In my blog post for May Day, as well as linking to numerous labour and protest songs, I mentioned (in what I termed propertarian stupidity of the day) that a Cato propertarian had effectively called for a restriction in the franchise to secure "capitalist democracy". While reactionary does not do the propertarians justice, it is rare for them to be so open about it. Needless to say, this slip has been much discussed.

A moderate classical liberal makes some good points. For example:

"It's because libertarians have done a terrible job countering the widespread suspicion that it’s a uselessly abstract ahistorical ideology for socially retarded adolescent white guys."

Which is a classic summing up! And:

"And if libertarian-style politics seems especially unnatractive to members of formerly oppressed and disenfranchised groups, maybe that’s because it is reasonable to suspect that a politics that focuses relentlessly on the inviolability of property rights in a system that once treated people as property, and for centuries denied much of the population the chance to accumulate any property, is a politics meant to protect those who reap the gains of a still-rigged and unjust system."

Exactly, although I quibble over "formerly oppressed" and would extend the analysis to treating labour as property (as in a worker sells their labour to the boss who then owns it). Can it really be a coincidence that almost all propertarians are so anti-union? Or the fact that Rothbard was so against the individual anarchist support for juries? What, ultimately, is the difference between Rothbard's (monopoly) "libertarian law code" designed by "Libertarian lawyers and jurists" and implemented and developed by judges ("judge-made law") and a state? Fundamentally, none:

The key difference between these liberals and Rothbard's brand of liberalism is that rather than an elected parliament making laws, "anarcho"-capitalism would have a general law code produced by "libertarian" lawyers, jurists and judges. Both would have laws interpreted by judges. Rothbard's system is also based on a legal framework which would both provide a definition of property rights and determine the rules of the game. However, the means of enforcing and arbitrating those laws would be totally private. Yet even this is hardly a difference, as it is doubtful if Friedman or von Mises (like Rand or Herbert) would have barred private security firms or voluntary arbitration services as long as they followed the law of the land. The only major difference is that Rothbard's system explicitly excludes the general public from specifying or amending the laws they are subject to and allows (prosperous) judges to interpret and add to the (capitalist) law. Perhaps this dispossession of the general public is the only means by which the minimal state will remain minimal (as Rothbard claimed) and capitalist property, authority and property rights remain secure and sacrosanct, yet the situation where the general public has no say in the regime and the laws they are subjected to is usually called dictatorship, not "anarchy."

Our moderate classical liberal makes the good point that "it would be better to design a democratic structure in advance, rather than morphing into a neo-fuedal landlord/tenant model of territorial governance" yet this is precisely what many propertarian thinkers (if that is the right term) end up suggesting. Rand's Galt's Gulch is effectively a monarchy, with the owner of the land ruling it and those within it. As another commentator on this says, Peter Thiel’s "essay really drives home how much libertarians shouldn’t own the word 'liberty', because they are actually modern day feudalists". This conclusion is not hard to draw, particularly as some "anarcho"-capitalists seem happy to admit it themselves! Not to mention minimal statists like Nozick

Hardly surprising, as the whole ideology is rooted in property, not liberty (hence the blindly obvious point that voluntarism is not enough!). I would guess that our new classical liberal will either end up rejecting propertarianism or end up seeing the benefits of autocracy… Hopefully the former.

Returning to the first commentator, he makes the basically correct conclusion that "I think the anarchist [sic!] is right about the minarchist: once you accept the public goods argument for state protection of various rights, you have accepted that there are no fully voluntary solutions to certain collective action problems, and you’re logic-bound to ride the public goods argument as far as it takes you, which is further than the minarchist thinks". I say this is correct because it was precisely what drove Rothbard to reject minimal statism (as he discussed in his The Betrayal of the American Right, page 74). Which raises the interesting question of whether, without the New Deal, there would even be "anarcho"-capitalism. After all, unlike individualist anarchism, it was not driven by a desire to see the end of exploitation and oppression of labour within a classical liberal state but, rather, opposition to taxes being used for anything other than defending private property (and so power).

All of which makes the propertarian use of the terms "libertarian" and "anarchist" so annoying, as they are associating these terms with fundamentally authoritarian and hierarchical set of ideas. This becomes problematic when you try to discuss your ideas, as you often have to state (particularly to Americans) the actual history of the term "libertarian" by the left. Then there is the difficulties of defining anarchism and libertarianism.

This is most notable on Wikipedia, which I look at occasionally (reading the discussion pages can be compulsive, seeing what nonsense is being raised, who is being quoted out of context, and so forth). The debates can be quite surreal, with the propertarians seeking to rewrite anarchist history and banish all mention of the awkward fact that few anarchists think "anarcho"-capitalism is anarchist. This gets extremely confusing, as you can see from the left-libertarianism definition. When the propertarians appropriated "libertarian" one response was to say, well, those are right-libertarians while we traditional libertarians are left-libertarians. Then a section of the right-libertarians decided that they could not quite bring themselves to accept the obvious implications of their ideology and sought ways of reducing inequalities (and so increase the liberties of the non-owning class) -- by, for example, taking up ideas associated with Henry George and arguing that natural resources should not be appropriated. They then decided to call themselves "left-libertarians"! Argh!

Wikipedia, I would say, is ideal for cranks (survival of those with the least social life, I would suggest!). It allows them access to a very public forum to punt their wacky ideas. They can reference books from their own milieu and so confuse issues massively. For example, Look at this extract (from Libertarianism page):

"Although anarchism is considered by some to be a left-wing ideology [citation needed], it always has included individualists – including anarcho-capitalists – who support pro-property and market-oriented economic structures. Anarchists may support anything from extreme individualism to complete collectivism."

Citation needed?!?!?!? WFT? If someone states socialism was left-wing, would they really need to prove it? Equally, "considered by some"? Some? The only people who do not consider anarchism to be "left-wing" are the "anarcho"-capitalists! Even the "Post-Left anarchists" would not deny that anarchism is associated with the left (however much they may seek to transcend that). This would be like someone putting something like this on the socialism page:

"Although socialism is considered by some to be a left-wing ideology, it always has included right-wingers – including national socialists – who support pro-property and capitalist economic structures. Socialists may support anything from extreme internationalism to complete nationalism."

Of course, this is the position of the propertarians whose analysis on "national socialism" is basically that as it includes "socialism" in the name, it must be socialist (I kid you note). This sort of nonsense is not tolerated in defining socialism, unsurprisingly. After all, why let a few cranks change the mentioning of a theory in order to make it more acceptable to their ideology?

Of course, unlike with socialism and Nazism, some academics do accept "anarcho"-capitalism as a form of anarchism. Why? Probably because they use "anarchism" to describe their ideology and anarchists are not so common to refute them (most of the better ones do mention that propertarian claims are rejected by most anarchists). Jeremy Jennings gets it right by stating that it is "hard not to conclude that these ideas ["anarcho"-capitalism] -- with roots deep in classical liberalism -- are described as anarchist only on the basis of a misunderstanding of what anarchism is." [Contemporary Political Ideologies, Roger Eatwell and Anthony Wright (eds.), p. 142] In other words, anarchism (regardless of what some academics suggest) has never been purely anti-state – anarchist principles have always been applied in critiquing property, most obviously (that explains why the likes of Molinari never called himself an anarchist). As noted here, Rothbard once reached the same conclusion -- that "all" schools of anarchism, including individualist anarchism, had "socialistic elements in their doctrines". Which must be the only thing Rothbard got right...

I should note an interesting coincidence, namely that five decades after Rothbard's conclusion leading "anarcho"-capitalist Walter Block reviewed Kevin Carson's book on individualist anarchism. Carson, it should be noted, holds identical positions as Tucker on land, credit and so forth. Block dismissed "Marxists like Carson" and labelled him "a supposed anarchist" who on many issues "is out there, way, way out there in some sort of Marxist never-never land." Changing "Marxist" to "socialist" and we have the same point against individualist anarchism by Rothbard and Block. Yes, indeed, individualist anarchist is socialistic – as Tucker noted constantly.

Significantly, Rothbard noted that the individualist anarchists ("it always has included individualists . . . who support pro-property and market-oriented economic structures") also shared socialist policies as well. Which is precisely what most anarchists point out -- and the main argument of An Anarchist FAQ on this matter. Which refutes something in the Wikipedia's AFAQ entry (yes, someone created an entry for it!):

Charles W. Johnson, a left-libertarian [I should note, in the sense of left-wing of the right-wing "libertarians"] writer and individualist anarchist, criticized the FAQ and argued that: "Their reading of the individualist anarchists is consistently selective and opportunistic. Their reading of the anarcho-capitalists is consistently uncharitable, superficial, and incomplete."

This quote is from a comment made to Kevin Carson's blog (apparently a comment on a blog is now considered a good source by propertarians -- how times have changed since some of them opposed referencing AFAQ in Wikipedia because it was "self-published"!). Needless to say, Johnson is wrong. Our account of individualist anarchism is in-depth and covers all the major issues -- including where it differs with social anarchism on issues like property and wage labour (and, of course, how it differs from "anarcho"-capitalism on key issues). This is acknowledged by other individual anarchists. As for "anarcho"-capitalism, AFAQ simply quotes Rothbard and his followers to show how far they are from anarchism. Sadly for the likes of Johnson, the fact is "anarcho"-capitalism is reactionary and attempts by some of them to distance themselves from this are just not convincing. Ultimately, that the founder of "anarcho"-capitalism came to the same "selective and opportunistic" conclusion as AFAQ on individualist anarchism says it all.

Elsewhere, Johnson states that "Meanwhile the social anarchists’ reconstruction of anarcho-capitalist theory is so ferociously uncharitable, and so far out of touch with the versions of anarcho-capitalism espoused by central figures such as Karl Hess and Murray Rothbard in the period of Left and Right and Libertarian Forum, that frankly they ought to be embarrassed to show it in public." Sorry, what? we should be "embarrassed" by not limiting our account of "anarcho"-capitalism to a (Johnson approved) very short period of Rothbard's writings? That we look to such works as Rothbard's The Ethics of Liberty to show the contradictions of "anarcho"-capitalism? Now that is strange and shows how flawed Johnson's comments are. Apparently a three year period in the 1960s should be used, rather than what came before and after. And should I note that The Ethics of Liberty came out in 1982, towards the end of the Libertarian Forum period. I think it fair to say that Johnson is the one who should be embarrassed for suggesting such a selective and opportunistic perspective on "anarcho"-capitalism! I can only surmise that he prefers to concentrate on the 1960s because Rothbard was trying to recruit from the left and so had to tone-down his reactionary ideology.

Perhaps Johnson's point is that not all propertarians are as reactionary as Rothbard and that even he had his periods when he was not quite as reactionary as normal. Or perhaps it is simply that some propertarians are closer to individualist anarchism than others? That is true, but just because some Marxists are closer to social anarchism than others does not stop them being Marxists. Nor does, say, concentrating on Lenin's works in 1917 in an attempt to portray him as being more a libertarian socialist than is often suggested seem less than convincing. Ultimately, when evaluating “anarcho”-capitalism it makes sense to concentrate on its founder rather than a selection of obscure people whom an equally obscure individual thinks are more ideologically correct.

Kevin Carson likes to quote Karl Hess from the 60s to the more reactionary propertarians, namely that "Libertarianism is a people's movement and a liberation movement." Hess suggested that this "is a far cry from sharing common ground with those who want to create a society in which super capitalists are free to amass vast holdings and who say that that is ultimately the most important purpose of freedom. This is proto-heroic nonsense." Sadly, within a decade it had become precisely that -- and remains there to this day. Perhaps because propertarianism, unlike individualist anarchism, is rooted in capitalist property rights? Whether Kevin's pointing out to propertarians that even the holy Rothbard had his moments of being less that totally reactionary is a useful strategy in raising awareness of genuine individualist anarchism is moot. It may just result in some of them changing their label rather than their actual ideology -- an appealing option now given the results of neo-liberal capitalism...

Still, Johnson is not noteworthy beyond what his inclusion says about Wikipedia and how it allows those with an agenda nearly free access to twist things to make them seem more important than they are -- like "Austrian" economics. And talking of which...

With a massive economic crisis exposing the failure of neo-classical economics, it is fair to say that the "Austrians" probably think their time has come. As in the 1930s, they are trying to convince people that analysis of the crisis makes sense and that their policies are the best. Hopefully, as when the last time this happened (the 1930s), they will fail (given the quality of its advocates, this seems likely -- see my critique of a recent article by George Reisman for example). I do hope that this is when post-Keynesianism goes mainstream, replacing (or at the very least, challenging) neo-classical orthodoxy and those ideologies, such as the "Austrian" school, close to it.

Interestingly, there has been a few posts on this subject. One is at the critiques of [right] libertarianism blog, and one at Matthew Yglesias's blog (The Right and Austrian Business Cycle Theory). The latter links to this posting, which states (in part):

At the time it was put forward, the Mises-Hayek business cycle theory was actually a pretty big theoretical advance. The main competitors were the orthodox defenders of Says Law, who denied that a business cycle was possible (unemployment being attributed to unions or government-imposed minumum wages), and the Marxists who offered a model of catastrophic crisis driven by the declining rate of profit.

Both Marxism and classical economics were characterized by the assumption that money is neutral, a ‘veil’ over real transactions.

Both assertions are wrong. Marx did not assume that money is neutral and he had explained the role of credit expansion in the business cycle (the Mises-Hayek theory) long before Mises put pen to paper. To quote a passage of Marx's in Doug Henwood's excellent Wall Street:

"[Credit is] the principal lever of overproduction and excessive speculation... because the reproduction process, which is elastic by nature, is now forced to its most extreme limit; and this is because a great part of the social capital is applied by those who are not its owners, and who therefore proceed quite unlike owners who, when they function themselves, anxiously weigh the limits of their private capital. This only goes to show how the valorization of capital founded on the antithetical character of capitalist production permits actual free development only up to a certain point, which is constantly broken through by the credit system. The credit system hence accelerates the material development of the productive forces and the creation of the world market, which it is the historical task of the capitalist mode of production to bring to a certain level of development, as material foundations for new forms of production. At the same time, credit accelerates the violent outbreaks of this contradiction, crises, and with these the elements of dissolution of the old mode of production.... The credit system has a dual character immanent in it: on the one hand it develops the motive of capitalist production, enrichment by the exploitation of others’ labour, into the purest and most colossal system of gambling and swindling, and restricts ever more the already small number of the exploiters of social wealth; on the other hand however it constitutes the form of transition towards a new mode of production. It is this dual character that gives the principal spokesmen for credit, from Law through to Isaac Péreire, their nicely mixed character of swindler and prophet."

See also Crotty's 1985 paper The Centrality of Money, Credit, and Financial Intermediation in Marx’s Crisis Theory: An Interpretation of Marx’s Methodology (pdf) or Steve Keen's excellent The Minsky Thesis: Keynesian or Marxian (pdf).

While Volume 1 of Capital assumes a commodity money economy and a an equilibrium analysis based on commodities changing at their values to show how surplus value is produced by the exploitation of labour, volume 3 introduces more dynamic perspectives -- including credit. In other words, Marx was well aware that credit heightened booms and deepened slumps. So far, so "Austrian". But the key difference was that Marx was also aware that capitalism would have a business cycle even in the unlikely situation that the banking system worked as the "Austrians" would like. In other words, credit expansion built upon an underlying cycle rather than creating it.

There is a certain irony in the "Austrian" position, namely that it is rooted in equilibrium analysis. As one post-Keynesian economist notes, it "not only proved to be vulnerable to the Cambridge capital critique . . . , but also appeared to reply upon concepts of equilibrium (the 'natural rate of interest', for example) that were inconsistent with the broader principles of Austrian economic theory." [J.E. King, A history of post Keynesian economics since 1936, p. 230] So here is an example of entrepreneurial activity which leads to increasing disequilibrium, one (ironically) drawn straight from "Austrian" economics itself -- namely the actions of bankers extending credit and so deviating from the "natural" (equilibrium) rate of interest. As we discussed in section C.8, this kind of activity is to be expected of entrepreneurs seeking to make money from meeting market demand. The net result of this activity is a tendency away from equilibrium -- although, as discussed in section C.7.2, this can be generalised to all commodities (for reasons that will become clear).

In fact, almost all "Austrian" use of disequilibrium really does not get beyond lip-service (unlike post-Keynesian). For the typical modern "Austrian" economist, the economy is considered not to be in equilibrium, with entrepreneur being seen as the means by which it brought towards it. Thus "this approach postulates a tendency for profit opportunities to be discovered and grasped by routine-resisting entrepreneurial market participants", with this "tending to nudge the market in the equilibrative direction." Lip-service is paid to the obvious fact that entrepreneurs can make errors "there is no tendency for entrepreneurial errors to be made. The tendency which the market generates toward greater mutual awareness, is not offset by any equal but opposite tendency in the direction of diminishing awareness" and so the "entrepreneurial market process may indeed reflect a systematically equilibrative tendency, but this by no means constitutes a guaranteed unidirectional, flawlessly converging trajectory." All this results on the "speculative actions of entrepreneurs who see opportunities for pure profit in the conditions of disequilibrium." [Israel M. Kirzner, "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach", pp. 60-85, Journal of Economic Literature, Vol. 35, No. 1, p. 71, p. 73, p. 82, p. 72 and p. 68]

When evaluating this, it is useful to remember that "postulate" means "to assume without proof to be true" or "to take as self-evident". At its most simple, this argument ignores how entrepreneurial activity pushes an economy away from equilibrium (something not lost on a few "Austrians" influenced by post-Keynesian economics such as Ludwig Lachmann, acknowledged in passing by Kirzner: "In a world of incessant change, they argue, it is precisely those acts of entrepreneurial boldness which must frustrate any discovery efforts made by fellow entrepreneurs." [p. 79]). In other words, market activity can lead to economic crisis and inefficient allocation decisions.

One of the reasons why neo-classical economists stress equilibrium is that prices only provide the basis for rational calculation only if they are at their long-run equilibrium levels. Yet the "Austrian" tradition denies that this is ever likely to be the case (most point to the role of the entrepreneur in converging towards a neoclassical notion of equilibrium). Ironically, the "Austrian" theory of the business cycle is rooted in the problems caused when one price (the interest rate) varies from its equilibrium ("natural") value. Yet it seems strange to suggest that the misinformation conveyed by disequilibrium prices can cause very substantial macroeconomic distortions for only one good. Surely, the argument as regards interest rates can apply to other disequilibrium prices, with responses to unsustainable prices for other goods being equally capable of generating malinvestment (which only becomes apparent when the prices adjust towards their "natural" levels).

When people trade at disequilibrium prices, it has serious impacts on the economy (which is why neo-classical economics abstracts from it). As one economist notes, if people "were to buy and sell at prices which did not clear the market" then once "such trading has taken place, there can be no guarantee that, even if an equilibrium exists, the economy will ever converge to it. In fact, it is likely to move in cycles around the equilibrium." This "is more than a mere supposition. It is an accurate description of what does happen in the real world." [Paul Ormerod, The Death of Economics, pp. 87-8] Once we dismiss the ideologically driven "postulate" of "Austrian" economics, we can see how these opportunities for "pure profit" (and, of course, a corresponding pure lose for the buyer) impacts on the economy and how the market system adds to uncertainty. As dissident economist Steve Keen puts it:

"However, a change in prices in one market will affect consumer demand in all other markets. This implies that a move towards equilibrium by one market could cause some or all others to move away from equilibrium. Clearly it is possible that this . . . might never settle down to equilibrium.

"This will be especially so if trades actually occur at disequilibrium -- as in practice they must . . . A disequilibrium trade will mean that the people on the winning side of the bargain -- sellers if the price is higher than equilibrium -- will gain real income at the expense of the losers, compared to the alleged standard of equilibrium. This shift in income distribution will then affect all other markets, making the dance of many markets even more chaotic." [Debunking Economics, p. 169]

This is rooted in the dynamic nature of the market and the fluctuations in market prices whose impact "Austrian" economists minimise. These, the obvious implications of disequilibrium, help undermine Mises' arguments against socialism as well as, ironically, their defence of capitalism (which depends, as Keen notes in his excellent Debunking Economics, an assumption that the economy is close to equilibrium) and , their own theory of the business cycle. After all, it seems unlikely that the credit market will simply jump from one equilibrium state to another -- assuming, of course, profit-seeking entrepreneurs in the banking sector can be regulated (by whom?) sufficiently to stop what they have done for centuries, make money by meeting consumer demand...

In fact, Marx raised the implications of disequilibrium long before the "Austrians":

"On the contrary, the question that has to be answered is: since, on the basis of capitalist production, everyone works for himself and a particular labour must at the same time appear as its opposite, as abstract general labour and in this form as social labour—how is it possible to achieve the necessary balance and interdependence of the various spheres of production, their dimensions and the proportions between them, except through the constant neutralisation of a constant disharmony? This is admitted by those who speak of adjustments through competition, for these adjustments always presuppose that there is something to adjust, and therefore that harmony is always only a result of the movement which neutralises the existing disharmony." (Theories of Surplus Value, Chapter XVII)

Although, I really also need to quote Proudhon's early comment:

"The economists admit it [that machinery causes unemployment]: but here they repeat their eternal refrain that, after a lapse of time, the demand for the product having increased in proportion to the reduction in price [caused by the investment], labour in turn will come finally to be in greater demand than ever. Undoubtedly, with time, the equilibrium will be restored; but I must add again, the equilibrium will be no sooner restored at this point than it will be disturbed at another, because the spirit of invention never stops." [System of Economical Contradictions, pp. 200-1]

Ultimately, like neo-classical economics, the "Austrian" school seeks to eulogise capitalism rather than to understand it. Hence Paul Davidson's summary question for "Austrian" economics: THE ECONOMICS OF IGNORANCE OR IGNORANCE OF ECONOMICS?.

On related matters, I should like to expand somewhat on my post on "trickle-down economics" where I linked to this (via Paul Krugman's blog) classic picture of a good use for photographs of bankers who left Iceland after the financial crisis in the toilet of a bar in Reykjavik:

I should have added these somewhat staggering figures on the change in after-tax income figures in America between 1979 and 2006 (i.e., the results of neo-liberal "trickle-down" economics):

All I can say is, wow... Wealth has flooded up to the top, while those below get a few drips. Of course, the typical propertarian will have two replies to this. First, neo-liberal America is far from their propertarian utopia. True, but surely it is closer than, say, Europe? It does not bode well for their vision. Second, there is the assertion (popularised by Milton Friedman) that inequality is unimportant as social mobility is higher. False, although often asserted:

'Shorto . . . argues that there's "a cultural tendency not to stand out or excel...the very antithesis of the American ideal of upward mobility." But you hear this a lot, and it's not quite true. Americans are in the odd position of fervently believing in upward mobility while not actually having very much of it. Eruopeans, conversely, don't really believe in economic mobility but have plenty of it.'

Somewhat ironically, western Europe is both more equal and more socially mobile. This is addressed in An Anarchist FAQ (see sections B.7.2 and C.10.3 where Friedman's variation on this theme is debunked). And talking of Friedman, this crisis has added to the extensive evidence of just how wrong his Monetarism was. Paul Krugman blogs against one of the few remaining Monetarists, showing that a rising money supply can correlate with deflation. This refutes the Friedmanite mantra that inflation is always a purely a monetary phenomenon, the result of there being more money in circulation than is needed for the sale of the various commodities on the market. However, this is old news -- as we discuss in section C.8.3 the Thatcherite and Reaganite experiments in Monetarism refuted his claims, as had the Great Depression itself.

Finally, Steve Keen has a new blog posting and I would recommend his paper A Marx for Post-Keynesians ( pdf).

So, until I blog again... Be seeing you!