem) by creating an even bigger and more
centralized monopoly (i.e., a world government). The American individualist anarchist Benjamin Tucker nicely
summarizes the self-refuting nature of the position taken by the author of the
article:
Marx, its [i.e., State Socialism's]
founder, concluded that the only way to abolish the class monopolies was to
centralize and consolidate all industrial and commercial interests, all
productive and distributive agencies, in one vast monopoly in the hands of the
State.... Competition must be utterly wiped out. All industrial and commercial activity must be centered in one
vast, enormous, all-inclusive monopoly.
The remedy for monopolies is monopoly.[xxviii]
In addition to the logical contradiction of trying to solve
a monopoly problem by creating an even bigger monopoly, the author's proposed
solution, which consists of a global government with the pooling of all the
resources of all the world's governments at one central global control point,
is both historically and theoretically infeasible. The author is probably unaware of the fact
that his article sounds similar to 1920-1930 era economics, such as the Soviet
experiment and the Hayek-Lange-Dickinson debates at the London School of
Economics with the earlier Misesian article
Economic Calculation in the Socialist Commonwealth certainly
instigating much of this later debate.
From a theoretical perspective, the idea of pooling all the
resources of the world's governments is addressed in modern times by Murray N.
Rothbard under the label "The One Big Cartel Problem." Rothbard discusses not only the calculability
problem faced by any attempt to establish a global cartel but also the long-term
instability problem faced by a global cartel once established. Rothbard writes that
in order to calculate the profits
and losses of each branch, a firm must be able to refer its internal operations
to external markets for each of the various factors and
intermediate products. When any of
these external markets disappears, because all are absorbed within the
province of a single firm, calculability disappears, and there is no way for
the firm rationally to allocate factors to that specific area. The more these limits are encroached upon,
the greater and greater will be the sphere of irrationality, and the more
difficult it will be to avoid losses.
One big cartel would not be able rationally to allocate producers' goods
at all and hence could not avoid severe losses. Consequently, it could never really be established, and, if
tried, would quickly break asunder.[xxix]
The calculability and instability concerns raised by
Rothbard are not news to someone familiar with economic history. In fact, Rothbard's entire argument is
simply a restatement of arguments made by at least three major writers, namely,
Boris Brutzkus, Max Weber, and Ludwig von Mises in the 1920-21 time period. The impossibility of rational economic
calculation under a scenario that pools all resources under one central global
government can be seen by starting with the Soviet experiment and then thinking
about whether this experiment could be replicated on a global scale. The eminent economist F. A. Hayek mentions
in one of his many papers on this socialist calculation problem that
Boris Brutzkus, a distinguished
economist mainly known for his studies in the agricultural problems of Russia,
subjected to a searching criticism in a series of lectures the doctrines
governing the action of the Communist rulers....Like Professor Mises and Max
Weber, his criticism centers round the impossibility of a rational
calculation in a centrally directed economy from which prices are necessarily
absent [emphasis added].[xxx]
The theoretical prediction that economic chaos will be the
result of the "one big cartel" scenario with its inherent inability
to engage in rational calculation is further confirmed when the historical
record regarding attempts to implement the theory in practice is
consulted. When the factors of
production are nationalized into what amounts to a national level "one big
cartel," factor prices cannot form because no market exists on which the
factors of production can be bought and sold.
The resulting economic chaos was best illustrated by the events in
Bolshevik Russia. Murray N. Rothbard
mentions how full-blown communism did not work forcing the communists to
backtrack on their plans:
When the Bolsheviks assumed power
in late 1917, they tried to leap into full "communism" by abolishing
money and prices, an experiment so disastrous (it was later dubbed "War
Communism") that Lenin, always the supreme realist, beat a hasty retreat
to a mere semisocialist system in the New Economic Policy (NEP).[xxxi]
In conclusion, the author's proposal, presented with the
mellifluous terms of "cooperation," "equity," and
"social justice," is inoperable in the real world. The author has presented a completely
utopian solution for solving the alleged capitalist-made global warming
crisis. The lessons of both theory and
history advise against implementing the author's proposal to establish a world
government meant to control the pooled resources of humanity.
The Bogeymen of "Free Trade" and of
"Free-Market Global Economy" Existing Today:
The author repeatedly attacks both free trade and the global
economy with calls for their abolition.
The author makes the following statements with regard to the issue of
free trade.
- but as
soon as free trade [emphasis added], deregulation, privatization,
and new world-spanning technologies enabled them to break the Keynesian
shackles, they quickly re-established capitalism
- the free-market
ideology [emphasis added] that has dominated the global economy
[emphasis added] for more than three decades
- cancelling
most free trade agreements [emphasis added]
The author makes two major mistakes in his discussion of
free trade. First, he erroneously
assumes that free trade actually exists today; in reality, genuine free trade
does not exist currently. The
author makes this mistake because he fails to distinguish between mercantilism
and true free trade.[xxxii] Second, the author is wrong when he claims
that a free-market ideology governs our global economy. To improve upon the author's analysis, a
look at both the social democratic ideology and the conservative
socialist ideology is in order, especially with regard to the issue of
redistributing property titles.
The first point to be made is that genuine free trade does not
exist today. To make this point starkly
clear, a look at the early history of free trade is in order. The rise of a class of free traders under
the feudal system is an example of a group of people trying to avoid
government interventions in their private affairs by effectively ignoring the
artificial international boundaries of states.
As Hans-Hermann Hoppe documents,
there was resistance to this
[feudal] system. Interestingly enough
though (from a present-day perspective), it was not the peasant population who
suffered most from the existing order, but the merchants and traders who
became the leading opponents of the feudal system [emphasis added]. Buying at a lower price in one place and
traveling and selling at a higher price in a different place, as they did, made
their subordination to any one feudal lord relatively weak [emphasis
added]. They were essentially a class
of "international" men, crossing the borders of various feudal
territories constantly.[xxxiii]
Free trade, then, implies a situation in which international
movements of both goods and people take place without regard to
government or their boundary lines.
Simply put, "under a system of completely free trade, capital and
labor would be employed wherever conditions are most favorable for
production"[xxxiv] with
both capital and labor moving across borders without any artificial obstacles
getting in their way.
Now by distinguishing between genuine free trade and government-managed
trade, Ron Paul not only helps to clarify what is actually happening in the
current environment but also helps to illustrate where the author of the
article is in error:
To establish genuine free trade, no
such transfer of power [by the United States to the World Trade Organization]
is necessary. True free trade does
not require treaties or agreements between governments [emphasis
added]. On the contrary, true free
trade occurs in the absence of government intervention in the free flow
of goods across borders. Organizations
like the WTO and NAFTA represent government-managed trade schemes, not free trade
[emphasis added].[xxxv]
The extent of these government-managed trade schemes to
regulate, not deregulate economies as the author alleges, is
illustrated nicely by Murray N Rothbard.
He writes that
externally, the EC [European
Community] can and does use its power to raise general tariffs with nations
outside the bloc [emphasis added].
But even internally, the result has increased trade restrictions and
regulations [emphasis added] inside the bloc. Thus, the EC has been building a burgeoning European super-government
and bureaucracy in Brussels, that has often increased regulation throughout
the area [emphasis added].
One pernicious measure of the EC has been to require low-tax countries
in Europe to raise their taxes so as to make sure that each country enjoys a "fair
and level playing field" [emphasis added] with the others.[xxxvi]
The fact that the European Community, the "noble
example of a vast regional free-trade area,"[xxxvii]
engages in a policy of equalization in order to create a "fair
and level playing field" demonstrates, contrary to the claim of the
author of the article, that no alleged free-market ideology is at work. Instead of a free market ideology, a
social democratic ideology is in existence today, which is obvious because
of the ongoing emphasis on equalization in the context of these alleged
"free-trade deals."
Equalization signals that the social democracy ideology is at work today
because social democracy is defined as "income taxation and equalization
[emphasis added], and, ... equalization of opportunity [emphasis added],
as being the true cornerstones of socialism."[xxxviii]
To further illustrate the anti-free-market ideology
inherent in free trade agreements, a look at the position taken by Jeffrey
Tucker, a laissez-faire economist, is valuable. Notice that Tucker stresses two important points. First, "free-trade agreements" are
a form of mercantilism. Second, contrary
to the claim made by the author of the article, the Keynesian
"shackles" have not been broken by the rapacious capitalists;
on the contrary, Keynesian planning is alive and well in the form of
these so called "free-trade agreements." Tucker captures these two points nicely by writing that
the Mises Institute has
consistently favored free trade--the real thing--while criticizing "free-trade
agreements" as mercantilism in disguise [emphasis added]. The position is a lonely one...even battling
as forms of Keynesian planning [emphasis added]. So there is a tradition here that would lead
modern Austrians [i.e., members of the Austrian School of Economics] to oppose
efforts like the North American Free Trade Agreement and all the others that
have followed.[xxxix]
As a final illustration of this anti-free-market ideology
point, Llewellyn H. Rockwell Jr. notes that organizations such as the World
Trade Organization are designed explicitly to regulate the global
economy. He observes that the WTO has
nothing to do with genuine free trade but rather everything to do with what
sounds very similar to World War II era calls for World Planning or
International Planning combined with talk of international agreements and regulations
[emphasis added].[xl] Rockwell writes on this global economic
regulation issue that
the WTO incorporates legal
mechanisms for regulating the world economy [emphasis added]...the
original charter included a tip-of-the-hat to these special-interest concerns.[xli]
The idea of regulating the entire world economy has nothing
to do with laissez-faire capitalism or the free-market ideology. What is being described here is actually an
example of what Hans-Hermann Hoppe calls conservative
socialism. Conservative socialism consists of policies that attempt "to
preserve the status quo through economic
and behavioral regulations
[emphasis added] and price controls."[xlii]
Therefore, the author
is grossly mistaken if he believes that our current situation ought to be
classified as an example of free-market ideology. A better classification would stress the social democratic and conservative socialist
ideas at work today. Suffice it to say
that such a confused system, which combines the "forced
change" aspect of equalization and social democracy with the
"preservation of the status quo" aspect of conservative socialism, is
not laissez-faire capitalism. The
fact that the actual state of affairs consists of a confused and contradictory mixture of ideas is unsurprising since such mixtures have been the hallmark of
socialism for some time now. Mises
notes this tendency toward mixing contradictory policies when he writes that
the social and economic teachings of the self-styled "un-orthodox
Progressives" are a garbled mixture of divers particles of heterogeneous
doctrines incompatible with one another.
The main components of this body of opinion were taken from Marxism,
British Fabianism, and the Prussian Historical School. Essential elements were also borrowed from
the teachings of those monetary reformers, inflationists who were long known
only as "monetary cranks."
And the legacy of Mercantilism is important too.[xliii]
Addressing the Author's Attack on Competition:
The author portrays his world government solution for the
global warming crisis as the "cooperative" solution supposedly in
order to make the situation appear as a choice between his
"cooperative" solution and the non-cooperative "competitive"
solution of capitalism. He
specifically writes that "when international cooperation was never more
desperately needed, capitalism promoted competition as the predominant form of
human relations." The author's way
of framing the entire debate is a classic example of the hypostatization of
"society" fallacy, which invariably leads to the assertion that the
interests of the supposedly cooperating collective outweigh those of the
supposedly atomistic individuals.[xliv] Moreover, it is a contradiction in terms to
call a world government a cooperative solution because every government,
by definition, is a coercive solution.
As Mises so eloquently put it, "the essential feature of government
is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government
interference are asking ultimately for more compulsion and less freedom."[xlv]
Even though the author has committed the epistemological
fallacy of hypostatization, has erroneously rejected methodological individualism,
and has advanced tyranny in the name of a cooperative solution, I still feel
that the author's multiple attacks on competition warrant a full and
detailed rebuttal. The author attacks
competition by making such accusations as follows:
- Competition
causes waste and consumption
- Competition
causes an "obscene accumulation of wealth by a ruthless
minority" (i.e., competition causes wealth concentration)
- Competition
causes all these horrible outcomes including impoverishment of half the
world's population (i.e., competition causes poverty)
- Competition
deprives the poor from access to food, shelter, education, and health care
- Competition
causes war and "other conflicts" (presumably the author means
imperialism?)
- Competition
is meant to finance war profiteering
- Competition
causes our current "national security" problems (presumably the
author is trying to imply that things such as the Patriot Act and
invasive TSA scanners are symptoms of competition run amuck?)
The author's prolonged attack on competition can only make
sense if humans live in a world of scarcity.
If we were to live in a world of superabundance with no scarcity then
there would be no reason for people to compete over access to resources. In the next section of my paper, I will
discuss the author's contradictory claim that our entire economic system is
based on "limitless" natural resources that can be
"endlessly" exploited, i.e., our entire economic system is based on
superabundance and not scarcity. The
author has created an imaginary figure called a "capitalist" who
simultaneously holds contradictory views.
In this section, the "capitalist" engages in competition; the
"capitalist" is therefore assuming that scarcity exists. However, in the next section, this same
"capitalist" operates in a world of "limitless" and
"endless" exploitation of resources, i.e., a world without
scarcity, a world without competition.
So, if this section is correct, i.e., if the "capitalist" is
really engaging in competition, then the next section must necessarily be
false. Similarly, if the next section
is correct, i.e., if the "capitalist" is really living in a
superabundant world without competition, then this section must
necessarily be false. Whichever way one
looks at the situation, the author has refuted himself. The world cannot be simultaneously
competitive and non-competitive, nor can it be simultaneously an example of
scarcity and no scarcity. A capitalist
will never permit himself to be simultaneously engaged in rigorous competition
if he also believes that resources are endlessly exploitable. In order to reply to the author, I will try
to play along with him and assume, in this section, that scarcity does exist;
consequently, I assume for the moment that people are engaged in competition
over scarce resources.
In a world of scarcity, all the objections raised by the
author are, in fact, immaterial; the author misses the point. The reason is that in a world of
scarcity, it is IMPOSSIBLE TO ELIMINATE COMPETITION. As Ludwig von Mises points out in one of his
shorter works, that humans, because they act, i.e., because they strive
to substitute a better state of affairs for a less satisfactory one, must
be engaged in continuous competition:
Competition can never be
eliminated [emphasis added]. As
there will always be positions which men value more highly than other
positions, people will strive for them and try to outstrip their rivals. It is immaterial whether we call this
emulation rivalry or competition. ... The question is only what kind of
competition should exist [emphasis added].[xlvi]
In fact, one of the author's proposed solutions would
actually intensify not reduce competition. By writing that his plan "entails curbing economic
growth," the author wants to intensify the scarcity problem by
restricting the amount of available goods and services and by limiting the
number of opportunities for labor and capital.
This enhanced scarcity problem implies, of course, that the intensity of
competition will increase, not decrease, thus undermining the author's
claim that he is fighting against the pernicious outcomes of competition. If the author were being consistent, i.e.,
if the author really wanted to solve the competition "problem," he
would recommend making more goods available in order to bring mankind
closer to the utopia state of superabundance, at least superabundance of
material goods and services.[xlvii]
The reality of the situation, as illustrated by economic
history, is as follows. Scarcity
exists; competition therefore also exists.
Since many capitalists do not like competition, a recurring theme in
economic history is that of deliberately suppressing competition. Consider as an illustrative example the
discussion of Benjamin Tucker on what he calls the "money
monopoly." I have deliberately
picked the history of banking in order to illustrate that our
"progressive" author is either intentionally or more likely
unintentionally advocating for a position that favors the big banks--surely
a rather strange position for a progressive writer to take! In Tucker's discussion of the "most
evil" of the monopolies, he singles out the money monopoly for his
harshest opprobrium. The reason why is
that the government grants privileges to favored producers in order to suppress
competition from rival firms; such suppression of competition is
obviously being done to protect the privileged from the rivalry of the
unprivileged. Tucker writes that
in the importance of its evil
influence they [i.e., Pierre-Joseph Proudhon and Josiah Warren] considered the
money monopoly, which consists of the privilege given by the government to
certain individuals [emphasis added], or to individuals holding certain
kinds of property, of issuing the circulating medium, a privilege which is now
enforced in this country [i.e., America; Tucker published in Massachusetts] by a
national tax of ten per cent., upon all other persons who attempt to furnish a
circulating medium [emphasis added], and by State laws making it a criminal
offense to issue notes as currency.[xlviii]
In the preceding quotation, Tucker is probably alluding to
the banking reforms brought in during the Lincoln administration. In his attack on the Hamiltonian inspired
"American System," Thomas DiLorenzo focuses his attention on the
privileges given to the favored "national banks" at the expense of
the unprivileged "state banks."
DiLorenzo writes that
they [i.e., the Republicans] passed
the National Currency Acts of 1863 and 1864, which created a system of nationally
chartered (and regulated) banks that could issue currency. A punitive 10 percent tax was placed on
state-chartered banks in order to drive them into bankruptcy [emphasis
added]. The neo-Hamiltonians were
candid about their intention to create an "unqualified government
monopoly..."[xlix]
The deliberate and discriminatory suppression of competition
by certain politically connected big banks at the expense of all other banks,
i.e., at the expense of their competitors, is, in fact, one of the common
denominators running throughout the history of banking. As a further and later example, consider
also the history of the creation of the Federal Reserve System in the United
States; this history reveals that one of the major reasons for establishing a
central bank was to deliberately suppress competition. As Gabriel Kolko observes in his
reinterpretation of the history of the Progressive Era, the machinations of the
bankers trying to establish a central bank contain many references to
competition suppression and specifically to the suppression of state-bank competition. Kolko, in reviewing a discussion about the
Aldrich Plan, mentions that
the participants were fully aware
of the menace of the growing state banking movement [emphasis added],
and referred to it many times. ... It was generally appreciated that the plan
would increase the power of the big national banks to compete with the rapidly
growing state banks, help bring the state banks under control [emphasis
added], and strengthen the position of the national banks in foreign banking
activities.[l]
Why did these big national bankers want to suppress
competition beginning with legislative movements in the Civil War era? Were they driven by the altruistic
"caring and sharing" motives of the Keynesians? Were the big bankers suppressing competition
in order to eliminate "waste" and "poverty"? Were the big bankers deliberately trying to
suppress competition so that they could prevent the wars sparked by unregulated
competition? Were the big bankers
worried about the "war profiteering" of competition, so they deliberately
set up a central bank in order to suppress it?
Are we to believe that the big bankers, honestly concerned about the
"dangerous wealth concentration" effects of competition, intervened
in the economy in order to suppress competition and thereby to help
redistribute wealth more evenly? The
author of the article is in a precarious position because on the one hand he
wants to abolish competition, which is favored by the big banks (a rather
non-"progressive" position to take), but on the other hand he wants
to overthrow the rich bankers (a more "progressive" position
perhaps), which is obviously not favored by them.
What seems to be going on here is that the author is
couching his argument for his seizing of power in terms of
"cooperation" and the suppression of supposedly "bad"
competition. History teaches that the
bankers were motivated in the late nineteenth-century and early
twentieth-century to suppress competition in order to establish a single
dominating power over the entire economy.
Kolko mentions this startlingly candid revelation from A. Barton Hepburn
regarding the real intentions for suppressing bank competition:
The measure recognizes and adopts
the principles of a central bank.
Indeed, if it works out as the sponsors of the law hope, it will make
all incorporated banks together joint owners of a central dominating power
[emphasis added]. Why, then, should not
the principle, once recognized, be correctly applied?[li]
Suppressing competition is all about establishing a central
dominating power over the economy and hence life itself. I suspect that the author's real concern is
that he wants to control the power of the state in order to impose what he
thinks is right; unfortunately, power is not in his hands but rather in
those of the bankers and other elites. Consequently, the author has couched his
power grab in terms of cooperation and saving the environment. He is trying to put an ethical spin on his
unethical world government proposal.[lii]
Now I will shift away from the more abstract issues of
scarcity and centralizing power by addressing specifically the laundry list of
complaints raised by the author against competition in some detail.
- I must
confess that I do not fully understand what the author means when he says
that competition causes "consumption" because consumption is
necessary for humans to stay alive.
All production happens in order to, eventually, satisfy the
consumption needs of consumers.
Maybe he is alluding to "conspicuous consumption" and
thinks that this "conspicuous consumption" is a form of
"waste." Maybe he is
concerned about consumers having choice and changing their minds; choice
and change might then threaten stable unionized jobs because they shift
demand from one group of producers to another.
- With regard
to the claim that competition causes waste, see Ludwig von Mises's Nation,
State, and Economy: Contributions
to the Politics and History of Our Time, pages 155-157.[liii] Mises critiques some of Karl Kautsky's
ideas regarding how to raise the standard of living of the proletarian
class substantially. Mises
specifically addresses Kautsky's laundry list of alleged "savings of
very many kinds," which are to appear when "wasteful"
capitalism is abolished and replaced by "non-wasteful" socialism
(e.g., by eliminating wasteful advertising expenses). Also see F. A. Hayek, The Road to
Serfdom pages 96-97 where he discusses attempts to increase abundance
by establishing "compulsory standardization" and
"prohibition of variety" as possible ways to reduce the
"waste" of "choice."[liv]
- With
regard to the claim that competition causes wealth concentration, see
Ludwig M. Lachmann's article The Market and the Distribution of Wealth,
in which he discusses how a truly free market creates such a dynamic
environment that wealth concentration becomes an impossibility. He emphasizes that "in a world of
unexpected change the maintenance of wealth is always problematical; and
in the long run it may be said to be impossible."[lv] For a further discussion of the
problems in this rather Marxist assertion that competition causes wealth
concentration, see Murray N. Rothbard's discussion on the concentration
of capital and on the law of the centralization of capital in
his Classical Economics.
Rothbard concedes that "there is a great amount of expansion
of scale of plant and firm in the modern world," but cautions that
"the law is scarcely apodictic [i.e., the law is not
unquestionably true]."[lvi] In addition, consider Robert LeFevre's
audio commentary on the impact of the Industrial Revolution in Great
Britain on the distribution of wealth.
He compares the distribution of wealth before the Industrial
Revolution (1650-1700) to the distribution after the Industrial Revolution
(1850).
In the 1650 to 1700 (i.e., before the rapid industrialization):
- 2%
of the people had 80% of the wealth
- 8%
of the people had 10% of the wealth
- 90%
of the people had 10% of the wealth
Around 1850 (i.e., after the rapid
industrialization):
- 2%
of the people had 30% of the wealth
- 58%
of the people had 50% of the wealth
- 40%
of the people had 20% of the wealth
LeFevre stresses that everyone
is better off because of the rapid industrialization period (i.e., because of
capitalism), including the top 2%, even thought their percentage share of the
total wealth was reduced from 80% to 30%.
The reason is because the total amount of wealth in existence expanded
so much that it is better to have 30% of the wealth in 1850 than to have 80% of
the wealth in 1650 or 1700. The middle
class has rapidly grown in size going from 8% of the population to 58%; the
lower classes have shrunk from 90% of the population to 40% and have become
better off since a larger percentage of the total wealth is now available to
the lower classes.[lvii]
- With
regard to the claim that competition causes pain and suffering to the
poor, see W. H. Hutt's paper The Factory System of the Early Nineteenth
Century, which contains a thesis that states that "there has been
a general tendency to exaggerate the 'evils' which characterized the
factory system before the abandonment of laissez faire."[lviii] Also see Murray N. Rothbard's The
Ethics of Liberty, which contains a discussion about how the poor benefit
from economic competition.
Rothbard's point is that "unrestrained economic individualism
led... to peaceful and harmonious exchange, which benefitted most
precisely the 'weak' and the 'sheep'; it is the latter who could not
survive in the statist rule of the jungle, who reap the largest share of
the benefits from the freely competitive society."[lix]
- With
regard to the claim that competition causes profitable wars and other
forms of conflict, see again Mises's Nation, State, and Economy: Contributions to the Politics and
History of Our Time, pages 148-9, especially footnote 2. Mises mentions that socialism is
inherently militaristic and imperialistic. This is because socialism wants to "arrange the future
state on the model of an army."
Also see Rothbard's discussion of the rise of American imperialism
and especially the machinations of Charles Conant in Rothbard's The Origins
of the Federal Reserve. In
particular, imperialism was supported, at least intellectually, by a theory
of surplus capital; however, the facts of history refute the
theory. "The Republican
also attacked the new theory of surplus capital, pointing out that only
two or three years earlier, businessmen had been loudly calling for more
[emphasis added] European capital to be invested in American
ventures."[lx] For a discussion on why competition
does not lead to conflict but rather to a harmonious alignment of all
interests, see Ludwig von Mises's Economics as a Bridge for Interhuman
Understanding, where Mises discusses the difference between the
Montaigne fallacy (i.e., the fallacy behind mercantilism) and the harmony
of interests doctrine of classical liberalism, which Mises refers to as
the "law of association."[lxi] For a discussion on the monetary
cause of war, see Murray N. Rothbard's Making Economic Sense (2nd
ed.) Rothbard identifies the
monetarist-Friedmanite version of an international monetary order as a causal
factor of World War II.
Rothbard explains how monetary policy manipulations cause
warfare by observing that the monetarist system offers governments
temptations to "intervene heavily in exchange rates, precipitating
the world into currency blocs, protectionist blocs, and
'beggar-my-neighbor' policies of competing currency devaluations such
as the economic warfare of the 1930s that helped generate World War II
[emphasis added]."[lxii] In discussing the fluctuating fiat
currency system that existed from 1931 to 1945, Rothbard discusses why
this system is internally self-refuting because it contains the naive
assumption that a government and central bank with complete power over a
money supply will self-regulate and avoid abusing that power. "The chaos and the unbridled
economic warfare of the 1930s," writes Rothbard, "points up an
important lesson: the grievous political
flaw...in the Milton Friedman-Chicago School monetary scheme." The scheme leaves "the absolute
control of each national currency in the hands of its central government
issuing fiat paper as legal tender--and then advise[s] each
government to allow its currency to fluctuate freely with respect to all
other fiat currencies, as well as to refrain from inflating its currency
too outrageously."[lxiii]
In conclusion, each and every specific point raised against
competition by the author of the article is wrong. Competition does not cause waste; on the contrary, the
rational economic calculation crisis of the author's proposed world government
will cause so much waste because of the misallocation of all of the factors of
production. Competition does not cause
a wealth concentration problem. On the
contrary, competition will make the world much more dynamic, and a dynamic
world ensures that holding onto wealth will become impossible. Competition does not cause poverty;
in fact, the system of competition, namely capitalism, makes everybody
better off materially as illustrated statistically by LeFevre. Competition does not cause wars. Wars are caused by governments manipulating
currencies in order for some governments to gain at the expense of other
governments, i.e., wars are caused by governments falling into the Montaigne
fallacy. Competition cannot be
eliminated so long as humans act.
To eliminate competition through the establishment of a world government
means that only this world government acts. Each individual will be denied the right to act, but to
deny the individual the right to act means that the individual can only obey
orders. The solution offered by the
author is, in the final analysis, blatantly tyrannical. Finally, competition does not really
exist in our current world, so the author's fears of competition are
unwarranted. Economic history, from the
Civil War Era to the present, shows an ongoing and deliberate war against
competition, which has been supported nonstop by states. The banking industry is the most important
illustration of this fact. The money
monopoly, to use Tucker's terminology, is the key command post of the entire
economy.[lxiv] This key central command post is clearly
not competitive because it is a monopoly, and it is not competitive by
deliberate design.
The Bizarre Claim that Capitalism is based on an
Assumption of "Limitless Growth/Limitless Resources":
In the preceding section, the author claims that capitalism
is evil because capitalists engage in destructive and ruinous competition. For this argument to hold, capitalists must
be assuming the existence of scarcity, because people compete only
when access to resources is limited.
However, in this section, the author makes the opposite case. Now, the author asserts, capitalists deny
the existence of scarcity as demonstrated by the fact that capitalists now
supposedly operate under the assumption of "limitless growth" or
"endless exploitation" of resources.
The author cannot have it both ways.
Either scarcity exists or it does not.
If it does, then competition exists and this entire section is
spurious. If, on the other hand,
scarcity does not exist, then the previous section on competition is
spurious. I have already demonstrated
that the previous section against competition is spurious; I will now
demonstrate that the current section on "capitalist superabundance"
is also spurious.
In this section, the reader is forced to assume that
capitalism operates under an assumption that scarcity does not exist. The author makes this point by saying such
things as:
- the
central fiction on which our economic model [i.e., the modern rapacious
capitalist model] is based: that
nature is limitless [emphasis added] (i.e., modern capitalism
assumes that natural resources, factors of production, are limitless)
- the
fatally flawed assumption of capitalism is "that we will always be
able to find more [emphasis added] of what we need" (i.e.,
capitalists assume superabundance of all factors of production)
- if
something runs out it can be seamlessly replaced by another resource that
we can endlessly exploit [emphasis added]
- its
irresponsible reliance on infinite economic growth [emphasis added]
on a finite planet
The author has linked capitalism with a world of
superabundance, i.e., a world without scarcity. This entire train of thought is rather
shocking given the history of socialist claims with regard to the scarcity
of resources issue. As will be
demonstrated, socialism has traditionally claimed that it will save humanity
from the "artificial" scarcity problem created by evil capitalists. Normally, the propaganda asserts that
capitalism means scarcity or artificially engineered scarcity but socialism
means superabundance and bliss. A quick
review of the literature demonstrates that the socialist position has
traditionally been:
·
Socialism was to create the world of plenty; the
scarcity problem was to be abolished
·
Once the proletarians had abolished private property
and capitalism, communist industrial production was to take over and grow
output at a very rapid rate
Hayek, in discussing his 1944 situation in Europe, paints a
picture of a world in which socialism was speaking of limitless resources, not
the other way around:
In their wishful belief that there
is really no longer an economic problem people have been confirmed by
irresponsible talk about "potential plenty"--which, if it were a
fact, would indeed mean that there is no economic problem which makes the
choice inevitable. But although this
snare has served socialist propaganda under various names as long as socialism
has existed, [emphasis added] it is still as palpably untrue as it was when
it was first used over a hundred years ago.[lxv]
Continuing with the issue of rapid and "infinite
growth," a look at the writing of Friedrich Engels, The Principles of
Communism, shows that communism desires to create such a rampant
rate of industrial growth that superabundance would be achieved. Rothbard, citing Engel's views on how
communism can achieve superabundance, writes that
private property can be abolished
only when the economy is capable of producing the volume of goods needed to
satisfy everyone's requirements... The new rate of industrial growth will
produce enough goods to satisfy all the demands of society [emphasis
added].[lxvi]
Socialism proposes to abolish the economic problem of
scarcity, and socialism proposes to grow industrial output at a rapid rate thus
creating the world of plenty. These
claims, of course, are meant to position socialism as the salvation of mankind
from the artificial scarcity problem created by the rapacious capitalists. In fact, two of the major non-economic
theories used to explain from where scarcity came blame capitalism. The traditional Marxian view labels scarcity
as a "historical category," which will be abolished by ending private
property, i.e., by abolishing capitalism.
A second view blames scarcity on the machinations of bankers and other
exploiters (i.e., on capitalists once again), but this time the capitalists
create an artificial scarcity by imposing checks on credit and new money
creation.[lxvii] Given this historical background, which
clearly blames capitalism for all the scarcity problems of the world, one
certainly should be shocked by the author's claim that capitalism is currently
producing as thought no scarcity exists.
From a market anarchist perspective, the claim that
capitalists operate under the assumption of "no scarcity" is
ludicrous. The existence of scarcity is
taken as self-evident: "It does
not need much comment to see that there is indeed scarcity of goods, of all
sorts of goods, everywhere, and the need for property rights is thus
evident."[lxviii] To deny the existence of scarcity, as
socialists do, is to invite mockery and derision from those familiar with
laissez-faire capitalism. For example,
classical liberal writers used to mock socialist writers for their naive
socialist superabundance fairytales. As a case in point, Ludwig von Mises, in his 1927 work on liberal
thought, sardonically writes of the views of Trotsky as well as those of other
socialist writers. Mises writes that
socialist authors promise not only
wealth for all, but also happiness in love for everybody, the full physical and
spiritual development of each individual, the unfolding of great artistic and
scientific talents in all men, etc.
Only recently Trotsky stated in one of his writings that in the
socialist society "the average human type will rise to the heights of an
Aristotle, a Goethe, or a Marx. And
above this ridge new peaks will rise. The
socialist paradise will be the kingdom of perfection, populated by completely
happy supermen. All socialist
literature is full of such nonsense [emphasis added].[lxix]
In conclusion, capitalists are not utopians; they do not
assume that the world has limitless natural resources, which can be exploited
interminably. They accept as
self-evident the claim that scarcity does, in fact, exist. In fact, market anarchy goes so far as to
assert that it is impossible to eliminate scarcity. "Because of the scarcity of body and
time," writes Hoppe, "even in the Garden of Eden property regulations
would have to be established."[lxx] Since capitalists accept scarcity as
a real and insoluble problem, the author's claims to the contrary must be
rejected as false.
The Author's Ahistoric Animistic Worldview:
The author of the article makes a revealing comment about
his worldview when he writes, "they [the capitalists] quickly
re-established capitalism as the truly ruthless and rapacious system it was designed
to be" [emphasis added]. The
key point is that the author claims that capitalism was designed by a
conspiracy of capitalists, who continue to plot not only against the vast
number of indigent and helpless human beings, but also against the Earth and
the environment. A number of points can
be raised against the author's animistic point of view.
First, the claim of a conspiracy by design on the part of
capitalists is ahistoric. The
emergence of capitalism is not an example of conscious design but rather
an example of spontaneous ordering of a complex system; this spontaneous
ordering took place in an anarchistic environment. Professor T. S. Ashton, a respected economic historian, observes
that
the truth is (as Professor Koebner
has said) that neither Marx nor Sombart (nor, for that matter, Adam Smith) had
any idea of the real nature of what we call the Industrial Revolution. They overstressed the part played by science
and had no conception of an economic system that develops spontaneously
without the help of either the state or the philosopher [emphasis added].[lxxi]
The claim that capitalism arose in an anarchistic
environment is further substantiated by Nobel Prize winning economist Friedrich
August von Hayek, referring to Jean Baechler's work on the origins of
capitalism. Hayek notes that "of
the revival of European civilisation during the later Middle Ages it could be
said that the expansion of capitalism--and European civilisation--owes its
origins and raison d'être to political anarchy."[lxxii]
Second, Hayek's discussion of the two different types
of scientists provides a possible explanation for why the author of the article
selects an animistic worldview. Hayek
distinguishes between the "chemist" type of scientist who is familiar
with complex phenomena and the "other" type of scientist who is
not. The "other" type of
scientist is more "accustomed to explaining everything in terms of simple
connections between a few observable events."[lxxiii] The author of the article might very well be
classified as a member of the "other" type of scientist group. The reason is that members of this
"other" group are "tempted to interpret more complex structures
[such as an economy] animistically as the result of design, and to suspect some
secret and dishonest manipulation--some conspiracy, as of a dominant
'class'--behind 'designs' whose designers are nowhere to be found."[lxxiv]
Third, the author of the article may have selected an
animistic worldview simply because he is a socialist. Such a "naive and childlike animistic view of the
world," writes F. A. Hayek, "has come to dominate social theory and
is the foundation of socialist thought."[lxxv]
In conclusion, a complex capitalist economic system is the
product of an spontaneous ordering, i.e., a complex ordering without
design. What the author of the
article is actually observing is not capitalism but rather the "planned
chaos" of government interventionism.
The Logical Inconsistencies When Claiming to Take the
Moral High Ground:
The author ends his paper with various hyperbolic
"moral high ground" or "global salvation type"
exclamations:
- It's
also going to be difficult, at least initially to engage...in this titanic
endeavour [emphasis added]
- to
stand idly by while runaway capitalism carries everyone with it to the
abyss [emphasis added]--surely that will not be the conscious
decision [emphasis added] most of us make
- I
can't believe we will be so cowed by them that we remain passive onlookers
instead of striving, as strenuously as we can, [emphasis added] to
avert disaster on a planetary scale
To begin, the claim that socialism is the means to salvation
is rather shocking, at least to somebody who knows its early history. As F. A. Hayek notes, socialism, in its
early days, was unashamedly totalitarian in its views:
It is rarely remembered now that
socialism in its beginnings was frankly authoritarian. The French writers who laid the foundations
of modern socialism had no doubt that their ideas could be put into practice
only by a strong dictatorial government.
To them socialism meant an attempt to "terminate the
revolution" [i.e., to terminate the liberalism of the French Revolution]
by a deliberate reorganization of society on hierarchical lines and by the
imposition of a coercive "spiritual power."[lxxvi]
The author claims that his proposals will bring salvation to
humanity, and he energetically rallies his readers to join his
"crusade" against the capitalist overlords. The reality is that these "moral high ground" proposals
advocated for by the author will end in a global level tyranny. Socialism was designed specifically
to bring about a top-down dictatorship; the author's proposal to establish a
world government in the name of fighting global warming will certainly
facilitate the longstanding socialist plan dating to the French Revolution.[lxxvii]
The last criticism that I will make of the author's article is simply that the
conclusion contradicts the introduction.
He begins the article with statements of inevitability; not
surprisingly, he begins his article with the unsubstantiated prophecy that
capitalism is about to "inevitably" collapse. Notice for example, the author writes:
- Capitalism
inevitably [emphasis added] faces the same fate.
- It is
[Capitalism is] not going to hit the pavement any time soon, but is
obviously on an irreversible downward plunge [emphasis added]
But when he reaches the conclusion part of the article, the
author switches gears by adopting a purposeful or teleological view of
the world. The conclusion section of
the article is obviously calling upon the readers to take deliberate
action. The author even goes so far
as to spell out a rudimentary plan of the things he wants to see changed
along with the things he wants to see adopted.
The author has fallen into another classic Marxist trap by
first arguing in terms of dialectical materialism, which talks of propelling
society toward socialism "with the inexorability of a law of nature,"
and then by arguing in terms of a teleological world view when he calls for
people to implement deliberately a revolutionary plan of global social
change. This particular problem is
examined in depth by Ludwig von Mises when he trenchantly observes that
the best illustration is provided
by Marxism. It teaches perfect
foreordination, yet still aims to inflame people with revolutionary
spirit. What is the use of
revolutionary action if events must inevitably turn out according to a
preordained plan, whatever men may do?
Why are the Marxians so busy organizing socialist parties and sabotaging
the operation of the market economy if socialism is bound to come anyway
"with the inexorability of a law of nature"?[lxxviii]
Conclusion:
The author of the article begins his paper by claiming that
the world today is a shining example of an "unchecked free enterprise
economy." He then proceeds by
providing evidence to support his initial claim. He sees a world of deregulation, free trade agreements, cutthroat
competition, unbridled capitalist greed, a global free market ideology,
capitalistic environmental destruction, and an animistic capitalist conspiracy
to hurt the poor and downtrodden. After
highlighting all of these horrible results of capitalism, the author provides a
socialist solution--cooperation through a world government. By implementing the proposed solution, the
author believes that he will create a better world consisting of cooperation,
equity, and social justice.
I deny that our current world should be classified as
"unchecked free enterprise" because the existence of the state
ensures that private property will be violated continually. I argue that the author's interpretation of
twentieth-century economic history is distorted and misleading especially the
claim that Keynesian economics was meant to help the weak and poor in
society. The description of the current
world as the paragon of free trade is false; the current world is best
described as an example of government-managed trade and mercantilism. The author levels an intense attack against
competition; I systematically reply in order to defend competition against all
of the author's charges. I particularly
stress the fact that economic history shows a deliberate trend of competition
suppression starting in the early 1860s.
I spend a lot of my time pointing out the contradictions in the paper
such as the issue of scarcity and superabundance existing simultaneously, the
conflicting mixture of conservative socialism with social democracy, and the
mixing of Marxian foreordination with deliberate teleological planning. I also argue that the author's proposed
solution to pool all of the existing governmental resources into a world
government is infeasible. The author's
proposed solution will not work; it will collapse as demonstrated by the early
Soviet experiment.
NEIL M. TOKAR
Niagara-on-the-Lake,
Ontario
May 29, 2012
[i]
F. A. Hayek, "History and Politics," in
Capitalism and the
Historians, ed. F. A. Hayek (Chicago:
University of Chicago Press, 1963), 25.
[ii]
Murray N. Rothbard,
Classical Economics, vol. 2 of
An Austrian
Perspective on the History of Economic Thought (Auburn: Ludwig von Mises
Institute, 2006), 418.
[iii]
Hans-Hermann Hoppe, The Economics and Ethics of Private Property: Studies in
Political Economy and Philosophy, 2nd ed. (Auburn: Ludwig von Mises
Institute, 2006), 378.
[iv]
Hans-Hermann Hoppe,
A Theory of Socialism and Capitalism (Auburn: Ludwig
von Mises Institute, 2010), 18.
[v]
F. A. Hayek, "'Free' Enterprise and Competitive Order," in
Individualism
and Economic Order (Chicago: University of Chicago Press, 1980), 107.
[vi]
F. A. Hayek, "History and Politics," in
Capitalism and the
Historians, ed. F. A. Hayek (Chicago:
University of Chicago Press, 1963), 14-15.
Hayek discusses the socialist origins of the term
"capitalism"; he emphasizes that the "modern connotations"
of capitalism are directly traceable to a socialist interpretation of economic
history.
[vii]
Murray N. Rothbard,
Anatomy of the State (Auburn: Ludwig von Mises
Institute, 2009), 42.
[viii]
Hans-Hermann Hoppe,
Democracy: The God That Failed; The Economics and
Politics of Monarchy, Democracy, and Natural Order (New Brunswick:
Transaction Publishers, 2001), 246.
[ix]
Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American
History, 1900-1916 (New York: The Free Press, 1977), 4.
[xiii]
Ibid., 39, 42, 78.
[xiv]
F. A. Hayek,
The Road to Serfdom:
Text and Documents, vol. 2 of
The Collected Works of F. A. Hayek
(Chicago:
University of Chicago Press,
2007), 93.
[xv]
Ludwig von Mises, "Small and Big Business," in
Economic Freedom
and Interventionism: An Anthology of
Articles and Essays, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund,
2006), 242.
[xvi]
Murray N. Rothbard,
America's Great Depression, 5th ed. (Auburn: Ludwig
von Mises Institute, 2000), 143-44.
[xvii]
Murray N. Rothbard, Making Economic Sense (Auburn: Ludwig von Mises
Institute, 1995), 244.
[xviii]
Gabriel Kolko,
The Triumph of Conservatism: A Reinterpretation of American
History, 1900-1916 (New York: The Free Press, 1977), 140.
[xix]
Murray N. Rothbard, Making Economic Sense (Auburn: Ludwig von Mises
Institute, 1995), 46.
[xxii]
Murray N. Rothbard,
Wall Street, Banks, and American Foreign Policy, 2nd
ed. (Auburn: Ludwig von Mises Institute, 2011), 1.
[xxiii]
Ludwig von Mises, "Professor Hutt on Keynesianism," in
Economic
Freedom and Interventionism: An
Anthology of Articles and Essays, ed. Bettina Bien Greaves (Indianapolis:
Liberty Fund, 2006), 162.
[xxiv]
Ludwig von Mises,
Human Action: A
Treatise on Economics, Scholar's ed. (Auburn: Ludwig von Mises Institute,
1998), 787.
[xxv]
Murray N. Rothbard,
Making Economic Sense (Auburn: Ludwig von Mises
Institute, 1995), 42.
[xxvii]
Murray N. Rothbard,
Making Economic Sense, 2nd ed. (Auburn: Ludwig von
Mises Institute, 2006), 300.
[xxviii]
Benjamin Tucker, "Individual Liberty," The Anarchist Library,
www.theanarchistlibrary.org/ HTML/Benjamin_Tucker_Individual_Liberty.html
(accessed May 11, 2012).
[xxix]
Murray N. Rothbard,
Man, Economy, and State with Power and Market, 2nd
ed. Scholar's ed. (Auburn: Ludwig von Mises Institute, 2009), 659.
[xxx]
F. A. Hayek, "Socialist Calculation I:
The Nature and History of the Problem," in
Individualism and
Economic Order (Chicago: University of Chicago Press, 1980), 144-45.
[xxxi]
Murray N. Rothbard, "The Myth of Monolithic Communism," Ludwig von
Mises Institute, mises.org/daily/4492 (accessed May 15, 2012); also
Hans-Hermann Hoppe,
A Theory of Socialism and Capitalism (Auburn: Ludwig
von Mises Institute, 2010), 55.
Hoppe
mentions that the disappointing experience of orthodox Marxist socialism in
Russia caused a shift in popularity away from this style of socialism to
social-democratic socialism.
[xxxii]
"They approve the fundamental thesis of mercantilism that the gain of one
nation is the damage of other nations; that no nation can win but by the loss
of others.
They think an irreconcilable
conflict of interests prevails among nations."
Ludwig von Mises,
Theory and History: An Interpretation of
Social and Economic Evolution, ed. Bettina Bien Greaves (Indianapolis:
Liberty Fund, 2005), 197.
[xxxiii]
Hans-Hermann Hoppe, A Theory of Socialism and Capitalism (Auburn: Ludwig
von Mises Institute, 2010), 84-85.
[xxxiv]
Ludwig von Mises,
Liberalism: The
Classical Tradition, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund,
2005), 98.
[xxxv]
Ron Paul, The Revolution: A Manifesto (New York: Grand Central
Publishing, 2008), 96.
[xxxvi]
Murray N. Rothbard,
Making Economic Sense (Auburn: Ludwig von Mises
Institute, 1995), 271.
[xxxviii]
Hans-Hermann Hoppe,
A Theory of Socialism and Capitalism (Auburn: Ludwig
von Mises Institute, 2010), 59.
[xxxix]
Jeffrey Tucker, "Free Trade versus Free-trade Agreements," Mises
Economics Blog, entry posted March 10, 2008,
blog.mises.org/7889/free-trade-versus-free-trade-agreements/ (accessed May 14,
2012).
[xl]
Ludwig von Mises,
Omnipotent Government:
The Rise of the Total State and Total War, ed. Bettina Bien Greaves
(Indianapolis:
Liberty Fund, 2011),
269, 275.
[xli]
Llewellyn H. Rockwell Jr., "The WTO:
Threat to Free Trade," Ludwig von Mises Institute,
mises.org/daily/340 (accessed May 14, 2012).
[xlii]
Hans-Hermann Hoppe,
A Theory of Socialism and Capitalism (Auburn: Ludwig
von Mises Institute, 2010), 12-13.
[xliii]
Ludwig von Mises, "The Objectives of Economic Education," in
Economic
Freedom and Interventionism: An
Anthology of Articles and Essays, ed. Bettina Bien Greaves (Indianapolis:
Liberty Fund, 2006), 206.
[xliv]
Ludwig von Mises,
The Ultimate Foundation of Economic Science: An Essay on
Method, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2006), 70-71.
[xlv]
Ludwig von Mises,
Human Action: A
Treatise on Economics, Scholar's ed. (Auburn: Ludwig von Mises Institute,
1998), 715.
[xlvi]
Ludwig von Mises, Bureaucracy, ed. Bettina Bien Greaves (Indianapolis:
Liberty Fund, 2007), 86.
[xlvii]
It should be noted that it is
impossible given the fact that human
beings are mortal to ever fully abolish the scarcity problem.
Even in a utopia consisting of a superabundance
of resources, and even if "socialist production" really did work to
raise production in the manner suggested by Karl Kautsky for example, mankind
will
still need to address the scarcity of body and the scarcity of time
problems.
See Hans-Hermann Hoppe,
A
Theory of Socialism and Capitalism (Auburn: Ludwig von Mises Institute,
2010), 18-20.
[xlviii]
Benjamin Tucker, "Individual Liberty," The Anarchist Library,
www.theanarchistlibrary.org/ HTML/Benjamin_Tucker_Individual_Liberty.html
(accessed May 16, 2012).
[xlix]
Thomas J. DiLorenzo,
Hamilton's Curse:
How Jefferson's Archenemy Betrayed the American Revolution--and What It
Means for Americans Today (New York:
Crown Forum, 2008), 127.
[l]
Gabriel Kolko,
The Triumph of Conservatism: A Reinterpretation of American
History, 1900-1916 (New York: The Free Press, 1977), 186.
[lii]
"The State is an inherently illegitimate institution of organized
aggression, of organized and regularized crime against the persons and
properties of its subjects." Murray N. Rothbard,
The Ethics of Liberty
(New York: New York University Press, 2002), 187.
[liii]
Ludwig von Mises,
Nation, State, and Economy: Contributions to the Politics and History of Our Time, ed.
Bettina Bien Greaves, trans. Leland B. Yeager (Indianapolis: Liberty Fund,
2006), 155-57.
[liv]
F. A. Hayek,
The Road to Serfdom:
Text and Documents, vol. 2 of
The Collected Works of F. A. Hayek (Chicago:
University of Chicago Press, 2007), 97.
[lv]
Ludwig M. Lachmann, "The Market and the Distribution of Wealth," Ludwig
von Mises Institute, mises.org/daily/5713 (accessed May 18, 2012).
[lvi]
Murray N. Rothbard,
Classical Economics, vol. 2 of
An Austrian
Perspective on the History of Economic Thought (Auburn: Ludwig von Mises
Institute, 2006), 419-420.
[lvii]
Robert LeFevre, "The Industrial Revolution: Part Two," Ludwig von
Mises Institute, mises.org/
media/1161/The-Industrial-Revolution-Part-Two/2
(accessed May 22, 2012).
[lviii]
W. H. Hutt, "The Factory System of the Early Nineteenth Century," in Capitalism
and the Historians, ed. F. A. Hayek (Chicago: University of Chicago Press, 1963), 184.
[lix]
Murray N. Rothbard,
The Ethics of Liberty (New York: New York University
Press, 2002), 218.
[lx]
Murray N. Rothbard,
The Origins of the Federal Reserve (Auburn: Ludwig
von Mises Institute, 2009), 46.
[lxi]
Ludwig von Mises, "Economics as a Bridge for Interhuman
Understanding," in
Economic Freedom and Interventionism: An Anthology of Articles and Essays, ed.
Bettina Bien Greaves (Indianapolis: Liberty Fund, 2006), 260.
[lxii]
Murray N. Rothbard,
Making Economic Sense, 2nd ed. (Auburn: Ludwig von
Mises Institute, 2006), 300.
[lxiii]
Murray N. Rothbard,
What Has Government Done to Our Money? (Auburn:
Ludwig von Mises Institute, 2008), 94.
[lxiv]
Murray N. Rothbard, Anatomy of the State (Auburn: Ludwig von Mises
Institute, 2009), 54n.
[lxv]
F. A. Hayek, The Road to Serfdom:
Text and Documents, vol. 2 of The Collected Works of F. A. Hayek
(Chicago: University of Chicago Press,
2007), 131.
[lxvi]
Murray N. Rothbard,
Classical Economics, vol. 2 of
An Austrian
Perspective on the History of Economic Thought (Auburn: Ludwig von Mises
Institute, 2006), 327.
[lxvii]
Ludwig von Mises,
Human Action: A
Treatise on Economics, Scholar's ed. (Auburn: Ludwig von Mises Institute,
1998), 236.
[lxviii]
Hans-Hermann Hoppe,
A Theory of Socialism and Capitalism (Auburn: Ludwig
von Mises Institute, 2010), 18-19.
[lxix]
Ludwig von Mises, introduction to Liberalism: The Classical Tradition, ed. Bettina Bien Greaves
(Indianapolis: Liberty Fund, 2005), xxxi.
[lxx]
Hans-Hermann Hoppe,
A Theory of Socialism and Capitalism (Auburn: Ludwig
von Mises Institute, 2010), 20.
[lxxi]
T. S. Ashton, "The Treatment of Capitalism by Historians," in Capitalism
and the Historians, ed. F. A. Hayek (Chicago: University of Chicago Press, 1963), 58.
[lxxii]
F. A. Hayek,
The Fatal Conceit: The
Errors of Socialism, vol. 1 of
The Collected Works of F. A. Hayek
(Chicago:
University of Chicago Press,
1991), 33.
[lxxvi]
F. A. Hayek,
The Road to Serfdom:
Text and Documents, vol. 2 of
The Collected Works of F. A. Hayek
(Chicago:
University of Chicago Press,
2007), 76.
[lxxvii]
David Gordon, ed.,
Strictly Confidential: The Private Volker Fund Memos of
Murray N. Rothbard (Auburn: Ludwig von Mises Institute, 2010), 28.
The reason for mentioning this work is to
address a possible objection that could be raised against Hayek's assertion
that socialism is unequivocally tyranny.
In this particular memo, Rothbard addresses the feasibility of
establishing left-wing anarchism, which takes the form of syndicalism in
practice.
Could socialism escape the
Hayekian charge of tyranny by appealing to left-wing anarchism as the escape
hatch?
Rothbard argues that left-wing
anarchism will quickly degrade back into statism, which is synonymous with
tyranny.
He writes that "left-wing
anarchism must in practice signify either regular Communism or a true chaos of
communistic syndics.
In both cases, the
actual result must be
that the State is reestablished under another name. It is the tragic irony of left-wing
anarchism that, despite the hopes of its supporters, it is not really anarchism
at all.
It is either Communism or
chaos."
[lxxviii]
Ludwig von Mises, Theory and History: An Interpretation of Social and
Economic Evolution, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund,
2005), 54.
