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Strategy

August 6, 2017 2 comments

This post is (probably) the last of my series on why I am no longer an anarcho-capitalist (ancap).

One major weakness with anarcho-capitalism is its lack of strategy. They have certain ideas I actually agree with, but they are not strategies but tactics. For instance, take agorism and counter-economics. Black markets, tax evasion and alternative currencies are fine, but alone they will not stop the state. Secession, too, while promising, will also not tear down power structures. These tactics are not strategies because we need more to have a revolution worthy of the name.

The true delusions of anarcho-capitalist tactics are the beliefs that you can somehow eliminate the state but keep the capitalist economy, that you do not have to or should not attack the rich themselves, and that violence is unnecessary for a revolution.

Black markets will not necessarily help the poor, disabled or persecuted. Tax evasion is very difficult for most working people. Bosses are not going to go along with not paying taxes. Their loyalties are not to employees who happen to hate the state. They are to their bosses and the stockholders, who will only use the corporation to break the law if there are millions in it for them.

Strikes

Ancaps tend to deride protests, condemn riots and property destruction and oppose unions. They see a few people destroying property and rush to the defense of corporations. They see riots and looting and instead of asking questions about the conditions that led to such behavior, they jump to condemn everyone who takes part. They say of protesters “they’re protesting so-and-so? where were they when…?” Who cares? They’re here now. They see unions fighting for better conditions and accuse them of stealing and breaking legitimate contracts. But workers and owners are in such unequal positions fairness simply does not enter into considerations of wages and working conditions. You sign a labor contract because you do not want to starve.

If you want to make a change through your job, organize your workplace and take it over from your bosses. I don’t recommend that for every business, but plenty can be said to treat their employees unfairly, taking a large percentage of the value of the product of their labor, firing them without warning just to improve the balance sheet, attacking strikers, and so on.

Some ancaps actually call unions thieves for demanding a greater share of production. If you believe market wages (ie. what employers have decided the minimum wage they can pay their employees is) are necessarily fair or what you deserve, naturally, anything more than that would be unfair. Ancaps believe in the homesteading principle. Haven’t the workers already homesteaded the means of production? (This post goes into a more detailed defense of seizing the means of production. Anarcho-syndicalism is not without its shortcomings, though.)

Strikes cripple production (or at least slow it down considerably), putting a dent in the wealth of those who control the state. If nothing else, a strike can grant workers a larger share of the product of their own labor. (Ideally, those same workers would quit and form cooperatives and communes, but those initiatives are difficult and often require more money or land than they have.)

Even better!

Protests

Protesting should not rule out the possibility of violence, depending on the circumstances, rather using what Peter Gelderloos in How Nonviolence Protects the State called a diversity of tactics. There are many possible forms of direct action. I would not discourage, say, blocking people from going to work at a factory producing cluster bombs to drop on Yemen. I see great potential value in attacking military recruiters, prisons, summit meetings, the offices and homes of people who profit from war or poisoning the environment, facilities where animals experience cruelty and rallies of people with inherently oppressive ideologies (eg. neo-Nazis).

How could such violence not be considered self defense? We are already living under such extreme conditions a lukewarm response will have little effect. Moreover, it is a sign of how privileged a person is that he or she would lecture those less fortunate on how they should behave, when it is right for them to fight back and when they should be quiet and remain oppressed. If not now, when? When ancaps say it’s ok?

Again, protests can lead to violence under the right circumstances. Why would it be wrong to intimidate or beat up those factory workers building cluster bombs when you know that person is going to do something that will lead to the deaths of innocent people? What is the problem? You would, in fact, be REDUCING the amount of violence by only beating someone. It is the same logic as stopping bullying by using force, or shooting someone so he or she could not commit murder. (I write more on the legitimacy of certain violence here.)

Actually, they both are

The problem with this meme is, while independence of a sort is probably necessary for anarchy, the state has, on innumerable occasions, shut down independent farms (see the documentary Farmaggeddon or read Everything I Want to Do Is Illegal for more). Who will protect them from the SWAT teams? They could certainly set up security arrangements with their neighbors, but at some point the police will overrun them. However, if large groups are fighting the police, tying them down and stretching their resources, the farmers will be of much lower priority.

Indeed, this meme typifies the ancap belief in the possibility of non-violent revolution. Whatever tactics they attempt, they will need to defend themselves in large groups. Secession could take place in some countries, such as the US or Canada, but if the nation states get too small, or if the elite from one place cannot extend their influence into the new place, violence will inevitably ensue. Secession on a large level (such as the possible secession of the state of California) leaves us with similar economic and political structures. Secession on a community or individual level, where people can truly govern themselves, leaves those people vulnerable to violent state reprisals. We would need mutual defense among free people to stay free.

Solidarity

Demonstrations could be accompanied with strikes if workers are on board (ie. if they are “woke”) and boycotts if consumers are. Protests, strikes and boycotts can be part of a push for solidarity. Solidarity means standing together, where we are stronger, instead of being disunited as employees, citizens or consumers.

From my perspective, the most effective way of reducing violence and promoting solidarity is through mutual aid. It leads to greater freedom for those who cannot care for themselves, and less inequality, with all the benefits therein. It reduces our reliance on big business and government, and thus their power. It eliminates the need for competition, for treating each other as crabs in a bucket, and for charity. Ancaps tend not to recognize the necessity for these things, which is why they are so lukewarm toward mutual aid. (Well, that and because it smacks of “communism”, which to an ancap is pure evil.)

I think solidarity and its attendant mutual aid are the ultimate weapons against those in power. Without them, eliminating the state will remain a pipe dream.

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Competition

July 14, 2017 1 comment

This post is part 6 of my series on why I am no longer an anarcho-capitalist (ancap).

Ancaps will not let you define capitalism in any way but theirs. Instead of acknowledging the decades of debate surrounding the term and the history of actual capitalism, they will post a link to a dictionary, or quote their favourite economist, and ignore everything you say. As such, it can be difficult to have a conversation with them. You talk about what you dislike about capitalism and they interrupt with “that’s not capitalism”. They write articles talking up the good things that have happened under actually exisiting capitalism but distance themselves from the bad things, as if one could have existed without the other. They like to take all the supposedly good things from capitalism as evidence that it works, and call all the bad things it brings “socialism”. They attempt to have their cake and eat it too.

Not all problems stem from the state. Slavery could easily continue without a state. Slavery was not and is not a result of the state. Neither was the Irish Potato Famine, as landlords exported food they owned in a way that should be considered legitimate to propertarians. These are problems of capitalism that would be problems whether or not ancaps’ particular vision were realized. Another such problem is that of competition.

Not everything can be reduced to economics. You say we should stop competing with each other and share and ancaps will accuse you of wanting monopolies. But anarcho-communists do not want monopolies. They want gift economies. A gift economy is, essentially, where things are free. Yes, it is possible; indeed, unlike trade, gift economies have been the norm throughout human existence, just like anarchy, equality and mutual aid.

People who say capitalism is the most efficient economic system ever devised do not seem to understand how capitalism works. Capitalism is not decentralized. Whether statist or not, capitalism necessarily concentrates money and decision-making in the hands of a small group of people, essentially the owners of the means of production. Corporations spend money on taxes, managers, shareholders, lobbyists, security guards, lawyers, accountants, human resources, marketing and advertising, none of which would be necessary in a system where everything was free. And competition creates huge amounts of redundancy as firms spend huge amounts on R&D producing competing but similar products, instead of pooling resources and creating something good for everyone. Moreover, competition among firms leads to paying the lowest possible wages, often resulting in slavery or near-slavery as people in places like China, the Congo and US jails receive pitiful wages and horrible working conditions when an efficient system could produce the same goods without inflicting such pain on its producers.

Alfie Kohn’s book No Contest: The Case against Competition dismantles every claim about the beneficial effects of competition. This post barely scratches the surface of his work. I recommend reading it through for a fuller understanding. (A lecture on the subject can be found here.)

For one, competition is not efficient: it is exceedingly inefficient. You have any number of people working for any number of firms to produce the same products and innovations. You have firms such as pharmaceutical giants all competing for scientific research into the same things, then spending a huge part of their budgets on marketing, administration and other waste. (See here, for example.) Every dollar taken as profit, or spent on marketing, sales or advertising, is a dollar capitalism itself has taken from you. If you work in marketing, etc., you need to understand your jobs are completely unnecessary.

But it’s “natural”, right? All creatures compete, right? Yes and no. There is an enormous amount of mutual aid in nature, even across species but especially within them. Some species engage in somewhat violent competition for mates, though that competition is rarely fatal. Is competition inherent in evolutionary success? Only a simplistic understanding of evolution would imply such. Stephen Jay Gould points out

The equation of competition with success in natural selection is merely a cultural prejudice …. Success defined as leaving more offspring can … be attained by a large variety of strategies – including mutualism and symbiosis – that we could call cooperative. There is no a priori preference in the general statement of natural selection for either competitive or cooperative behavior. (In Kohn, 21)

Besides, modern humans are a bit different. We have created a civilization where competition is no longer necessary, because abundance has become the norm. We do not need to compete over, say, food, water and land, because there is enough for all of us, and we value sharing and cooperation. Whatever nature appears to dictate through the lens of our culture, the reality is there is nothing inevitable about competing.

So why encourage it? Kids don’t like it. Kohn says “I am aware of no studies that found a preference for competition over cooperation – providing the subjects had experienced the latter in some fashion.” (32) If given a choice, children would rather cooperate and eliminate the need to divide winners from losers. While a few kids may enjoy competing over cooperating, the vast majority appear not to. Competition as we know it is largely a learned phenomenon, continually reaffirmed in school rankings, games and sports. This focus on competition, especially on creating the myth that it is inevitable and beneficial, serves those in power, who want us to compete with each other to serve the rich, rather than work together to make serving the rich unnecessary.

Kohn also asked the question “Do we perform better when we are trying to beat others?” and found overwhelming evidence to suggest the answer is almost never. Competition tends to bring down performance, not enhance it. (47) Competition puts intense pressure on us, and not even pressure to succeed (which in itself is not necessarily good) but pressure to beat others. Trying to do something right and well is quite different from trying to beat others. (55) It might result in lies, tripping other people up, heartbreak, and so on, when in the absence of competition we need not stress but simply be as good as we choose to be.

Competition encourages win-lose thinking, as opposed to win-win thinking. (127) It poisons our relationships. (132) It discourages altruism and empathy while encouraging envy, mistrust and contempt. (140-1) And it is unnecessary.

The results of the many studies, which clear away the myths about competition’s inevitability and benefits, should mean radical changes to the way we do things, from the market economy to kids in school and at home, from examinations to debates, from meting out justice to having fun. Unfortunately, it is fundamental to capitalism, so those who identify with capitalism are likely to have a hard time unlearning competition.

Workers should not compete with each other, locally or across countries, but unite to unionize or take over their workplaces or start cooperatives or overthrow capitalism altogether and begin sharing the product of our labor.

Inequality

February 20, 2017 2 comments

This post is part 3 of my series on why I am no longer an anarcho-capitalist (ancap).

One thing anarchism has given me is a relentless desire for freedom–not just for myself, but for everyone. It has extended to my personal relationships and to the food I eat, as I believe animals are just as worthy of liberation as humans. I think equality is an essential part of freedom.

Ancaps tend to shy away from the word, as if “equality” meant conformity, or sameness. No anarchist believes in a Harrison-Bergeron state, where people with talent are fettered so others don’t feel bad. All equality has to mean is having an equal say in the decisions that affect you. We do not have that now, as most people are locked out of the political process, and we do not have that under any hierarchy. In the moneyless, propertyless society anarcho-communists and others envision, there would be no inequality of wealth, either, as everyone would share and thus have equal access to everything. (More about this in my next post, on property.) Ancaps tend to assume, as I used to, that there is no particular harm in inequalities of wealth if no one has control of the state’s tools of violence, and that attempting to reduce inequality is a pointless distraction. I think this belief is mistaken. Tolerating inequality is dangerous, particularly under a state but even in a stateless society.

Some ancaps invoke an analogy of Robinson Crusoe to justify exclusive ownership or private property. Alone on his island, Robinson can do whatever he likes. But when Friday comes along, now there are two people and things need to be divided among them. If Robinson spends time making a fishing net while Friday basks lazily in the sun, Robinson should own the fish he catches and should not be obliged to give any to Friday. This situation is plausible on a desert island. But that analogy can take us no further than a new society of able-bodied people who start with nothing. Our world is a world full of established order, of force and violence, of wealth acquired by force and inherited for generations. It is a world where laws, regulations, taxes and, underpinning it all, unequal access to resources have made it impossible for many people to earn a living wage, and yet where ancaps tell people whatever “the market”–not the ideal free market but the market as it is now–dictates their wage should be is correct.

Ancaps will tell you “no one owes you anything”, to the effect not of proposing ethics for a free society but to justify the market and property relations of today. They speak as if most CEOs and rich people were simply workers who had worked particularly hard and somehow deserved not only their enormous salaries but the power over workers and politicians that position brings with it. They do not appreciate that a major feature (some might say the defining feature) of capitalism is how the people on top own the product of a worker’s labor and then give as little as they can get away with back to the worker. If you produce $50 worth of widgets in an hour and make $10 an hour, the corporation has taken most of the value of your product away. That is what socialists mean by exploitation. If you are a fly-by-night employee working for people who have put many years of sweat into their business, this arrangement is not problematic. However, if a hundred people have run a factory for years, they are the true source of the wealth of the owners and bosses. Yet, if they attempted to take over their factory, ancaps would say they are stealing, and violence is a justifiable response.

The capitalist corporation

While I think abolishing the state would significantly reduce the power of the rich, if they are simply left alone they could easily find a way to reconstitute the state in a different form. Capitalist enterprise always sends money up the hierarchy. Retaining hierarchy, the money system and unequal access to resources could make it profitable to raise a private army. While most anarchists envision a society where everyone’s needs are met, many ancaps simply assume this situation would arise if we eliminated taxes and barriers to work. But what if it did not?

Theft would still be an issue, which means security guards would still work in the employ of the rich. Whether or not security guards became a private army, the employment of security guards is a highly inefficient way to allocate resources–protecting wealth rather than creating it. Why would that situation be preferable to more equality, more access to what we need, less need for protection from either theft (for the rich) or predatory armies (for everyone else)? How can you justify turning someone away from a hospital or denying them life-saving drugs when there is easily enough money to pay for it? How can you justify letting someone go hungry when supermarkets owned by rich people are full of food?

Another problem with the current economic system, whatever you want to call it, is it necessarily produces winners and losers. It inherently–not incidentally–produces unemployment, homelessness, poverty, debt and non-state violence. These effects are not due to lack of hard work. I think most ancaps, at least thoughtful ones, understand this point. What it means in practice is, as unfortunate as it might be, we need welfare programs. Yes, there are better ways of providing them, but until you are helping organize mutual-aid arrangements, please do not encourage the dismantling of programs that help people keep their heads above water.

On a related note, while I sympathize with the desire to abolish the Federal Reserve, the federal income tax or intellectual property, these things are simply not going to happen while power is still concentrated in the hands of the rich. The people who are really in charge benefit from these things, which means that even on the off chance a large majority of voters agreed with these policies, the system would perform as it always does on such occasions: Politicians would talk about the need to “do something”; they would either pass a law hailed as monumental or complain about being stymied by the president, the Congress, the courts, the pressure groups or whomever else; if they were successful in passing the bill it would be too watered down to have any significant effect or it would be quietly repealed a few months later and things would somehow return to how they were. That is why the slogan “evolution, not revolution” does not take the workings of the system into account. A popular revolt can topple a government in a matter of days, and has often led to anarchy. If people have the right ideas and initiative, they can create a free society in this situation.

Capitalism creates a class system, which creates stress, a significant cause of illness. It creates boom-and-bust cycles, which put us in a state of hypervigilance, fearing for our very survival. It leads to domination and hopelessness. It leads to substance abuse, as we try to find a way to dull the pain. (More on all these effects here.)

More people in our world need to learn about humanity’s long history of mutual aid. Charity may be necessary in a world where we do not organize and take care of each other but we will not have a revolution worthy of the name without mutual aid. Charity is only necessary because of the systems of exclusion and exploitation that destroyed mutual aid. Charity is a top-down approach.

Rich people are not generous just because they give money to charity. They may have made their money through inheritance, the violence of the state (eg. intellectual property) or simply by having enough capital to start and maintain a business, paying workers as little as possible and keeping the rest. Anarchists advocate a non-hierarchical, non-paternalistic, empowering approach to solving our problems, not one where you can give a small amount of your enormous wealth away and be called a public benefactor.

I have written more on this subject in another post. Suffice to say, inequality is not “good” or “natural” and ancaps should learn about the dangers it poses to freedom.

The problem with inequality

October 18, 2014 1 comment

The state is a tool to create a ruling class of people who acquire their wealth through theft. Inequality means those who have can buy protection from those who do not, and that tends to lead to repression in the form of police states or slavery. The state cannot, by its nature, eliminate inequality. But what if we abolished the state, as anarchists want? Would inequality still matter? I used to believe inequality was not a big deal, or it only mattered to jealous people. I was wrong. Here are three reasons why, especially today but even in a stateless society, inequality is an issue of major importance.

-Psychological effects

Studies suggest we have an innate desire for equality and fairness. The UK Mental Health Foundation finds that living in an unequal society causes psychological and physiological changes. Inequality can lead to a constant “fight or flight” reaction and perpetual stress. It can lead to violence directly through increased crime (including homicide), and can also create the conditions in which violence festers: less trust, disintegrating families and communities, poor scholastic and work performance and mental illness. The US and the UK, the most unequal societies in the rich world, show the strongest symptoms.

So much for those of us on the bottom of the pyramid. What about those on top? People with relatively large amounts of power and wealth are known to take on the characteristics of psychopaths. Compassion, empathy and sense of guilt decrease (“why don’t the poor just work harder?”); narcissism and entitlement increase (“of course I deserve to be where I am”); rules become for other people (“survival of the fittest”); lying and manipulating become easier; irresponsibility becomes the norm; and the desire to accumulate overrides other goals. (Find more here, here, here, here and here.)

-Structural violence

Structural violence is a kind of indirect violence whereby social structure and institutions prevent people from meeting their basic needs. Intellectual property laws that prevent people who need medicine from receiving it are one example. Borders preventing needy people from entering places where they could make a living are a second. Hoarding food or means of sustenance and surrounding it with fences or security guards is a third. Excessive debt, certain forms of discrimination, structural unemployment, poor working conditions and even just beliefs in the rightness of social hierarchy are further examples. Hellen Keller became a radical socialist soon after she realised blindness and other handicaps were mostly concentrated among the lower classes. A considerably inequitable social structure could lead to structural violence.

-Statism

The modern state is both a cause and an effect of the endless accumulation of wealth. Historically, it has not been possible to create and maintain vast fortunes without violence. Primitive states were forged in conquest to accrue and protect fortunes at the expense of their subjects, and modern states continue to exist for this purpose. (The actions of the so-called Islamic State mirror the actions of a primitive state.) Capitalist states emerged to protect and privilege those who made their fortunes as owners of capital, and while not all of “the 1%” want to use violence to make or expand their wealth, all benefit from and most refuse to question the violence of the system. A hierarchical or unequal society would make it possible for new states (or other forms of violence, such as human trafficking) to form. A stateless society should have safeguards against such a possibility.

-Protecting ourselves from the unequal society

The people of an anarchist society must protect themselves against the mental stresses and violence of unwarranted privilege and the potential reemergence of a state. My suggestion is a very widespread feeling of solidarity: the idea that we are all of equal inherent value and have no right to rule others; taking care of those in need; organisation based on mutual aid, including, of course, self defense. Sufficiently large numbers of people skilled at wielding modern weapons would make it easier to prevent the rise of a new state. We will be truly free when those around us are free, and we will only achieve freedom by working together.

The Black Panthers offer a model of an egalitarian community organisation. Imagine a confederation of them.

The Black Panthers offer a model of an egalitarian community organisation. Imagine a confederation of them.

It is not necessary—in fact, it is contrary—to enforce a state of equality. Benjamin Tucker wrote that the word “socialism” scares people because so many others think one can dismantle privilege by destroying competition and centering production in the hands of the few. But as he went on to point out, as Mikhail Bakunin had years before, anarchism is socialism without the state. If we organise to make decisions together and take care of each other, we have no need for authority. It is not necessary to kill rich people but simply to eliminate the system of violence that privileges them. Laurance Labadie once said “[i]n a world where inequality of ability is inevitable, anarchists do not sanction any attempt to produce equality by artificial or authoritarian means. The only equality they posit and will strive their utmost to defend is the equality of opportunity. This necessitates the maximum amount of freedom for each individual. This will not necessarily result in equality of incomes or of wealth but will result in returns proportionate to services rendered. Free competition will see to that.” Market anarchists might take this to mean freed markets and free association. Gary Chartier explains here and in Markets Not Capitalism, freed markets can work to abolish wage labour and corporate hierarchy as the main form of economic organisation, as well as the formation of a dominant class. (You may want to follow the links provided to read his proposals as to how to work toward such conditions.) He goes on to point out that those who protest in the millions against capitalism are not opposing private ownership and free exchange but a system that exists to grant the owners of capital a huge amount of power over society.

The future will be determined by what we value and why we value it. If we value equality as a means to freedom, we can have both.

Second edition is published

July 9, 2013 Leave a comment

The second edition of the Rule of Freedom: the Manifesto of the Sovereign Community has been published. The full volume is now available for free here.

Spontaneous order as an alternative to imposed order

April 18, 2013 14 comments

I think tearing down the state would be one of the best things humanity could do for itself. I know most people disagree, but I wonder if that is partly because they don’t know much about spontaneous order.

One of the main reasons we still have the state is humans have a bias toward needing to feel in control. We believe not only that we can control our surroundings but that we should. Control means order, right? The more control we have–over the whole world, ideally–the safer we are. The theory of spontaneous order demonstrates the shortsightedness of this argument (as does the incredible damage the state has done to the world since its inception).

Spontaneous order is one of the most powerful forces in the universe, but most people do not know it by name. Spontaneous order, or self-organisation, has been used to explain the expansion of the universe and the movement of celestial objects, the evolution of life on earth, the formation of snowflakes and crystal structure, the activities of cells, ant colonies, beehives, flocks of birds, language, culture, markets and cities. It is the order, contrary to what we tend to expect, that arises when we stop trying to control things and let them be. A single ant could not direct an ant colony; a beehive is not run by a committee of bees. Likewise, central planning fails miserably while free people build wealth for themselves.

spontaneous order

When people are freed from whoever is constraining or oppressing them, the norm is not rioting and Hobbes’ war of all against all. It is people peacefully cooperating to do what they agree is important. Look at what happens during revolutions. Look at what happens during wars. When all law and order break down, to the extent they can, people often work together, because they need each other. Spontaneous order is the phenomenon that explains it. Never mind humans; when anything, particularly life on earth, is left alone by outside or artificial constraints, it tends to flourish.

As far as we know, the idea dates back to ancient China. Here is something Laozi said over 2000 years ago.

The more laws and restrictions there are,
The poorer people become.
The sharper men’s weapons,
The more trouble in the land.
The more ingenious and clever men are,
The more strange things happen.
The more rules and regulations,
The more thieves and robbers.

Therefore the sage says:
I take no action and people are reformed.
I enjoy peace and people become honest.
I do nothing and the people become rich.
I have no desires and people return to the good and simple life.

Statism is just one idea for organising society. The state is very good at fulfilling its purpose: concentrating power in the hands of a few people: once kings and courtiers but now politicians, top bureaucrats, heads of the security apparatus and corporate clients. But it is not good at leaving people alone to reach their potential.

spontaneous order hierarchy network

When we are free, economies thrive, because individuals are far more empowered and responsible. Science and technology speed ahead. The most free and open complex societies in history are the ones that made all the most important advances in knowledge and the arts—not China in its days of oppression but in its days of openness. Not in today’s Middle East with its corrupt dictatorships but in the Middle East that advanced mathematics, astronomy and medicine and saved all the books the Europeans had thrown out as blasphemous. Not that Europe; the Europe since the beginning of the Enlightenment. But not the Europe of today, either, with its seemingly endless regulations, bureaucracy and welfare state. Europe used to consist of many small states with little power to regulate their societies. As Hans-Hermann Hoppe puts it,

Contrary to orthodoxy, then, precisely the fact that Europe possessed a highly decentralized power structure composed of countless independent political units explains the origin of capitalism—the expansion of market participation and of economic growth—in the Western world. It is not by accident that capitalism first flourished under conditions of extreme political decentralization: in the northern Italian city states, in southern Germany, and in the secessionist Low Countries (Netherlands).

People all around the world have so much wealth in their communities that, if they could own and transform however they like, could lift them out of poverty. Instead, they either do not have freedom to own and defend their property so they cannot use it, or are told not to work for themselves but to come and pick up a cheque so they can remain part of the wider economy. Their potential is still there, though. The benefits of freeing people from artificial constraints demonstrate the amazing power of spontaneous order. It is something voluntaryists and other freedom-minded people should help others understand better in order to make their case.

Regulation

March 18, 2013 5 comments

“Corporate capitalists don’t want free markets. They want dependable profits, and their surest route is to crush the competition by controlling the government.” – RFK, Jr.

It is often claimed in “progressive” and “liberal” circles that we need more regulation to curb the influence and power of big business. This belief is based largely on a misconception as to the origin, purpose and result of regulations.

During the period between the end of the American Civil War and roughly the 1890s, business in the US tried to cartelise but found it could not. In general, cartels can only control a market when force is introduced. During this period, every attempt to form a cartel and raise prices led to new competitors that realised they could undercut the cartels. In response, big business began lobbying the government to pass laws “in the public interest” (as all laws are claimed to be) that would enable them to keep competitors out. It worked. (Find a large amount of research on the subject here.)

Today, regulations and other laws protecting business include corporate personhood, accounting standards, safety standards, environmental standards and intellectual property. In addition, there are subsidies (“corporate welfare”), amounting to perhaps $98b a year, selective tax breaks and contracting. In each of these categories, government and industry have made a variety of laws enabling large firms to eliminate competition. As such, they are a kind of tax taken from consumers who would pay lower prices and entrepreneurs who would be able to make their livings doing what they want. The tax is given to business owners who would be forced to lower prices or improve services in a free market. The Small Business Administration in 2005 estimated the total cost of these regulations at $1.1 trillion.

free market government regulation

Accounting standards are widely considered necessary to prove a firm is not cooking the books. But in the absence of state regulation, concerned investors would find a way to insure against this possibility with audits. An example of the enormous and unnecessary complication of accounting standards is the Sarbanes-Oxley Act, passed in the wake of the Enron accounting scandal and failure. The Act made accounting more complicated. Implementing it costs a firm millions of dollars. Millions of dollars is pocket change for a big corporation, but prohibitively expensive for new and small businesses that could otherwise rival them. As a result, fewer businesses are created, and wealth and power are concentrated in the larger firms. We now have a complex tax code that could not be implemented by less than a team of accountants. The same is true of the legal code. The modern legal code was designed so that teams of high-priced lawyers can get away with murder and people without money see no justice.

Sarbanes-Oxley is, of course, but one law in a sea of other laws. Those who say the 2008 financial crash was caused by a lack of regulation may do well to realise there were thousands of lines of financial regulations already. They often cite the repeal of parts of the Glass-Steagal Act as the only incidence of deregulation they can think of, but this change did nothing to enable banks to make bad loans. A look at the facts indicates very clearly that regulation was the main cause of the bubble that caused the massive destruction of wealth for all but those whose ties to the state got them trillion-dollar bailouts.

Negative externalities, which seem to be the reason people beg the government to get involved in the market, are easily externalised in a statist society. The same big corporations pollute and break the law repeatedly. They are sued by the government, they pay the government, which means it gets another legal donation from an interest group, and then they are allowed to continue business as usual. The lawsuits are a bone thrown to voters and the corporations shake them off like lice. But they give the appearance that justice has been done. The corporations nonetheless retain all the benefits they get from the state in the form of legal personhood, subsidies, tax loopholes, intellectual property and regulatory barriers to competition. The state does not protect us against negative externalities.

Intellectual property enables firms to monopolise virtually anything they create. Consider the effects of IP laws in the pharmaceutical industry. Kevin Carson explains that drug patents are unnecessary to recoup expenses and develop the most effective drugs.

First of all, there has been a dramatic shift away from fundamentally new kinds of blockbuster drugs, because it’s much more cost-effective to put money into tweaking the formulas of drugs whose patents are about to expire just enough to qualify for repatenting them—so-called ‘me, too drugs.’ Second, a great deal of the basic research on which drug development is based is carried out at government expense in publicly-funded universities. Around half of the overall cost of drug R&D is taxpayer-funded. And in the United States, under the terms of legislation passed in the 1980s, the patents on drugs developed entirely at taxpayer expense are given away—free of charge—to the drug companies that produce and market them. Third, most of the actual R&D cost for developing drugs comes, not from testing the version of a drug actually marketed, but from securing patent lockdown on all the other major possible variants.

Generic drugs do not get developed, or get banned as soon as they are, because they are competition. The poor people who need them most do not get them. Intellectual property, Carson concludes, is murder.

corporatism regulation big business free market

We can divine the purpose of regulation from its results. We now have giant, multinational corporations straddling the Earth, with no government willing or able to oppose them, with the exception of a few populist, anti-imperialist holdouts. Large corporations’ alliance with the state has enabled the two to control natural resources and all manner of other markets. Consumers thus have fewer choices and higher prices than in a market freed from regulation. But freedom is always preferable to laws and regulations imposed by the state. Freedom allows economies and the arts to flourish. It means scientific advances and technological innovation. And it forces responsibility on those able to handle it while still allowing for us to help each other.

The solution to the control of markets by cartels is to free them. That would make customers the true regulators. If they decry a firm’s practices, they can stop buying from it and start buying from its competitor. If you abhor business, you are free to start and join one of the thousands of cooperatives in the world or simply produce and give to your neighbours. But demanding more regulation to prevent big-business malfeasance is akin to shooting oneself in the head to cure one’s headache.