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Is Macy’s Part of the State? A Critique of Left Deviationists — and related posts

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From the Mises Blog (archived version):

Is Macy’s Part of the State? A Critique of Left Deviationists

OCTOBER 9, 2008 by

in ur macys.jpgI recently criticized the “vandarchists” who claim that breaking Macy’s windows (as some of the “anarchist” RNC protestors did) is not necessarily a crime. Why? Because Macy’s is not the legitimate owner of the property nominally in its name. Now why is this? Here the reasons become murky. (The vandarchists include a large number of self-admitted “anti-market,” unlibertarian anarchists, and apparently even some of the allegedly pro-market anarchists.)

This view seems to be based on the idea that our society is so riddled with statist intervention that certain businesses cannot be considered “private”. Wal-Mart is sometimes able to get a choice plot of land due to a local government using its power of eminent domain, some say. And many companies “benefit” from the tax-subsidized road network, and thus tend to use more distant suppliers than they would in a free market (so argue the “localist” zealots; for a good critique of localism, see Bob Murphy’s The Worst Economics Article Ever?).

Another argument is that companies benefit from “limited liability” privileges doled out by the state by allowing firms to “incorporate.” There long been opposition, among some libertarians, to the corporate form of business organization itself. As I’ve noted elsewhere, libertarian criticism of incorporation is flawed–based on confusion about the nature of contracts, liability, and causation, and often based on ignorance of what the current law under criticism actually is (why people who do not even understand what limited liability really means under current law feel compelled to vociferously weigh in on it is a mystery).

Calculation and Anti-Market Attacks on Business

[Update: See also “Appendix: Corporate America being “part of the state” and the calculation problem” to Corporate Personhood, Limited Liability, and Double Taxation]

There are of course many problems with these scattershot, misguided, and non-rigorous swipes at modern business and free enterprise. For one, the attacks sometimes focus on “corporations,” but not all businesses are organized as corporations. Yet they are attacked as well. For another, the attacks are usually aimed at larger “corporations,” even though smaller firms would seem to benefit from and be entangled in the state’s regulatory web as much, or to a significant degree. A consistent attack would have to attack not only big corporations, but all types of firms, of all sizes–from the mom and pop sole proprietorship, to partnerships, to behemoth corporations and multinational enterprises.

And not only would these companies have to be merely criticized. More than that, they would have to be considered to be parts of the state. After all, this is what is implied by saying it’s not a crime to break Macy’s windows: that it’s not a private owner, that it, like the state, is a criminal possessor of property owned by others (why the brick-throwing unemployed vandals are the owners is a mystery). These “criminal” corporations, who are intertwined with the state, are thus nothing but parts of the state.

This is what motivated my comments to this thread. A few of the relevant excerpts:

Mises had it right when he said that you could tell if a country is basically capitalist (in the good sense) or not: whether it had a functioning stock market. We do, and I am quite sure Mises would never agree with such a ridiculous claim that there is “no distinction” between the state and the Fortune 500 companies. Of course they are essentially private. The market is hampered, but it is not the state. If it were the state, it could not produce as much as it does (see Mises’s socialist calculation argument).

Moreover, in my view, if Macy’s and Wal-Mart are “fair game,” that means they are basically part of the state. Which means that the Fortune 500 is nothing but a department of the state. Now, this either means Mises’s views on the socialist calculation problem are wrong, or the globally dominant productivity of American industry-despite, not because of, the shackles of the state-is merely a myth. Which is it?

Sure, I’d be open to coherent, sane, calm, non-biased, even-handed “evidence” that Macy’s is basically criminal-coupled with a coherent and libertarian-compatible theory of criminality (such as Walter Block’s sketch). I would think that if an enterprise is basically tax-subsidized-a net tax-eater instead of a tax-payer, that is a good sign it’s just parasitical, if not criminal. But again: if you assume that Macy’s and companies “like them” or worse, or the Fortune 500, are all next tax-eaters, that implies something is wrong with the Misesian calculation argument, because if they are all tax-eaters, where is the wealth coming from?

In other words, if the anti-market types are right, then, contra Mises, we don’t have a free market at all, but just one giant corporatist state–what some call state capitalism or monopoly capitalism. But if we have a huge state, and if Mises’s calculation argument is right, then calculation ought to be virtually impossible or severely hampered–certainly it would not permit the obviously stupendous amounts of productivity that the American private sector still produces. One would have to maintain that America’s $14 trillion GDP is nothing but a myth, a shell game. That our prosperity is fake; a sham.

Now Kevin Carson responded to my calculation point as follows:

“Your [Roderick Long’s] observation about government insulating corporations from the competitive ill effects of diseconomies of scale suggests the answer to Stephan Kinsella’s earlier question-i.e., how large corporations are able to function, if they are de facto branches of the state, without being crippled by calculational chaos.

“The answer, of source, is that being “crippled” is relative. The old economy of the USSR was able to function, in the sense that it created use-value. State industry manufactured refrigerators, tractors, etc., and people bought them (or at least a considerable portion of them) because they were, after all, better than nothing. They cooled food, or hauled farm machinery, after a fashion. The problem is that nobody knew if they were the best possible use of the inputs that were consumed creating them, or even if they were a net loss of value compared to the resources used up to make them.”

Carson misses the point. The Soviet Union did not have total socialism, but it had a high enough degree so that its economy was severely crippled. It was able to function in part because “it existed in a world containing many relatively capitalist markets, such as that in the United States. Thus, the socialist planners were able to parasitically copy the prices of the West as a crude guideline for pricing and allocating their own capital resources” (from my appendix “Economic Calculation Under Socialism“, to the 1997 forerunner to my 2005 book International Investment, Political Risk, and Dispute Resolution; citing Mises’s Human Action, pp. 702-03; Rothbard, The End of Socialism and the Calculation Debate Revisited).

Now it is true that every firm (whether large or small, whether orgnaized as a “corporation” or not) faces its own calculation problems. Peter Klein explains in his Economic Calculation and the Limits of Organization that the very reason firms exist is to overcome certain costs, such as transaction costs, and for other advantages. However, as firms grow, the calculation problem becomes worse. Thus firms will exist, at some size; but face more severe transaction costs as they become larger (other costs loom larger as well as a firm grows). As Klein notes, “Rothbard has shown how the need for monetary calculation in terms of actual prices not only explains the failures of central planning under socialism, but places an upper bound on firm size.”

Of course, states themselves are subject to severe calculation problems, in part because of their size and the degree of unitary control over capital; and this “upper limit” is in a sense why total socialism is indeed “impossible”. But if the entire American corporate structure is really part of the state, then it would be crippled by the calculation problem. And unlike the Soviet Union, it would have no more-free external capitalist market prices to borrow from. It should be doing even worse than the Soviet Union did. Instead of the reliable, safe, comfortable and beautiful luxury cars produced by private enterprise in the West, we ought to be driving around rickety Trabants.

Private Ownership of Property

The point to all this is to show how ridiculous it is to maintain that Western enterprise is part of the state. Mises was right that we have an essentially capitalist market economy–albeit an increasingly hampered one. Capitalism’s productivity is hampered and under increasing jeopardy due to state intervention; but the productivity that we have and continue to have is real and exists despite state intervention. The idea that Wal-Mart is productive or prosperous only because it sometimes “benefits” from eminent domain, or because its transportation costs are subsidized is ridiculous. (Everyone’s transportation costs are subsidized; are we “beneficiaries” of this “free” gift? Or is it not a gift, but an overall cost? Can vandarchists smash the windowz of anyone who’s ever driven on public roads?) Even companies like Microsoft or Apple whose business models are heavily intertwined with the illegitimate state construct of intellectual property are boons to mankind (see, e.g., Tom DiLorenzo’s The Gates-Rockefeller Myth and Anti-trust, Anti-truth).

But if private enterprises–this includes both small and large companies, whether organized as “corporations” or not; that is, “firms”–is actually productive, and not part of the state–why are they not legitimate owners of property? To be sure, big business is not without sin–beside, perhaps, from a small number of libertarians, no companies or individuals in America are. But to maintain that property used and nominally owned by a particular person or firm is really “unowned” or “up for grabs” if the putative owner has ever used or endorsed any state program would be to eradicate the institution of private property itself: almost the entire country would have to be viewed as unowned, up for grabs–subject to vandalism. We anarcho-libertarians have a hard enough time fighting off the mainstream misconception that we oppose order and are bomb-throwing nihilists.

We must maintain the distinction between the state and its victims, even if the democratic state does everything it can to erode this distinction. An argument can be made that, besides the nominal state agencies and state employees, other companies are so in bed with the state and play such a reporting role (or vice-versa) that they are illegitimate and at least partially complicit with the state–bounty hunters, private prisons, military contractors, BlackWater, and so on. But Wal-Mart, Macy’s, and even Microsoft, for heaven’s sake? These are productive companies who are harmed by the state, not benefitted by it (yes, yes, they also support the state and many of its unjust policies, as do most American individuals, who are also on net harmed by the state).

The Vulgar Anti-Market “Anarchists”

Some of the left anarchists and mutualists have made some valid points about so-called “vulgar” libertarians–those who praise modern big business and turn a blind eye to its use of the state to loot taxpayers and suppress competition. But this is not news to Rothbardian libertarians. We have long known this. As Rothbard wrote in Confessions of a Right-Wing Liberal,

in the remarkable phrase of Ayn Rand, Big Business is “America’s most persecuted minority.” Persecuted minority, indeed! Sure, there were thrusts against Big Business in the old McCormick Chicago Tribune and in the writings of Albert Jay Nock; but it took the Williams-Kolko analysis to portray the true anatomy and physiology of the American scene.

As Kolko pointed out, all the various measures of federal regulation and welfare statism that left and right alike have always believed to be mass movements against Big Business are not only now backed to the hilt by Big Business, but were originated by it for the very purpose of shifting from a free market to a cartelized economy that would benefit it. Imperialistic foreign policy and the permanent garrison state originated in the Big Business drive for foreign investments and for war contracts at home.

And even Rand criticized the tendency of business to seek government protection from competition; run to the government to protect it from competition (see also Grinder and Hagel, “Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure, from the very first issue of the Journal of Libertarian Studies in 1977.)

Yes, we must condemn the pro-state lobbying, support, and views rampant among our fellow men. But the anti-vulgarians, in their bizarre fetish for localism and disdain for enterprise and capitalist acts among consenting adults, take it too far. This is self-evident when you see them defending hooligans vandalizing the property of a department store like Macy’s. Macy’s, and Wal-Mart, and even Microsoft, are not Lockheed or the Army. As a friend wrote me,

It’s a bizarre version of libertarianism that doesn’t allow you to recognize all the good that Wal-Mart and Microsoft have done without at that moment criticizing them for the ways that they benefit from the government. … As far as I can tell, most of the debate on this is about the culture of libertarian discourse and its emphasis. But so what if the Mises Institute has posted articles praising Wal-Mart’s mission to provide cheap goods? Is it really misguided if they don’t include the left-libertarian subtitle or asterisk?

In the comments to this thread, Roderick Long asked me, “what are your criteria for determining how much state involvement a private business has to have before it becomes an extension of the state and so not a legitimate proprietor? And is it an absolute cut-off or a matter of degree? I’ll close here with my reply (edited a bit; see also Kinsella on Left-Wing Idiocy, by one “Cork”):

Roderick: I have not had occasion to figure this out. I do not see the need. The need would arise if we had some kind of post-revolutionary war crimes tribunal, I suppose, but I don’t know of much done in this regard other than Block’s Toward a Libertarian Theory of Guilt and Punishment for the Crime of Statism. But I really think if we ever achieved any kind of victory we’d be looking for conciliation, compromise, negotiation, and a peaceful way forward (for most people, anyway). I believe some of the “agorist”; or more naive-utopian minded might think we need to decide this now, but I don’t. The only way we will ever progress is if more people become more aware of the virtues of libertarianism–peace, prosperity, cooperation, civilization, and the libertarian private property ethic that underpins it. “Countereconomics” by disaffected losers who resent the universe won’t do it, in my humble opinion.

I think it’s sufficient to establish that there is a state, and that it is distinct from society. I know that you believe it is. If you combine this basic insight with the basic libertarian precepts–cooperation, conflict-free interaction, private property rights–then in my opinion you arrive at the view that not only is the libertarian rule of first-user=first-owner right and applicable to some “ideal” state of affairs–but it applies to any real-world messy-life situation too. Only in a world where everyone is equally culpable and evil, where no state is identifiable, where there is an eternal, chaotic, “anarchic” war of man against man, of all against all, would the rule not apply (for who could apply it?). In our world, any rule that castigates basically all of society for being enmeshed in the web of the state is self-defeating, futile, wrong, victim-blaming, and really, to be honest, nihilistic and evil.

For some reason these disaffected “anti-corporate” types, who appear to largely be stuck in dismoded Marxian economics and social analysis, have no comprehension of the way real enterprise works. It’s as if a bunch of Che-teeshirt wearing grad students whose Republican daddies paid for their scholarships to Princeton and never worked a day in their lives were railing against “Wal-Mart.” They have some inexplicable, useless, and self-destructive (in the Darwinian sense; would that we had not short-circuited Darwinism with our modern capitalist largesse) animus against commerce and market life. Hey, to each his own–but it’s not libertarian (I contend), and it certainly doesn’t justify breaking the windows of merchants. They may feel “alienated” (though how pampered grad students and trust-fund babies can be alienated from labor you don’t actually perform with your own hands is a mystery), but to assume, Marx-like, that this is a natural condition of actors on the market is antiquated, to say the least.

So I would of course as a libertarian favor a rule whereby non-state actors having some color of title to property have a presumptive right to use it as owners until someone else can establish a better claim thereto. Pocahontas’s great-great-…-grandniece can establish a better claim to the property than you? Fine. Hand it over to her. Such cases would be rare; and covered by title insurance. In the meantime: the world is for the living. Rand was not wrong about everything.

We as libertarians must–we must–support productive achievement, commerce, the market, freedom, free enterprise, the division of labor, economies of scale, individualism, and, above all, as Nozick said, capitalist acts between consenting adults–which these ignorant savages rail against.

Enough. Yes, we can appreciate the caution against vulgar libertarianism. But it is too much. Give me “vulgar” libertarianism any day over the rock-throwing–and condoning–non-libertarian misfits.


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