I’m sick of the free pass given the libertarian blather, “The state is the only source of coercive power.” I doubt that many non-libertarians buy that assetion, but they too often remain silent because most libertarians are rabid on that issue and arguing with them is like talking to a wall. But since that bogus assertion has been showing up increasingly in comments here as right-wing plants are becoming more common, I might as well do a quick shred, since it does not take much effort to show this claim is nonsense.

Let’s look at some simple empirical examples of why this pet argument just ain’t so. The first comes from Tom Ferguson:

American history is replete with examples of business groups and individual firms retaining vast armies of military and paramilitary forces for long periods of time. In the nineteenth century many railroads kept private armies. The Pennsylvania Coal and Iron Police ran their own Obrigkeitsstaat [authoritarian state] for decades. General Motors maintained the Black Legion; Ford sported a veritable Freikorps recruited by the notorious Henry Bennett; and any number of detective agencies, goon squads, “special consultants,” and wiretappers have also been active. . . . Force on such a scale potentially menaces competitors, buyers, and suppliers almost as much as it does workers.

Some modern versions of coercion don’t involve actual harm, but credible threats. For instance, I know three different lawyers who have been suing banks who have gotten ugly warnings (and some follow-up action, like break ins and messages specifying where children were on specific days; one is spending $20,000 a month on bodyguards).

And pressure can be financial rather than physical. Recall the HB Gary plans against Glenn Greenwald. They clearly planned to destroy his professional reputation (not that that would be as easy as they thought) so he would have to choose “career over cause”. But in the US, where jobs are hard to come by and safety nets are frayed to non-existant, someone over 35 and/or with kids who is not independently wealthy or is self employed with a very solid franchise is economically vulnerable.

Let’s consider another example. A friend of mine opened the Dun & Bradstreet office in Moscow in the 1990s. That meant selling information in a country which was and is not big on transparency, making the initiative a risky proposition. She says she is the only person ever to have sued a Russian oil company, win in court, collect the money, and live to tell the tale. In her day in Russia, it cost $5000 to have someone killed, which was actually a lot in local terms. It was expensive because you had to murder three people to cover your tracks properly: the target, the assassin, and the person who made the arrangement to hire the killer. The last person was costly to eliminate, they were usually much higher caliber and hence more wary than the assassins.

Note there was no state power in this little murder ring: all were private contractors. Indeed, the sort of weak state that libertarians celebrate typically makes for fertile breeding grounds for all sorts of private goon squads stepping into a power vacuum. And thuggery works, witness the rarity of my friend’s evident insanity in pursuing an oil company deadbeat.

More broadly, the fact that coercion is not blatant does not make it any less coercive. From Robert Heilbroner in Behind the Veil of Economics:

This negative form of power contrasts sharply with with that of the privileged elites in precapitalist social formations. In these imperial kingdoms or feudal holdings, disciplinary power is exercised by the direct use or display of coercive power. The social power of capital is of a different kind….The capitalist may deny others access to his resources, but he may not force them to work with him. Clearly, such power requires circumstances that make the withholding of access of critical consequence. These circumstances can only arise if the general populace is unable to secure a living unless it can gain access to privately owned resources or wealth… The organization of production is generally regarded as a wholly “economic” activity, ignoring the political function served by the wage-labor relationships in lieu of baliffs and senechals. In a like fashion, the discharge of political authority is regarded as essentially separable from the operation of the economic realm, ignoring the provision of the legal, military, and material contributions without which the private sphere could not function properly or even exist. In this way, the presence of the two realms, each responsible for part of the activities necessary for the maintenance of the social formation, not only gives capitalism a structure entirely different from that of any precapitalist society, but also establishes the basis for a problem that uniquely preoccupies capitalism, namely, the appropriate role of the state vis-a-vis the sphere of production and distribution.

Libertarianism does a great disservice to the debate about the most productive relationship between the state and private sector, which is an ongoing challenge as economies and societies evolve. It simply denies that the private sector is intrinsically dependent on the state for key functions for it to perform well, and ignores the fact its ideal of a minimal state does not scale at all. Similarly, many forms of enterprise show considerable economies of scale and hence will dominate the political realm if the political sphere is not allowed to constrain the economic realm when broader society prefers to impose rules (for instance, via product safety and truth in advertising laws so that consumers do not have to spend considerable amounts of time researching purchases).

Although the economics discipline has also unwittingly reinforced the idea of the separation of the political and economic arenas, the spectacle of major financial firms becoming even more influential after nearly destroying the global economy has put power dynamics front and center. “Political economy” was the new buzzphrase at the April INET conference. Let’s hope that we see more recognition of the fact that commerce both depends upon and influences the societies it inhabits. Markets are not sacrosanct, but must be judged and if need be, reshaped based on how well they server their broader constituencies.