PDF version of Section I.
I.1 Isn’t libertarian socialism an oxymoron?
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:
- (1) producers (i.e. members of a collective or self-employed artisans);
- (2) those unable to work (i.e. the old, sick and so on, who were producers); or
- (3) the young (i.e. those who will be producers).
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:
“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]
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:
“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]
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:
“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]
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:
“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]
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.