11 October 2008

Pillar Perfect: Commentary on an irrational interpretation of anarcho-capitalism

one dollar bill burnt istock photo anarchy
This is a commentary on a post by a self-styled anarchist. You can find the entire post here: Pillage Perfect.

I have taken quotations from that page for commentary, much like I did for the tragically lacklustre Serj essay.

As it stands, my understanding is that Anarcho-Capitalists believe that no business shall be regulated by laws, however the Rule of Law would still apply to individuals.

As it stands, my understanding of anarchism is that nobody shall be regulated by a government. The free market is allowed to operate freely, because all affairs of man should be determined by the entities (be they individuals or businesses) concerned on a voluntary basis.

There is no clear definition of anarcho-capitalism used in this post - not even an outside link for reference. The closest to a definition this post gets is the above.

Contrast this definition with a standard definition of anarcho-capitalism, namely a society without any government where the free market rules. The private sector would enforce law. Note that natural law would still apply to both businesses and individuals. The differences are that the law industry is privatised and not ruled by a central monopoly like the state, and that economic practices are not artificially regulated.

Also note that the absence of government is precisely the scenario that anarchism suggests. Anarchism is defined as a society where government is abolished. To criticise Anarcho-Capitalism for not having a regulating agency like the government is to criticise the basic tenet of anarchy of any flavour.

History has shown us that businesses, corporations, land owners (the original "business owners" pre-capitalism), and the like are not, in fact, prone to ethical behavior. If they were, slavery would never have existed. Child labor would never have come about, and worker's rights would never have been an issue.

Capitalism is a system where property is privately owned and where the basic means of production is privately owned. For a business owner – original or not – to exist, capitalism is an a priori.

The original business owners pre-capitalism? That's a contradiction. There can be no business owners pre-capitalism, because owning a private business implies that capitalism is already established.

If one looks at the history of businesses, corporations and land owners, one finds no clear conclusion as to their propensity for ethical behaviour.

The Enron scandal is often sited as an example of the horrors of an unregulated market. This is nothing but an argument from ignorance. Picture a scenario where governments regulate markets absolutely. Would Enron be bankrupt today? No, of course not. They would still be up and running, with no stockholder any wiser as to their dirty tactics.

South Africa's Eskom is an example of the horrors of a regulated market, where competition is kept out and monopolies are kept in place by the divine rule of the government. In an unregulated market, Eskom would - just like Enron - be bankrupt today for exactly the same reason, namely selling commodities they did not have.

In short, having a massive corporation like Enron go bankrupt for not playing nice is an argument for deregulation, and not an argument for regulation. A company that doesn't deliver the goods should go bankrupt, like Enron did. A company that is friendly with the government does not go bankrupt in a regulated economy.

Slavery is a system whereby persons are deprived of personal freedom (including property rights) and forced to perform labour or services. Note that slavery is a pre-capitalist era practice. In fact, depriving individuals of private property rights is the first requisite for slavery to take hold. As a notion that brought about private ownership, capitalism actually brought the end of slavery.

Capitalism is not a system where human beings are held as property. Historically, big businesses and corporations never kept slaves. In fact, big businesses and corporations only came into being with a large dose of deregulation after the Industrial Revolution. Less government control gave rise to more individual autonomy, which gave rise to private ownership.

Slavery thrives in conditions where there are few land owners and a low level of technological development. This is precisely the kind of conditions which are a result of socialism. In African society, which has never been noted for its high level of private ownership nor its high level of technological development, African tribes such as Ashanti of Ghana and the Yoruba of Nigeria historically relied solely on slave trade.

Note that without a government, there would be no slave trade. The slave trade became established when slaves were captured and sold between African governments and their mostly Spanish and Portuguese counterparts. It is thus inaccurate to presume land ownership and slavery go hand in hand, as historically the exact opposite rings true.

In a society where you own the means of your productive capabilities and the means to sell them in a voluntary way, worker rights can never become an issue.

Of course, monopolies are good for the giant business that succeeds at crushing out the competition, but it is inherently bad for individuals, and yes, small businesses.

Not necessarily. A monopoly that is artificially kept in place is bad for everyone. Monopolies do however come and go when they are subjected to the laws of a free market, and by extension the law of supply and demand, as the Enron scandal showed.

A monopoly that is not regulated is actually good for individuals, and yes, small businesses, because of the resulting gaps in the market and because nobody can be kept out of the market by regulation.

There is a huge difference between a monopoly as part of a business cycle and a monopoly that is artificially created and kept in place by regulation. The former is inevitable and transient, the latter is artificial and leads to bad things like a credit crunch. Regulation doesn't solve business cycle problems, it only prolongs them and makes their impact worse.

Taxation is, actually, the largest group plan with the greatest group rate available. Regardless of your opinion about how budgets are made, and if we should have more say in how our taxes are used, you can't argue that the benefits of taxes give us the best bang for our buck.

You could, actually. We are agreed that artificial monopolies are bad? Then we have to conclude that a monopoly of taxation is bad, as it is monopolised by the government. We already established that private ownership leads to personal freedom and wealth. We already established that slavery is a state where your means of production is owned by someone else. How is taxation different? Does the end justify the means? That's like looking at the majestic pyramids and saying slavery is a good idea, because it gets results.

Anarcho-capitalism argues for private ownership of services like law and security precisely because it believes private ownership would greatly increase the efficacy of these services.

The main idea of anarcho-capitalism is to ensure that our governance becomes subject to the rules of perfect competition. This implies that we do not have one centralised government monopolising certain services, but many buyers and sellers who offer the same services, thus resulting in many substitutes for the government.

But who will pay for all of these services? You will! On a higher cost, single payer rate to a privatized company. Leaving the vast majority of people who cannot afford these services out in the cold, and with no access to programs that defend or protect their human rights.

Not exactly. We already established that competition is bad for monopolies, but good for us as individual consumers and small businesses. Instead of a government granting a tender to a company based on favour, tenders would be based on pure economic matters such as cost effectiveness and service delivery. Since there is no monopoly of your tax money and taxation is voluntary, the rates would actually go down (more competition, remember?).

Even if the rates go up, there would be more means to create wealth. In effect, escalating rates would have less effect on the average Joe on the street, because the average Joe on the street would be more wealthy.

Consider the state of the average Chinese person, where the government artificially keeps rates low, with the state of the average Hongkonger, who is largely subjected to the laws of the free market. The average Chinese person still can't afford the subsidised rates, yet the average Hongkonger can afford their largely exorbitant rates.

Since there is more competition, there would be more programs that defend or protect human rights. This means those who cannot afford these services in a monopolised system, would be more likely to afford them in a system with more competition – or start their own such systems!

To whom will the poor complain to about dangerous working conditions? To whom will the employees complain to about not being paid fairly, or at all? To whom will the workers turn to to stop exploitation? Will they complain to the company? Ha! The company will simply fire them, end of problem. Then what will they do?

This is based on several flawed assumptions. Some of these include:
  1. The poor necessarily have dangerous working conditions.

  2. Employees have no way to raise grievances in a system without regulation.

  3. Workers necessarily get exploited and companies will not hear these grievances unless they are required by regulation to do so.

Naturally, in a system with no regulation and thus more competition, for a monopoly to take root would be far more difficult than merely adhering to government regulation and getting on the good side of the one big monopoly.

Secondly, if a worker has grievances, such a worker has several other competitors for which he could work. Besides, we already established that an anarcho-capitalist system prescribes private ownership of property and the means of production – in other words, precisely the private rights that we are without in a centrally controlled or regulated economy. The law in such a system would not collapse, merely the system whereby the government determines law by its own decree and interpretation of the law.

Thirdly, since all workers privately own the means of their production and the fruits of their labour, exploitation can not occur without mutual consent. This is not the case in a regulated system, where you are often forced to belong to a labour union or pension plan against your will or better judgement. Again, the end does not justify the means.

Would this not then, put the corporations into the position of power known as the State? If they are creating, enforcing, and interpreting law, as well as controlling currency (and said value), creating and enforcing policies regarding individuals, does this not make the corporations a government by default?

It simply cannot, because there are no regulations which would grant sanctity or immunity to any one controlling agency. Any such a state would have to remain in place by remaining the most cost effective and delivering the best possible service for the price we as individuals are voluntarily contributing, amidst competition from other suppliers.

We have already seen that – contrary to the interpretation here – anarcho-capitalism is not about the abolishment of individual rights. Instead of promoting one agency to protect individual rights, anarcho-capitalists promote the competition of several such agencies to provide this service.

The poor will actually become poorer, and everyone knows that poverty breeds crime, so they will now be wide open for further victimization, by default. We had might as well close the poor communities in, and spray paint a giant bullseye and an "Open for Pillaging" sign on the walls.

Again, several flawed assumptions in this paragraph, namely:
  • The poor will become poorer.

  • Everyone knows that poverty breeds crime.

  • The poor will get pillaged by the wealthy.

The poor cannot become poorer. You can't take something away from someone who has nothing.

There is no direct link between socio-economic circumstances and crime. There is more evidence to suggest a link between innate intelligence and criminal activity, and broken homes and criminal activity, than between socio-economic circumstances and crime. Everyone simply does not agree on what causes crime and it is misleading to suggest this. It is mere speculation at best.

This paragraph suggests that the wealthy have nothing better to do with their time than to pillage the poor. It is suggested that the poor are lead to crime due to their socio-economic circumstances. If this were true, we would have to hold the converse to be true, namely that desirable socio-economic circumstances would completely get rid of crime. This implies that the wealthy – with advantageous socio-economic circumstances – would not be criminals. Since the wealthy would be the only class who is not inside the closed poor communities, they are the only class who would be in a position to pillage the poor. But then, the supposed cause of the criminal intent of the wealthy is non-existent, because they are in comfortable socio-economic circumstances.

I believe the contradictions are clear.

For all of the complaints about government restrictions on businesses, I read them while shaking my head. Let's look at these restrictions, minimum wage, any business complaining about minimum wage is an admission of guilt, of sorts, of wanting to pay employees less than the minimum amount.

This implies that minimum wage is determined objectively and fairly. For a business to complain about minimum wage is not an admission of anything.

In economies where labour laws are stringent, we find that it is more difficult to find work. This is the case in South Africa, were the desperately poor are not allowed to be hired legally by a business who honestly can't afford minimum wage. A bad job is better than no job. Minimum wages and labour laws keep a large contingent of people outside of the labour market.

If we look to history, what we see is that excessive poverty, plus excessive wealth equals market meltdown.

At what level does wealth become excessive? I can understand that any level of poverty is excessive, but certainly the precise definition of wealth as the state of having a plentiful supply of material goods and money implies excess.

This is actually an admission of guilt: labourers want a plentiful supply of material goods and money by virtue of the fact that they do not understand how someone who works smarter instead of harder is more wealthy. They see surplus, and they want some of that surplus, by nook or by crook. This is a logical fallacy based on the notion of positive rights.

In economics, excessive wealth is an amount of wealth that is accumulated by a person or group that goes so far above the normal amount of wealth it can no longer reasonably be used to purchase items, and thus, sustain an economic market. In other words, the uber-wealthy can only buy so many products, and when they stop buying products because they already have everything, their wealth becomes useless, thus excessive.

Yet more contradictions. In a society where the majority of people live in poverty and the minority is wealthy, any amount of wealth is above the normal level of wealth.

It is also a misnomer to suggest that money in the bank is useless or excessive. We all know how money in the bank contributes to keeping inflation low, because the money supply is down. Less inflation means that the poor do not become poorer (for lack of a better expression), because the value of their money doesn't drop. It follows that a society with the excessively wealthy is actually supporting those in excessive poverty, even if they never spend all their wealth, because they support the overall value of currency.

Historically speaking, those who earned unthinkable amounts of money on their own steam actually dispersed their wealth in reasonable ways before they passed away. Andrew Carnegie is perhaps the most famous example. Bill Gates is another such an example, as is his Microsoft co-founder Paul Allen.

If the poor don't have enough money to continue putting currency into the market, and the wealthy have nothing to buy, what you have is a market failure

Market failure results when optimal allocation of a resources is not attained. It is important to note the difference between optimal allocation and mere allocation as in sharing among everyone with a need for that resource.

In some cases, market failure is a result of minimum wages. Because employers are expected to pay x amount for wages, regardless of what the market demand for the performed labour is, we have a supply of labour without a demand for that labour. This is a market failure, because labour is a resource which is not allocated optimally. Labour is shared, as in allocated indiscriminately, without giving heed to supply and demand.

It is thus a misnomer that market failure implies that a resource like money is hogged by one particular group of a society, because the opposite does not necessarily imply optimal allocation of that resource. Market failure implies an allocation of resources which is not optimal, and has nothing to do with the wealthy with nothing to buy, or the poor with no money to spend.

Because of the law of supply and demand, the prices of goods and services would fluctuate. This means that such an equilibrium, where the poor have nothing to spend and the wealthy have nothing to spend on, is not an undesirable nor permanent state. It also does not imply a market failure.

Either that, or the people pushed into poverty will not try to "climb ladders" but rather stage a revolution, and put a stop to it, anyway.

And cause everyone to be poor. Revolutions like these merely put a stop to wealth, and not to poverty. The good kind of revolution is the kind that takes an economy away from centralised regulation towards a free market. The examples are too many to list. For recent examples, start with Poland and Ireland. For older examples, start with Germany and Austria.

Capitalism should never, under any circumstances, exist without the checks and balances of a State. Which is why Anarchists oppose both State and Capitalism, because the two are linked at the hip.

Actually capitalism and the notion of a state as a controlling enterprise are irreconcilable. To suggest that they are joined at the hip testifies of ignorance with regards to the role of the state and a basic definition of capitalism.

There is also a clear contradiction in claiming to be an anarchist, who calls for the abolishment of the state, and then calling for the regulation of an economic practice like capitalism by a state-like entity. The closest anarchism has come to answering this question is with the minarchism movement, which acknowledges that we do need a state. Kinda doesn't make it anarchy then, which explains why they called it something else.

"No gods, no masters. Against all authority"

While sloganeering like this is likely to impress Che Guevara fans, it is irrational to claim that capitalism should be regulated, then claiming that one is against any gods or masters or authority.

If capitalism is to be regulated, it implies an authority that could regulate it. What makes one an anarchist then, if one calls for such regulation? Isn't a capitalist by definition an anarchist?

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