The difference between market anarchism and market statism is profound and far-reaching. Very often, those of a conservative bent like to think of our current society as a free-market economy, with perhaps, a few distortions introduced by the government. Get rid of those and we’d be quite alright. Of course they think that because they’re doing kind of alright now, despite those pesky little taxes, and the occasional annoying regulation.
This is in part because by and large the laws were written by people like them, for people like them, so they seem largely invisible to them. The myriad of hidden costs and barriers to free action don’t really touch them enough to be noticeable. It’s more of a bee-sting than an alligator bite. Wealthy “liberals” think much the same way, only they figure “going from a bee-sting to a hornet-sting is worth it to secure the economy further in a direction we’d like it to go”. This direction is usually more corporatist and authoritarian than they’d normally admit, but hey they’ll set up a nice welfare camp for the people their policies impoverished in the first place. And thus is our political discussion restrained by the skewed view of the ruling class.
The reality from the ground floor is quite different, and alas, often leads to a different sort of skewed view. The truth is, our entire economy is statist, with the market elements distorted all the way through it. The way markets work, every action is dependent on every other action, all demand curves and supply curves interact somewhere… think of how ripples in a pond create interference waves when they meet. Rightists often talk about how markets adapt to the state, implying that markets overcome the state. But this is not so. Markets adapt to the state, but the state does not adapt to markets, except in a minimal way when absolutely forced to.
In every city there is a “parks and recreation department” for example. This department exists for a reason. It’s not like the P&R commissioner just sits around watching porn and drinking all day on the taxpayers’ dime… well actually it often is like that, but his staff doesn’t… or at least they don’t all do that, all the time. In fact a government where no one did any “work” would work out much better for most of us. We could treat that sort of government as a sort of permanent natural disaster, a simple cost of survival. But the reality is much worse. These guys build parks wherever they want, their only limitation being their budget (which is where the market minimally forces a limit on statism) and the remote possibility of angering the public enough to get fired.
In some ways, the will of the people through elections does affect the government, but they do everything in their power to thwart that… not to mention that it’s a highly inefficient expression of the popular will. Demand curves on the other hand are a much better expression of the popular will. In some ways, a real free market is the ultimate in democracy. What the people want, they will get.
But hey, everyone likes parks, right? Well, sure, if they don’t have to sacrifice anything else for them. If people really wanted a park somewhere, they could definitely make it happen under anarchism. Just buy the land, and make a park. If you needed to charge admission to recoup the costs, well, if people really want the park, they’ll be happy to pay. But statist parks on the other hand, take land willy-nilly that could have been used for other things, and in fact, should have been. People wanted something else than a park there, or there would already be one there. And the cost is paid by everyone, even people who don’t like parks, or have no access to the park. And of course, the park closes when the government says it does, and has only the amenities that the government wants to put in there. People like soccer, but the parks commissioner likes baseball? Baseball field.
But it gets even worse. All the money that was used to build and maintain the park is taking money away from other things that people would have spent it on. And it drives up the cost of land in the area, the cost of sod, and the cost of everything else that money is spent on. It distorts the pricing signals of everything related to parks… this ripples through the rest of the economy. This goes on in every city in the world. Of course it’s not just parks, it is roads, bridges, dams, etc. People change their behavioral patterns around this “infrastructure”. For instance, I live in a pocket ghetto created by an intersection of two major government roads. All around me are tire shops, car washes, auto parts stores, etc. Those stores wouldn’t have been built if not for the government roads. But then again, none of this would have, it would have all been different in a free market. It is precisely these “little things” that get taken for granted, like roads and zoning laws and permits and licenses that have the most impact on the economy.
As for the direction these laws tend to go in, well let’s look at a hypothetical example. Let’s say there’s a certain market for widgets. The biggest widget manufacturer, A Corp, has 25% of the market. The next biggest, B Corp, has 15%. C Corp has 10%. Below that about 100 other firms share the other 50%. Now even this is much more oligopolistic than a real free market would be, IMO, but for the sake of simplicity and being fair to the other side we’ll go with it. Now the government proposes a regulation that will make widget manufacturing more expensive and difficult. Well, A Corp’s economists and accountants will sit down and run a cost-benefit analysis, comparing the extra expense of complying with the regulation against the extra market share they will gain after a certain number of firms get knocked out of the market because they can’t absorb the cost. Included in this is the possibility of passing the cost onto the consumer and shrinking the market. If A Corp ends up with 50% of a market that’s 10% smaller, they still win. If they come out ahead, they’ll call up Senator X and say “we will support this legislation”, if not, then they say “we will oppose this legislation tooth and nail”. Now, let’s say the bean counters say “well, we come out 5% ahead if it’s written like X, but if you add clause Y, we’d come out 10% ahead”. Well then they will call up Senator X and say “if you introduce this amendment, we’ll support the bill, but if you don’t, we’ll oppose it”. What do you think is going to happen?
Now, if all of these corporations are traded on the stock market, just proposing the legislation publicly is going to impact them. Some investors are going to guess that the legislation will pass, and will sell their stock in Corp B and C and buy A. A certain number of the smaller firms will have their stock price discounted effectively to 0 and be forced to drop out of the market even before the law is voted on. Perhaps their assets will be bought up by Corps A, B and C if they’re lucky. So now, if A, B and C maybe get together and hash out a different version of that proposed law that works well for all of them, they can all support it together. And there you have it.
This mechanism goes on at every level of government, local, state and federal. In fact it’s often more pernicious and corrupt at the lower levels, because it’s much easier to influence the politicians at that level. On the other hand it’s much easier for the citizens to get together and block laws at the lower levels too, but that’s why there’s so much effort by the ruling class to brainwash people and get them to look the other way and keep their heads down. The news media will make a big deal about state and federal laws that people really have little or no opportunity to influence, but local corruption only gets mentioned when the politicians cross the wrong local businessman.
A study came out that noticed that every industry has basically 3-4 major players, and everyone else is marginal, having little impact on overall supply. However given the above example you can see why. There’s no reason to believe that the pattern would be so oligopolistic in a free market, knowing that basically, the state is constantly acting to shrink the number of firms in the market, and in fact, to shrink markets for the benefit of the 3-4 major players. Of course another side benefit is that this increases unemployment in every industry, driving wages down and increasing the power that employers have over employees. This points to the weakness of Neoclassical or Keynesian economics. The effect of the state cannot be “factored out” in looking at the economy, statistically. It distorts all supply curves, and almost all demand curves. When an economist from this school talks about “the economy” as a noun, they basically mean these top firms from every industry. The impact of labor as producers can largely be factored out these days, thanks to that persistent unemployment. As consumers, we have an effect, which is why whenever academic “economists” talk about the people at large, it is in our role as consumers and how that affects “the economy”. In their view, when we consumers save, we hurt “the economy”, but when we spend, especially if we go into debt to do so, we help “the economy”. It’s like we’re being held hostage at this point. Our interest as producers (which is to spend, because most of us are working for “the economy”) is in conflict with our interest as consumers (which is to save).
Now of course our current financial model has something to do with all of this as well. If there is one aspect of the economy which is thoroughly fascistic through and through, in a way that we can all agree on (except “the economy” and their pet “economists”), it’s the current financial/banking system. “How’s that so-called democracy working out for you guys? Awesome.” This has been going on for a while actually, even though it’s become more deep and blatant since the establishment of worldwide fiat currency and central banking in the World War eras. A good book to read to get the history of it is Rothbard’s “A History of Money and Banking In The United States”. Even if you’re not down with Rothbard on the whole, this was a master work.
One of the things that the bankers and money masters have been doing since forever is trying to rob people of their savings and discourage saving in general. One reason is that this makes people more dependent on steady income, disciplining workers. Another is that it destroys any capital accumulation outside of the class of insiders (“the economy”). If you need to capitalize your business you have to go to a limited group of people with nearly unlimited power to give out money. And the price of capital is kept artificially high. Right now, the old cliché goes, 1 in 10 businesses that start, survive. The main reason given for the failure of the 9 out of 10 is “cash flow”. If your business is operating paycheck to paycheck, you are utterly dependent on the money masters, if something unexpected happens.
But also, we must consider who gets the majority of loans. Of course there are collateralized loans. Those drive up the price of land and transportation, which is only good for those who run the roads and own the vast tracts of land. But outside of those, most loans are made to large businesses to help them expand and compete against other businesses. Banks generally aren’t in business to lose money. They know how the game works. Every time a bank makes a loan with money it doesn’t have, they are stealing from everyone else. The people who first get that money are also stealing from everyone, just a little less. And so on… somewhere down the chain of spending the situation inverts, where prices have already gone up before you got any of that new money. You’re the loser in that scenario. Of course this provides an incentive to borrow, driving up the cost of borrowing. We can view the banking system as a giant wealth vacuum, and those who are closest to the vacuum bag get the best outcome. This creates a much more unequal society than we would have under free banking, where such a one-sided wealth vacuum would be impossible.
It helps if you realize that in a fiat money scenario, the total amount of money in circulation = the total value of goods and services. So your wealth is not a matter of an absolute number of dollars, but how many dollars you have in comparison to the whole.
So to say that we live in a “free market” society is an absolute affront to the idea of freedom. We do have markets, of a kind. Such markets being utterly manipulated by the state and “the economy” to their own benefit. But we do have a way to fight back. We can make real free markets, but only outside the state. We can do so by building our own shadow economy, an economy for everyone, not just the politically favored. This requires stealth, exile and cunning. We must find each other and trade outside the law, as much as possible. And to the extent that their “economy” grows unstable, ours will grow stronger. We shall prevail because market anarchism is better for 90% of the population than market statism.
Make use of the following additional resources to expand knowledge and understanding of the topic covered in this unit.
The entire unit, including all additional resources, can also be downloaded as a workbook to be used offline.