Right-Libertarian “Free Trade” and “Free Markets”: The Exoteric, and Esoteric Version

Quinn Slobodian. “Perfect Capitalism, Imperfect Humans: Race, Migration and the Limits of Ludwig von Mises’s Globalism”1 Contemporary European History (2018), 0: 0, 1-13.

This article does an excellent job of unpacking the statism that is implicit in nominally “laissez-faire” right-libertarian models of free trade and free markets.

By way of background, the main current of what is called “libertarianism” in the United States, and “liberalism” elsewhere, treats the Gilded Age as a satisfactory proxy for the “free market.” See, for example, Jacob Hornberger’s characterization of that period as a close approximation to laissez-faire because… well, read it for yourself:

So, here you have, Richard, a society where there was no income tax, no welfare state to speak of. I mean, there was land grants to the railroads, but there was no Social Security, no Medicare, no Medicaid, no education grants. I think the only real welfare program was pensions to Civil War veterans. And so here you had a society where government didn’t take care of anybody.

No, the government didn’t take care of anybody — except the Robber Barons who got those land grants, whose extent was larger than entire European countries. And the plutocracy as a whole, who inherited the property distribution, wage system, and other structural legacies of centuries of Enclosure, imperial conquest, and enslavement. America itself was sitting on top of a continent stolen from its native population, and enormous tracts of that continent were closed off and granted to privileged absentee owners who went on to exact tribute from those who actually put the land to use. Just read Albert Nock’s account of the scale of land grants and land speculation that prevailed among our “Founding Fathers” in Our Enemy, the State. Slavery may have been formally abolished, but industrial capitalists in the election of 1876 handed over a third of the country to former slave-owners, and allowed them to institute regional Apartheid and reduce the nominally free black population to peonage, in return for a free hand in plundering the rest of the country. Of course those former slave-owners retained their massive concentrations of land that rightfully belonged to the slaves who had worked it for them. So basically all large concentrations of wealth in this ostensibly “laissez-faire” period were the result of past robbery and murder on a scale that boggles the mind, and its nod to “free markets” was simply to say “All right, no more robbery, starting… NOW!” Parrington didn’t call this period the Great Barbecue because of the government’s restraint in taking care of people.

And don’t forget that the state intervention wasn’t relegated to the past. The state actively intervened to stop working people from taking back some of the wealth that was stolen from them. The period from the Great Betrayal of 1877 to the War Hysteria and Red Scares of the Wilson administration were a prolonged civil war in which the railroads, great banks, grain wholesalers, and capital in general, in alliance with the American state, fought ruthlessly to suppress the cooperative, farm populist, and labor movements. Besides the rail barons’ use of differential rates to break the will of the rural farming population and defeat the cooperatives, this war extended to the nationwide repression of the labor and socialist movements after Haymarket, Cleveland’s use of federal troops to break the Pullman Strike, and endless pitched battles by state militias against striking workers from the Copper Wars out west to Homestead. The totalitarian ideology of 100% Americanism, Loyalty, Old Glory and the American Legion was created to socialize American workers into the belief that (hat tip to George Frederick Baer) “The rights and interests of the laboring man will be protected and cared for… by the Christian men of property to whom God in His infinite wisdom has given the control of the property interests of the Country.”

So what it all boils down to is that the Gilded Age is massively statist to its very core; it lives, moves, and has its being in ongoing, pervasive, systemic violence with the state at its core. It is closely interconnected with all the other legacy institutions from the previous blood-soaked centuries in which the peoples of the world were subjugated to capital. But for Hornberger, it’s an adequate approximation of “laissez-faire” because the government did nothing to take care of poor people, while protecting the propertied classes in continued possession of the enormous mountain of everybody else’s stolen loot it sat atop. And Richard Ebeling has the chutzpah to comment in reply with an allusion to Bastiat on “What Is Seen and What Is Not Seen,” which means that irony is officially dead. As I commented at the time:

Individualist anarchist Benjamin Tucker once said of Herbert Spencer that “amid his multitudinous illustrations … of the evils of legislation, he in every instance cites some law passed, ostensibly at least, to protect labor, alleviate suffering, or promote the people’s welfare…” Entirely missing from this discussion is the primary, upward form of income redistribution from poor to rich, through structural intervention to reduce the bargaining power of labor and increase the monopoly returns on accumulated property — a redistribution which dwarfs, many times over, compensatory downward forms of redistribution through the welfare state. Missing are the fundamental ways the state has been in structural alliance with capital — not just some hand-waving at “crony capitalism” and “corporatism” — since the beginning of capitalism five or six hundred years ago.

Returning to Slobodian: The precedents appealed to by right-libertarian advocates of “free trade” are likewise telling, when it comes to all the legacy effects of past robbery and brutalization, and all the ongoing forms of embedded coercion, that are necessary for maintaining their “non-coercive” system. This is true, in particular, of Ludwig von Mises’s lionization of the trade policies pursued under the British Empire following the triumph of the Liberal Party and repeal of the Corn Laws.

Mises and Hayek — unlike many of their most prominent followers today — were not anarcho-capitalists, and were willing to at least obliquely acknowledge the role of the state in maintaining their favored system. Slobodian writes that the term “neoliberal” — which today is applied variously to the global economic model upheld by the Bretton Woods institutions and the rest of the postwar order created by FDR and Truman, and to the Washington Consensus policies prevailing globally since the advent of Reaganism and Thatcherism — was originally coined at the Walter Lippmann Colloquium in 1938 (which, counting Mises and Hayek among its attendees, was sort of a dress rehearsal for the Mont Pèlerin Society, founded nine years later). Although the actual origin of the term “neoliberalism” is contested, and its adoption may have been a contested issue among the Colloquium attendees themselves, the Lippmann Colloquium and Pèlerin Society were key sources of the post-WWII policy currents currently identified as neoliberal. And whether they agreed on the term “neoliberal” as such, they saw their favored agenda as a “renovation of liberalism” in response to the perceived failure of the original liberal order in the 19th century — first through the disintegration of WWI, then through the rise of high national tariffs, and finally through the corporatist national economic policies adopted in response to the Depression and the autarkic models of the USSR, the European fascist regimes, and the Greater East Asian Co-Prosperity Sphere — and the need for a new international order capable of preserving a resurrected liberalism from similar disintegration.

Far from seeing a liberal order as spontaneously emerging, as Slobodian describes it, Mises et al envisioned the need for “a strong state to take a more proactive role in defending the conditions of competition against the disruptive demands of voting publics, organised labour and special interests.” Mises and Hayek, in particular, romanticized the Austro-Hungarian empire as a model in miniature for the kind of international polity required to enforce the neoliberal order. Viewing nationalism as the enemy of economic liberalism, Mises “conceived instead of multinational forms of governance capable of protecting a world of what he called ‘perfect capitalism’ with total global mobility of labour, capital and commodities.”

Mises’s position on what is commonly called “open borders” was, however, ambivalent. Although he saw the Habsburg Empire as the model for a miniature “transnational” order maintaining the free movement of capital, goods, and persons without regard to borders, he gradually came to restrict this vision of perfect labor mobility to (in his view) racially homogeneous areas like Europe that were culturally capable of sustaining such an order. He was more pessimistic regarding the “imperfect human nature” prevailing outside the West. This is the context for Slobodian’s epigram to this article, a quote from Mises’s 1944 Omnipotent Government: “How can we expect that the Hindus, the worshipers of the cow, should grasp the theories of Ricardo and of Bentham?”

At any rate Mises clearly believed in the legitimacy of constitutive state violence in imposing capitalism on societies by force. In a work called Socialism, ironically, he wrote in language that could have plausibly come from Marx’s passages on accumulation that it was a “fundamental social law” for capitalism “to draw the greatest number of human beings into the personal division of labor and the whole earth’s surface into the geographical division of labor.” And lest anyone be deceived by the expression “fundamental social law” that Mises’s triumphal vision simply entailed the expansion of the market through voluntary exchange, Mises spelled out in Nation, State, and Economy (1918) that the colonial wars and genocides carried out by the European powers were justified by the benefits of the “liberal” system that resulted. Although he acknowledged that “one can think only with shudders and anger of the fearful mass murders that prepared the basis for many of the colonial settlements flourishing today,” nevertheless to justify them “one has only to imagine what would have happened if India and China and their hinterland had remained closed to world commerce. Not only each Chinese and each Hindu, but also each European and each American, would be considerably worse off.”

Mises saw the British Empire as by far the best of the European colonial empires, in opening the world to “free trade” and keeping it open by force. In so doing, the Empire overrode the ruled populations’ desires for national self-determination and self-rule and imposed a cosmopolitan transnational order — much like that of Austria-Hungary — on them against their will.

As Oliver MacDonough argued in “The Anti-Imperialism of Free Trade,” the “free trade” of the British Empire, rather than the kind advocated by Cobden and Bright, was far closer to that of Palmerston and the later “Open Door Imperialism” (so called by William Appleman Williams) of the United States. It relied on gunboat diplomacy to open foreign markets and collect debts. And Mises was perfectly fine with that. So anyone who conflates genuine free trade with the kind practiced by polities from the British Empire to neoliberal America — or the kind advocated by Mises — is either naive or disingenuous.

The British industrialists embraced “free trade” in the early- and mid-19th century because they could afford to. They had already subjugated, by force of arms, market areas comprising millions of square miles and tens of millions of human beings. And this imperial policy was not confined, as Mises euphemistically put it, to “opening up markets.” It included forcibly suppressing the textile industry of India, the largest in the world at the time. It included Warren Hastings’s Permanent Settlement in Bengal, which essentially reenacted the open-field enclosures of England and robbed the peasantry of their legitimate communal property rights in the land. And the imperial “free trade” regime celebrated by Mises saw no inconsistency in repeating this same robbery over and over again — for example the seizure of the best arable land in East Africa from the peasantry, after the partition of that continent at the Berlin Conference, and its settlement by British planters. This was a “free trade” agenda that entailed not only massive abrogation of property rights and forcible imposition of completely different ones in their place, but industrial wrecking on a scale that Ned Ludd could never have imagined.

British industrial capitalists repealed the Corn Laws and adopted “free trade” for the same reason that global capital in the neoliberal age supports the elimination of tariff barriers: they have outlived their usefulness for capital, at a time when corporations are transnational and most goods consumed in the West are produced under contract in independent factories overseas. So-called “Free Trade” on the Washington Consensus model is just as statist, just as protectionist, as Smoot-Hawley ever was. But now the centerpiece of the typical “Free Trade Agreement” is the enforcement of the maximalist intellectual property laws that serve the same protectionist function for global corporations that tariffs served for national ones. Yet every week we see another puff piece at Reason and other right-libertarian rags celebrating the glories of “free trade” and condemning the economic retrogression of politicians who oppose this or that protectionist “Free Trade Agreement.”

After WWI, according to Slobodian, Mises saw both nationalism and mass democracy as the twin villains that destroyed the transnational order, and saw separating the polity or state from the nation as the only way to prevent the similar destruction of a new liberal order. Under this model, a cosmopolitan state would transcend the nationalities of its component populations, and enforce a liberal economic order; the publicly visible legislative bodies would be mostly symbolic and limited in power, while the institutions of economic governance would be largely removed from the public eye. Nationality, on the other hand, would be relegated to the sphere of purely private educational, charitable, and cultural institutions, and symbols like postage stamps and flags. Linguistic groupings would be unmoored from permanent geographical locations, with the mobility of population, and would resemble the shotgun distribution pattern of the German, Magyar, and Slavic populations throughout the Habsburg Empire.

At various times he saw this as a model, which was the proper alternative to the League of Nations and its organization around component nation-states, either for a United Europe or for a liberal global order, depending on his degree of optimism at the time. At others, he was pessimistic as to whether the world — as opposed to Europe or the West — possessed the cultural prerequisites for sustaining such a transnational liberal order. In particular, he acknowledged the need for Europe, North America, and Australia to close their borders to free immigration by non-white populations. It was an issue he never fully resolved.

His vision of a supranational political order resembled in many ways the imposition of austerity in recent years by multilateral institutions like the European Union, World Bank and IMF.

Despite the latter-day aversion of his self-described followers in the libertarian movement, Mises himself was not opposed to supranational intervention per se. When Austria was forced to accept a loan from the League of Nations with punitive conditions attached in 1932, he stressed its pedagogic potential: ‘the severe conditions under the loan may open the eyes of the entire population to the fact that the economic policy that has been followed in recent years has brought us to a situation where we really see no other way out than to accept the sort of subjugation which this loan imposes on us’. In this case the League was the mechanism of an unflinching economic rationality flouted by the policies of socialist governed Red Vienna. With the compulsion of League conditionality, the ‘measures of frugality that the economy has required for a long time – but which have always been delayed or sabotaged – [must] be put into effect as quickly as possible’. For Mises, a good version of the League had the capacity to act as an iron glove for the invisible hand of the market.

No doubt he would have fully approved of Kissinger’s intention to “squeeze the Chilean economy till it screams,” and Nixon’s instruction that “not a fucking sprocket gets through.”

If Mises was relatively circumspect at most times about the violence inherent in the system, Sorin Cucerai — a scholar associated with the Ludwig von Mises Romania Institute — is far more honest and enthusiastic about the full extent of the coercive prerequisites, both initial and ongoing, for what right-libertarianism usually frames as a spontaneous social order. Unlike mainstream Austro-libertarians, who awkwardly juggle the actual historical prerequisites of capitalism with their professed belief in deontological ethics and the “non-aggression principle,” Cucerai (“The Fear of Capitalism and One of Its Sources,” Idei in Dialog May 2009, translated by John Medaille) openly abandons any pretense that modern capitalism came about by voluntary means. In fact he celebrates the fact that the states of the capitalist West, from early modern times on, had to declare war on human nature itself, rob ordinary people of their possessory claims to the land, and compel them by force to do what they otherwise would not have done, in order to create societies in which the laboring population was divorced from its ownership in the means of production and the whole of life was forcibly incorporated into the cash nexus.

To be able to live, a man needs shelter and food. The owner of a source of food and habitation is autonomous in the sense that he is self-sufficient, he does not depend on others to be able to survive. And if he does not depend on others, he cannot be constrained to maintain commercial relations to other people…. In short, the fundamental condition for the existence of a capitalist order is the absence of the individual autonomy in the sense of owing the source of your food…. Under the modern states, the citizens are obliged to pay taxes only in denominations…, not by products or labor. Even if one owns a food source he could not keep his property if he does not engage in commercial relations on a monetarised market in order to get the money necessary to pay the fees and taxes…. It is very important to understand that the capitalist order is not a natural order. People do not search instinctually a source of monetary revenue. And yet, they search, in a natural way, to have access to a source of food and shelter; in other words, in their natural way, people try to become autonomous — “autonomous” in the strong sense of the word…. Capitalism is made possible only if this natural process is interrupted by an instrument that makes sure nobody could have access to food and shelter unless a monetary revenue is used as an intermediary.

In discussing the historical prerequisites and ongoing institutional requirements of capitalism, Cucerai proclaims, openly and proudly, general truths that are usually stated plainly only in the work of radical historians while “libertarians” hem and haw and shuffle their feet about them. One could not find the principle that capitalism and the wage system required forcible separation of the producing classes from the means of subsistence stated any more bluntly by Marx himself in the Grundrisse or the chapter on primitive accumulation in Capital vol. 1, or by J. L. and Barbara Hammond. The principle that societies dominated by the cash nexus came about, not spontaneously through some Smithian “mutual coincidence of wants,” but by state imposition, is stated as unambiguously by Cucerai as it is in David Graeber’s Debt. And unlike the average right-libertarian, who sees these facts as an embarrassment to be denied or minimized, Cucerai positively celebrates them much as some theologians celebrate Adam’s sin as a felix culpa. The retrograde populations, first of Europe and then of the world, were forced to be free! In relation to mainstream libertarian historiography, Cucerai plays the same “helpful” role that Rudy Giuliani plays in relation to Donald Trump: “Of course capitalism did all these awful, awful things — and it’s wonderful!”

Richard Ebeling, in the interview I cited above, chided the Left for their neglect of “What Is Not Seen,” but if anyone has that failing it is self-proclaimed “anarcho-capitalists” and “Voluntaryists,” who — in distinguishing “coercive” from “voluntary” interactions — resemble a dog who looks at one’s fingertip instead of the object pointed at. Their criteria for identifying “coercive” or “forcible” actions do not extend beyond the immediate point of interaction, and ignore coercive background and legacy conditions altogether. Any critic of Elon Musk or Jeff Bezos on social media is immediately swarmed with replies from right-libertarians indignantly objecting that they “earned” their 12-figure fortunes by selling things that people freely chose to buy, and that their workers can’t be exploited because they “willingly” went to work for them and should “look for another job” if they don’t like it. The idea that there are background conditions that constrain the options available to workers and consumers, to the benefit of capital — background conditions which the state played and continues to play the chief role in creating and enforcing, primarily at the behest of the capitalist economic interests that dominate its councils — never occurs to them.

At the risk of sounding like Leo Strauss, right-libertarianism seems to have both an exoteric and an esoteric doctrine. The former, embodied in polemics aimed at a mass audience, treats the “liberal” or “free market” order as spontaneously emergent from voluntary human interaction, and frames the only possible choice in regard to state action as whether to “allow” natural inequality and the hegemony of the cash nexus, or “intervene” to prevent it. This is the level of understanding of rank and file right-libertarians, who smugly tell others to “go study economics,” while themselves being ignorant of both economics and history beyond whatever pablum is spoon-fed to them in Walter Williams op-eds, Charlie Kirk speeches, and commentaries at Mises.org. They look at a system whose history is centuries of a boot stamping on a human face, whose core logic is violence, and see only “voluntary interactions.” But Mises himself knew better, and at times admitted it. And we can thank Quinn Slobodian for bringing this esoteric teaching, strong meat of doctrine unfit for babes, to light.

Notes