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. In fact, anarchists have been using it as a synonym for anarchist for over 150 years, since 1858. In comparison, widespread use of the term by the so-called "libertarian" right dates from the 1970s in America (with, from the 1940s onwards, limited use by a few individuals). Indeed, outside of North America libertarian is still essentially used as an equivalent of anarchist and as a shortened version of libertarian socialist. As Noam Chomsky notes:

"Let me just say regarding the terminology, since we happen to be in the United States, we have to be rather careful. Libertarian in the United States has a meaning which is almost the opposite of what it has in the rest of the world traditionally. Here, libertarian means ultra right-wing capitalist. In the European tradition, libertarian meant socialist. So, anarchism was sometimes called libertarian socialism, a large wing of anarchism, so we have to be a little careful about terminology." [Reluctant Icon]

This in itself does not 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).

Yet 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, see section H.3.13 ). For anarchists state ownership of capital is not socialistic in the slightest. 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? 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, particularly anarchism as, obviously, no form of anarchism would be socialist by such a definition nor do anarchists seek disorder. Therefore, the use of dictionaries is not the end of a discussion and often misleading when applied to politics.

Libertarian, though, is generally defined to mean someone who upholds the principles of liberty, especially individual liberty of thought and action. Such a situation cannot but be encouraged by socialism, by free access to the means of life. This is because in such a situation people associate as equals and so, as John Most and Emma Goldman once argued, the "system of communism logically excludes any and every relation between master and servant, and means really Anarchism." ["Talking about Anarchy", p. 28, Black Flag, no. 228, p. 28] In other words, by basing itself on free association and self-management in every aspect of life the anarchist form of socialism cannot but be libertarian.

In other words, there is a reason why anarchists have used the term libertarian for over 150 years! More to the point, why assume that the right's recent appropriation of the word be considered the base point? That implies that private property defends individual liberty rather than suppresses it. Such an assumption, as anarchists have argued from the start of anarchism as a distinct socio-political theory, is wrong. As we discussed earlier (see section B.4, for example), capitalism denies liberty of thought and action within the workplace (unless one is the boss, of course). As one staunch defender of capitalism (and a classical liberal often listed as a forefather of right-wing "libertarianism") glibly noted, the capitalist "of course exercises power over the workers", although "he cannot exercise it arbitrarily" thanks to the market but within this limit "the entrepreneur is free to give full rein to his whims" and "to dismiss workers offhand." [Ludwig von Mises, Socialism, p. 443 and p. 444] Right-wing "libertarians" are utterly blind to the liberty-destroying hierarchies associated with private property, perhaps unsurprisingly as they are fundamentally pro-capitalist and anti-socialist (equally unsurprisingly, genuine libertarians tend to call them "propertarians"). As left-wing economist Geoffrey M. Hodgson correctly notes:

"By their own logic, [such] market individualists are forced to disregard the organisational structure of the firm, or to falsely imagine that markets exist inside it. To do otherwise would be to admit that a system as dynamic as capitalism depends upon a mode of organisation from which markets are excluded . . . This . . . allows market individualists to ignore the reality of non-market organisations in the private sector . . . They can thus ignore the reality of control and authority within the private capitalist corporation but remain critical of public sector bureaucracy and state planning." [Economics and Utopia, pp. 85-6]

The propertarian perspective inevitably generates massive contradictions, such as admitting that both the state and private property share a common monopoly of decision making over a given area yet opposing only the former (see section F.1). As anarchists have long pointed out, the hierarchical social relations associated with private property have nothing to do with individual liberty. Removing the state but keeping private property would, therefore, not be a step forward: "A fine business we would make if we destroyed the State and replaced it with a mass of little States! killing a monster with one head and keeping a monster with a thousand heads!" [Carlo Cafiero, "Anarchy and Communism", pp. 179-86, The Raven, No. 6, p. 181]

This is why we argue that anarchism is more than just a stateless society, for while a society without a state is a necessary condition for anarchy it is not sufficient -- private hierarchies also limit freedom. Hence Chomsky:

"It's all generally based on the idea that hierarchic and authoritarian structures are not self-justifying. They have to have a justification . . . For example, your workplace is one point of contact and association. So, workplaces ought to be democratically controlled by participants . . . there are all kinds of ways in which people interact with one another. The forms of organisation and association that grow out of those should be, to the extent possible, non-authoritarian, non-hierarchic, managed and directed by the participants." [Reluctant Icon]

Therefore, anarchists argue, 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. Or, to use Proudhon's words, the "abolition of the proletariat." [Selected Writings of Pierre-Joseph Proudhon, p. 179] Unless this is done then the majority of people will become subject to the authoritarian social relationships the likes of Mises and other right-wing "libertarians" support. As one communist-anarchist put it:

"It is because the individual does not own himself, and is not permitted to be his true self. He has become a mere market commodity, an instrument for the accumulation of property -- for others . . . Individuality is stretched on the Procrustes bed of business . . . If our individuality were to be made the price of breathing, what ado there would be about the violence done to the personality! And yet our very right to food, drink and shelter is only too often conditioned upon our loss of individuality. These things are granted to the propertyless millions (and how scantily!) only in exchange for their individuality -- they become the mere instruments of industry." [Max Baginski, "Stirner: The Ego and His Own", pp. 142-151, Mother Earth, Vol. II, No. 3, p. 150]

Socialism, anarchists argue, can only mean 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. Thus to be consistently libertarian is, logically, to advocate self-management, and so socialism (see section G.4.2). This explains the long standing anarchist opposition to the phoney "individualism" associated with classical liberalism (so-called right-wing "libertarian" ideology, although better termed "propertarian" to avoid confusion). Thus we find Emma Goldman dismissing "this kind of individualism" in "whose name . . . social oppression are defended and held up as virtues." [Red Emma Speaks, p. 112]

As we will discuss in section I.3.3, socialisation is advocated to ensure the elimination of wage labour and is a common theme of all genuine forms of socialism. Anarchists argue that state socialism does not eliminate wage labour, rather it universalises it. In fact, state socialism 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 so-called "socialist" countries were/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 with much more reason that we are the most logical and most complete socialists, since we demand for every person not just his [or her] entire measure of the wealth of society but also his [or her] portion of social power, which is to say, the real ability to make his [or her] influence felt, along with that of everybody else, in the administration of public affairs." [Malatesta and Hamon, Op. Cit., 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 the words of leading French anarcho-syndicalist Emile Pouget, "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. 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, consistent 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 an 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. Far from there being any contradiction between libertarianism and socialism, libertarian ideals imply socialist ones, and vice versa. As Bakunin put it 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. Rather than libertarian socialism being the oxymoron, it is state socialism and libertarian capitalism that are. Both historically (in terms of who first used the word) and logically (in terms of opposing all hierarchical organisations) it is anarchists who should be called libertarians, not the propertarian right.

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." For Mises, socialism meant central planning with the economy "subject to the control of a supreme authority." ["Economic Calculation in the Socialist Commonwealth", pp. 87-130, Collectivist Economic Planning, F.A von Hayek (ed.), p. 104 and p. 106] While applying his "economic 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.

Yet as David Schweickart observes it "has long been recognised that 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, so many bricks, so many hours of work and so on. If we assume a mutualist society, then the prices of these goods can be easily found as the co-operatives in question would be offering 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.

Ironically enough, Mises did mention the idea of such a mutualist system in his initial essay. "Exchange relations between production-goods can only be established on the basis of private ownership of the means of production" he asserted. "When the 'coal syndicate' provides the 'iron syndicate' with coal, no price can be formed, except when both syndicates are the owners of the means of production employed in their business. This would not be socialisation but workers' capitalism and syndicalism." [Op. Cit., p. 112] However, his argument is flawed for numerous reasons.

First, and most obvious, socialisation (as we discuss in section I.3.3) simply means free access to the means of life. As long as those who join a workplace have the same rights and liberties as existing members then there is socialisation. A market system of co-operatives, in other words, is not capitalist as there is no wage labour involved as a new workers become full members of the syndicate, with the same rights and freedoms as existing members. Thus there are no hierarchical relationships between owners and wage slaves (even if these owners also happen to work there). As all workers' control the means of production they use, it is not capitalism.

Second, nor is such a system usually called, as Mises suggests, "syndicalism" but rather mutualism and he obviously considered its most famous advocate, Proudhon and his "fantastic dreams" of a mutual bank, as a socialist. [Op. Cit., p. 88] Significantly, Mises subsequently admitted that it was "misleading" to call syndicalism workers' capitalism, although "the workers are the owners of the means of production" it was "not genuine socialism, that is, centralised socialism", as it "must withdraw productive goods from the market. Individual citizens must not dispose of the shares in the means of production which are allotted to them." Syndicalism, i.e., having those who do the work control it, was "the ideal of plundering hordes"! [Socialism, p. 274fn, p. 270, p. 273 and p. 275]

His followers, likewise, concluded that "syndicalism" was not capitalism with Hayek stating that there were "many types of socialism" including "communism, syndicalism, guild socialism". Significantly, he indicated that Mises argument was aimed at systems based on the "central direction of all economic activity" and so "earlier systems of more decentralised socialism, like guild-socialism or syndicalism, need not concern us here since it seems now to be fairly generally admitted that they provide no mechanism whatever for a rational direction of economic activity." ["The Nature and History of the Problem", pp. 1-40, Collectivist Economic Planning, F.A von Hayek (ed.),p. 17, p. 36 and p. 19] Sadly he failed to indicate who "generally admitted" such a conclusion. More recently, Murray Rothbard urged the state to impose private shares onto the workers in the former Stalinist regimes of Eastern Europe as ownership was "not to be granted to collectives or co-operatives or workers or peasants holistically, which would only bring back the ills of socialism in a decentralised and chaotic syndicalist form." [The Logic of Action II, p. 210]

Third, syndicalism usually refers to a strategy (revolutionary unionism) used to achieve (libertarian) socialism rather than the goal itself (as Mises himself noted in a tirade against unions, "Syndicalism is nothing else but the French word for trade unionism" [Socialism, p. 480]). It could be argued that such a mutualist system could be an aim for some syndicalists, although most were and still are in favour of libertarian communism (a simple fact apparently unknown to Mises). Indeed, Mises ignorance of syndicalist thought is striking, asserting that the "market is a consumers' democracy. The syndicalists want to transform it into a producers' democracy." [Human Action, 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 Mises asserts. Given that 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.

More importantly, the whole premise of his critique of mutualism is flawed. "Exchange relations in productive goods" he asserted, "can only be established on the basis of private property in the means of production. If the Coal Syndicate delivers coal to the Iron Syndicate a price can be fixed only if both syndicates own the means of production in industry." [Socialism, p. 132] This may come as a surprise to the many companies whose different workplaces sell each other their products! In other words, capitalism itself shows that workplaces owned by the same body (in this case, a large company) can exchange goods via the market. That Mises makes such a statement indicates well the firm basis of his argument in reality. Thus a socialist society can have extensive autonomy for its co-operatives, just as a large capitalist firm can:

"the entrepreneur is in a position to separate the calculation of each part of his total enterprise in such a way that he can determine the role it plays within his whole enterprise. Thus he can look at each section as if it were a separate entity and can appraise it according to the share it contributes to the success of the total enterprise. Within this system of business calculation each section of a firm represents an integral entity, a hypothetical independent business, as it were. It is assumed that this section 'owns' a definite part of the whole capital employed in the enterprise, that it buys from other sections and sells to them, that it has its own expenses and its own revenues, that its dealings result either in a profit or in a loss which is imputed to its own conduct of affairs as distinguished from the result of the other sections. Thus the entrepreneur can assign to each section's management a great deal of independence . . . Every manager and submanager is responsible for the working of his section or subsection. It is to his credit if the accounts show a profit, and it is to his disadvantage if they show a loss. His own interests impel him toward the utmost care and exertion in the conduct of his section's affairs." [Human Action, pp. 301-2]

So much, then, for the notion that common ownership makes it impossible for market socialism to work. After all, the libertarian community can just as easily separate the calculation of each part of its enterprise in such a way as to determine the role each co-operative plays in its economy. It can look at each section as if it were a separate entity and appraise it according to the share it contributes as it is assumed that each section "owns" (i.e., has use rights over) its definite part. It can then buy from, and sell to, other co-operatives and a profit or loss can be imputed to evaluate the independent action of each co-operative and so their own interests impel the co-operative workers toward the utmost care and exertion in the conduct of their co-operative's affairs.

So to refute Mises, we need only repeat what he himself argued about large corporations! Thus there can be extensive autonomy for workplaces under socialism and this does not in any way contradict the fact that "all the means of production are the property of the community." ["Economic Calculation in the Socialist Commonwealth", Op. Cit., p. 89] Socialisation, in other words, does not imply central planning but rather free access and free association. In summary, then, Mises confused property rights with use rights, possession with property, and failed to see now a mutualist system of socialised co-operatives exchanging products can be a viable alternative to the current exploitative and oppressive economic regime.

Such a mutualist economy also strikes at the heart of Mises' claims that socialism was "impossible." Given that he 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 Mises, the problem for socialism was 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. As Mises admitted when discussing one scheme of guild socialism, "associations and sub-associations maintain a mutual exchange-relationship; they receive and give as if they were owners. Thus a market and market-prices are formed." 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 Mises' 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 company can buy products from another part of the same company under capitalism. That goods produced by self-managed syndicates have market-prices does not imply capitalism for, as they abolish wage labour and are based on free-access (socialisation), it is a form of socialism (as socialists define it, Mises' protestations that "this is incompatible with socialism" not-with-standing!). [Socialism, p. 518]

Murray Rothbard suggested that a self-managed system would fail, and a system "composed exclusively of self-managed enterprises is impossible, and would lead . . . to calculative chaos and complete breakdown." When "each firm is owned jointly by all factor-owners" then "there is no separation at all between workers, landowners, capitalists, and entrepreneurs. There would be no way, then, of separating the wage incomes received from the interest or rent incomes or profits received. And now we finally arrive at the real reason why the economy cannot consist completely of such firms (called 'producers' co-operatives'). For, without an external market for wage rates, rents, and interest, there would be no rational way for entrepreneurs to allocate factors in accordance with the wishes of the consumers. No one would know where he could allocate his land or his labour to provide the maximum monetary gains. No entrepreneur would know how to arrange factors in their most value-productive combination to earn greatest profit. There could be no efficiency in production because the requisite knowledge would be lacking." [quoted by David L. Prychitko, Markets, Planning and Democracy, p. 135 and p. 136]

It is hard to take this argument seriously. Consider, for example, a pre-capitalist society of farmers and artisans. Both groups of people own their own means of production (the land and the tools they use). The farmers grow crops for the artisans who, in turn, provide the farmers with the tools they use. According to Rothbard, the farmers would have no idea what to grow nor would the artisans know which tools to buy to meet the demand of the farmers nor which to use to reduce their working time. Presumably, both the farmers and artisans would stay awake at night worrying what to produce, wishing they had a landlord and boss to tell them how best to use their labour and resources.

Let us add the landlord class to this society. Now the landlord can tell the farmer what to grow as their rent income indicates how to allocate the land to its most productive use. Except, of course, it is still the farmers who decide what to produce. Knowing that they will need to pay rent (for access to the land) they will decide to devote their (rented) land to the most profitable use in order to both pay the rent and have enough to live on. Why they do not seek the most profitable use without the need for rent is not explored by Rothbard. Much the same can be said of artisans subject to a boss, for the worker can evaluate whether an investment in a specific new tool will result in more income or reduced time labouring or whether a new product will likely meet the needs of consumers. Moving from a pre-capitalist society to a post-capitalist one, it is clear that a system of self-managed co-operatives can make the same decisions without requiring economic masters. This is unsurprising, given that Mises' asserted that the boss "of course exercises power over the workers" but that the "lord of production is the consumer." [Socialism, p. 443] In which case, the boss need not be an intermediary between the real "lord" and those who do the production!

All in all, Rothbard confirms Kropotkin's comments that economics ("that pseudo-science of the bourgeoisie") "does not cease to give praise in every way to the benefits of individual property" yet "the economists do not conclude, 'The land to him who cultivates it.' On the contrary, they hasten to deduce from the situation, 'The land to the lord who will get it cultivated by wage earners!'" [Words of a Rebel, pp. 209-10] In addition, Rothbard implicitly places "efficiency" above liberty, preferring dubious "efficiency" gains to the actual gains in freedom which the abolition of workplace autocracy would create. Given a choice between liberty and "efficiency", the genuine anarchist would prefer liberty. Luckily, though, workplace liberty increases efficiency so Rothbard's decision is a wrong one. It should also be noted that Rothbard's position (as is usually the case) is directly opposite that of Proudhon, who considered it "inevitable" that in a free society "the two functions of Wage-Worker on the one hand, and of Proprietor-Capitalist-Entrepreneur on the other, become equal and inseparable in the person of every worker". This was the "first principle of the new economy, a principle full of hope and of consolation for the worker without capital, but a principle full of terror for the parasite and for the tools of parasitism, who see reduced to naught their celebrated formula: Capital, labour, talent!" [Property is Theft!, p. 535 and p. 289]

And it does seem a strange co-incidence that someone born into a capitalist economy, ideologically supporting it with a passion and seeking to justify its class system just happens to deduce from a given set of axioms that landlords and capitalists happen to play a vital role in the economy! It would not take too much time to determine if someone in a society without landlords or capitalists would also logically deduce from the same axioms the pressing economic necessity for such classes. Nor would it take long to ponder why Greek philosophers, like Aristotle, concluded that slavery was natural. And it does seem strange that centuries of coercion, authority, statism, classes and hierarchies all had absolutely no impact on how society evolved, as the end product of real history (the capitalist economy) just happens to be the same as Rothbard's deductions from a few assumptions predict. Little wonder, then, that "Austrian" economics seems more like rationalisations for some ideologically desired result than a serious economic analysis.

Even some dissident "Austrian" economists recognise the weakness of Rothbard's position. Thus "Rothbard clearly misunderstands the general principle behind producer co-operatives and self-management in general." In reality, "[a]s a democratic method of enterprise organisation, workers' self-management is, in principle, fully compatible with a market system" and so "a market economy comprised of self-managed enterprises is consistent with Austrian School theory . . . It is fundamentally a market-based system . . . that doesn't seem to face the epistemological hurdles . . . that prohibit rational economic calculation" under state socialism. Sadly, socialism is still equated with central planning, for such a system "is certainly not socialism. Nor, however, is it capitalism in the conventional sense of the term." In fact, it is not capitalism at all and if we assume that free access to resources such as workplaces and credit, then it most definitely is socialism ("Legal ownership is not the chief issue in defining workers' self-management -- management is. Worker-managers, though not necessarily the legal owners of all the factors of production collected within the firm, are free to experiment and establish enterprise policy as they see fit."). [David L. Prychitko, Op. Cit., p. 136, p. 135, pp. 4-5, p. 4 and p. 135] This suggests that non-labour factors can be purchased from other co-operatives, credit provided by mutual banks (credit co-operatives) at cost and so forth. As such, a mutualist system is perfectly feasible.

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. Perhaps it will be suggested that an economy needs stock markets to price companies, as Mises did. Thus investment is "not a matter for the mangers of joint stock companies, it is essentially a matter of the capitalists" in the "stock exchanges". Investment, he asserted, was "not a matter of wages" of managers but of "the capitalist who buys and sell stocks and shares, who make loans and recover them, who make deposits in the banks." [Socialism, p. 139]

It would be churlish to note that the members of co-operatives under capitalism, like most working class people, are more than able to make deposits in banks and arrange loans. In a mutualist economy, workers will not loose this ability just because the banks are themselves co-operatives. Similarly, it would be equally churlish but essential to note that the stock market is hardly the means by which capital is actually raised within capitalism. As David Engler points out, "[s]upporters of the system . . . claim that stock exchanges mobilise funds for business. Do they? When people buy and sell shares, 'no investment goes into company treasuries . . . Shares simply change hands for cash in endless repetition.' Company treasuries get funds only from new equity issues. These accounted for an average of a mere 0.5 per cent of shares trading in the US during the 1980s." [Apostles of Greed, pp. 157-158] This is echoed by David Ellerman:

"In spite of the stock market's large symbolic value, it is notorious that it has relatively little to do with the production of goods and services in the economy (the gambling industry aside). The overwhelming bulk of stock transactions are in second-hand shares so that the capital paid for shares usually goes to other stock traders, not to productive enterprises issuing new shares." [The Democratic Worker-Owned Firm, p. 199]

This suggests that the "efficient allocation of capital in production does not require a stock market (witness the small business sector [under capitalism])." "Socialist firms," he notes, "are routinely attacked as being inherently inefficient because they have no equity shares exposed to market valuation. If this argument had any merit, it would imply that the whole sector of unquoted closely-held small and medium-sized firms in the West was 'inherently inefficient' -- a conclusion that must be viewed with some scepticism. Indeed, in the comparison to large corporations with publicly-traded shares, the closely-held firms are probably more efficient users of capital." [Op. Cit., p. 200 and p. 199]

In terms of the impact of the stock market on the economy there is good reason to think that this hinders economic efficiency by generating a perverse set of incentives and misleading information flows and so their abolition would actually aid production and productive efficiency).

Taking the first issue, the existence of a stock market has serious (negative) effects on investment. As Doug Henwood notes, there "are serious communication problems between managers and shareholders." This is because "[e]ven if participants are aware of an upward bias to earnings estimates [of companies], and even if they correct for it, managers would still have an incentive to try to fool the market. If you tell the truth, your accurate estimate will be marked down by a sceptical market. So, it's entirely rational for managers to boost profits in the short term, either through accounting gimmickry or by making only investments with quick paybacks." So, managers "facing a market [the stock market] that is famous for its preference for quick profits today rather than patient long-term growth have little choice but to do its bidding. Otherwise, their stock will be marked down, and the firm ripe for take-over." While "[f]irms and economies can't get richer by starving themselves" stock market investors "can get richer when the companies they own go hungry -- at least in the short term. As for the long term, well, that's someone else's problem the week after next." [Wall Street, p. 171]

Ironically, this situation has a parallel with Stalinist central planning. Under that system the managers of State workplaces had an incentive to lie about their capacity to the planning bureaucracy. The planner would, in turn, assume higher capacity, so harming honest managers and encouraging them to lie. This, of course, had a seriously bad impact on the economy. Unsurprisingly, the similar effects caused by capital markets on economies subject to them are as bad as well as downplaying long term issues and investment. In addition, it should be noted that stock-markets regularly experiences bubbles and subsequent bursts. Stock markets may reflect the collective judgements of investors, but it says little about the quality of those judgements. What use are stock prices if they simply reflect herd mentality, the delusions of people ignorant of the real economy or who fail to see a bubble? Particularly when the real-world impact when such bubbles burst can be devastating to those uninvolved with the stock market?

In summary, then, firms are "over-whelmingly self-financing -- that is, most of their investment expenditures are funded through profits (about 90%, on longer-term averages)" The stock markets provide "only a sliver of investment funds." There are, of course, some "periods like the 1990s, during which the stock market serves as a conduit for shovelling huge amounts of cash into speculative venues, most of which have evaporated . . . Much, maybe most, of what was financed in the 1990s didn't deserve the money." Such booms do not last forever and are "no advertisement for the efficiency of our capital markets." [Henwood, After the New Economy, p. 187 and p. 188]

Thus there is substantial reason to question the suggestion that a stock market is necessary for the efficient allocation of capital. There is no need for capital markets in a system based on mutual banks and networks of co-operatives. As Henwood concludes, "the signals emitted by the stock market are either irrelevant or harmful to real economic activity, and that the stock market itself counts little or nothing as a source of finance. Shareholders . . . have no useful role." [Wall Street, p. 292]

Then there is also the ironic nature of Rothbard's assertion that self-management would ensure there "could be no efficiency in production because the requisite knowledge would be lacking." This is because capitalist firms are hierarchies, based on top-down central planning, and this hinders the free flow of knowledge and information. As with Stalinism, within the capitalist firm information passes up the organisational hierarchy and becomes increasingly simplified and important local knowledge and details lost (when not deliberately falsified to ensure continual employment by suppressing bad news). The top-management takes decisions based on highly aggregated data, the quality of which is hard to know. The management, then, suffers from information and knowledge deficiencies while the workers below lack sufficient autonomy to act to correct inefficiencies as well as incentive to communicate accurate information and act to improve the production process. As Cornelius Castoriadis correctly noted:

"Bureaucratic planning is nothing but the extension to the economy as a whole of the methods created and applied by capitalism in the 'rational' direction of large production units. If we consider the most profound feature of the economy, the concrete situation in which people are placed, we see that bureaucratic planning is the most highly perfected realisation of the spirit of capitalism; it pushes to the limit its most significant tendencies. Just as in the management of a large capitalist production unit, this type of planning is carried out by a separate stratum of managers . . . Its essence, like that of capitalist production, lies in an effort to reduce the direct producers to the role of pure and simple executants of received orders, orders formulated by a particular stratum that pursues its own interests. This stratum cannot run things well, just as the management apparatus . . . [in capitalist] factories cannot run things well. The myth of capitalism's productive efficiency at the level of the individual factory, a myth shared by bourgeois and Stalinist ideologues alike, cannot stand up to the most elemental examination of the facts, and any industrial worker could draw up a devastating indictment against capitalist 'rationalisation' judged on its own terms.

"First of all, the managerial bureaucracy does not know what it is supposed to be managing. The reality of production escapes it, for this reality is nothing but the activity of the producers, and the producers do not inform the managers . . . about what is really taking place. Quite often they organise themselves in such a way that the managers won't be informed (in order to avoid increased exploitation, because they feel antagonistic, or quite simply because they have no interest: It isn't their business).

"In the second place, the way in which production is organised is set up entirely against the workers. They always are being asked, one way or another, to do more work without getting paid for it. Management's orders, therefore, inevitably meet with fierce resistance on the part of those who have to carry them out." [Political and Social Writings, vol. 2, pp. 62-3]

This is "the same objection as that Hayek raises against the possibility of a planned economy. Indeed, the epistemological problems that Hayek raised against centralised planned economies have been echoed within the socialist tradition as a problem within the capitalist firm." There is "a real conflict within the firm that parallels that which Hayek makes about any centralised economy." [John O'Neill, The Market, p. 142] This is because workers have knowledge about their work and workplace that their bosses lack and a self-managed co-operative workplace would motivate workers to use such information to improve the firm's performance. In a capitalist workplace, as in a Stalinist economy, the workers have no incentive to communicate this information as "improvements in the organisation and methods of production initiated by workers essentially profit capital, which often then seizes hold of them and turns them against the workers. The workers know it and consequently they restrict their participation in production . . . They restrict their output; they keep their ideas to themselves . . . They organise among themselves to carry out their work, all the while keeping up a facade of respect for the official way they are supposed to organise their work." [Castoriadis, Op. Cit., pp. 181-2] An obvious example would be concerns that management would seek to monopolise the workers' knowledge in order to accumulate more profits, better control the workforce or replace them (using the higher productivity as an excuse). Thus self-management rather than hierarchy enhances the flow and use of information in complex organisations and so improves efficiency.

This conclusion, it should be stressed, is not idle speculation and Mises was utterly wrong in his assertions related to self-management. People, he stated, "err" in thinking that profit-sharing "would spur the worker on to a more zealous fulfilment of his duties" (indeed, it "must lead straight to Syndicalism") and it was "nonsensical to give 'labour' . . . a share in management. The realisation of such a postulate would result in syndicalism." [Socialism, p. 268, p. 269 and p. 305] Yet, as we note in section I.3.2, the empirical evidence is overwhelmingly against Mises (which suggests why "Austrians" are so dismissive of empirical evidence, as it exposes flaws in the great chains of deductive reasoning they so love). In fact, workers' participation in management and profit sharing enhance productivity. In one sense, though, Mises is right, in that capitalist firms will tend not to encourage participation or even profit sharing as it shows to workers the awkward fact that while the bosses may need them, they do not need the bosses. As discussed in section J.5.12, bosses are fearful that such schemes will lead to "syndicalism" and so quickly stop them in order to remain in power -- in spite (or, more accurately, because) of the efficiency and productivity gains they result in.

"Both capitalism and state socialism," summarises Ellerman, "suffer from the motivational inefficiency of the employment relation." Op. Cit., pp. 210-1] Mutualism would be more efficient as well as freer for, once the stock market and workplace hierarchies are removed, serious blocks and distortions to information flow will be eliminated.

Unfortunately, the state socialists who replied to Mises in the 1920s and 1930s did not have such a libertarian economy in mind. In response to 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 Mises's argument came from Fred Taylor and Oscar Lange (for a collection of their main papers, see On the Economic Theory of Socialism). In light of their work, Hayek shifted the question from theoretical impossibility to whether the theoretical solution could be approximated in practice. Which raises an interesting question, for if (state) socialism is "impossible" (as Mises assured us) then what did collapse in Eastern Europe? If the "Austrians" claim it was "socialism" then they are in the somewhat awkward position that something they assure us is "impossible" existed for decades. 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 most of the arguments of Mises and Hayek did not apply to libertarian socialism, which rejects central planning along with every other form of centralisation.

Nor was the response by Taylor and Lange 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 Walrasian "Auctioneer" (the "god in the machine" of general equilibrium theory which ensures that all markets clear) Taylor and Lange presented 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 their model 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 assert that "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 these countries were not socialist at all and did not even approximate the (libertarian) socialist idea (the only true form of socialism). The Stalinist countries had authoritarian "command economies" with bureaucratic central planning, and so their failure cannot be taken as proof that a decentralised, libertarian socialism cannot work. Nor can Mises' and 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). 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 section I.8).

Thus the "calculation argument" does not prove that socialism is impossible. 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." [Human Action, p. 706] This is because capitalism is not defined by markets as such but rather by wage labour, a situation where working class people do not have free access to the means of production and so have to sell their labour (and so liberty) to those who do. If quoting Engels is not too out of place, the "object of production -- to produce commodities -- does not import to the instrument the character of capital" as the "production of commodities is one of the preconditions for the existence of capital . . . as long as the producer sells only what he himself produces, he is not a capitalist; he becomes so only from the moment he makes use of his instrument to exploit the wage labour of others." [Collected Works, Vol. 47, pp. 179-80] In this, as noted in section C.2.1, Engels was merely echoing Marx (who, in turn, was simply repeating Proudhon's distinction between property and possession). As mutualism eliminates wage labour by self-management and free access to the means of production, its use of markets and prices (both of which pre-date capitalism) does not mean it is not socialist (and as we note in section G.1.1 Marx, Engels, Bakunin and Kropotkin, like Mises, acknowledged Proudhon as being a socialist). This focus on the market, as David Schweickart suggests, is no accident:

"The identification of capitalism with the market is a pernicious error of both conservative defenders of laissez-faire [capitalism] and most left opponents . . . If one looks at the works of the major apologists for capitalism . . . one finds the focus of the apology always on the virtues of the market and on the vices of central planning. Rhetorically this is an effective strategy, for it is much easier to defend the market than to defend the other two defining institutions of capitalism. Proponents of capitalism know well that it is better to keep attention toward the market and away from wage labour or private ownership of the means of production." ["Market Socialism: A Defense", pp. 7-22, Market Socialism: the debate among socialists, Bertell Ollman (ed.), p. 11]

The theoretical work of such socialists as David Schweickart (see his books Against Capitalism and After Capitalism) present an extensive discussion of a dynamic, decentralised market socialist system which has obvious similarities with mutualism -- a link which some Leninists recognise and stress in order to discredit market socialism via guilt-by-association (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.'" [Hillel Ticktin, "The Problem is Market Socialism", pp. 55-80, Op. Cit., p. 56]). 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). Ironically, while these Leninists reject the idea of market socialism as contradictory and, basically, not socialist they usually acknowledge that the transition to Marxist-communism under their workers' state would utilise the market.

So, 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] As we discuss in section I.3.5 Proudhon's 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 (Proudhon, unlike individualist anarchists, was well aware of the negative aspects of markets and the way market forces can disrupt society). Dissident economist Geoffrey M. Hodgson is right to suggest that Proudhon's system, in which "each co-operative association would be able to enter into contractual relations with others", could be "described as an early form of 'market socialism'". In fact, "instead of Lange-type models, the term 'market socialism' is more appropriately used to refer to such systems. Market socialism, in this more appropriate and meaningful sense, involves producer co-operatives that are owned by the workers within them. Such co-operatives sell their products on markets, with genuine exchanges of property rights" (somewhat annoyingly, Hodgson incorrectly asserts that "Proudhon described himself as an anarchist, not a socialist" when, in reality, the French anarchist repeatedly referred to himself and his mutualist system as socialist). [Economics and Utopia, p. 20, p. 37 and p. 20]

Thus it is possible for a socialist economy to allocate resources using markets. By suppressing capital markets and workplace hierarchies, a mutualist system will improve upon capitalism by removing an important source of perverse incentives which hinder efficient use of resources as well as long term investment and social responsibility in addition to reducing inequalities and increasing freedom. As David Ellerman once noted, many "still look at the world in bipolar terms: capitalism or (state) socialism." Yet there "are two broad traditions of socialism: state socialism and self-management socialism. State socialism is based on government ownership of major industry, while self-management socialism envisions firms being worker self-managed and not owned or managed by the government." [Op. Cit., p. 147] Mutualism is a version of the second vision and anarchists reject the cosy agreement between mainstream Marxists and their ideological opponents on the propertarian right that only state socialism is "real" socialism.

Finally, it should be noted that most anarchists are not mutualists but rather aim for (libertarian) communism, the abolition of money. Many do see a mutualist-like system as an inevitable stage in a social revolution, the transitional form imposed by the objective conditions facing a transformation of a society marked by thousands of years of oppression and exploitation (collectivist-anarchism contains elements of both mutualism and communism, with most of its supporters seeing it as a transitional system). This is discussed in section I.2.2, while section I.1.3 indicates why most anarchists reject even non-capitalist markets. So does 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" (see last section) is often used by propertarians (so-called right-wing "libertarians") as the basis for the argument that communism (a moneyless society) is impossible, it is based on certain false ideas of what prices do, the nature of the market and how a communist-anarchist society would function. This is hardly surprising, as Mises based his theory on a variation of neo-classical economics and the Marxist social-democratic (and so Leninist) ideas of what a "socialist" economy would look like. So 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 wage-labour and money. However, it is useful here to indicate exactly why communism 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 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." His argument was 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. 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." Thus we would quickly see "the spectacle of a socialist economic order floundering in the ocean of possible and conceivable economic combinations without the compass of economic calculation." ["Economic Calculation in the Socialist Commonwealth", pp. 87-130, Collectivist Economic Planning, F.A. von Hayek (ed.), p. 104, p. 103 and p. 110] Hence the claim 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 A cost $10 and B $5, then clearly method one would be the most efficient ($20 versus $25). Without the market, Mises argued, such a decision would be impossible and so every decision would be "groping in the dark." [Op. Cit., p. 110]

Mises' argument rests on three flawed assumptions, two against communism and one for capitalism. The first two negative assumptions are that communism entails central planning and that it is impossible to make investment decisions without money values. We discuss why each is wrong in this section. Mises' positive assumption for capitalism, namely that markets allow exact and efficient allocation of resources, is discussed in section I.1.5 .

Firstly, Mises assumes a centralised planned economy. As Hayek summarised, the crux of the matter was "the impossibility of a rational calculation in a centrally directed economy from which prices are necessarily absent", one which "involves planning on a most extensive scale -- minute direction of practically all productive activity by one central authority". Thus the "one central authority has to solve the economic problem of distributing a limited amount of resources between a practically infinite number of competing purposes" with "a reasonable degree of accuracy, with a degree of success equally or approaching the results of competitive capitalism" is what "constitutes the problem of socialism as a method." ["The Nature and History of the Problem", pp. 1-40, Op. Cit., p. 35, p. 19 and pp. 16-7]

While this was a common idea in Marxian social democracy (and the Leninism that came from it), centralised organisations are rejected by anarchism. As Bakunin argued, "where are the intellects powerful enough to embrace the infinite multiplicity and diversity of real interests, aspirations, wishes, and needs which sum up the collective will of the people? And to invent a social organisation that will not be a Procrustean bed upon which the violence of the State will more or less overtly force unhappy society to stretch out?" Moreover, a socialist government, "unless it were endowed with omniscience, omnipresence, and the omnipotence which the theologians attribute to God, could not possibly know and foresee the needs of its people, or satisfy with an even justice those interests which are most legitimate and pressing." [Bakunin on Anarchism, pp. 268-9 and p. 318] For Malatesta, such a system would require "immense centralisation" and would either be "an impossible thing to achieve, or, if possible, would end up as a colossal and very complex tyranny." [At the Café, p. 65]

Kropotkin, likewise, dismissed the notion of central planning as the "economic changes that will result from the social revolution will be so immense and so profound . . . that it will be impossible for one or even a number of individuals to elaborate the social forms to which a further society must give birth. The elaboration of new social forms can only be the collective work of the masses." [Words of a Rebel, p. 175] The notion that a "strongly centralised Government" could "command that a prescribed quantity" of a good "be sent to such a place on such a day" and be "received on a given day by a specified official and stored in particular warehouses" was not only "undesirable" but also "wildly Utopian." During his discussion of the benefits of free agreement against state tutelage, Kropotkin noted that only the former allowed the utilisation of "the co-operation, the enthusiasm, the local knowledge" of the people. [The Conquest of Bread, pp. 82-3 and p. 137]

Kropotkin's own experience had shown how the "high functionaries" of the Tsarist bureaucracy "were simply charming in their innocent ignorance" of the areas they were meant to be administrating and how, thanks to Marxism, the socialist ideal had "lost the character of something that had to be worked out by the labour organisations themselves, and became state management of industries -- in fact, state socialism; that is, state capitalism." As an anarchist, he knew that governments become "isolated from the masses" and so "the very success of socialism" required "the ideas of no-government, of self-reliance, of free initiative of the individual" to be "preached side by side with those of socialised ownership and production." Thus it was essential that socialism was decentralised, federal and participatory, that the "structure of the society which we longed for" was "worked out, in theory and practice, from beneath" in by "all labour unions" with "a full knowledge of local needs of each trade and each locality." [Memoirs of a Revolutionist, p. 184, p. 360, p. 374-5 and p. 376] He reiterated this as the Bolsheviks confirmed his warnings:

"The immense constructive work demanded by a social revolution cannot be accomplished by a central government . . . It has need of knowledge, of brains and of the voluntary collaboration of a host of local and specialised forces which alone can attack the diversity of economic problems in their local aspects . . . Socialism will certainly make considerable progress, and new forms of more independent life will be created based on local autonomy and free initiative . . . But the success of this reconstruction will depend in great part on the possibility of direct cooperation between the different peoples. To achieve that, it is necessary that . . . there should be a union of all the workers' organisations of the world, federated to deliver world production from its present subjection to capitalism." [Anarchism, pp. 255-6]

So anarchists can agree with Mises that central planning cannot work in practice as its advocates hope. Or, more correctly, Mises agreed with the anarchists, as we had opposed central planning first. We have long recognised that no small body of people can be expected to know what happens in society and plan accordingly ("No single brain nor any bureau of brains can see to this organisation." [Issac Puente, Libertarian Communism, p. 29]). Moreover, there is the pressing question of freedom as well, for "the despotism of [the 'socialist'] State would be equal to the despotism of the present state, increased by the economic despotism of all the capital which would pass into the hands of the State, and the whole would be multiplied by all the centralisation necessary for this new State. And it is for this reason that we, the Anarchists, friends of liberty, we intend to fight them to the end." [Carlo Cafiero, "Anarchy and Communism", pp. 179-86, The Raven, No. 6, p. 179]

As John O'Neill summarises, the "argument against centralised planning is one that has been articulated within the history of socialist planning as an argument for democratic and decentralised decision making." [The Market, p. 132] So, for good economic and political reasons, anarchists reject central planning. This central libertarian socialist position feeds directly into refuting Mises' argument, for while a centralised system would need to compare a large ("infinite") number of possible alternatives to a large number of possible needs, this is not the case in a decentralised system. Rather than a vast multitude of alternatives which would swamp a centralised planning agency, one workplace comparing different alternatives to meet a specific need faces a much lower number of possibilities as the objective technical requirements (use-values) of a project are known and so local knowledge will eliminate most of the options available to a small number which can be directly compared.

As such, removing the assumption of a central planning body automatically drains Mises' critique of much of its force -- rather than an "the ocean of possible and conceivable economic combinations" faced by a central body, a specific workplace or community has a more limited number of possible solutions for a limited number of requirements. Moreover, any complex machine is a product of less complex goods, meaning that the workplace is a consumer of other workplace's goods. If, as Mises admitted, a customer can decide between consumption goods without the need for money then the user and producer of a "higher order" good can decide between consumption goods required to meet their needs.

In terms of decision making, it is true that a centralised planning agency would be swamped by the multiple options available to it. However, in a decentralised socialist system individual workplaces and communes would be deciding between a much smaller number of alternatives. Moreover, unlike a centralised system, the individual firm or commune knows exactly what is required to meet its needs, and so the number of possible alternatives is reduced as well (for example, certain materials are simply technically unsuitable for certain tasks).

Mises' other 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 assumed 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. Yet more information can be provided which can be used to inform decision making. As socialists 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] Thus any good used as an input into a production process would require the communication of this kind of information.

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'Neill notes, "the market may be one way in which dispersed knowledge can be put to good effect. It is not . . . the only way". "The strength of the epistemological argument for the market depends in part on the implausibility of assuming that all knowledge could be centralised upon some particular planning agency" he stresses, but Mises' "argument ignores, however, the existence of the decentralised but predominantly non-market institutions for the distribution of knowledge . . . The assumption that only the market can co-ordinate dispersed non-vocalisable knowledge is false." [Op. Cit., p. 118 and p. 132]

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.

Somewhat ironically, given how "Austrian" economics tends to stress that the informational limitations are at the root of its "impossibility" of socialism, the fact is that the market hides a significant amount of essential information required to make a sensible investment decision. This can be seen from an analysis of Mises' discussion on why labour-time cannot replace money as a decision-making tool. Using labour, he argued, "leaves the employment of material factors of production out of account" and presents an example of two goods, P and Q, which take 10 hours to produce. P takes 8 hours of labour, plus 2 units of raw material A (which is produced by an hour's socially necessary labour). Q takes 9 hours of labour and one unit of A. He asserts that in terms of labour P and Q "are equivalent, but in value terms P is more valuable than Q. The former is false, and only the later corresponds to the nature and purpose of calculation." ["Economic Calculation in the Socialist Commonwealth", Op. Cit., p. 113]

The flaw in his argument is clear. Assuming that an hour of socially necessary labour is £10 then, in price terms, P would have £80 of direct labour costs, with £20 of raw material A while Q would have £90 of direct labour and £10 of A. Both cost £100 so it hard to see how this "corresponds to the nature and purpose of calculation"! Using less of raw material A is a judgement made in addition to "calculation" in this example. The question of whether to economise on the use of A simply cannot be made using prices. If P, for example, can only be produced via a more ecologically destructive process than Q or if the work process by which P is created is marked by dull, mindless work but Q's is more satisfying for the people involved than Q may be considered a better decision. Sadly, that kind of information is not communicated by the price mechanism.

As John O'Neill points out, "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." [Ecology, Policy and Politics, p. 115] This central assumption was unchallenged by Taylor and Lange in their defence of "socialism", meaning that from the start the debate against 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.

Anarchists question whether using prices means basing all decision making on one criterion and ignoring all others is a rational thing to do. As O'Neill suggests, "the relative scarcity of items . . . hardly exhaust the full gamut of information that is distributed throughout society which might be relevant to the co-ordination of economic activities and plans." [The Market, p. 196] Saying that a good costs £10 does not tell you much about the amount of pollution its production or use generates, under what conditions of labour it was produced, whether its price is affected by the market power of the firm producing it, whether it is produced in an ecologically sustainable way, and so forth. Similarly, saying that another, similar, good costs £9 does not tell you whether than £1 difference is due to a more efficient use of inputs or whether it is caused by imposing pollution onto the planet.

And do prices actually reflect costs? 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 could have a lower price than one produced in a country which allowed unions to organise and has 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.

In other words, market prices can be horribly distorted in that they ignore quality issues. Exchanges therefore occur in light of false information and, moreover, with anti-social motivations -- to maximise short-term surplus for the capitalists regardless of losses to others. Thus they distort valuations and impose a crass, narrow and ultimately self-defeating individualism. Prices are shaped by more than costs, with, for example, market power increasing market prices far higher than actual costs. Market prices also fail to take into account public goods and so bias allocation choices against them not to mention ignoring the effects on the wider society, i.e. beyond the direct buyers and sellers. Similarly, in order to make rational decisions relating to using a good, you need to know why the price has changed for if a change is permanent or transient implies different responses. Thus the current price is not enough in itself. Has the good become more expensive temporarily, due, say, to a strike? Or is it because the supply of the resource has been exhausted? Actions that are sensible in the former situation will be wrong in the other. As O'Neill suggests, "the information [in the market] is passed back without dialogue. The market informs by 'exit' -- some products find a market, others do not. 'Voice' is not exercised. This failure of dialogue . . . represents an informational failure of the market, not a virtue . . . The market . . . does distribute information . . . it also blocks a great deal." [Op. Cit., p. 99]

So 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, capitalist "calculation" fails because private firms are oblivious to the social cost of their labour and raw materials inputs.

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 (see section E.3). Thus the market creates a perverse incentive to subsidise their input costs through off-the-book social and environmental externalities. As Chomsky suggests:

"it is by now widely realised that the economist's 'externalities can no longer be consigned to footnotes. No one who gives a moment's thought to the problems of contemporary society can fail to be aware of the social costs of consumption and production, the progressive destruction of the environment, the utter irrationality of the utilisation of contemporary technology, the inability of a system based on profit or growth-maximisation to deal with needs that can only be expressed collectively, and the enormous bias this system imposes towards maximisation of commodities for personal use in place of the general improvement of the quality of life." [Radical Priorities, pp. 190-1]

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.

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 the argument that only market prices represent costs falls. Equally, there may be costs (in terms of quality of life issues) which cannot be reflected in price terms.

Simply put, the market fails to distribute all relevant information and, particularly when prices are at disequilibrium, can communicate distinctly misleading information. In the words of two South African anarchists, "prices in capitalism provided at best incomplete and partial information that obscured the workings of capitalism, and would generate and reproduce economic and social inequalities. Ignoring the social character of the economy with their methodological individualism, economic liberals also ignored the social costs of particular choices and the question of externalities." [Michael Schmidt and Lucien van der Walt, Black Flame, p. 92] This suggests that 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] It is precisely these real costs, hidden by price, which need to be communicated to producers and consumers for them to make informed and rational decisions concerning their economic activity.

It is useful to remember that Mises argued that it is the complexity of a modern economy that ensures money is required: "Within 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]

A libertarian communist society would, it must be stressed, 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.

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). Moreover, it should be remembered that production goods are made up on inputs of other goods, that is, higher goods are made up of consumption goods of a lower order. If, as Mises admits, calculation without money is possible for consumption goods then the creation of "higher order" goods can be also achieved and a record of its costs made and communicated to those who seek to use it.

While the specific "aids to the mind" as well as "costs" and their relative weight would be determined by the people of a free society, we can speculate that it would include direct and indirect labour, externalities (such as pollution), energy use and materials, and so forth. As such, it must be stressed that a libertarian communist society would seek to communicate the "costs" associated with any specific product as well as its relative scarcity. In other words, it needs a means of determining the objective or absolute costs associated with different alternatives as well as an indication of how much of a given good is available at a given it (i.e., its scarcity). Both of these can be determined without the use of money and markets.

Section I.4 discusses possible frameworks for an anarchist economy, including suggestions for libertarian communist economic decision-making processes. In terms of "aids to the mind", these include methods to compare goods for resource allocation by indicating the absolute costs involved in producing a good and the relative scarcity of a specific good, among other things. 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 free us for space and time for reflective judgements where they matter most." [John O'Neill, Ecology, Policy and Politics, pp. 117-8] It is these "rules and institutions need themselves to be open to critical and reflective appraisal." [O'Neill, The Market, p. 118]

Economic decisions, in other words, cannot be reduced down to one factor yet 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 than 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."

Basing your economic decision making on a single criteria, namely profitability, can, and does, lead to perverse results. Most obviously, the tendency for capitalists to save money by not introducing safety equipment ("To save a dollar the capitalist build their railroads poorly, and along comes a train, and loads of people are killed. What are their lives to him, if by their sacrifice he has saved money?" [Emma Goldman, A Documentary History of the American Years, vol. 1, p. 157]). Similarly, it is considered a more "efficient" use of resources to condemn workers to deskilling and degrading work than "waste" resources in developing machines to eliminate or reduce it ("How many machines remain unused solely because they do not return an immediate profit to the capitalist! . . . How many discoveries, how many applications of science remain a dead letter solely because they don't bring the capitalist enough!" [Carlo Cafiero, "Anarchy and Communism", pp. 179-86, The Raven, No. 6, p. 182]). Similarly, those investments which have a higher initial cost but which, in the long run, would have, say, a smaller environmental impact would not be selected in a profit-driven system.

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 green economist 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 than 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. In fact, the market rewards such behaviour as a company which was socially responsible would be penalised by higher costs, and so market prices. 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."

Ironically enough, Mises also pointed to the irrational nature of the price mechanism. He stated (correctly) that there are "extra-economic" elements which "monetary calculation cannot embrace" because of "its very nature." He acknowledged that these "considerations themselves can scarcely be termed irrational" and, as examples, listed "[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 also noted that "they are just as much motive forces of rational conduct as are economic factors" but they "do not enter into exchange relationships." 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, Mises comments indicate well the inverted logic of capitalism. That 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 begs the question and has plausibility only if it assumes what it is supposed to prove. [Op. Cit., p. 99-100] Indeed, the person who would put a price on friendship would have no friends as 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 individuals value, such as beautiful places, happiness, the environment and so on.

So essential information required for sensible decision making would have to be recorded and communicated in a communist society and used to evaluate different options using agreed methods of comparison. This 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 social dimension simply because they involve other human beings and the environment. As Mises himself acknowledged, monetary calculation does not capture such dimensions.

We, therefore, need to employ practical judgement in making choices aided by a full understand