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Marx was right about capitalism

Hoppe has explained how Marx was “essentially correct” in his theory of history and class analysis. His main mistake was his understanding of exploitation, which was based on a flawed understanding of the labor theory of value. As Hoppe argues, drawing on Rothbardian libertarian and Austrian insights, the only meaningful exploitation is aggression against private property. Once you understand exploitation in this light, a Marxian style class analysis and understanding of history makes sense.

And Marx was also right about some of his views about capitalism. In the comments section on a recent Mises post, Chartier: Markets Not Capitalism, left-libertarian Charles Johnson perceptively writes:

The term “capitalism” was introduced by anti-capitalists but not by Marx. Its most notable early appearance is in Louis Blanc’s Organisation du Travail (1840), published while Marx was still a grad student in Berlin.

Fun fact: Marx himself actually hardly ever uses the word — “capitalism” (Kapitalismus) appears all of about 2 or 3 times in the whole three volumes of Das Kapital, and hardly anywhere else in all of his work. But he does talk about “capitalists” and the “capitalistic mode of production” all over the place, and when later Marxist writers took up the term “capitalism” from Blanc, Proudhon, and other early adopters (mostly French), it was fairly straightforward to treat the term as more or less equivalent in meaning to Marx’s “capitalistic mode of production” (i.e. a mode of production based on concentrated absentee ownership of capital and the hiring of employees to work it).

None of these folks, incidentally, understood the term to mean “a free market in land and means of production.” Some (Blanc, Marx) believed that a free market in land and the means of production would inevitably tend to produce capitalistic patterns of ownership and control. Others (Proudhon, Warren, Tucker) dissented, and argued explicitly that a free market in land and the means of production could possibly, or even would naturally tend to, undermine capitalistic patterns of ownership and control (in the sense that large-scale inequalities of wealth would tend to dissipate, absolute poverty would largely disappear, and the working class would become the owning class, no longer subject to perpetual rent or debt, and no longer dependent on relationships with absentee owners of capital in order to make a living); hence (they held) if you were serious about being an anti-capitalist, then you ought to be serious about freeing markets and abolishing the state. On this one, I side with the Anarchists.

I side with Marx, not the “Anarchists,” here: in their belief “that a free market in land and the means of production would inevitably tend to produce capitalistic patterns of ownership and control.” I believe that if you respect private property rights (which the (good) left-libertarians do) then you will end up with a productive, advanced industrialized and “capitalist” society with differences in wealth, widespread use of firms, concentration of capitalism, employers and employees and employment, and inequalities in income. And there is nothing wrong with these features, assuming they do not arise due to state intervention or property theft. This does not mean that the capitalist order that would characterize a key aspect of the economy of a free society would be exactly like the one we see today. There may well be more self-employment, more localism, more self-sufficiency, and at the same time even more international trade, more billionaires, more wealth disparities (who can say?), more specialization and division of labor, and even larger “companies” (formerly known as “corporations”) and multi-national enterprises (MNE’s; well as nation-states would not exist, maybe they would be called multi-country firms, or multi-continent-firms) than we see now.

A couple of related points: even to the extent some current property holdings have arisen by unlibertarian acts in the past, as Rothbard explains:

It might be charged that our theory of justice in property titles is deficient because in the real world most landed (and even other) property has a past history so tangled that it becomes impossible to identify who or what has committed coercion and therefore who the current just owner may be. But the point of the “homestead principle” is that if we don’t know what crimes have been committed in acquiring the property in the past, or if we don’t know the victims or their heirs, then the current owner becomes the legitimate and just owner on homestead grounds. In short, if Jones owns a piece of land at the present time, and we don’t know what crimes were committed to arrive at the current title, then Jones, as the current owner, becomes as fully legitimate a property owner of this land as he does over his own person. Overthrow of existing property title only becomes legitimate if the victims or their heirs can present an authenticated, demonstrable, and specific claim to the property. Failing such conditions, existing landowners possess a fully moral right to their property. (See my post Justice and Property Rights: Rothbard on Scarcity, Property, Contracts….)

Also, note that Johnson mentions that the Anarchists he sides with think that in a free market the “working class” would “no longer dependent on relationships with absentee owners of capital in order to make a living.” The left-libertarians variously criticize several phenomenon, sometimes lumped together. I think they should be treated separately:

  1. Unowned land claimed by the state. Truly “unowned” land: this is land not yet really improved or homesteaded but fenced off and claimed by the state–such as the vast interior of national parks and forests and other lands controlled e.g. by the Bureau of Land Management, and other untransformed areas such as the deep sea bed (subject to the Law of the Sea Treaty), antarctica, the moon, and so on. The libertarian position here is that upon dissolution of the state these resources are subject to homesteading, as they are not yet truly owned.
  2. Property legally owned by the state. Other property that is legally owned by the state, such as roads and government buildings and military bases. It is crankish to regard these as “unowned”, as some libertarians do. This property has been homesteaded, either by the state; or by some private owner that the state either expropriated or purchased from. These should be regarded, in my view, as assets legally owned by the state but morally owned by the state’s victims and subject to claims of restitution by them. For specific pieces of property expropriated from an owner by the state, that victim ought to reclaim his property. For the rest, it should be subject to a pro-rata claim by all the various creditors of the state–e.g., auctioned off and then the proceeds split among the claimants. Consider a piece of property that the state acquire by sale: the previous owner has no specific claim since he sold his land to the state. He was already compensated. Likewise, someone who had their property taken by eminent domain but then received a payment of “fair market value” has (mostly) been compensated already–and with money stolen from taxpayers at large. Thus, for condemned or purchased property where the state paid the previous owner, this should be an asset available for restitution to the state’s victims at large.
  3. Unimproved property legally owned by a private owner. Land that is unimproved but held by a nominally private owner under color of title granted by the state. This land is arguably similar to class 1 above, and the current legal/nominal owner perhaps ought not have his state-granted title recognized. Perhaps such unimproved property should be subject to homesteading if the state were to wither away. I am not sure of this, but I grant that it is arguable.
  4. Land owned by “absentee” owners. Land that was at one point homesteaded, but which is occupied on a day to day basis by tenants or employees of an “absentee” or “distant” owner. Now the comment above implies that this is illegitimate. I disagree completely, as I argue in A Critique of Mutualist Occupancy. Contrary to the claims of some mutualists and left-libertarians, absentee ownership is not unlibertarian. It cannot be plausibly argued that the absentee owner has “abandoned” the property. In fact, even if you argue that property that is never improved, or that is not kept in a state of active use, is to be regarded as unowned, in the landlord or employer situation the property is actively used, and the tenants or employees keep the property in a state of use on behalf of the (absentee) owner, as his agent, by contract. To hold otherwise is to undercut property rights by denying the right of free individuals to enter into property contracts.

[Mises]

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{ 15 comments… add one }

  • Paul Lockett October 26, 2011, 3:14 pm

    “…the tenants or employees keep the property in a state of use on behalf of the (absentee) owner, as his agent, by contract. To hold otherwise is to undercut property rights by denying the right of free individuals to enter into property contracts.”

    I disagree. I think it would be bizarre to consider the tenant to be an agent when it is the tenant who is paying the landlord.

    The contract and the property right are separate issues. I may be willing to enter into a contract with regard to a currently enforceable property right, due to the fact that it is currently enforceable, but that says nothing about whether or not that property right is legitimate and should, or should not, be enforceable.

    • Taylor September 28, 2012, 2:11 am

      I would like to point out that we aren’t just talking about people that lease farmland when discussing absentee owners (as many would jump to). A group in Wichita is launching a database in order to simplify locating owners for downtown buildings, since so many buildings are unused and it’s become impossible for any developer to track them down.

      I’m sure it’s similar for other cities as well.

      I just wish I had the ability to camp out in one of those buildings for the next seven years or so and gain ownership.

  • Stephan Kinsella October 26, 2011, 3:28 pm

    “I think it would be bizarre to consider the tenant to be an agent when it is the tenant who is paying the landlord.”

    What is the relevance of “bizarreness”? If left-libs had their way and were letting tenants squat on the landlord’s property, the landlord would put a clause in the lease saying “you have to pay me $700/month rent, and agree to represent me for ownership purposes of the land as my agent.” This is not difficult.

    “The contract and the property right are separate issues.”

    Contract is just a way of specifying use and transfer of title to property.

    ” I may be willing to enter into a contract with regard to a currently enforceable property right, due to the fact that it is currently enforceable, but that says nothing about whether or not that property right is legitimate and should, or should not, be enforceable.”

    I fail to see the relevance or coherence of this assertion.

  • Paul Lockett October 26, 2011, 3:44 pm

    “What is the relevance of “bizarreness”?”

    Maybe I was trying to be overly polite. I possibly should have been more blunt and said it was nonsensical.

    “…the landlord would put a clause in the lease saying…”

    This tacitly acknowledges the contradiction, by trying to shoehorn the word “agent” into an arrangement where it doesn’t belong, whilst allowing the word “lease” to slip in, which implies an opposing commercial relationship.

    “Contract is just a way of specifying use and transfer of title to property. ”

    Exactly! The existence of a contract tells us nothing about whether the underlying property right is legitimate.

    “I fail to see the relevance or coherence of this assertion.”

    I think it’s fairly obvious. If you have a state-granted right/privilege/monopoly and I am willing to enter into a contract to access it, it doesn’t automatically make the underlying property right legitimate.

    • Stephan Kinsella October 26, 2011, 5:56 pm

      Maybe I was trying to be overly polite. I possibly should have been more blunt and said it was nonsensical.

      It’s not nonsenical in the slightest. Nor have you shown it is.

      “…the landlord would put a clause in the lease saying…”

      This tacitly acknowledges the contradiction, by trying to shoehorn the word “agent” into an arrangement where it doesn’t belong,

      Who says it doesn’t “belong”? It’s not a shoehorn. I’ve written 5000 contracts. You change things al the time. There is no reason you can’t have this in there. You don’t have a clue as to what you are yapping about.

      whilst allowing the word “lease” to slip in, which implies an opposing commercial relationship.

      “Contract is just a way of specifying use and transfer of title to property. ”

      Exactly! The existence of a contract tells us nothing about whether the underlying property right is legitimate.

      What in god’s name are you jabbering about. If there is no property right there is no title for a contract to transfer. If there is, there is.

      “I fail to see the relevance or coherence of this assertion.”

      I think it’s fairly obvious.

      You are wrong twice: it is not obvious, and you are not thinking.

      If you have a state-granted right/privilege/monopoly and I am willing to enter into a contract to access it, it doesn’t automatically make the underlying property right legitimate.

      Who said it did?

      • Paul Lockett November 5, 2011, 9:37 am

        “What in god’s name are you jabbering about.”

        I take if from your snappy tone that you realise that you are wrong and are trying to distract from the substance of the issue.

        On issues of intellectual monopoly, you are generally excellent. Maybe you should stick to that area.

  • Jim October 26, 2011, 3:49 pm

    When markets approach perfect competition, profits trend towards zero, with entries to and exits from the industry at the margin. IOW, most of the benefits of sales go to specialist employees.

    This argument would tend to stand in the way of say, the banking industry, which is heavily regulated and in most instances designed to increase leverage, socialize losses, and prevent competition, which must to great extent explain how they can extract 40% of current corporate profits.

    Synergistically, unions often negotiate for the wrong seniority and security prizes. Imagine a GM union that decades ago refuted the class argument and rather negotiated for richer shares of the profit, thus putting them in alignment with management in increasing flexibility, innovation and profit. We might imagine then, that GM workers today, though fewer in number, would be far richer.

    IOW, there is at least some reason to believe that free markets would result in less inequality than we have today, even while the whole of society was richer.

  • Cal October 26, 2011, 8:11 pm

    Reminds me of

    Marx’s original insight about capitalism was that it was the most revolutionary and creative force ever to appear in human history. And though it brought with it enormous attendant dangers, that was the first thing to recognize about it. That is actually what the Manifesto is all about. As far as I know, no better summary of the beauty of capital has ever been written.

    … There is no longer a general socialist critique of capitalism–certainly not the sort of critique that proposes an alternative or a replacement. There just is not and one has to face the fact..

    Christopher Hitchens, ‘Free Radical,’ Reason (2001)

  • dL October 30, 2011, 7:42 am

    I addressed your original post, “Corporate Personhood, Limited Liability, and Double Taxation,” in these two posts:

    http://rulingclass.wordpress.com/2011/10/24/anarchism-and-the-firm/

    http://rulingclass.wordpress.com/2011/10/30/the-corporation-as-social-contract/

  • Tibor R. Machan October 31, 2011, 8:52 am

    See, however, Tibor R. Machan, Revisiting Marxism, A Bourgeois Reassessment (Hamilton Books, 2006).

  • Tibor R. Machan November 1, 2011, 5:53 am

    For Marx capitalism is like adolescence for an individual, a period of powerful physical development along with mental confusion, indirection, a period of training for adulthood when all the fitness acquired at this stage will be put to good use (in socialism and, in time, communism). The critique of capitalism is but a means for moving the process along toward its healthy conclusion. The critique is based on the idea that the standard of health or maturity is the final end, communism. If communism is bunk, so is the critique of capitalism.

  • K Gallagher November 12, 2011, 2:16 am

    ” The critique is based on the idea that the standard of health or maturity is the final end, communism. If communism is bunk, so is the critique of capitalism.”

    I don’t see quite how you get here. If Marx was right in certain aspects, but wrong in others, his conclusion does not naturally follow… Communism is not necessarily a “less exploitative” system, if Hoppe’s analysis of the flaws is correct. So if the conclusion that communism is superior is based on Marx’s flawed reasoning regarding exploitation, that conclusion being wrong does not mean nothing about his critique of capitalism is correct.

    Stephen – I’m currently an ordinary everyday radical libertarian lady torn between Austrian and Mutualist, reading madly to find my allegiance – I’ve been inspired and edified by Hoppe’s writings on the science of economics… But I am also worried about certain of his statements that seem authoritarian and homophobic. I also have recently encountered a specially horrific individual, who considers a white supremacist, anti-woman “private” tyranny completely acceptable Hoppe-style anarchy.

    I wished to yell at him that even a very conservative man like Hoppe would not condone such cruelty as he was describing… And yet… Somehow I feared he would condone more cruelty than I liked. I feel I rather like the man described in your comments about Hoppe, and yet I also find in some of his writings a sense of authoritarianism that frightens me deeply. It’s affected my perception of his insights. Even reading the book of essays you edited doesn’t sooth my fear that Hoppe might have left me abused, by my spouse in the name of tradition, on some compound somewhere. And that if he didn’t think it was ideal, that like monarchy, it was something better than nothing. His comments that we should encourage hieriarchal tribalism where we find it do not make me feel ill at ease. When Hoppe writes about class or capitalism, what is and is not exploitative, I, an ordinary person, and – I admit, a victim of domestic violence with the propensity to jump at shadows – worried about his comments and notion of natural elites, can’t help but wonder what “exploitation” he would allow.

  • K Gallagher November 12, 2011, 2:17 am

    do not make me feel ill at ease

    d’oh. I meant MAKE me feel ill at ease of course.

  • K Gallagher November 12, 2011, 2:25 am

    And I’m deeply sorry for spelling your name Stephen, Stephan.

  • Xerographica November 13, 2011, 5:27 pm

    Marx said that religion was the opium of the masses. It was hard for them to overthrow their oppressors when they were promised great wealth and riches in the next life. Also, religion teaches that poverty is a virtue…it is easier for a camel to go through the eye of a needle than it is for a rich men to enter the kingdom of heaven.

    These days religion has been replaced with democracy. Tocqueville wrote in his book Democracy in America that majority rule allows the “proletariat” to write laws in their favor. This is of course his concept of Tyranny of the Majority.

    Rather than one big revolution as Marx dreamed of we now have small contained revolutions each time we vote. The “proletariat” are able to nonviolently “expropriate” some of the wealth that the “bourgeoisie” had originally “expropriated” from them.

    Hoppe’s strategy involves “delegitimizing” the democratic process…which is what I’m guessing that Marx would have favored. But how can you have class struggle without “expropriation”? Would anarcho-capitalists struggle if they didn’t believe that taxes were theft?

    As a pragmatarian my strategy is to allow voters to determine the functions of government and allow taxpayers to directly determine which functions they fund.

    To “expropriate” Marxist’s concept…taxpayers have been alienated from their altruism. Taxpayers contribute to the common good…but all the “warm glow” has been stolen by congress. Once we allow taxpayers to choose how their taxes are allocated then they will be reunited with the feeling that should be associated with contributing to the common good.

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