In a word, no. This question is often asked by those who have come across the so-called "libertarian" right. As discussed in section A.1.3, the word "libertarian" has been used by anarchists for far longer than the pro-free market right have been using it. Indeed, outside of North America "libertarian" is still essentially used as an equivalent of "anarchist" and as a shortened version of "libertarian socialist."
This in itself does not, of course, prove that the term "libertarian socialist" is free of contradiction. However, as we will show below, the claim that the term is self-contradictory rests on the assumption that socialism requires the state in order to exist and that socialism is incompatible with liberty (and the equally fallacious claim that capitalism is libertarian and does not need the state). This assumption, as is often true of many objections to socialism, is based on a misconception of what socialism is, a misconception that many authoritarian socialists and the state capitalism of Soviet Russia have helped to foster. In reality it is the term "state socialism" which is the true oxymoron.
Sadly many people take for granted the assertion of many on the right and left that socialism equals Leninism or Marxism and ignore the rich and diverse history of socialist ideas, ideas that spread from communist and individualist-anarchism to Leninism. As Benjamin Tucker once noted, "the fact that State Socialism . . . has overshadowed other forms of Socialism gives it no right to a monopoly of the Socialistic idea." [Instead of a Book, pp. 363-4] Unfortunately, many on the left combine with the right to do exactly that. Indeed, the right (and, of course, many on the left) consider that, by definition, "socialism" is state ownership and control of the means of production, along with centrally planned determination of the national economy (and so social life). This definition has become common because many Social Democrats, Leninists, and other statists call themselves socialists. However, the fact that certain people call themselves socialists does not imply that the system they advocate is really socialism (Hitler, for example, called himself a "National Socialist" while, in practice, ensuring and enhancing the power and profits of capitalists). We need to analyse and understand the systems in question, by applying critical, scientific thought, in order to determine whether their claims to the socialist label are justified. As we will see, to accept the above definition one has to ignore the overall history of the socialist movement and consider only certain trends within it as representing the movement as a whole.
Even a quick glance at the history of the socialist movement indicates that the identification of socialism with state ownership and control is not common. For example, Anarchists, many Guild Socialists, council communists (and other libertarian Marxists), as well as followers of Robert Owen, all rejected state ownership. Indeed, anarchists recognised that the means of production did not change their form as capital when the state took over their ownership nor did wage-labour change its nature when it is the state employing labour (for example, Proudhon argued that if the "State confiscate[d] the mines, canals and railways" it would only "add to monarchy, and [create] more wage slavery." [No Gods, No Masters, vol. 1, p. 62]). For anarchists state ownership of capital is not socialistic in the slightest but rather a tendency within, not opposed to, capitalism just as the growth of larger and larger companies does not imply in any way a tendency to socialism (regardless of what Lenin or Marx argued -- see section H.3.12 for more on this). Indeed, as Tucker was well aware, state ownership turned everyone into a proletarian (bar the state bureaucracy) -- hardly a desirable thing for a political theory aiming for the end of wage slavery!
So what does socialism mean? And is it compatible with libertarian ideals? What do the words "libertarian" and "socialism" actually mean? It is temping to use dictionary definitions as a starting point, although we should stress that such a method holds problems as different dictionaries have different definitions and the fact that dictionaries are rarely politically sophisticated. Use one definition, and someone else will counter with one more to their liking. For example, "socialism" is often defined as "state ownership of wealth" and "anarchy" as "disorder." Neither of these definitions are useful when discussing political ideas. Therefore, the use of dictionaries is not the end of a discussion and often misleading when applied to politics.
With that warning, what do we find?
Webster's New International Dictionary defines a libertarian as "one who holds to the doctrine of free will; also, one who upholds the principles of liberty, esp. individual liberty of thought and action." As we discussed earlier (see section B.1, for example), capitalism denies liberty of thought and action within the workplace (unless one is the boss, of course). Therefore, real libertarian ideas must be based on workers self-management, i.e. workers must control and manage the work they do, determining where and how they do it and what happens to the fruit of their labour, which in turn means the elimination of wage labour. The elimination of wage labour is the common theme of socialism (in theory at least, anarchist argue that state socialism does not eliminate wage labour, rather it universalises it). Or, to use Proudhon's words, the "abolition of the proletariat." [Selected Writings of Pierre-Joseph Proudhon, p. 179] It implies a classless and anti-authoritarian (i.e. libertarian) society in which people manage their own affairs, either as individuals or as part of a group (depending on the situation). In other words, it implies self-management in all aspects of life -- including work. It has always struck anarchists as somewhat strange and paradoxical (to say the least) that a system of "natural" liberty (Adam Smith's term, misappropriated by supporters of capitalism) involves the vast majority having to sell that liberty in order to survive.
According to the American Heritage Dictionary "socialism" is "a social system in which the producers possess both political power and the means of producing and distributing goods." This definition fits neatly with the implications of the word "libertarian" indicated above. In fact, it shows that socialism is necessarily libertarian, not statist. For if the state owns the workplace, then the producers do not, and so they will not be at liberty to manage their own work but will instead be subject to the state as the boss. Moreover, replacing the capitalist owning class by state officials in no way eliminates wage labour; in fact it makes it worse in many cases. Therefore "socialists" who argue for nationalisation of the means of production are not socialists (which means that the Soviet Union and the other 'socialist" countries are not socialist nor are parties which advocate nationalisation socialist).
Indeed, attempts to associate socialism with the state misunderstands the nature of socialism. It is an essential principle of socialism that (social) inequalities between individuals must be abolished to ensure liberty for all (natural inequalities cannot be abolished, nor do anarchists desire to do so). Socialism, as Proudhon put it, "is egalitarian above all else." [No Gods, No Masters, vol. 1, p. 57] This applies to inequalities of power as well, especially to political power. And any hierarchical system (particularly the state) is marked by inequalities of power -- those at the top (elected or not) have more power than those at the bottom. Hence the following comments provoked by the expulsion of anarchists from the social democratic Second International:
"It could be argued. . . that we [anarchists] are the most logical and most complete socialists, since we demand for every person not just his entire measure of wealth of society, but also his portion of social power, which is to say, the real ability to make his influence felt, along with that of everybody else, in the administration of public affairs." [No Gods, No Masters, vol. 2, p.20]
The election of someone to administer public affairs for you is not having a portion of social power. It is, to use of words of Emile Pouget (a leading French anarcho-syndicalist) "an act of abdication," the delegating of power into the hands of a few. [Op. Cit., p. 67] This means that "[a]ll political power inevitably creates a privileged situation for the men who exercise it. Thus it violates, from the beginning, the equalitarian principle." [Voline, The Unknown Revolution, p. 249]
From this short discussion we see the links between libertarian and socialism. To be a true libertarian requires you to support workers' control otherwise you support authoritarian social relationships. To support workers' control, by necessity, means that you must ensure that the producers own (and so control) the means of producing and distributing the goods they create (i.e. they must own/control what they use to produce goods). Without ownership, they cannot truly control their own activity or the product of their labour. The situation where workers possess the means of producing and distributing goods is socialism. Thus to be a true libertarian requires you to be a socialist.
Similarly, a true socialist must also support individual liberty of thought and action, otherwise the producers "possess" the means of production and distribution in name only. If the state owns the means of life, then the producers do not and so are in no position to manage their own activity. As the experience of Russia under Lenin shows, state ownership soon produces state control and the creation of a bureaucratic class which exploits and oppresses the workers even more so than their old bosses. Since it is an essential principle of socialism that inequalities between people must be abolished in order to ensure liberty, it makes no sense for a genuine socialist to support any institution based on inequalities of power. And as we discussed in section B.2, the state is just such an institution. To oppose inequality and not extend that opposition to inequalities in power, especially political power, suggests a lack of clear thinking. Thus to be a true socialist requires you to be a libertarian, to be for individual liberty and opposed to inequalities of power which restrict that liberty.
Therefore, rather than being an oxymoron, "libertarian socialism" indicates that true socialism must be libertarian and that a libertarian who is not a socialist is a phoney. As true socialists oppose wage labour, they must also oppose the state for the same reasons. Similarly, libertarians must oppose wage labour for the same reasons they must oppose the state.
So, libertarian socialism rejects the idea of state ownership and control of the economy, along with the state as such. Through workers' self-management it proposes to bring an end to authority, exploitation, and hierarchy in production. This in itself will increase, not reduce, liberty. Those who argue otherwise rarely claim that political democracy results in less freedom than political dictatorship.
One last point. It could be argued that many social anarchists smuggle the state back in via communal ownership of the means of life. This, however, is not the case. To argue so confuses society with the state. The communal ownership advocated by collectivist and communist anarchists is not the same as state ownership. This is because it is based on horizontal relationships between the actual workers and the "owners" of social capital (i.e. the federated communities as a whole, which includes the workers themselves we must stress), not vertical ones as in nationalisation (which are between state bureaucracies and its "citizens"). Also, such communal ownership is based upon letting workers manage their own work and workplaces. This means that it is based upon, and does not replace, workers' self-management. In addition, all the members of a participatory anarchist community fall into one of three categories:
Therefore, workers' self-management within a framework of communal ownership is entirely compatible with libertarian and socialist ideas concerning the possession of the means of producing and distributing goods by the producers themselves.
Hence, far from there being any contradiction between libertarianism and socialism, libertarian ideals imply socialist ones, and vice versa. As Bakunin argued in 1867:
"We are convinced that freedom without Socialism is privilege and injustice, and that Socialism without freedom is slavery and brutality." [Bakunin on Anarchism, p. 127]
History has proven him correct.
In 1920, the right-wing economist Ludwig von Mises declared socialism
to be impossible. A leading member of the "Austrian" school of economics,
he argued this on the grounds that without private ownership of the means
of production, there cannot be a competitive market for production goods
and without a market for production goods, it is impossible to determine
their values. Without knowing their values, economic rationality is
impossible and so a socialist economy would simply be chaos -- "the
absurd output of a senseless apparatus." ["Economic Calculation in the
Socialist Commonwealth", in Collectivist Economic Planning, F.A von
Hayek (ed.), p.104] While applying his "calculation argument" to Marxist
ideas of a future socialist society, his argument, it is claimed, is
applicable to all schools of socialist thought, including libertarian
ones. It is on the basis of his arguments that many right-wingers claim
that libertarian (or any other kind of) socialism is impossible in
principle.
As David Schweickart observes "[i]t has long been recognised that von
Mises's argument is logically defective. Even without a market in
production goods, their monetary values can be determined." [Against
Capitalism, p. 88] In other words, economic calculation based on prices
is perfectly possible in a libertarian socialist system. After all, to
build a workplace requires so many tonnes of steel, of many bricks, so
many hours of work and so on. If we assume a mutualist (i.e. market
socialist/co-operative) libertarian socialist society, then the prices
of these goods can be easily found as the co-operatives in question
would be offer their services on the market. These commodities would
be the inputs for the construction of production goods and so the
latter's monetary values can be found (this does not address whether
monetary values accurately reflect real costs, an issue we will discuss
in the next section).
Ironically enough, von Mises did mention the idea of such a
mutualist system in his initial essay. He wrote of a system
in which "the 'coal [miners'] syndicate' provides the 'iron
[workers'] syndicate'" with goods and argued that "no price
can be formed, except when both syndicates are the owners of
the means of production employed in their business" (which
may come as a surprise to transnational companies whose
different workplaces sell each other their products!) Such
a system is dismissed: "This would not be socialisation
but workers' capitalism and syndicalism." [Op. Cit., p. 112]
However, his logic is flawed. Firstly, as we noted, modern
capitalism shows that workplaces owned by the same body
(in this case, a large company) can exchange goods via the
price form. That von Mises makes such a statement indicates
well the firm basis of his argument in reality. Secondly,
such a system may be, as von Mises states, "syndicalism" (at
least a form of syndicalism, as most syndicalists were and
still are in favour of libertarian communism, a simple fact
apparently unknown to von Mises) but it is not capitalist as
there is no wage labour involved as workers' own and control
their own means of production. Indeed, von Mises ignorance
of syndicalist thought is striking. In Human Action he
asserts that the "market is a consumers' democracy. The
syndicalists want to transform it into a producers'
democracy." [p. 809] Most syndicalists, however, aim to
abolish the market and all aim for workers' control
of production to complement (not replace) consumer
choice. Syndicalists, like other anarchists, do not aim
for workers' control of consumption as von Mises asserts.
Given that von Mises asserts that the market, in which one
person can have a thousand votes and another one, is a
"democracy" his ignorance of syndicalist ideas is perhaps
only one aspect of a general ignorance of reality.
Indeed, such an economy also strikes at the heart of von
Mises' claims that socialism was "impossible." Given that
von Mises accepted that there may be markets, and hence
market prices, for consumer goods in a socialist economy
his claims of the impossibility of socialism seems unfounded.
For von Mises, the problem for socialism is that "because no
production-good will ever become the object of exchange, it
will be impossible to determine its monetary value." [Op. Cit.,
p. 92] The flaw in his argument is clear. Taking, for example,
coal, we find that it is both a means of production and of
consumption. If a market in consumer goods is possible for
a socialist system, then competitive prices for production
goods is also possible as syndicates producing production-goods
would also sell the product of their labour to other syndicates
or communes. Thus, when deciding upon a new workplace, railway
or house, the designers in question do have access to competitive
prices with which to make their decisions. Nor does his argument
work against communal ownership in such a system as the commune
would be buying products from syndicates in the same way as
one part of a multi-national company can buy products from
another part of the same company under capitalism. That goods
produced by self-managed syndicates have prices does not
imply capitalism, regardless of von Mises' claims.
Thus economic calculation based on competitive market prices
is possible under a socialist system. Indeed, we see examples
of this even under capitalism. For example, the Mondragon
co-operative complex in the Basque Country indicate that a
libertarian socialist economy can exist and flourish. There
is no need for capital markets in a system based on mutual
banks and networks of co-operatives (indeed, as we argue at
the end of section I.4.8,
capital markets hinder economic
efficiency by generating a perverse set of incentives and
misleading information flows and so their abolition would
actually aid production and productive efficiency).
Unfortunately, the state socialists who replied to Mises
did not have such a libertarian economy in mind.
In response to von Mises initial challenge, a number of economists
pointed out that Pareto's disciple, Enrico Barone, had already,
13 years earlier, demonstrated the theoretical possibility of a
"market-simulated socialism." However, the principal attack on
von Mises's argument came from Fred Taylor and Oscar Lange (for a
collection of their main papers, see On the Economic Theory of
Socialism, Benjamin Lippincott (ed.), University of Minnesota,
1938). In light of their work, Frederick von Hayek shifted the
question from theoretical impossibility to whether the theoretical
solution could be approximated in practice. Thus even von Hayek, a
major free-market capitalist guru, seemed to think that von Mises's
argument could not be defended.
Moreover, it should be noted that both sides of the argument accepted
the idea of central planning of some kind or another. This means
that many of von Mises's and von Hayek's arguments did not apply
to libertarian socialism, which rejects central planning along with
every other form of centralisation. This is a key point, as most
members of the right seem to assume that "socialists" all agree
with each other in supporting a centralised economic system. In
other words, they ignore a large segment of socialist thought
and history in order to concentrate on Social Democracy and
Leninism. The idea of a network of "people's banks" and
co-operatives working together to meet their common interests
is ignored, although it has been a common feature in socialist
thought since the time of Robert Owen.
Nor was Taylor and Lange's response particularly convincing
in the first place. This was because it was based far more on
neo-classical capitalist economic theory than on an appreciation
of reality. In place of the Walsrian "Auctioneer" (the "god in
the machine" of general equilibrium theory which ensures that all
markets clear) Taylor and Lange presented the Planning Authority (the
"Central Planning Board"), whose job it was to adjust prices so that
all markets cleared. Neo-classical economists who are inclined to
accept Walrasian theory as an adequate account of a working capitalist
economy will be forced to accept the validity of Taylor and Lange's
version of "socialism." Little wonder Taylor and Lange were considered,
at the time, the victors in the "socialist calculation" debate by most
of the economics profession (with the collapse of the Soviet Union,
this decision has been revised somewhat -- although we must point out
that Taylor and Lange's model was not the same as the Soviet system, a
fact conveniently ignored by commentators).
Unfortunately, given that Walrasian theory has little bearing to
reality, we must also come to the conclusion that the Taylor-Lange
"solution" has about the same relevance (even ignoring its
non-libertarian aspects, such as its basis in state-ownership,
its centralisation, its lack of workers' self-management and so
on). Many people consider Taylor and Lange as fore-runners of
"market socialism." This is incorrect -- rather than being market
socialists, they are in fact "neo-classical" socialists, building
a "socialist" system which mimics capitalist economic theory
rather than its reality. Replacing Walrus's mythical creation
of the "Auctioneer" with a planning board does not really get
to the heart of the problem! Nor does their vision of "socialism"
have much appeal -- a re-production of capitalism with a planning
board and a more equal distribution of money income. Anarchists
reject such "socialism" as little more than a nicer version of
capitalism, if that.
With the collapse of the Soviet Union, it has been fashionable to
argue that "von Mises was right" and that socialism is impossible
(of course, during the cold war such claims were ignored as
the Soviet threat had to boosted and used as a means of social
control and to justify state aid to capitalist industry). Nothing
could be further from the truth. As we have argued in the
previous section and
elsewhere, these countries were not socialist
at all and did not even approximate the (libertarian) socialist
idea (which is the only true form of socialism). Obviously the
Soviet Union and Eastern European countries had authoritarian
"command economies" with central bureaucratic planning, and so
their failure cannot be taken as proof that a decentralised,
libertarian socialism cannot work. Nor can von Mises' and von
Hayek's arguments against Taylor and Lange be used against a
libertarian mutualist or collectivist system as such a system
is decentralised and dynamic (unlike the "neo-classical" socialist
model they proposed). Libertarian socialism of this kind did,
in fact, work remarkably well during the Spanish Revolution in
the face of amazing difficulties, with increased productivity and
output in many workplaces as well as increased equality and liberty
(see Sam Dolgoff, The Anarchist Collectives or Gaston Leval's
Collectives in the Spanish Revolution as well as
section I.8 of this FAQ).
Thus von Mises "calculation argument" does not prove that socialism is
impossible. The theoretical work of such socialists as David Schweickart
(see his Against Capitalism for an extensive discussion of a dynamic,
decentralised market socialist system) and others on market socialism
shows that von Mises was wrong in asserting that "a socialist system
with a market and market prices is as self-contradictory as is the notion
of a triangular square." Indeed, by suppressing capital markets in favour
of simple commodity production, a mutualist system will improve upon
capitalism by removing an important source of perverse incentives
which hinder long term investment and social responsibility (see
section I.4.8) in addition to
reducing inequalities, increasing
freedom and improving general economic performance.
So far, most models of market socialism have not been fully libertarian,
but instead involve the idea of workers' control within a framework of
state ownership of capital (Engler in Apostles of Greed is an exception
to this, supporting community ownership). However, libertarian forms of market socialism are indeed possible
and would be similar to Proudhon's mutualism. As anarchist Robert Graham
points out, "Market socialism is but one of the ideas defended by Proudhon
which is both timely and controversial. . . Proudhon's market socialism
is indissolubly linked with his notions of industrial democracy and
workers' self-management." ["Introduction", P-J Proudhon, General Idea
of the Revolution, p. xxxii] His system of agro-industrial federations
can be seen as a non-statist way of protecting self-management, liberty
and equality in the face of market forces (as he argued in The Principle
of Federation, "[h]owever impeccable in its basic logic the federal
principle may be. . . it will not survive if economic factors tend
persistently to dissolve it. In other words, political right requires
to be buttressed by economic right" and "in an economic context,
confederation may be intended to provide reciprocal security in
commerce and industry. . . The purpose of such specific federal
arrangements is to protect the citizens. . . from capitalist and
financial exploitation. . . in their aggregate they form . . .
an agro-industrial federation" [The Principle of Federation,
p. 67 and p. 70]).
Indeed, some Leninist Marxists recognise the links between Proudhon
and market socialism. For example, the unorthodox Trotskyite Hillel
Ticktin argues that Proudhon, "the anarchist and inveterate foe of
Karl Marx. . . put forward a conception of society, which is probably
the first detailed exposition of a 'socialist market.'" ["The Problem
is Market Socialism", in Market Socialism: The Debate Among
Socialists, edited by Bertell Ollman, p. 56] In addition, see
Against the Market in which the author, Dave McNally, correctly
argues that Proudhon was a precursor of the current market socialists.
Needless to say, these Leninists reject the idea of market socialism
as contradictory and, basically, not socialist (while, strangely
enough, acknowledging that the transition to Marxist-communism
under the workers' state would use the market!).
Thus it is possible for a socialist economy to allocate resources
using a competitive market. However, does von Mises's argument mean
that a socialism that abolishes the market (such as libertarian
communism) is impossible? Given that the vast majority of anarchists
seek a libertarian communist society, this is an important question.
We address it in the next section.
In a word, no. While the "calculation argument" is often used by
right-libertarian's as the "scientific" basis for the argument
that communism (a moneyless society) is impossible, it is based
on certain false ideas of what money does and how an anarchist
society would function without it. This is hardly surprising,
as Mises based his theory on the "subjective" theory of value
and the Marxist social-democratic (and so Leninist) ideas of
what a "socialist" economy would look like. As Libertarian
Marxist Paul Mattick correctly argued:
Therefore, there has been little discussion of what a true
(i.e. libertarian) communist society would be like, one that
utterly transformed the existing conditions of production by
workers' self-management and the abolition of both the wages
system and money. However, it is useful here to indicate
exactly why a moneyless (i.e. truly communist) "economy"
would work and why the "calculation argument" is flawed as
an objection to it.
Mises argued that without money there was no way a socialist economy
would make "rational" production decisions. Not even von Mises denied
that a moneyless society could estimate what is likely to be needed
over a given period of time (as expressed as physical quantities of
definite types and sorts of objects). As he argued, "calculation in
natura in an economy without exchange can embrace consumption-goods
only." [Collectivist Economic Planning, F.A. Von Hayek (ed.), p. 104]
Mises' argument is that the next step, working out which productive
methods to employ, would not be possible, or at least would not be
able to be done "rationally," i.e. avoiding waste and inefficiency.
As he argues, the evaluation of producer goods "can only be done
with some kind of economic calculation. The human mind cannot orient
itself properly among the bewildering mass of intermediate products
and potentialities without such aid. It would simply stand perplexed
before the problems of management and location." [Op. Cit., p. 103]
Mises' claimed that monetary calculation based on market prices is
the only solution.
This argument is not without its force. How can a producer be
expected to know if tin is a better use of resources than iron
when creating a product if all they know is that iron and tin
are available and suitable for their purpose? Or, if we have
a consumer good which can be made with A + 2B or 2A + B
(where A and B are both input factors such as steel, oil
electricity, etc.) how can we tell which method is more efficient
(i.e. which one used least resources and so left the most
over for other uses)? With market prices, Mises' argued, it
is simple. If the iron cost $5 and tin $4, then tin should be
used. Similarly, if A cost $10 and B $5, then clearly method
one would be the most efficient ($20 versus $25). Without
the market, von Mises argued, such a decision would be impossible
and so every decision would be a "leap in the dark."
However, Mises' argument is based on a number of flawed assumptions.
Firstly, he assumes a centralised, planned economy. While this
was a common idea in Marxian social democracy (and the Leninism
that came from it), it is rejected by anarchism. No small body
of people can be expected to know what happens in society ("No
single brain nor any bureau of brains can see to this organisation,"
in the words of Issac Puente [Libertarian Communism, p. 29]). As
Bakunin argued, it would lead in practice to "an extremely complex
government. This government will not content itself with administering
and governing the masses politically . . . it will also administer the
masses economically, concentrating in the hands of the State [all
economic and social activity] . . . All that will demand an immense
knowledge and many heads 'overflowing with brains' in this government.
It will be the reign of scientific intelligence, the most aristocratic,
despotic, arrogant, and elitist of all regimes. There will be a new
class, a new hierarchy . . . Such a regime will not fail to arouse
very considerable discontent in the masses of the people, and in order
to keep them in check . . .[a] considerable armed force [would be
required]." [Bakunin on Anarchism, p. 319] Hence anarchists can
agree with Mises: central planning cannot work in practice. However,
socialist ideas are not limited to Marxian Social Democracy, and so
von Mises ignores far more socialistic ideas than he attacks.
His next assumption is equally flawed. This is that without the market,
no information is passed between producers beyond the final outcome of
production. In other words, he assumes that the final product is all that
counts in evaluating its use. Needless to say, it is true that without
more information than the name of a given product, it is impossible to
determine whether using it would be an efficient utilisation of resources.
But von Mises misunderstands the basic concept of use-value, namely the
utility of a good to the consumer of it. As Adam Buick and John Crump
point out, "at the level of the individual production unit or industry,
the only calculations that would be necessary in socialism would be
calculations in kind. On the one side would be recorded the resources
(materials, energy, equipment, labour) used up in production and on the
other the amount of good produced, together with any by-products. . . .
Socialist production is simply the production of use values from use
values, and nothing more." [State Capitalism: The Wages System Under
New Management, p. 137]
The generation and communication of such information implies a
decentralised, horizontal network between producers and consumers.
This is because what counts as a use-value can only be determined
by those directly using it. Thus the production of use-values from
use-values cannot be achieved via central planning, as the central
planners have no notion of the use-value of the goods being used
or produced. Such knowledge lies in many hands, dispersed throughout
society, and so socialist production implies decentralisation.
Capitalist ideologues claim that the market allows the utilisation
of such dispersed knowledge, but as John O'Neil notes, "the market
may be one way in which dispersed knowledge can be put to good
effect. It is not . . . the only way." [Ecology, Policy and
Politics, p. 118]
So, in order to determine if a specific good is useful to a person, that
person needs to know its "cost." Under capitalism, the notion of cost has
been so associated with price that we have to put the word "cost" in
quotation marks. However, the real cost of, say, writing a book, is not
a sum of money but so much paper, so much energy, so much ink, so much
human labour. In order to make a rational decision on whether a given good
is better for meeting a given need than another, the would-be consumer
requires this information. However, under capitalism this information
is hidden by the price.
Moreover, a purely market-based system leaves out information on
which to base rational resource allocations (or, at the very least,
hides it). The reason for this is that a market system measures, at
best, preferences of individual buyers among the available options.
This assumes that all the pertinent use-values that are to be outcomes of
production are things that are to be consumed by the individual, rather
than use-values that are collectively enjoyed (like clean air). Prices
in the market do not measure social costs or externalities, meaning
that such costs are not reflected in the price and so you cannot have
a rational price system. Similarly, if the market measures only
preferences amongst things that can be monopolised and sold to
individuals, as distinguished from values that are enjoyed
collectively, then it follows that information necessary for
rational decision-making in production is not provided by the market.
In other words, prices hide the actual costs that production involved
for the individual, society, and the environment, and instead boils
everything down into one factor, namely price. There is a lack of
dialogue and information between producer and consumer. As John
O'Neil argues, "the market distributes a little information and
. . . blocks the distribution of a great deal [more]. . . The
educative dialogue exists not through the market, but alongside
of it." [Ecology, Policy and Politics, p. 143]
In the words of Joan Robinson:
Indeed, prices often mis-value goods as companies can gain a
competitive advantage by passing costs onto society (in the form
of pollution, for example, or de-skilling workers, increasing
job insecurity, and so on). This externalisation of costs is
actually rewarded in the market as consumers seek the lowest
prices, unaware of the reasons why it is lower (such information
cannot be gathered from looking at the price). Even if we assume
that such activity is penalised by fines later, the damage is
still done and cannot be undone. Indeed, the company may be able
to weather the fines due to the profits it originally made by
externalising costs.
And do prices actually reflect costs, even assuming that they
accurately reflect social costs and externalities? The question
of profit, the reward for owning capital and allowing others to
use it, is hardly a cost in the same way as labour, resources and
so on (attempts to explain profits as an equivalent sacrifice as
labour have always been ridiculous and quickly dropped). When
looking at prices to evaluate efficient use for goods, you cannot
actually tell by the price if this is so. Two goods may have
the same price, but profit levels (perhaps under the influence
of market power) may be such that one has a higher cost price
than another. The price mechanism fails to indicate which uses
least resources as it is influenced by market power. Indeed,
as Takis Fotopoulos notes, "[i]f . . . both central planning
and the market economy inevitably lead to concentrations of
power, then neither the former nor the latter can produce the
sort of information flows and incentives which are necessary
for the best functioning of any economic system." [Towards an
Inclusive Democracy, p. 252] Moreover, a good produced under
a authoritarian state which represses its workforce would have
a lower price than one produced in a country which allowed
unions to organise and had basic human rights. The repression
would force down the cost of labour, so making the good in
question appear as a more "efficient" use of resources. In
other words, the market can mask inhumanity as "efficiency"
and actually reward that behaviour by market share.
Simply put, prices cannot be taken to reflect real costs
any more that they can reflect the social expression of
the valuation of goods. They are the result of a conflict
waged over these goods and those that acted as their inputs
(including, of course, labour). Market and social power,
much more than need or resource usage, decides the issue.
The inequality in the means of purchasers, in the market
power of firms and in the bargaining position of labour
and capital all play their part, so distorting any
relationship a price may have to its costs in terms of
resource use. Prices are misshapen. Little wonder Kropotkin
asked whether "are we not yet bound to analyse that
compound result we call price rather than to accept
it as a supreme and blind ruler of our actions?" [Fields,
Factories and Workshops Tomorrow, p. 71]
Von Mises argued that anyone "who wished to make calculations
in regard to a complicated process of production will
immediately notice whether he has worked more economically
than others or not; if he finds, from reference to the
exchange values obtaining in the market, that he will not
be able to produce profitably, this shows that others
understand how to make better use of the higher-order
goods in question." [Op. Cit., pp. 97-8] However, this only
shows whether someone has worked more profitably that
others, not whether it is more economical. Market power
automatically muddles this issue, as does the possibility
of reducing the monetary cost of production by recklessly
exploiting natural resources and labour, polluting, or
otherwise passing costs onto others. Similarly, the issue
of wealth inequality is important, for if the production
of luxury goods proves more profitable than basic essentials
for the poor does this show that producing the former is
a better use of resources? And, of course, the key issue
of the relative strength of market power between workers
and capitalists plays a key role in determining "profitably."
Therefore, the claim that prices reflect real costs and so
efficiency can be faulted on two levels. Moreover, without
using another means of cost accounting instead of prices
how can supporters of capitalism know there is a correlation
between actual and price costs? One can determine whether
such a correlation exists by measuring one against the
other. If this cannot be done, then the claim that prices
measure costs is a tautology (in that a price represents a
cost and we know that it is a cost because it has a price).
If it can be done, then we can calculate costs in some other
sense than in market prices and so that argument that only
market prices represent costs falls.
Similarly, von Mises assumes that capitalism can accurately
estimate the costs of investing. Using the example of a
new railroad, he asks "[s]hould it be built at all, and if
so, which out of the number of conceivable roads should be
built? In a competitive and monetary economy, this question
would be answered by monetary calculation. The new road
will render less expensive the transport of some goods,
and it may be possible to calculate whether this reduction
of expense transcends that involved in the building and
upkeep of the new line." [Op. Cit., pp. 108-9] However,
this is not the case. An investment decision is made
based on estimating possible future events. The new
line may reduce transportation costs but the expected
reduction may be relatively less that predicted, so causing
the investment to fail. Moreover, an investment may fail
while it meets a social need simply because people may
need the product but cannot afford to pay for it. In
other words, von Mises example hardly shows the superiority
of monetary calculation as the decision to invest under
capitalism is as much a leap in the dark as it would
be an a socialist system (the future is uncertain, in
other words).
Lastly, Mises assumes that the market is a rational system. As
O'Neil points out, "Von Mises' earlier arguments against socialist
planning turned on an assumption about commensurability. His central
argument was that rational economic decision-making required a single
measure on the basis of which the worth of alternative states of affairs
could be calculated and compared." [Op. Cit., p. 115] This central
assumption was unchallenged by Taylor and Lange in their defence of
"socialism", meaning that from the start the debate against von Mises
was defensive and based on the argument that socialist planning could
mimic the market and produce results which were efficient from a
capitalist point of view. Thus, no one challenged Mises' assumptions
either about the centrally planned nature of socialism or about the
market being a rational system. Little wonder that the debate put
the state socialists on the defensive. As their system was little
more than state capitalism, it is unlikely they would attack the
fundamentals of capitalism (namely wage labour and centralisation).
So, is capitalism rational? Well, it does exist, but that does not prove
that it is rational. The Catholic Church exists, but that shows nothing
about the rationality of the institution. To answer the question, we must
return to our earlier point that using prices means basing all decision
making on one criterion and ignoring all others. This has seriously
irrational effects, because the managers of capitalist enterprises are
obliged to choose technical means of production which produce the
cheapest results. All other considerations are subordinate, in particular
the health and welfare of the producers and the effects on the environment.
The harmful effects resulting from "rational" capitalist production
methods have long been pointed out. For example, speed-ups, pain, stress,
accidents, boredom, overwork, long hours and so on all harm the physical
and mental health of those involved, while pollution, the destruction of
the environment, and the exhaustion of non-renewable resources all have
serious effects on both the planet and those who live on it. As E. F.
Schumacher argued:
Schumacher stressed that "about the fragmentary nature of the
judgements of economics there can be no doubt whatever. Even
with the narrow compass of the economic calculus, these
judgements are necessarily and methodically narrow. For one
thing, they give vastly more weight to the short then to the
long term. . . [S]econd, they are based on a definition of
cost which excludes all 'free goods' . . . [such as the]
environment, except for those parts that have been privately
appropriated. This means that an activity can be economic
although it plays hell with the environment, and that a
competing activity, if at some cost it protects and conserves
the environment, will be uneconomic." Moreover, "[d]o not overlook
the words 'to those who undertake it.' It is a great error to
assume, for instance, that the methodology of economics is
normally applied to determine whether an activity carried
out by a group within society yields a profit to society
as a whole." [Op. Cit., p. 29]
To claim that prices include all these "externalities" is
nonsense. If they did, we would not see capital moving to
third-world countries with few or no anti-pollution or
labour laws. At best, the "cost" of pollution would only
be included in a price if the company was sued successfully
in court for damages -- in other words, once the damage is
done. Ultimately, companies have a strong interest in buying
inputs with the lowest prices, regardless of how they are
produced. As Noam Chomsky points out, "[i]n a true capitalist
society, . . . socially responsible behaviour would be
penalised quickly in that competitors, lacking such social
responsibility, would supplant anyone so misguided as to be
concerned with something other than private benefit."
[Language and Politics, p. 301] It is reductionist
accounting and its accompanying "ethics of mathematics"
that produces the "irrationality of rationality" which
plagues capitalism's exclusive reliance on prices (i.e.
profits) to measure "efficiency." Moreover, the critique
we have just sketched ignores the periodic crises that hit
capitalist industry and economies to produce massive
unemployment and social disruption -- crises that are
due to subjective and objective pressures on the operation
of the price mechanism (see section C.7
for details).
Ironically enough, von Mises also pointed to the irrational nature
of the price mechanism. He states (correctly) that there are
"extra-economic" elements which "monetary calculation cannot
embrace" because of "its very nature." He acknowledges that
these "considerations themselves can scarcely be termed
irrational" and, as examples, lists "[i]n any place where
men regard as significant the beauty of a neighbourhood or
a building, the health, happiness and contentment of mankind,
the honour of individuals or nations." He states that "they are
just as much motive forces of rational conduct as are economic
factors" but they "do not enter into exchange relationships."
[von Mises, Op. Cit., p. 99] How rational is an economic system
which ignores the "health, happiness and contentment" of people?
Or the beauty of their surroundings? Which, moreover, penalises
those who take these factors into consideration? For anarchists,
von Mises comments indicate well the inverted logic of capitalism.
That von Mises can support a system which ignores the needs of
individuals, their happiness, health, surroundings, environment
and so on by "its very nature" says a lot (his suggestion
that we assign monetary values to such dimensions [p. 100]
begs the question and has plausibility only if it assumes what
it is supposed to prove. Indeed, the person who would put
a price on friendship simply would have no friends. They
simply do not understand what friendship is and are thereby
excluded from much which is best in human life. Likewise
for other "extra-economic" goods that individual's value,
such as beautiful places, happiness, the environment and
so on).
Under communist-anarchism, the decision-making system used to
determine the best use of resources is not more or less "efficient"
than market allocation, because it goes beyond the market-based
concept of "efficiency." It does not seek to mimic the market but
to do what the market fails to do. This is important, because the
market is not the rational system its defenders often claim. While
reducing all decisions to one common factor is, without a doubt,
an easy method of decision making, it also has serious side-effects
because of its reductionistic basis (as discussed further in the
next section). As Einstein once pointed out, things should be made
as simple as possible but not simplistic. The market makes decision
making simplistic and generates a host of irrationalities and
dehumanising effects.
Sections I.4.4 and
I.4.5 discusses one possible framework for a
communist economic decision-making process. Such a framework is
necessary because "an appeal to a necessary role for practical
judgements in decision making is not to deny any role to general
principles. Neither . . . does it deny any place for the use of
technical rules and algorithmic procedures . . . Moreover, there
is a necessary role for rules of thumb, standard procedures, the
default procedures and institutional arrangements that can be
followed unreflectively and which reduce the scope for explicit
judgements comparing different states of affairs. There are limits
in time, efficient use of resources and the dispersal of knowledge
which require rules and institutions. Such rules and institutions
can fee us for space and time for reflective judgements where
they matter most." [John O'Neil, Op. Cit., pp. 117-8]
While these algorithmic procedures and guidelines can, and indeed
should be, able to be calculated by hand, it is likely that
computers will be extensively used to take input data and process
it into a suitable format. Indeed, many capitalist companies
have software which records raw material inputs and finished
product into databases and spreadsheets. Such software could be
the basis of a libertarian communist decision making algorithm.
Of course, currently such data is submerged beneath money and
does not take into account externalities and the nature of the
work involved (as would be the case in an anarchist society).
However, this does not limit their potential or deny that
communist use of such software can be used to inform decisions.
This, we must note, indicates that communist society would
use various "aids to the mind" to help individuals and groups
to make economic decisions. This would reduce the complexity
of economic decision making, by allowing different options
and resources to be compared to each other. Hence the
complexity of economic decision making in an economy with
a multitude of goods can be reduced by the use of rational
algorithmic procedures and methods to aid the process. Such
tools would aid decision making, not dominate it as these
decisions affect humans and the planet and should never be
made automatically.
It is useful to remember that von Mises argued that it is
the complexity of a modern economy that ensures money is
required. As he put it, "[w]ithin the narrow confines of
household economy, for instance, where the father can
supervise the entire economic management, it is possible
to determine the significance of changes in the processes
of production, without such aids to the mind [as monetary
calculation], and yet with more or less of accuracy." However,
"the mind of one man alone -- be it ever so cunning, is too
weak to grasp the importance of any single one among the
countlessly many goods of higher order. No single man
can ever master all the possibilities of production,
innumerable as they are, as to be in a position to make
straightway evident judgements of value without the aid
of some system of computation." [Op. Cit., p. 102]
That being the case, a libertarian communist society would
quickly develop the means of comparing the real impact of
specific "higher order" goods in terms of their real costs
(i.e. the amount of labour, energy and raw materials used
plus any social and ecological costs). As we noted above,
this essential decision making information would have to
be recorded and communicated in a communist society and used
to evaluate different options using an agreed methods of
comparison. This methods of comparison differs drastically
from the price mechanism as it recognises that mindless,
automatic calculation is impossible in social choices. Such
choices have an unavoidable ethical and political dimension
simply because they involve other human beings and the
environment. As von Mises himself acknowledges, monetary
calculation does not capture such dimensions. We, therefore,
need to employ practical judgement in making choices aided
by a full understanding of the real social and ecological
costs involved using, of course, the appropriate "aids to
the mind."
In addition, a decentralised system will by necessity have
to compare less alternatives as local knowledge will eliminate
many of the options available. As von Mises acknowledged,
a "household economy" can make economic decisions without
money. Being more decentralised than capitalism, a libertarian
communist economy will, therefore, be able to do so as well,
particularly when it uses the appropriate "aids to the mind"
to evaluate external resources versus locally produced ones.
Given that an anarchist society would be complex and integrated,
such aids would be essential but, due to its decentralised nature,
it need not embrace the price mechanism. It can evaluate the
efficiency of its decisions by looking at the real costs
involved to society rather than embrace the distorted system
of costing explicit in the price mechanism (as Kropotkin once
put it, "if we analyse price" we must "make a distinction
between its different elements" in order to make rationale
allocation and investment decisions [Op. Cit., p. 72]).
Thus, anarchists argue that von Mises' claims were wrong.
Communism is viable, but only if it is libertarian communism.
Economic decision making in a moneyless "economy" is possible.
Indeed, it could be argued that von Mises' argument exposes
difficulties for capitalism rather than for anarchism. Capitalist
"efficiency" is hardly rational and for a fully human and
ecological efficiency, libertarian communism is required. As
two libertarian socialists point out, "socialist society still
has to be concerned with using resources efficiently and
rationally, but the criteria of 'efficiency' and 'rationality'
are not the same as they are under capitalism." [Buick and
Crump, Op. Cit., p. 137]
So, to claim that communism will be "more" efficient than
capitalism or vice versa misses the point. Libertarian
communism will be "efficient" in a totally different way
and people will act in ways considered "irrational" only
under the logic of capitalism.
A lot. Markets soon result in what are termed "market forces,"
"impersonal" forces which ensure that the people in the economy
do what is required of them in order for the economy to function.
The market system, in capitalist apologetics, is presented to appear
as a regime of freedom where no one forces anyone to do anything,
where we "freely" exchange with others as we see fit. However, the
facts of the matter are somewhat different, since the market often
ensures that people act in ways opposite to what they desire or
forces them to accept "free agreements" which they may not actually
desire. Wage labour is the most obvious example of this, for, as we
indicated in section B.4, most people have
little option but to agree to work for others.
We must stress here that not all anarchists are opposed to the market.
Individualist anarchists favour it while Proudhon wanted to modify
it while retaining competition. For many, the market equals capitalism.
However, this is not the case as it ignores the fundamental issue of
(economic) class, namely who owns the means of production. Capitalism
is unique in that it is based on wage labour, i.e. a market for labour
as workers do not own their own means of production and have to sell
themselves to those who do. Thus it is entirely possible for a market
to exist within a society and for that society not to be capitalist.
For example, a society of independent artisans and peasants selling
their product on the market would not be capitalist as workers would
own and control their means of production and so wage labour (and so
capitalism) would not exist. Similarly, Proudhon's competitive system
of self-managed co-operatives and mutual banks would be non-capitalist
(and socialist) for the same reason. Anarchists object to capitalism
due to the quality of the social relationships it generates between
people (i.e. it generates authoritarian ones). If these relationships
are eliminated then the kinds of ownership which do so are anarchistic.
Thus the issue of ownership matters only in-so-far it generates
relationships of the desired kind (i.e. those based on liberty,
equality and solidarity). To concentrate purely on "markets" or
"property" means to ignore social relationships and the key aspect
of capitalism, namely wage labour. That right-wingers do this is
understandable (to hide the authoritarian core of capitalism) but
why (libertarian or other) socialists should do so is less clear.
In this section of the FAQ we discuss anarchist objections to the
market as such rather than the capitalist market. The workings of
the market do have problems with them which are independent of, or
made worse by, the existence of wage-labour. It is these problems
which make most anarchists hostile to the market and so desire a
communist-anarchist society.
So, even if we assume a mutualist or market-socialist system of
competing self-managed workplaces, it's clear that market forces
would soon result in many irrationalities occurring. Most obviously,
operating in a market means submitting to the profit criterion. This
means that however much workers might want to employ social criteria,
they cannot. To ignore profitability would cause their firm to go
bankrupt. Markets therefore create conditions that compel workers
and consumers to decide things which are not be in their interest,
for example introducing deskilling or polluting technology, longer
hours, and so on. We could also point to the numerous industrial
deaths and accidents which are due to market forces making it
unprofitable to introduce adequate safety equipment or working
conditions, (conservative estimates for industrial deaths in the
USA are between 14 000 and 25 000 per year plus over 2 million
disabled), or to increased pollution and stress levels which
shorten life spans.
In addition, a market-based system can result in what we have
termed "the ethics of mathematics," where things (particularly
money) become more important than people. This can have a
de-humanising effect, with people becoming cold-hearted
calculators who put profits before people. This can be seen
in capitalism, where economic decisions are far more important
than ethical ones. And such an inhuman mentality can be
rewarded on the market. Merit does not "necessarily" breed
success, and the successful do not "necessarily" have merit.
The truth is that, in the words of Noam Chomsky, "wealth and
power tend to accrue to those who are ruthless, cunning,
avaricious, self-seeking, lacking in sympathy and compassion,
subservient to authority and willing to abandon principle for
material gain, and so on. . . Such qualities might be just the
valuable ones for a war of all against all." [For Reasons
of State, pp. 139-140] Thorstein Veblen elaborated at length
on this theme in The Leisure Class, a classic analysis of
capitalist psychology. Needless to be said, if the market
does reward such people with success it can hardly be considered
as a good thing. A system which elevates making money to
the position of the most important individual activity will
obviously result in the degrading of human values and an
increase in neurotic and psychotic behaviour.
Little wonder, as Alfie Kohn has argued, competition can have
serious negative effects on us outside of work, with it damaging
both our personal psychology and our interpersonal relationships
(see his excellent book No Contest for details). The market can
impoverish us as individuals, sabotaging self-esteem, promoting
conformity, ruining relationships and making use less than what
we could be. This is a problem of markets as such, not only
capitalist ones.
Any market system is also marked by a continuing need to expand
production and consumption. This means that market forces ensure
that work continually has to expand, causing potentially destructive
results for both people and the planet. Competition ensures that
we can never take it easy, for as Max Stirner argued, "[r]estless
acquisition does not let us take breath, take a calm enjoyment.
We do not get the comfort of our possessions. . . Hence it is at
any rate helpful that we come to an agreement about human labours
that they may not, as under competition, claim all our time and toil."
[The Ego and Its Own, p. 268]
Value needs to be created, and that can only be done by labour. It is
ironic that supporters of capitalism, while usually saying that "work" is
and always will be hell, support an economic system which must continually
expand that "work" (i.e. labour) while deskilling and automating it and
those who do it. Anarchists, in contrast, argue that work need not be
hell, and indeed, that when enriched by skills and self-management, can be
enjoyable. We go further and argue that work need not take all our time
and that labour (i.e. unwanted and boring work) can and must be
minimised. Hence, while the "anti-work" capitalist submits humanity to
more and more labour, the anarchist desires the liberation of "work" and
the end of "labour" as a way of life.
In addition, market decisions are crucially conditioned by the purchasing
power of those income groups that can back their demands with money. The
market is a continuous bidding for goods, resources, and services, with
those who have the most purchasing power the winners. This means that the
market system is the worst one for allocating resources when purchasing
power is unequally distributed. This is why orthodox economists make the
convenient assumption of a "given distribution of income" when they try
to show that a market-based allocation of resources is the best one (for
example, "Pareto optimality"). While a mutualist system should reduce
inequality drastically, it cannot be assumed that inequalities will
not increase over time. This is because inequalities in resources
leads to inequalities of power on the market. Any trade or contract
will benefit the powerful more than the powerless, so re-enforcing
and potentially increasing the inequalities and power between the
parties. This could, over time, lead to a return to capitalism (as
Proudhon himself noted, the "original equality [between contractor
and workmen] was bound to disappear through the advantageous
position of the master and the dependence of the wage-workers."
[System of Economical Contradictions, p. 201]).
With the means of life monopolised by one class, the effects of market
forces and unequal purchasing power can be terrible. As Allan Engler
points out, "[w]hen people are denied access to the means of livelihood,
the invisible hand of market forces does not intervene on their behalf.
Equilibrium between supply and demand has no necessary connection with
human need. For example, assume a country of one million people in which
900,000 are without means of livelihood. One million bushels of wheat are
produced. The entire crop is sold to 100,000 people at $10 a bushel.
Supply and demand are in equilibrium, yet 900 000 people will face
starvation." [Apostles of Greed, pp. 50-51] In case anyone thinks that
this just happens in theory, the example of African countries hit by
famine gives a classic example of this occurring in practice. There, rich
landowners grow cash crops and export food to the developed nations while
millions starve in their own.
Lastly, there are the distributional consequences of the market system.
As markets inform by 'exit' only -- some products find a market, others
do not -- 'voice' is absent. The operation of 'exit' rather than 'voice'
leaves behind those without power in the marketplace. For example, the
wealthy do not buy food poisoned with additives, the poor consume it. This
means a division grows between two environments: one inhabited by those
with wealth and one inhabited by those without it. As can be seen from
the current capitalist practice of "exporting pollution" to developing
countries, this problem can have serious ecological and social effects.
So, far from the market being a "democracy" based on "one dollar,
one vote," it is an oligarchy in which, for example, the "79 000
Americans who earned the minimum wage in 1987 have the same influence
[or "vote"] as Michael Milken, who 'earned' as much as all of them
combined." [Michael Albert and Robin Hahnel, The Political Economy
of Participatory Economics, p. 21]
In other words, markets are always biased in favour of effective demand,
i.e. in favour of the demands of people with money. A market may be
Pareto-optimal, but it can never (except in the imaginary abstractions
of mathematical welfare economics) allocate the necessities of life to
those who need them the most.
In addition, markets never internalise external costs. Two people
(or companies) who strike a market-rational bargain between themselves
need not consider the consequences of their bargain for other people
outside their bargain, nor the consequences for the earth. Thus
market exchanges are never bilateral agreements as their effects
impact on the wider society (in terms of, say, pollution, inequality
and so on). The market also ignores the needs of future generations
as they always discount the value of the long term future. A payment
to be made 1 000 years from now (a mere speck in geological time) has
a market value of virtually zero according to any commonly used discount
rate. Even 50 years in the future cannot be adequately considered as
competitive pressures force a short term perspective on people harmful
to present and future generations, plus the ecology of the planet.
Also, markets do not reflect the values of things we do not put a price
upon (as we argued in section B.5).
It cannot protect wilderness, for
example, simply because it requires people to turn it into property and
sell it as a commodity. If you cannot afford to visit the new commodity,
the market turns it into something else, no matter how much you value
it. This ensures that the market cannot really provide the information
necessary for rational-decision making and so resources are inefficiently
allocated and we all suffer from the consequences of that.
Thus are plenty of reasons for concluding that efficiency and the
market not only do not necessarily coincide, but, indeed, necessarily
do not coincide. Indeed, rather than respond to individual needs,
the market responds to money (more correctly, profit), which by its
very nature provides a distorted indication of individual preferences
(and does not take into account values which are enjoyed collectively,
such as clean air, or potentially enjoyed, such as the wilderness a
person may never visit but desires to see exist and protected).
So, for all its talk of "invisible hands" and "individual freedom,"
capitalism ignores the actual living individual in the economy and
society. The "individual rights" on which capitalists' base their "free"
system are said to be "man's rights," on what "man needs." But "man,"
after all, is only an abstraction, not a real living being. By talking
about "man" and basing "rights" on what this abstraction is said to need,
capitalism and statism ignore the uniqueness of each person and the
conditions required to develop that uniqueness. As Max Stirner pointed
out, "[h]e who is infatuated with Man leaves persons out of account so
far as that infatuation exists, and floats in an ideal, sacred interest.
Man, you see, is not a person, but an ideal, a spook." [The Ego and Its
Own, p. 79] And like all spooks, it requires sacrifice -- the sacrifice
of individuality to hierarchy and authority.
This anti-individual biases in capitalism can be seen by its top-down
nature and the newspeak used to disguise its reality. For example,
there is what is called "increasing flexibility of the labour market."
"Flexibility" sounds great: rigid structures are unappealing and hardly
suitable for human growth. In reality, as Noam Chomsky points out
"[f]lexibility means insecurity. It means you go to bed at night and don't
know if you have a job tomorrow morning. That's called flexibility of the
labour market, and any economist can explain that's a good thing for the
economy, where by 'the economy' now we understand profit-making. We
don't mean by 'the economy' the way people live. That's good for the
economy, and temporary jobs increase flexibility. Low wages also
increase job insecurity. They keep inflation low. That's good for people
who have money, say, bondholders. So these all contribute to what's called
a 'healthy economy,' meaning one with very high profits. Profits are doing
fine. Corporate profits are zooming. But for most of the population, very
grim circumstances. And grim circumstances, without much prospect of a
future, may lead to constructive social action, but where that's lacking
they express themselves in violence." [Keeping the Rabble in Line,
pp. 283-4]
This does not mean that social anarchists propose to "ban" the market --
far from it. This would be impossible. What we do propose is to convince
people that a profit-based market system has distinctly bad effects on
individuals, society and the planet's ecology, and that we can organise
our common activity to replace it with libertarian communism. As Max
Stirner argued, "competition. . .has a continued existence. . . [because]
all do not attend to their affair and come to an understanding
with each other about it. . . .Abolishing competition is not equivalent
to favouring the guild. The difference is this: In the guild baking,
etc., is the affair of the guild-brothers; in competition, the affair
of chance competitors; in the union, of those who require baked goods,
and therefore my affair, yours, the affair of neither guildic nor the
concessionary baker, but the affair of the united." [Ego and Its Own,
p. 275]
Therefore, social anarchists do not appeal to "altruism" in their
struggle against the de-humanising effects of the market, but rather,
to egoism: the simple fact that co-operation and mutual aid is in our
best interests as individuals. By co-operating and controlling "the
affairs of the united," we can ensure a free society which is worth
living in, one in which the individual is not crushed by market forces
and has time to fully develop his or her individuality and uniqueness:
Some "Libertarian" capitalists say yes to this question, arguing that
the Labour Theory of Value (LTV) does not imply socialism but what they
call "self-managed" capitalism. This, however, is not a valid inference.
The LTV can imply both socialism (selling the product of ones labour)
and communism (distribution according to need). The theory is a critique
of capitalism, not necessarily the basis of a socialist economy, although
it can be considered this as well. For example, Proudhon used the LTV
as the foundation of his proposals for mutual banking and co-operatives,
while Robert Owen used it as the basis of his system of labour notes.
Marx, on the other hand, use the LTV purely as a critique of capitalism
while hoping for communism.
In other words, though a system of co-operative selling on the market
(what is mistakenly termed "self-managed" capitalism by some) or exchanging
labour-time values would not be communism, it is not capitalism. This
is because the workers are not separated from the means of production. Therefore, right-libertarians' attempts to claim that it is capitalism
are false, an example of misinformed insistence that virtually every
economic system, bar state socialism and feudalism, is capitalist.
Some libertarian Marxists (as well as Leninists) claim, similarly,
that non-communist forms of socialism are also just "self-managed"
capitalism. Why libertarian Marxists desire to reduce the choices
facing humanity to either communism or some form of capitalism is
frankly strange, but also understandable because of the potential
dehumanising effects of market systems seen under capitalism.
However, it could be argued that communism (based on free access and
communal ownership of resources) would mean that workers are exploited
by non-workers (the young, the sick, the elderly and so on). While this
may reflect the sad lack of personal empathy (and so ethics) of the
pro-capitalist defenders of this argument, it totally misses the point
as far as communist anarchism goes. This is because of two reasons.
Firstly, "anarchist communism . . . means voluntary communism, communism
from free choice" [A. Berkman, ABC of Anarchism, p. 11], which means it
is not imposed on anyone but is created and practised only by those who
believe in it. Therefore it would be up to the communities and syndicates
to decide how they wish to distribute the products of their labour and
individuals to join, or create, those that meet their ideas of right
and wrong. Some may decide on equal pay, others on payment in terms
of labour time, yet others on communistic associations (we have indicated
elsewhere why most anarchists consider that communism would be in people's
self-interest, so we will not repeat ourselves here). The important thing
to realise is that co-operatives will decide what to do with their output,
whether to exchange it or to distribute it freely. Hence, because it is
based on free agreement, anarchist communism cannot be exploitative.
Members of a co-operative which is communistic are free to leave, after
all. Needless to say, the co-operatives will usually distribute their
product to others within their confederation and exchange with the
non-communist ones in a different manner. We say "usually," for in
the case of emergencies like earthquakes and so forth the situation
would call for mutual aid.
Secondly, the so-called "non-workers" have been, or will be, workers.
As the noted Spanish anarchist De Santillan pointed out, "[n]aturally,
children, the aged and the sick are not considered parasites. The
children will be productive when they grow up. The aged have already
made their contribution to social wealth and the sick are only
temporarily unproductive." [After the Revolution, p. 20] In other
words, over their life time, everyone contributes to society and
it so using the "account book" mentality of capitalism misses the
point.
The reason why capitalism is exploitative is that workers have to
agree to give the product of their labour to another (the boss) in
order to be employed in the first place (see
section B.4). Capitalists
would not remain capitalists if their capital did not produce a profit.
In libertarian communism, by contrast, the workers themselves agree to
distribute part of their product to others (i.e. society as a whole,
their neighbours, friends, and so forth). It is based on free agreement,
while capitalism is marked by power, authority, and the firm hand of
market forces. As resources are held in common, people have the option
of working alone if they so desired.
Similarly, capitalism by its very nature as a "grow or die" system,
needs to expand into new areas, meaning that unlike libertarian
socialism, it will attempt to undermine and replace other social
systems (usually by force, if history is any guide). As freedom
cannot be given, there is no reason for a libertarian-socialist
system to expand beyond the effect of a "good example" on the
oppressed of capitalist regimes.
I.1.1 Didn't Ludwig von Mises's "calculation argument" prove that
socialism can not work?
I.1.2 Does Mises' argument mean libertarian communism is impossible?
"However divided the old [social-democratic] labour movement
may be by disagreements on various topics, on the question of
socialism it stands united. Hilferding's abstract 'General-Cartel',
Lenin's admiration for the German war socialism and the
German postal service. Kautsky's eternalisation of the
value-price-money economy (desiring to do consciously what
in capitalism is performed by blind market forces). Trotsky's
war communism equipped with supply and demand features, and
Stalin's institutional economics -- all these concepts have
at their base the continuation of the existing conditions
of production. As a matter of fact, they are mere reflections
of what is actually going on in capitalist society. Indeed,
such 'socialism' is discussed today by famous bourgeois
economists like Pigou, Hayek, Robbins, Keynes, to mention
only a few, and has created a considerable literature to
which the socialists now turn for their material."
[Anti-Bolshevik Communism, pp. 80-1]
"In what industry, in what line of business, are the true social
costs of the activity registered in its accounts? Where is the
pricing system that offers the consumer a fair choice between
air to breath and motor cars to drive about in?" [Contribution
to Modern Economics, p. 10]
"But what does it mean when we say that something is uneconomic? . . .
[S]omething is uneconomic when it fails to earn an adequate profit in
terms of money. The method of economics does not, and cannot, produce
any other meaning. . . The judgement of economics . . . is an extremely
fragmentary judgement; out of the large number of aspects which in
real life have to be seen and judged together before a decision can
be taken, economics supplies only one -- whether a money profit
accrues to those who undertake it or not." [Small is Beautiful,
pp. 27-8]
I.1.3 What is wrong with markets anyway?
"Solidarity is therefore the state of being in which Man attains the
greatest degree of security and wellbeing; and therefore egoism itself,
that is the exclusive consideration of one's own interests, impels Man
and human society towards solidarity." [Errico Malatesta, Anarchy, p. 28]
I.1.4 If capitalism is exploitative, then isn't socialism as well?