Capitalism Depends on Artificial, State-Enforced Stability

Kevin Carson’s Rejoinder to Derek Wall.

I appreciate the thoughtful tone of Derek’s response, and I’m certainly gratified by whatever role I may have played in inspiring him to take up brewing beer. And having been strongly influenced by the work of Elinor Ostrom myself, I was pleased to learn that an Ostrom scholar was invited to respond to my article for this symposium.

As for his actual argument, I think his restatement of my positions is quite fair.

Despite the friendly tone of his counter-argument, however, I find myself at somewhat of a loss as to what his material points of disagreement actually are.

After summarizing my arguments — I repeat, quite fairly — Derek goes on to state, briefly, his reasons for believing that markets will lead to capitalism. But he states these reasons for all intents and purposes as bare assertions, simply restating the positions I attempted to refute without actually providing any new material on why my arguments to the contrary are wrong. Next, in the interest of fairness, he summarizes my arguments regarding countervailing tendencies that would prevent markets from leading to a concentration of capital and restoration of capitalism without the involvement of a state. Then he restates his own original assertions. At no point does he evaluate our respective positions, where they directly contradict each other, in terms of evidence.

Derek’s general position is that “[m]arkets tend, in largely spontaneous ways, to generate capitalism … [I]f we replaced corporate control with market competition, we would, in a relatively short time, be back to concentrated markets.” In addition, he feels that markets as such are “to a large extent oppressive and ecologically destructive.”

He cites Marx’s argument that capital tends to become concentrated, and “competition tends to lead to the removal of smaller enterprises and a drive to monopoly.” This happens because “economies of scale mean larger firms often drive out smaller.” He acknowledges that I “challenge” Marx’s position in “an interesting way” — but provides no material basis for deciding between Marx’s position and mine where they differ.

Derek also repeats the standard Marxist arguments regarding capital accumulation and the substitution of physical capital for human labor-power. The consequences are that the first firms to invest in new technology drive out those that don’t, and increased capital accumulation leads to increased average firm size and market concentration. He also mentions Brewer’s argument, in Marxist Theories of Imperialism, that competition, with attendant pressure to cut costs by adopting technical improvements, is “the primary driving force in capitalism.” Brewer gives his stamp of approval to the idea that “large-scale production is more efficient than small-scale,” and that large firms will be “better able to survive … in slumps.”

All these assertions — and I repeat, unsupported assertions is what they are — either reflect dated technological assumptions that were more appropriate for the early and mid-20th century (if even then), or were never entirely true. Behind all of them is the implicit assumption that efficiency in production directly correlates with capital-intensiveness, scale and cost in production technology. I have argued at length elsewhere [1] that this was only true — if it ever was — during a particular phase of industrial history (and even then, the superior efficiency was to a large extent illusory and resulted from state actions to externalize inefficiency cost or insulate large firms from competition). Although acknowledging I have made such arguments, Derek provides no reason either as to why he finds them unconvincing or why the reader should.

As to the allegedly relentless competitive pressure to cut costs, that’s certainly the conventional wisdom. And it’s the party line among corporate management, who justify downsizings, speedups and stagnant wages by reference to the “competitive global economy.”

But in fact corporate capitalism is characterized far more by the suppression of competition. Competition is mainly for the small players. Far from constantly adopting more efficient technical innovations under the pressure of competition, the large corporations in any particular industry are more likely to collude in spooning out technical improvements in dribs and drabs as they retire old equipment. For example, consider the Big Three US auto companies which, according to the Nader Group, agreed in the early ’60s not to introduce various new features until all three companies were ready to introduce them at the same time. Or the major telecommunications companies, which generally provide the same lousy bandwidth and data caps and high rates in any given geographical area, while pocketing the billions in excess rates they collected based on the original promise to build out fiber optic infrastructure.

And throughout industrial history, the major corporate players’ relationship to new technology has been characterized by collusion more than competition. Rather than one firm adopting an innovation and taking over an industry, firms have established cartels through the exchange and pooling of patents.

Far from being better able to endure the ups and downs of market competition because they’re larger and more efficient, the big players depend on the state to stabilize the marketplace and erect entry barriers to protect them against competition from more efficient small players.

As John Kenneth Galbraith pointed out in The New Industrial State, in the very heyday of mass-production capitalism — a system he enthusiastically endorsed — competition is the one thing that large-scale industry cannot deal with. If anything, capital-intensiveness results in fragility, not resilience; the long-term planning horizons of the large manufacturing corporation mean that it has to undertake production with a reasonable assurance that what is produced after several years of design, planning and retooling will be consumed. What large-scale, capital-intensive, mass-production industry needs, above all else, is stability and predictability. Rather than having a superior ability to weather the storms of market competition, large-scale industry is a hothouse flower that depends on the state to reshape the surrounding society to remove as much uncertainty and instability as possible.

That was the primary reason for what Gabriel Kolko, in The Triumph of Conservatism, called the “political capitalism” of the Progressive Era regulatory state: state intervention in the market to rationalize the economy and restrict competition to acceptable levels, and enable corporations to extract reasonable, predictable profits in the long run.

Capital-intensiveness carries with it high overhead — and overhead is the essence of fragility. It is the high overhead of large, capital-intensive firms that requires them to have a guaranteed outlet for their product, and creates the imperative of suppressing competition. The higher the overhead, the larger the minimum regular revenue stream required to service it — just to run in place, in other words. The lower the overhead, on the other hand, the more agile and resilient a firm is; likewise the better able it is to ride out bad times without going in the hole, and the more of the revenue stream is income free and clear in good times.

And an increasing share of production technology even within the centralized corporate economy is small-scale, better suited to lean on-demand production for local industrial districts than to a mass consumer society. It’s just that the technologies of the new economy are enclosed within corporate walls through the use of state-enforced monopolies — like patents and trademarks — to suppress competition.

Derek also argues that markets “tend to encroach on more and more of human life … Money tends to move into new areas of society,” and ever growing areas of life are incorporated into the cash nexus.

But as David Graeber argued in Debt, market exchange (not the predominance of the cash nexus as the primary way of organizing life) has existed on a stable basis in various times and places without turning into capitalism. The exchange of goods with money prices has been a part of economic life in many societies over the past few thousand years. But the hegemony of the cash nexus, and monetization of most of life, to the exclusion of other forms of organizing production and consumption within the social economy is a pathological phenomenon associated with militaristic, aggressive states (as in the Axial age of empires dating from the mid-1st millennium B.C. to the mid-1st millennium A.D., and the even more virulent imperial states that arose in early modern Western Europe and conquered and enslaved most of the world).

And as Derek acknowledges, my enthusiasm for ideas of Ostrom’s like natural resource commons (as well as my equal enthusiasm for organizing a growing share of activity through the post-money, abundance-based communism of P2P networks) should make it plain that my idea of a market society is simply one in which market exchange is part of the mix — and not necessarily even a very large part of it.

He also raises the possibilities suggested by Marx himself — for example, he hints that the developing world outside Europe might in some way leapfrog the Western European model of industrial capitalism and evolve directly into communism through such pre-capitalist institutions as the Russian Mir. I think had he lived to see speculations like those of Kropotkin’s on the decentralizing potential of electrically powered machinery, in Fields, Factories and Workshops, he might have moderated his views on the association between progress and capital-intensiveness and further developed his thoughts on the possibility of much of the world using small-scale, ephemeral technology to bypass the Dark Satanic Mills and go directly towards distributed socialism.

I’m not entirely sure whether Derek has fully taken into account the extent to which my socialistic idea of a “free market society” differs from conventional anarcho-capitalist visions of a society dominated by money exchange and business firms. But that difference leaves a lot of room for agreement between me and Derek on what kind of free society could exist on a stable basis without degenerating into capitalism — perhaps more than Derek has considered. But Derek himself recognizes that there is a great deal of commonality in the kind of post-corporate world we desire, with both of us desiring “a diverse economy, which moves beyond the state and the market to the commons.”

While he sees value in markets, he does to some extent over leap the conventional assumptions, like both Marx and Ostrom, recognising that economic activity extends beyond markets and states. This position is vitally important because there is a large and increasingly militant rebellion against corporate neoliberalism taking place. In Europe, parties like Podemos and Syriza have risen on opposition to austerity and corporate control. I am still amazed that my friend Jeremy Corbyn, a lonely left wing MP who was more popular with Greens than his own party, has won a landslide victory to lead the opposition Labour Party here in the UK. In Rojava and the rest of Kurdistan, the revolutionary Kurds, learning from their own participatory experiments and the writings of green anarchist Murray Bookchin, are creating a left libertarian non state.

Like Derek, I have felt enthusiasm not only for Ostrom’s thought, but for the rise of offshoot political movements from M15 and Syntagma. I see a great deal of promise in Corbyn’s distinction between state and social ownership — perhaps even some hope of a partial move back towards Colin Ward’s vision of public services organized around mutuals and friendly societies instead of government and corporate bureaucracies.

Derek finally notes that to the extent we hope to prevent a “diverse market plus commons economy” from degenerating back into capitalism,

will require precise mechanism, perhaps some kind of jubilee as advocated in the Torah for wiping out debt and redistributing resources…. While we cannot at a stroke move beyond both markets and states, we can I believe to some extent roll both markets and states back, democratize the economy and create institutional governance which is participatory rather than elitist.

There’s much we can agree on here. Like Graeber, I sympathize strongly with the traditional revolutionary program throughout history of abolishing debts and redividing the land. I view the vast majority of today’s land titles as artificial and based on past robbery or enclosure, and believe that a libertarian system of ownership (including common ownership) based on appropriation by use and with reasonable standards for constructive abandonment would lead to a state of affairs in which most land was owned by people personally occupying and using it. I believe, likewise, that the vast majority of existing debt is odious and should be wiped clean, and that enforcement of even legitimate debt should be mainly through reputational mechanisms rather than legal enforcement of payment.

In a society based on these principles, and a money system based on the constant mutual advance of credit of the sort Graeber described in the credit-clearing systems of medieval villages, I believe the countervailing measures against the concentration of land and capital would be quite similar to those of the biblical Jubilee system. And in a society where one’s right to an aliquot share of natural resource commons was guaranteed by custom, and a major share of one’s own subsistence needs could be met within the household economy without permission from (or the payment of rent to) anybody else, the floor of guaranteed comfortable subsistence even in bad times would be quite high by historic standards.

And I repeat, the world in which these things existed (whether that of the Israelite league of the central Palestinian highlands in the Book of Judges or that of the commmoners described by J.M. Neeson) was destroyed primarily by the action of the state.

So to a large extent, I think that once we get beyond the respective connotations that we attach to the word “market” and get to concrete particulars, the potential area of agreement between Derek and me is very large indeed.

Notes:

Citations to this article: