Theories of Power: Part 3, Elite Theory

The Leader of the Movementarians

Part 1 of my multiple-part series on various theories of Power covers Pluralism. Pluralism, according to G. William Domhoff’s article Who Rules America?: Alternative Theoretical Views, is a “society-centric”theory of power structures based on the competition of various groups in society. Just as capitalists have to compete for customers in a free market, so various groups in society have to compete for votes in elections: “most of these ‘society-centric’ analysts have been pluralists. That means the control of the state by private interests was not to be deplored because many different groups were involved….Who controls that state?…the American public through political parties, elections, interest groups, lobbying, and the force of public opinion (as pluralists claim).”  Pluralism is based on the idea of “countervailing” powers thus preventing it from being clustered into a small group at the top of a hierarchy:

It is usually concluded by most power analysts that elected officials, along with “interest groups” like “organized labor” and “consumers,” have enough “countervailing” power to say that there is a more open, “pluralistic” distribution of power rather than one with rich people and corporations at the top. (G. William Domhoff, The Class-Domination Theory of Power).

Effectively, pluralism is a defense of the current capitalist order in America:

Pluralist theory…emphasizes that there are freedoms and electoral possibilities in democratic capitalist countries that are not present in most societies. In that sense, it is mostly a defense of the American system. American capitalist democracy is not perfect, pluralists say, but it is about as good as can be done by human beings. (G William Domhoff, Who Rules America?: Alternative Theoretical Views).

Then, in Part 2 of this series, I discuss the State Autonomy Theory of Power. State Autonomy Theory says that the state is controlled by “elected officials, appointed officials, and career employees” (G. William Domhoff, Who Rules America?: Alternative Theoretical Views).  The most important part of this theory, I think, is that it views the government as having “independence from the rest of society” (ibid). In other words, the government officials are separated from all the other groups in society.  It is as if the government had a “mind of its own,” and the government is only looking out for its own interests. The government is not some puppet of the capitalist class interests or any other group such as labor, because the government is this autonomous and independent entity:

Thanks to these powers, government officials can enter into coalitions with groups in society, whether business, labor, or political parties, if they share the same goals as the state….For the state autonomy theorists, then, the state can and does act in its own interests, which are stability and expansion. In a capitalist world, the state’s leaders do their best to keep capitalism healthy because that is in their own interests in terms of state revenues and a happy civilian population, not because they are first and foremost concerned with capitalism and capitalists. (ibid)

In addition, my Part 2 article on State Autonomy Theory discusses at some length why I suspect that an overlap does exist between the Austrian School of Economics’s views on state power and State Autonomy Theory of Power.  I stress the fact that State Autonomy Theory creates a gap between the state and the different groups in society, such as the capitalist group and the labor group.  To me, the Austrian School view on state power deviates from the State Autonomy Theory on one major point: on how state autonomy might impact capital.

When I first described State Autonomy Theory, I followed Domhoff’s description of the autonomous state supporting capitalism because this is seen as being in the state’s interests: “the state’s leaders do their best to keep capitalism healthy because that is in their own interests in terms of state revenues and a happy civilian population.”

The Austrian School’s perspective that I presented in Part 2 is based on the views of Hans-Hermann Hoppe. I argued that Hoppe’s views are generally consistent with the State Autonomy Theory because the state is seen as an entity separate from capitalism and capitalists, and so Hoppe can have his anarcho-capitalist dream of abolishing the state while keeping capitalism in existence. He can separate “good” market entrepreneurs (good capitalists) from “bad” political entrepreneurs (bad capitalists) because State Autonomy Theory lets him separate the capitalists from the state.  The big difference is that Hoppe sees the “autonomous state” as a THREAT to capitalism, not its ally. Hoppe sees the autonomous state as a direct threat to capitalism because an autonomous state will:

1. regulate capital
2. tax capital
3. set itself up as a monopoly on the use of force

It turns out that Hoppe’s fears of the “autonomous state” are probably correct, at least from the point of view of capitalists. The big fear of capitalists is that the autonomous state will develop a mind and will of its own and use that independent mind to help out the working classes:

It also comes close to explaining why capitalists then and now want a small domestic state they can dominate: they were/are afraid that a large and perhaps more autonomous state might help the working class. States that help workers are states that disrupt capitalist control of labor markets, and such disruption cuts into the profits and power of capitalists. If Skocpol and other state autonomy theorists could bring themselves to see the importance of this basic conflict in shaping how capitalists view the state, then they could better understand why the American state still lacks “autonomous administrative organs.” The capitalists and their allies have bitterly opposed the development of such organs throughout American history. It is “their state,” and they aren’t going to let it get away from them without a fight. (G. William Domhoff, The Death of State Autonomy Theory, bold emphasis mine)

Do capitalists actually worry about “controlling the labor market”? That seems to be the next logical question, and that is the subject matter of the Elite Theory of Power.

The Elite Theory of Power

The purpose of the Elite Theory of Power seems to be to downplay the significance of class conflict, i.e., the conflict between capital and labor is minimized. Domhoff summarizes this theory about elites or leaders of all the large bureaucratic organizations that dominate current society as follows:

the lack of attention to class conflict leads elite theory to underestimate the differences between corporate-dominated organizations and organizations based in the working class, especially unions. The capitalists and the working class are interdependent, as elite theory stresses, which does set outer limits on what they can do to each other. Moreover, the leaders of unions do work with the leaders of corporate-oriented organizations once their unions are established, as elite theory emphasizes. (G. William Domhoff, Who Rules America?: Alternative Theoretical Views, bold emphasis mine)

So the discussion of elite theory will center around the question of whether the capitalists and the working class are interdependent or not.

My first impression of Elite Theory, based on how Domhoff describes it, is that it is an attempt to “smooth over” all the capital and labor related issues.  I will discuss this issue first.

My second impression of Elite Theory is that it helps explain modern day right wing libertarianism and especially Austrian School views on power. I will discuss my findings in this area later. But first, let’s look at labor and capital in the context of Elite Theory.

Elite Theory and Issues of Capital and Labor

Domhoff tells us that under Elite Theory, “the relationship between elites and non-elites is one of interdependence…elites are not omnipotent, and that there is no inherent opposition between elites and non-elites” (bold emphasis mine). If we take “non-elites” to mean “the working class” and “elites” to mean “capitalist owning class” then this seems to be the “harmony of interests” idea often presented by classical liberal writers. We definitely see it in Ludwig von Mises’s book Liberalism: The Classical Tradition (Liberty Fund edition), where he tells us that

in order to grasp the meaning of the doctrine of the class war, one must bear in mind that it is directed against the liberal doctrine of the harmony of the rightly understood interests of all members of a free society founded on the principle of private ownership of the means of production….Liberalism has demonstrated that the antagonism of interests, which, according to a widely prevalent opinion, is supposed to exist among different persons, groups, and strata within a society based on private ownership of the means of production, does not, in fact, occur. (125, 127)

When I did some digging into the “harmony of interests” idea, I found that it does seem to trace back to Bastiat, one of the Mises Institute “heroes” because they even have a special “Circle Bastiat” in honor of him.

We find in the Anarchist Writers, F.3.2 Can there be harmony of interests in an unequal society? a mention of this earlier formation of the “harmony of interests” doctrine:

Bastiat formulated his “harmony of interests” theory precisely when the class struggle between workers and capitalists had become a threat to the social order, when socialist ideas of all kinds (including anarchism, which Bastiat explicitly opposed) were spreading and the labour movement was organising illegally due to state bans in most countries. As such, he was propagating the notion that workers and bosses had interests in common when, in practice, it was most obviously the case they had not. What “harmony” that did exist was due to state repression of the labour movement, itself a strange necessity if labour and capital did share interests. (bold emphasis mine)

Domhoff also discusses the interaction between corporate elites and union elites, and I want to briefly talk about that aspect of capital/labor interaction under Elite Theory. Domhoff tells us in Who Rules America?: Alternative Theoretical Views that

the leaders of unions do work with the leaders of corporate-oriented organizations once their unions are established, as elite theory emphasizes.

However, many of the union leaders’ objectives remain class-based. There is major conflict between them and the corporate leaders, who see unions as deadly enemies and do everything they can to eradicate them. Moreover, the union leaders have been defeated again and again by the corporate community since the late 1930s, making them a secondary elite at best.  (bold emphasis mine)

This discussion of Elite Theory by Domhoff reminds me on a very important part of Italian anarchist history. Italy 1920: When 600,000 workers seized control of their workplaces, by Tom Wetzel, tells us about the “biennio rosso” years, the “red years” in Italian history that provoked a fascist response.

The basic story in Italy begins with a “growing disaffection with the union leadership” caused by the union leadership behaving just as Power Elite theory predicts. The union became an elite force as well, disconnected from the rank-and-file memberships:

a growing aspiration for workers control, and for social transformation in an anti-capitalist direction, ran head on into the growing bureaucratization of official Italian trade-unionism….A professional union hierarchy had emerged, as permanent “representatives” of workers in regular bargaining with employers. The process of union bureaucratization, and an increasing gap between the leadership and the rank-and-file, was accelerated by the First World War. (bold emphasis mine)

We see the union leadership pretty much giving the managers what they want. I think this is an interesting point because we often hear about “profit,” “profit,” and more “profit,” when discussing these issues of class conflict, but when it comes to capital and labor “control” seems to be more important:

The employers were particularly willing to grant concessions on pay and hours in exchange for greater control over the labor process.

A similar observation was made by the Keynesian economist Michael Kalecki in his famous article Political Aspects of Full Employment where he stresses the fact that “‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders” (3).

The relationship between the “leaders”–the union leadership, employer leaders, and the state leaders–begins to break down when the dissident union called the Italian Syndicalist Union or Unione Sindacale Italiana started to rebel with things such as “committees for direct action.” Things really start to spiral out of control for the capitalist “robber barons” such as the Perrone brothers, (“the Perrone brothers were the first big businessmen to start pouring funds into Mussolini’s fascist groups”), and we see the rise of fascism in response to this syndicalist movement in Italy–what amounted to a gigantic worker occupation movement.

This period of Italian history–the biennio rosso–around 1919-1920 is a period of history that really needs to be studied a lot more. It certainly is fascinating to me, and I plan to study it a lot more. One of the pivotal statements to come out of all of this is that the elites can be overthrown by the proletarian class. Antonio Gramsci said:

The social hierarchies are broken. Historic values are overthrown. The classes [that had been mere instruments of others] are become directing classes….The workers themselves must build the first historic cell of the proletarian revolution.

Elite Theory and the Austrian School

My second observation is that there seems to be a lot of overlap between the Elite Theory of Power and what is coming out of the Austrian School with regard to issues of state power, “natural elites,” hierarchy and so on. Let’s begin with G. William Domhoff’s article entitled Power Structure Research and the Hope for Democracy by focusing on the section entitled: The Return of a Revised Elite Theory. 

My plan of attack is very simple. First, I want to summarize Domhoff’s findings with regard to the Revised Elite Theory. Then I want to point out the glaring similarities between the Revised Elite Theory and the material offered by some Austrian School economists, particularly Hans Hermann Hoppe and Murray N Rothbard. What initially drew my eyes to this was the fact that there are only two sources that I have read so far that stress the “circulation of elites,” namely, Rothbard and Domhoff.

Summary of The Revised Elite Theory (from Domhoff):

1. Anti-Marxist
2. Anti-Egalitarian
3. Jaundiced view of human nature
4. Cynical about politics
5. Elites are inevitable in large-scale and bureaucratized societies
6. Even parties advocating socialism are controlled by the leaders at the top
7. The “Iron Law of Oligarchy” is used to describe the undemocratic tendencies in any organization
8. “Men willing to use force (“lions”) come to leadership and create strong organizations, to be followed by cunning caretakers (“foxes”), who are cautious and mostly try to keep a good thing going. They are soon superseded by new lions, and so the cycle goes, a “circulation of elites.”
9. The general citizenry has little or no impact and apparently does not deserve to have any
10. “Elites merely circulate between lions and foxes while feeding on the sheep or masses.”
11. Elites are seen as the leaders within organizations
12. “Variations in elite structure and functioning are very important in determining the general nature of a society, such as its openness to compromises and its use of elections to settle policy disputes.”
13. “The relationship between elites and non-elites is one of interdependence….elites are not omnipotent, and that there is no inherent opposition between elites and non-elites.”
14. Elite theory argues that anarchy is impossible. It denies that non-hierarchical societies are possible.

Now consider the opening section of Murray N Rothbard’s paper Bureaucracy and the Civil Service in the United States, and note how Rothbard clearly is writing in a Power Elite style (with its implied criticisms of democracy and libertarian socialism):

One of the most important sociological laws is the “Iron Law of Oligarchy”: every field of human endeavor, every kind of organization, will always be led by a relatively small elite. This condition will hold sway everywhere…In every area, the persons most interested and able, those most adaptable to or suited for the activity, will constitute the leading elite. Time and again, utopian attempts to form institutions or societies exempt from the Iron Law have fallen prey to that law…what we should try to achieve is not the absurd and anti-natural goal of eradicating such elites, but, in Pareto’s term, for the elites to “circulate.” Do these elites circulate or do they become entrenched? The free market economy provides an unparalleled example of a continuing healthy circulation of elites. (bold emphasis mine)

Similarly, if we look at another Austrian school economist, Hans-Hermann Hoppe, in his article entitled Natural Elites, Intellectuals, and the State, we find a similar resignation towards the inevitability of a small leading group of elites (I guess that the point is supposed to be that Marx was wrong when he claimed that socialism was “inevitable” because it turns out that elitist and hierarchical capitalism is, in fact, “inevitable”):

According to his view, states are the outgrowth of natural elites: the natural outcome of voluntary transactions between private property owners is non-egalitarian, hierarchical, and elitist. In every society, a few individuals acquire the status of an elite through talent. Due to superior achievements of wealth, wisdom, and bravery, these individuals come to possess natural authority, and their opinions and judgments enjoy wide-spread respect. Moreover, because of selective mating, marriage, and the laws of civil and genetic inheritance, positions of natural authority are likely to be passed on within a few noble families. It is to the heads of these families with long-established records of superior achievement, farsightedness, and exemplary personal conduct that men turn to with their conflicts and complaints against each other. These leaders of the natural elite act as judges and peacemakers, often free of charge out of a sense of duty expected of a person of authority or out of concern for civil justice as a privately produced “public good.” (bold emphasis mine)

In Part 4 of my series on power structures, I plan to look at Elite Theory in more detail, to see how anarchists (i.e., libertarian socialists, libertarian communists, mutualists, not anarcho-capitalists) might reply to this “inevitability of hierarchy and capitalism” thesis that is coming out of the Classical Elite and Revised Elite Theories.

Theories of Power: Part 2, State Autonomy Theory

This is Part 2 in my series about different theories of power. My previous article in this series, Theories of Power: Part 1, Pluralism, addresses the pluralist view of power. Pluralism, very briefly, is the view that power is held by various groups in society. It is like the theory of free markets applied to the political realm because both are based on competition. In free markets, capitalists compete with one another for the “votes” of consumers; similarly, in pluralism, there is competition among various interest groups for votes.  G. William Domhoff,  in his article Who Rules America: Alternative Theoretical Views, succinctly summarizes what pluralism stands for when he writes, “who controls the state”:

the American public through political parties, elections, interest groups, lobbying, and the force of public opinion as pluralists claim.

The “trick” to make society work, according to pluralists, is to make sure that power is dispersed among many groups. As Domhoff tells us:

Most of these “society-centric” analysts have been pluralists. That means the control of the state by private interests was not to be deplored because many different groups were involved.

Now in this article, I move on to another theory of power, namely, the State Autonomy Theory. The plan for this paper is simply to:

1. Summarize the major points of the State Autonomy Theory based on G. William Domhoff’s article Who Rules America: Alternative Theoretical Views
2. Apply the insights of the State Autonomy Theory to the Right Wing Libertarian or Austrian School views on the government and state, because I think there is some noticeable overlap here

The Major Points of State Autonomy Theory

My general impression of the State Autonomy Theory is that it views the state as some sort of super alien being with its own dominant will that is detached from the rest of society. It is as if there is society in one corner of the room and the state in another corner.  Power is not in the hands of the general citizenry, nor is it in the hands of a dominant social class. Instead, the government has “independence from the rest of society” or is considered an “autonomous” entity. Domhoff, echoing what John Taylor Gatto wrote in Dumbing Us Down: The Hidden Curriculum of Compulsory Schooling, tells us that under the State Autonomy Theory, “the state can and does act in its own interests, which are stability and expansion.” Gatto said a similar thing when he writes that “nearly a century ago a French sociologist wrote that every institution’s unstated first goal is to survive and grow, not to undertake the mission it has nominally staked out for itself” (58). In fact, the State Autonomy Theory seems to even echo some of the ideas coming from a book you can download for free at the Mises Institute, Gunter Reimann’s The Vampire Economy: Doing Business Under Fascism. In Reimann’s book, he mentions how the state seems to take on a “mind of its own” when it gets away from its original architects. Reimann explains how the original big business architects of Nazism had intended to create a Nazi state as their tool; unfortunately for these Nazis, their tool got out of hand and the Nazi state developed a mind of its own:

It was their hope that the Nazi party would serve as their tool. Especially was this the belief of the important industrialists who had feared the loss of their monopolies, and of the big agrarians who could not survive the crisis without fresh State subsidies. Both eagerly sought political power in order to safeguard their positions–not merely against social revolutionary forces, but also against business competitors who attacked their monopolist privileges. They invested huge amounts of money in the Nazis. They did this, or had to do it, on too large a scale. For the power they helped create all too soon became the master of its creators–“authoritarian,” independent of their will and regulation. (291-292, bold emphasis mine)

Since the state is this independent and autonomous unit with its own will, according to the State Autonomy Theory, then “government officials can enter into coalitions with groups in society, whether business, labor, or political parties, if they share the same goals as the state” (Domhoff, Who Rules America: Alternative Theoretical Views). When asked “who controls that state,” Domhoff replies:

elected officials, appointed officials, and career employees as the state autonomy theorists claim.

Domhoff tells us that there are three major reasons that explain how the state becomes this independent monster with its own will (with bold emphasis mine):

1. its monopoly on the legitimate use of force within the country
2. its unique role in defending the country from foreign rivals
3. its regulatory and taxing powers

Finally, the last point I want to mention about the State Autonomy Theory is that it stresses the autonomy or independence of the state from corporate or capitalist power. In other words, the state and capitalism are two distinct entities. We see this very clearly when Domhoff writes the following about how the state and capitalism interact under the State Autonomy Theory:

In a capitalist world, the state’s leaders do their best to keep capitalism healthy because that is in their own interests in terms of state revenues and a happy civilian population, not because they are first and foremost concerned with capitalism and capitalists. (bold emphasis mine)

Applying the State Autonomy Theory to Austrian Economic Views of the State

My sneaking suspicion is that the Austrian School approach to the state and the State Autonomy’s approach to the state share some noticeable points of overlap. Let me explain why I think this overlap exists.

First, notice that the State Autonomy Theory creates this separation between the state and capitalism. This, of course, is the essence of the Austrian school anarcho-capitalism–this view that we can separate capitalism from the state and we can abolish the state while keeping capitalism.

We have the state as this independent will that can enter into “coalitions” or alliances with different groups in society. Domhoff mentioned a few of these possible “alliance partners” with the state: business, labor and political parties. Let’s translate a few of these into “Austrian” lingo:

1. Let’s say that the independent and autonomous state forms an alliance with labor. Then all these “socialist” type laws will be passed–welfare, unemployment insurance, occupational health and safety laws, minimum wage laws and so on. Then, the reaction will come in the form of Austrian books such as Hans-Hermann Hoppe’s Democracy: The God that Failed. Democratic states are just monsters out there ruining the economy by distorting time preference and looting the productive assets of the economy. Or as Hoppe puts it, “it must be regarded as unavoidable that public-government ownership results in continual capital consumption. Instead of maintaining or even enhancing the value of the government estate, as a king would do, a president (the government’s temporary caretaker or trustee) will use up as much of the government resources as quickly as possible, for what he does not consume now, he may never be able to consume” (24).
2. Let’s say instead that the independent and autonomous state is thinking about forming an alliance with business. Now we have the textbook Austrian School distinction between the “market” entrepreneur and the “political” entrepreneur coming into play. Because capitalism is separated from the state, according to the State Autonomy Theory, then we can have the Austrian “market” entrepreneur scenario, i.e., the story of the entrepreneur who gets rich by only engaging in free market transactions and by never getting any state assistance. The “market” entrepreneur is the “good guy” who totally separates his capitalist enterprise from the state. If, on the other hand, an alliance is actually formed between the autonomous state and business, then we have the textbook Austrian “political” entrepreneur scenario. In the “political” entrepreneur scenario, the “bad” capitalist (unlike the “good” Austrian capitalist) is running to the government for some nefarious alliance, maybe a subsidy or a bailout or protection from foreign competition and so on.  I have written more about this Austrian distinction between the “good” market entrepreneur and the “bad” political entrepreneur in my articles Doubting the Right Wing Libertarian Robber Baron Revisionism and More on James J Hill: Putative Market Entrepreneur Extraordinaire.

The last point I will make is to simply point out that there is some obvious overlap between the Austrian theory of the state and what is offered by the State Autonomy Theory when it comes to the issue of what constitutes “state independence”? In the State Autonomy Theory we are told that “state independence, usually called ‘autonomy’ is said to be due to several intertwined factors.” I listed those three major factors above, but let me reproduce them again. This time, however, keep in mind that I am trying to illustrate the overlap with the Austrian theory of the state:

1. its monopoly on the legitimate use of force within the country
2. its unique role in defending the country from foreign rivals
3. its regulatory and taxing powers

Now let’s go pull out Hans-Hermann Hoppe’s book Democracy: The God that Failed in order to show that all three of the above issues from the State Autonomy Theory are pretty much what Austrians obsess about when it comes to the state.

Chapter 2 in Hoppe’s book begins by saying that

a government is a territorial monopolist of compulsion [sounds like “force” to me]–an agency which may engage in continual, institutionalized property rights violations and the exploitation–in the form of expropriation, taxation and regulation–of private property owners. Assuming no more than self-interest on the part of government agents [the State Autonomy Theory!], all governments must be expected to make use of this monopoly and exhibit a tendency toward increased exploitation. (45, bold emphasis mine)

Well, the overlap isn’t exact, since Domhoff tells us that the state would try to keep capitalism going by keeping capitalism healthy, while Hoppe tells us that the complete opposite will happen when he writes about the “increased” exploitation.  But notice the overlap. Both Hoppe and Domhoff mention that the state is a (1) monopolist, (2) of force or compulsion, with the power to (3) tax and regulate. And notice how Hoppe specifically states that there is “self-interest on the part of government agents.” That is precisely what we find in the State Autonomy Theory: “for the state autonomy theorists, then, the state can and does act in its own interests.“

I don’t want to belabor this, but one could find relatively easily Hoppe bemoaning the fact that the state is the monopoly defense provider as well. This, of course, would demonstrate that Hoppe–our Austrian school economist–is in conformity with point 2 of the State Autonomy Theory. This is the topic of Hoppe’s chapter 12, where he begins this chapter by stating that

I will demonstrate that the idea of collective security is a myth that provides no justification for the modern state, and that all security is and must be private (239).

And finally, to conclude my article, I want to point out the significance of linking the Austrian school’s views about the state to those offered by the State Autonomy Theory. This is because it provides for some new approaches to criticizing the Austrian School of Economics. The criticisms that are leveled at the State Autonomy Theory could possibly be turned around and leveled at the Austrian School as well.  If you read Domhoff’s article, it is fairly obvious that he strongly dislikes the State Autonomy Theory; Domhoff is quite convinced that the State Autonomy Theory is wrong mainly because it just does not apply to the United States. I will end my article by citing Domhoff on this very important point:

Even with the idea of potential autonomy available as a way to concede that there is corporate dominance in the United States, they insist on giving the American state considerable autonomy. However, there are many reasons why this potential does not manifest itself in the United States. State autonomy is only possible when a state is unified and relatively impermeable to the employees and representatives of private organizations. But the American government is neither. (bold emphasis mine)

Theories of Power: Part 1, Pluralism

Noam Chomsky tells us that the essence of anarchism is

to seek out and identify structures of authority, hierarchy, and domination in every aspect of life, and to challenge them; unless a justification for them can be given, they are illegitimate, and should be dismantled, to increase the scope of human freedom. That includes political power, ownership and management, relations among men and women, parents and children, our control over the fate of future generations…and much else. Naturally this means a challenge to the huge institutions of coercion and control: the state, the unaccountable private tyrannies that control most of the domestic and international economy, and so on. (Chomsky on Anarchism: Anarchism, Marxism and Hope for the Future, 178)

So anarchy is fundamentally a perpetual questioning of authority and power; it asks us to consider the legitimacy of all power. In fact, James C Scott begins his history of anarchism in upland Southeast Asia by pointing out that we have to study the state by also studying statelessness or anarchy:

The huge literature on state-making, contemporary and historic, pays virtually no attention to its obverse: the history of deliberate and reactive statelessness. This is the history of those who got away, and state-making cannot be understood apart from it. This is also what makes this an anarchist history. (The Art of Not Being Governed, x)

To me, the comments from Chomsky and Scott imply an important question, one that I am not sure of the answer, although I hope to find it out some day. The question is this: what exactly is this “power” that anarchists are deliberately trying to run away from?

The question is simply this: what is power? The answer is not obvious. Trying to answer this question is the purpose of my following series of articles. I have decided to use G. William Domhoff’s collection of articles as a springboard for my exploration into the question of “what is power?”

In this article, I am going to use Domhoff’s article called Who Rules America: Alternative Theoretical Views as my starting point of inquiry. I will limit this article to a discussion of pluralism.

Domhoff, who is in the Sociology Department at the University of California at Santa Cruz, begins his discussion of pluralism, one of many rival theories of power, with this rather ominous sentence:

Pluralism is the theory that most closely corresponds to claims made in high school textbooks and the mass media, and to what many Americans believe. (bold emphasis mine)

In other words the pluralist theory seems to be very popular. My gut feeling is that if something is popular, then it is probably wrong. According to Mark Twain, this is a time to reflect:

Now I will summarize Domhoff’s discussion of the nature of pluralism (and neo-pluralism–which is the revised version of pluralism). I hope that you will start to wonder why this is the popular theory of power in the United States, because I certainly did.

1. There are no hierarchies (so anarchism is useless, because anarchy is about abolishing hierarchical relationships in society). There is no dominant class. Power is disbursed among several groups. Power seems to be situational because different groups have power on different issues.
2. Pluralism “mirrors” the free market economy. Everything “works” in society because of competition. Just as markets have competition in order to provide “consumer sovereignty,” so too the political arena has competition in order to provide “voter sovereignty.”
3. The government is seen as a neutral dispute resolution body that will arbitrate among the competing interests in the society. The government is a fair and impartial judge.
4. Power comes from the bottom up or the grassroots. The people rule! Democratic capitalism is a collection of voluntary groups that attempt to influence public opinion.
5. These groups can become “institutionalized” into what are called “interest groups.” These interest groups can form coalitions or alliances depending on the situation.
6. Corporate power is a non-issue. Corporate leaders are too divided among themselves to dominate government.
7. The basic pluralist assumption about human nature is that people are self-maximizing individuals. In other words, capitalism is in, egalitarianism is out.
8. When it comes to property rights, pluralism sounds exactly like right wing libertarianism: “The state may be brought in to institutionalize property rights, or it may be viewed as a dangerous threat to them; but the state is not a part of the creation of private property” (bold emphasis mine). It reminds me of all these online discussions from right wing libertarians trying to explain the “non-state” origins of property: such as homesteading or self-ownership.
9. Major foundation funding of new citizen interest groups is downplayed as a source of nefarious influence by money on these citizen groups. In other words, the independence of these citizen groups has not been compromised even though they are getting a lot of money from corporate foundations.
10. Evidence supporting the pluralist view is found in the correlation between public opinion and legislative outcome.

My Comments on Pluralism’s Theory of Power:

My initial reaction is that pluralism seems to be a theory of power created by people in power in order to justify their existing power. Domhoff stresses the fact that pluralism likes to dance around and minimize the corporate power issue. In his list of arguments against pluralism, the one that jumps out at me is this one:

At that point it seemed to a growing number of social scientists that corporations did have predominant power and that the government was not responsive to the interests of the general public. (bold emphasis mine)

Domhoff’s argument reminds me of Chomsky’s argument, about how maximizing corporate power results in the minimization of popular power:

Of course, when you minimize the state, you maximize something else–and it isn’t popular control. What gets maximized is private power, domestic and foreign. (How the World Works, 262).

There is also a similarity between Domhoff’s view that public opinion in America is all fake, the product of corporate programming, and Chomsky’s views on manufacturing consent. Domhoff argues, when discussing how public opinion is actually corporate opinion, “the corporate community spends enormous sums of money to influence public opinion through an opinion-shaping network.” Similarly, Chomsky in his book How the World Works says that “one factor is the power of business propaganda in the US, which has succeeded, to an unusual extent, in breaking down the relations among people and their sense of support for one another” (301). Both authors attack the public relations industry for shaping public opinion.

I think what the pluralist theory is trying to accomplish is to argue that power is dispersed throughout the society. Nobody has a little group or class in charge. The people or the masses are in charge through the competitive process of voting. The government–this neutral tool of the people–then works out all the conflicts between groups in society.

I think the fundamental problem with this theory of power is that it ignores the problem of inequality. It is very difficult to speak of a voluntary society when some groups have lots of wealth while other groups have very little wealth. Domhoff stresses the fact that pluralism is based on a justification of inequality: “there are great inequalities in power and wealth, but they are disbursed among several groups.” It is this defense of radical inequality that makes the pluralist system break down, in my opinion.

The next article, Part 2 in this series, will continue with Domhoff’s paper by discussing the State Autonomy Theory of Power.

 

 

 

 

 

 

 

 

 

 

 

Alternative Labour Market Models, Government Intervention, and Price Fixing

When I was still a callow undergraduate at York University in Toronto, I remember that in one of my first year classes we had a “guest lecturer” from the University of Toronto. I forget his name, but he told us a joke about economics that I still remember quite vividly, and is completely germane for my later discussion about the labour market. He told us that: “economists have intellectual orgasms when lines cross!” 

How very true! If we look, for instance, at one of my lower level economics textbooks, we see what has almost become a cliché of economic analysis: a supply curve sloping upwards combined with a demand curve sloping downwards, which cross to produce our “intellectual orgasm” at the market clearing equilibrium! Here is the hackneyed “Economics 101” view of the labour market, taken from Macroeconomics: Canada in the Global Environment, 4^th edition, by Michael Parkin and Robin Bade, page 703:

When I think back to my freshman year at York University, I also recall that my political interests tended to favor the views expressed by Milton Friedman. In fact, I had the York University Book Store special order me two books by Friedman: Capitalism and Freedom: The Classic Statement of Milton Friedman’s Economic Philosophy and Free to Choose: A Personal Statement (co-authored with Rose Friedman). 

Now that I reflect back, I find these past experiences to be rather ironic in nature. Free to choose? Really? Take a look at the graph again. Where exactly is the “choice” in this analysis? Let us pretend for the moment that I am a sadistic monster with some desire to torture the working classes. If I choose to set the wage rate below the equilibrium rate, let’s say at $2 per hour in this example, then, the market forces will fight me as an implacable foe. I will lose, and the wage will rise back to the $20 per hour rate. On the contrary, if I were a very magnanimous angel, maybe I would set the wage rate at $40 per hour, because I want to be as generous as possible to the working classes. But again, the impersonal forces of the market will fight me interminably, until I lose again. So whatever the market says go; I get to “choose” what the market forces of supply and demand tell me.

Or to put it more starkly, this model rules out government intervention in the labour market. If the government plays the role of “sadistic monster” by deliberately setting the wage rates below the market clearing rate, then it will just be inducing a rebellion against itself. It will jeopardize its popularity and its ability to get reelected. If the government were to set a minimum wage above the market equilibrium rate (in this example above $20 per hour), then it will just create lots of unemployment for the working classes. By setting the wage artificially too high, the supply of labour will far exceed the demand for labour, and the “gap” will be all the unemployed workers. So a putatively benevolent and magnanimous policy of minimum wage laws will end up harming the working classes.

So game over for those pesky labour market interventionists. 

Looking at Some Alternative Models of the Labour Market

Not so fast! Maybe the game isn’t over! 

Through my research, I have stumbled across some alternative models of the labour market, which I want to briefly bring to my readers’ attention. These models look very different from the standard textbook version of the labour market. 

One of the obvious differences is the existence of multiple equilibria, i.e., the labour market may have more than one possible “solution” or “outcome.” And if the labour market has more than one possible solution, then we actually now face a possible choice, after all! If the standard economic model can give economists “intellectual orgasms” when just two lines cross, then these models will surely blow their minds with these multiple lines crossing!!! 

One book that I stumbled across is called Introduction to Post-Keynesian Economics by Marc Lavoie. In this book we are presented with the following model of the labour market, which is described as follows: “With a positively-sloped or backward-bending labour supply curve, the short-period Kaleckian model suggests the existence of two possible full employment equilibrium positions” (97). The model looks like this:

We see the existence of two possible equilibria, the “good” solution for labour at the point labeled H and the “bad” solution for labour at the point labeled L. Note that both H and L are possible “equilibrium solutions,” i.e., they represent points where labour supply and labour demand (the “effective” labour demand) curves intersect. 

Why is the H solution “good” and why is the L solution “bad” for labour? The answer is simply found by looking at the axes of the graph. The vertical axis has three points labeled as some variation of “w/p.” Labour wants to maximize w/p, because w/p represents the “real wage rate.” So from the point of view of labour, the solution “higher up” on the graph is to be preferred. 

When looking horizontally, the ideal solution for labour is to be as far to the right on the graph. This is because the horizontal axis represents output and employment. So the perfect solution from the point of view of labour is H because it is furthest to the right (implying the maximization of output and employment) and furthest up (implying the maximization of real wages). 

Conversely, outcome L is the “nightmare scenario” for labour because it is the complete opposite of H. Real wages are at the lowest possible value; output and employment too are at their lowest possible values. Point L implies very low output, very low employment, and very low real wages—it implies poverty and austerity for the working classes. 

Lavoie then poses this question—the most natural one to ask—“given these two possibilities, which of the two equilibrium positions, L or H, has the highest probability of being realized?” (98) His conclusion is that there is a tendency for the labour market to drift towards the L solution—the nightmare solution for labour:

If the labour market were deprived of conventions, rules, regulations, or institutional anchors, the nominal wage [i.e., the wage measured in dollars]…would trend downwards…in such a flex-price economy [i.e., an economy where prices adjust quickly, a truly free market], with falling nominal wages and stable prices, the real wage [i.e., the wage measured in terms of what the workers can actually buy, such as computers, cars, pens etc.] would tend to fall, until it reaches (w/p)_L , which corresponds to the low full employment equilibrium (98). 

Lavoie’s conclusion is that state intervention is needed to prevent the tendency for the labour market to slide down into the nightmare scenario of L. State intervention, according to Lavoie, is needed to maintain the preferred solution from the point of view of labour, namely, solution H. He writes:

While the Kaleckian multiple-equilibrium model shows that market forces can push the economy towards a low equilibrium with low levels of wages, output and employment, it also shows that adequate legislation and institutions can push the economy towards higher levels of employment, higher real wages, and higher living standards (99).

I will now mention one other model that I came across. I want to just quickly make my readers aware of this model. This model of the labour market is found in the book called How Markets Work: Supply, Demand and the ‘Real World,’ by Robert E Prasch. In this model we now have four possible solutions: two stable equilibria, and two unstable equilibria: 

What is most interesting about this model, I think, from the point of view of labour, is the solution labeled “D Stable” (which corresponds to the wage labeled w_p. This is the worst possible intersection of labour supply and labour demand, since it corresponds to the lowest possible wage for labour. In this situation, the amount of labour employed is actually quite high, i.e., the “D Stable” equilibrium is very far to the right. This solution corresponds to an outcome with the lowest possible wages and the highest possible amount of labour being used. It looks as though workers are being worked to death—(speaking sarcastically) all work and no pay. 

This is how Prasch summarizes this model of the labour market (bold emphasis mine):

The novelty of the revised labor supply schedule…is that it features two locally stable equilibrium points—points B and D. These reflect high wages/low hours and low wages/high hours respectively…

 

Under “free market” conditions the system has a built-in tendency to gravitate to one of these two points and remain there. The particular equilibrium that is eventually achieved is entirely dependent upon initial conditions in the market. 

 

This is a critical finding. If this theory is a plausible representation of the low wage labor market it follows that no amount of education, training, exhortation, or lectures on moral uplift directed at the poor will force the labor market equilibrium to move from point D to point B. Once achieving a poverty trap, the system remains there. End of story. (92)

The direct policy implication of Prasch’s model is to set the minimum wage rate slightly above the “C Unstable” equilibrium. By setting the minimum wage above the “C Unstable” equilibrium, free market forces would then cause the wage rate to rise to the “B Stable” equilibrium. The final solution at B is ideal from the point of view of labour because it combines low hours of work and high wages. Prasch explains all of this on page 94 of his book:

The revised labor supply schedule implies a similar analysis in the event that a minimum wage is enacted. Consider…a minimum wage set just above w_c. With such a mandated minimum wage, the quantity of labor demanded will be greater than the quantity supplied. The competitive process will then exert pressure on wages to rise until the market achieves the high wage/low hours equilibrium at point B. (94)

Concluding Remarks

Before we crack out the champagne to celebrate Prasch’s novel solution—basically a combination of free market forces and government intervention (i.e., the strategically set minimum wage) that interact in such a way to make the labour force substantially better off (i.e., the achievement of “B Stable” with high wages and low hours of work—I must caution that such approaches—both the earlier Kaleckian model with the two equilibria and the Prasch model with four equilibria–will be very hard to implement in the real world. This is because they involve the government to set the minimum wage at a sufficiently high level. I feel very uneasy about saying tersely: well, just get the government to solve the problem, lobby enough, set the minimum wage above w_c and we can solve the labour problem! 

If only it were that easy. In particular, I am reminded of the famous 1943 paper by Michal Kalecki called Political Aspects of Full Employment, and his stern warning that:

In this situation a powerful alliance is likely to be formed between big business and rentier interests, and they would probably find more than one economist to declare that the situation was manifestly unsound. (5/9)

So part of the solution has not been provided yet—how do we “make it all work” especially if the government is probably going to take the side of the big business and rentier classes, in their attempt to prevent labour from achieving the “full employment” outcome. That will be the topic of a later article in which I will ponder some possible solutions to the implementation problem. 

 

 

Thanksgiving From a Different Political Perspective

One style of writing that I take umbrage at is the style that declares that it has found the “truth” of a particular topic. In my previous articles, I made criticisms of Thomas DiLorenzo’s Austrian School of Economics interpretation of the “robber” barons, getting my inspiration from his chapter entitled “The Truth About the ‘Robber Barons.'” The articles I am referring to are my Doubting the Right Wing Libertarian Robber Baron Revisionism and my sequel article called More on James J Hill: Putative Market Entrepreneur Extraordinaire.

True to form,  the right wing libertarians and Austrian School types also provide us with the “truth”of  i.e., a revisionist account of, the story of the American Thanksgiving holiday.  In fact, this version of history seems to be quite popular when one looks online. In fact, the New York Times felt it necessary to publish a rebuttal of sorts to what is being circulated by right wing libertarians as the “corrected” version of American Thanksgiving history. So this right wing libertarian version of events must be ruffling some feathers.  For example, Right Wing Watch has a paper called “Right Wing Continues to Push ‘Socialist Pilgrims’ Myth.”

The Plan of Attack

1. Summarize the state of this debate, which has been framed as “capitalist” good guys versus “socialist” bad guys
2. Look at an alternative non-capitalist approach to see if we can find some better interpretative tools, which will help us possibly resolve this debate. I will look at a an anarchist paper from what is probably the perspective of Pierre Joseph Proudhon.
3. I will give some of my thoughts and opinions on what I think all of this means.

1. Summarizing the “Capitalist” versus “Socialist” Debate

So let me quickly summarize what seems to be going on in this debate, which has been framed as “good” guy versus “bad” guy. This is the same approach that you will find me criticizing  in my previous articles, the ones I linked to above, in which the world is divided into the “good” market entrepreneurs and the “bad” political entrepreneurs. In this discussion of the story of the creation of the American Thanksgiving holiday, the “good” guys are the putative capitalists and the “bad” guys are the putative “socialists.”

I read the right wing libertarian and Austrian School version of events at this particular link entitled, The Great Thanksgiving Hoax by Richard J Maybury. You can find a similar approach in Thomas J DiLorenzo’s book, How Capitalism Save America: The Untold History of Our Country, from the Pilgrims to the Present. The basic story is that the Pilgrims started out as socialists but then through some miracle they learned from experience and not an axiom that socialist common land ownership doesn’t work in the real world. So using this experience, they become capitalists, and capitalism saves them all from famine. The lesson learned is simply that capitalism means prosperity, and socialism means death and starvation.  Let me quickly cite the germane points from the article. First, we have the “bad” socialists screwing everything up badly:

This “from each according to his ability, to each according to his need” was an early form of socialism, and it is why the Pilgrims were starving.”

The socialists are of course indolent and lazy:

The problem with this official story is that the harvest of 1621 was not bountiful, nor were the colonists hardworking or tenacious. 1621 was a famine year and many of the colonists were lazy thieves.

The problem of course is rooted in the lack of property rights–those silly socialists–specifically the lack of land ownership. We will have to ignore the fact that there used to be a sharp distinction between the “land” factor of production and the “capital” factor of production but these two distinction concepts got fused together in order to confuse discussions of political economy if we are to believe the Georgist interpretation of Economic history. This takes me way off course from the point I want to make in this article; however, if you are interested in this debate about how the land-labor-capital distinction got collapsed into the labor-capital distinction, see Mason Gaffney and Fred Harrison, The Corruption of Economics. So the fact that this argument is about the “land” factor of production and not the “capital” factor specifically might be one way to illustrate that this argument shouldn’t be framed as “capitalism” versus “socialism.” We aren’t specifically dealing with capitalists; we are dealing with land owners and workers. But forgive me for my slight digression into the possible “equivocation fallacy” surrounding this entire debate. But, back to the right wing libertarian version of history.

To rectify this situation, in 1623 Bradford abolished socialism. He gave each household a parcel of land and told them they could keep what they produced, or trade it away as they saw fit. In other words, he replaced socialism with a free market, and that was the end of famines. (bold emphasis mine, it will come in handy later)

Remember, the article that I am citing from is reprinted from mises.org so we know that this is all meant as evidence for either Misesian laissez-faire economics and Rothbardian anarcho-capitalism. I first heard about all of this stuff from Thomas J DiLorenzo’s book How Capitalism Saved America: The Untold History of Our Country, From The Pilgrims to the Present. If we turn to Chapter 3, entitled How Capitalism Saved the Pilgrims we see that this entire debate is being directly framed as “capitalism” versus “socialism”:

Communal land ownership certainly caused problems for the Pilgrims, but, Bradford noted, “God in His Wisdom saw another course fitter for them”–and that course was private property. The “common course” was abandoned. By 1650 privately owned farms were predominant in New England….Securing property rights not only saved those fledgling settlements but also made it possible for other colonies to flourish. (60)

On the previous page, DiLorenzo gives us the same basic story: lazy socialists, then every man is given some land, and finally this results in prosperity:

Setting “every man for his own particular” meant establishing private plots of land. Immediately, those who had been lazy and indolent became “very industrious,” so much so that women who had previously pleaded frailty worked long and hard–once they saw how they and their families cold benefit from such hard work. (59)

2. Looking at an Anarchist Paper

So let us turn to an anarchist paper called Bad Books, Austerity, Democracy, and Thanksgiving Myths, at the Anarchist Writers. In this article, we see the same basic point, that the land was held communally, but then it was distributed to all the men:

The right’s notion of capitalism against socialism seems to flow from William Bradford’s 1650 History of Plymouth Plantation:

“At length, after much debate of things, the Governor (with the advice of the chiefest amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves; in all other thing to go on in the general way as before.”

The issue at this entire debate hinges on what they did with the land. How did they go about parceling it out.  I tried to highlight this point about “everyone getting a little bit of land” in my discussion above. DiLorenzo seems to be saying that when he wrote about how they set “‘every man for his own particular’ [which] meant establishing private plots of land” (59). In the article called The Great Thanksgiving Hoax (the article I have been citing from throughout), we have this key line: “He gave each household a parcel of land and told them they could keep what they produced, or trade it away as they saw fit.”

As the Anarchist Writers points out, the problem is that what the capitalists are describing is not capitalism. They put it rather humorously (since they are obviously enjoying how silly this capitalist argument is), so I will just quote them, and then I will give a dry, academic explanation of what they are saying in part 3 of my article:

Ironically, though, the propertarians [they mean the anarcho-capitalists, the right wing libertarians] fail to recognise that this was not capitalism! Everyone had their own parcel of land–they were self-employed! They kept the product of their own labour. If it were capitalism, they would have given the land to a few landlords and turned everyone else into wage-workers. The landlord would have kept the product of the workers’ labour and the actual workers, well, they would get just a fraction of what they produce. (bold emphasis mine)

3. My Comments and Interpretation

First of all, this whole argument of trying to read “capitalism” and “socialism” into what happened in the 1620s sounds like a dirty propaganda technique. In fact, it was the great Austrian economist Ludwig von Mises who warned against what his school is doing right now in his name:

It is an old trick of political innovators to describe that which they seek to realize as Ancient and Natural. (Ludwig von Mises, Socialism: An Economic and Sociological Analysis, 41).

I found that quotation to be quite amusing. Ancient. Natural. Ancient as in how we have supposedly found capitalism saving the day in the 1620s? Ancient in how DiLorenzo cites Aristotle in this discussion of the Pilgrims: “Bradford went on to blame the disastrous policy of collectivism on ‘that conceit of Plato’s’–the Greek philosopher’s advocacy of collective ownership of land, an idea that Aristotle had refuted” (59).  See Tony Endres’s review article in the History of Economics Review: An Austrian Perspective on the History of Economic Thought for this Austrian penchant of morphing Aristotle into an Austrian School Economist (page 152). And of course, a lot of right wing libertarian and Austrian school apologetics is based on appeals to “natural law.” On this attempt to defend right wing libertarianism using natural law, see L.A. Rollins The Myth of Natural Rights, and also Robert Anton Wilson Natural Law, or Don’t Put a Rubber on Your Willy. So in a way, Ludwig von Mises seems to be warning us against the “old tricks” of his own school.

(In all fairness to Ludwig von Mises, his current school, especially the Rothbardian wing, is a beast of its own, very different from the original Misesian version of laissez-faire capitalism. I first noticed this in the totally unconvincing attempt to turn Mises into an anarcho-capitalist by people such as Hoppe. It is a strikingly bad example of citing selectively. Please note that I am trying very hard to be as polite as possible as I can in this analysis. If you would like a rather scathing analysis of how the current Austrian school has abandoned its roots in Mises and Hayek, see the article by Dr. Oliver Marc Hartwich “The Errors of Hans-Hermann Hoppe.” What makes this article so valuable is that Hartwich supports Mises and Hayek and he is writing about his personal interacts with Hoppe. Dr. Hartwich objects to the current Austrian school in many ways: methodology (the a priori), trying to reduce everything to property issues etc., and thinks that Hoppe’s style of rhetoric is totalitarian: “It was shocking how close Hoppe’s language got to totalitarian rhetoric–and I wish to underline that I am only talking about rhetoric here, not about contents–but this is just another sign of how far away Hoppe has moved from the positions and values of classical liberalism.”)

In other words, this entire discussion smacks of political propaganda and political tricks. So it isn’t really very scientific in its approach. However, since the mainstream media is probably not going to use anarchist theories to explain what is going on, we are sadly forced to read this “good” guy versus “bad” guy or “capitalism” versus “socialism” version of history of Thanksgiving.  But if we look at the evidence, it seems to me that what is being described is a form of anarchism called mutualism.

Let me quickly review the argument above, i.e., the argument that the Pilgrims were saved by capitalism. What did we see:

1. The land was divided up so everyone got some land to work with–hence no land lords and hence self-employed workers (“he gave each household a parcel of land”)
2. The producers got to keep everything they produced (“told them they could keep what they produced”)
3. Free and voluntary exchange (“trade it away as they saw fit”)

But this basically is a textbook definition of mutualism–a type of anarchy, which is not capitalism. Mutualism is a type of socialism.  From the Anarchist Writers we see in the article entitled, Mutualism, yes and no, that

Mutualism is a libertarian form of market socialism. It is most associated with Pierre-Joseph Proudhon, the first person to call himself an anarchist….Mutualism aims to create a system of self-employed workers and cooperatives honestly exchanging goods and services in a market without interest, rent, profits, land lords, or capitalists. (bold emphasis mine)

So if I wanted to be a cocky and arrogant propagandist I might say at this point: well, if these capitalists were to interpret their own evidence correctly, they should be telling us that Mutualism saved the Pilgrims! Thanksgiving is therefore a story of how Mutualism saved the Pilgrims from starving to death! But I won’t, because this would just be another example of highly selective quoting of the historical record. It would be another example of trying to twist the historical record in order to get it to fit the Mutualist story.

The easiest way to see this is to note that there was some very important government activity going on in this entire “land distribution” saga of the Pilgrims. It makes no sense to argue that the government was acting in a Mutualist-anarchist sense for reasons that should be self-evident–anarchy and government don’t mix! With regard to the capitalist/right-wing libertarian version of the story, well, if the government is the source of land property, then how can this fit in with their capitalist story about the homesteading origins of land property? Well, it can’t.  The reason why right wing libertarians and capitalists would want to avoid this point is because it  smacks of original appropriation (i.e., the state seizes the land and gives it out to its favorites, in this case the land is given to its favorites, the Pilgrims), an interpretation of history that we will find coming from communists, not capitalists, that’s for sure! If we go to the libcom.org website we find in their article about Thanksgiving called Thanksgiving and Telling the Full History that the land was stolen by the state and then given to the exploiter class, i.e., the Pilgrims:

The colonists decided they did not need to consult the Indians when they seized new lands, they only had to consult the representative of the crown (meaning the local governor)…Ely smooths over the differences between the Pilgrims and the Puritans, writing out of history that the original Pilgrims were a dissident group who attempted to live an apostolic life–creating a new commons, and contributing each according to their abilities, and receiving according to their needs. They were one of the many radical religious groups in England at the time that sought to live a life in common. Of course, just as the peasantry in England had been dispossessed, and the bourgeois hijacked their movements to themselves take over and develop capital, the same happened in Plymouth. (bold emphasis mine)

I guess the lesson to be learned here is that actual history doesn’t usually fit nicely into a category for apologetic reasons. To declare that capitalism saved the Pilgrims is just to search through the historical record, seize upon a few favorable quotes, and ignore the rest of the evidence. I have tried to draw upon a variety of sources and perspectives in order to–I hope–come closer to what actually happened with the Pilgrims.  I hope that my research has helped to illuminate what happened at that first American Thanksgiving.

The Mutualist, Pierre Joseph Proudhon

The Form Critics meet the Austrians: Biblical Criticism and Austrian Mythology

Can you guess which Austrian school economist said these immortal words? Can you guess which Austrian school of economics book I am citing from when I type:

Their book takes, in the traditional style of historical apologetics, a completely deductive a priori approach.

Was it Ludwig von Mises? It might be. Take a look at one of Mises’s adversaries, the blogger Lord Keynes. Lord Keynes summarizes the Misesian methodological approach by writing in Mises’ Praxeology: A Critique:

Its [i.e., praxeological] statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and fact.

Maybe it comes from Mises’s book on method, The Ultimate Foundation of Economic Science where we are told that

economics is not history. Economics is a branch of praxeology, the aprioristic theory of human action. The economist does not base his theories upon historical research, but upon theoretical thinking like that of the logician or the mathematician. (66)

Or could it be one of Mises’s followers, perhaps? How about we try Hoppe who tells us Democracy: The God that Failed that

A priori theory trumps and corrects experience (and logic overrules observation), and not vice-versa. (xvi)

Or maybe it is tucked away in the Introduction to the Second Edition of Man, Economy, and State with Power and Market in a section that says something like this:

This explains why Rothbard identified the use of the praxeological method, rather than a loose subjectivist orientation, as the hallmark and acid test of scientific economics. (xxxiii)

Nope! It isn’t Mises, nor is it Hoppe, nor is it Rothbard. It is none of them. In fact, I didn’t cite an Austrian school economist at all! No, my opening quotation comes from Chapter 10 of The Christian Delusion: Why Faith Fails, written by Robert M Price. His article has nothing to do with Austrian School economics; instead, it is a review essay of a “landmark work of Gospel apologetics” called The Jesus Legend: A Case for the Historical Reliability of the Synoptic Jesus Tradition. Price is a Jesus Seminar scholar who was originally quite the Christian if I remember correctly, but he eventually abandoned the faith and became one of the most prolific writers on atheism today. Just to give you a quick flavor of where Price is coming from, take a look at the book he co-authored with Jeffery Jay Lowder called The Empty Tomb: Jesus Beyond the Grave, and we see how the “a priori” comes into play in an attempt to establish the historical reliability of the story of the resurrection of Jesus Christ as opposed to it just being a legend:

It seems to me that there are good reasons to reject Craig’s a priori assumptions about what an empty tomb story would have included if it were legendary. (624/1182, bold emphasis mine)

What struck me was how Price begins this essay–the one my opening quotation is from–by pointing out that Christian apologetics is based on a completely deductive a priori approach, i.e., the Austrian school of economics’s “home turf.”

Now Price’s essay is about, in part, defending the Biblical Form Critics from the attacks leveled against them by the completely deductive a priori Christian apologists. Look at the warm and fuzzy relationship that exists between these two groups when Price writes that

they [i.e., the Christian apologists Boyd and Eddy] sneer at the form-critical axiom that particular forms in which the sayings or stories meet us in any way reflect the Sitz-im-Leben [i.e., the life situation of the church at the time of the creation of these stories] of their use. (Jesus: Myth and Method, 284, bold emphasis mine)

So my educated guess at the moment is this: maybe Biblical “Form Criticism” could be used as another way to dissect and to critique the deductive a priori Austrians.

So what is “form” criticism? Well, if we go to Robert M Price’s book, The Christ-Myth Theory and Its Problems, we see that it boils down to this: what is useful to a community (i.e., the early Christian church community), is what gets passed down to future generations:

I referred to the central axiom of form criticism: that nothing would have been passed down in the tradition unless it was useful to prove some point, to provide some precedent….all pericopae [i.e., contained units or sayings] of the Jesus tradition owe their survival to the fact that they were useful. (20/428, bold emphasis mine)

Price then gives us the “practical implication” of all of this, namely this: the Church sticks words into the mouth of Jesus in order to give them authority. I will cite Price on this, then I want to compare this to one of the reviews of the Rothbard approach to writing the history of economic thought. They do sound very similar to me. But first, Price:

The closer a Jesus-saying seems to match the practice or teaching of the early Church, the greater likelihood that it stems from the latter and has been placed fictively into the speech or life of Jesus merely to secure its authority. (20/428, bold emphasis mine)

Now let’s turn to the essay I was reading yesterday, which inspired me to write in my notes the following: the reviewer is accusing Rothbard of putting words into the mouth of historical characters such as Cantillon, or the French laissez-faire economists, or Say, etc. It is that expression “putting words into the mouth of historical characters” that got me seriously thinking about this link between Biblical Form Criticism and the Rothbardian approach to writing the history of economic thought.  In Tony Endres’s article in the History of Economics Review, we see the reviewer complaining again and again about how Rothbard is transforming historical characters into things that they were not.  Just as the later Christian church is “sticking words into the mouth” of the earlier Jesus, so too the later Murray Rothbard is “sticking words into the mouth” of the earlier historical characters. That is how I would interpret Endres’s review of Rothbard’s works on the history of economic thought.

For example, Endres writes, how Aristotle becomes an Austrian School economist: “Aristotle’s fragmentary remarks on money are exemplary because they are viewed as ‘predating parts of the economics of the Austrian school.'” Cantillon becomes a defender of the Austrian Business Cycle Theory: “Cantillon ‘provides the first hints of the later Austrian theory of the business cycle’ simply because he understood that ‘expanding credit lower[s] the rate of interest.'” Say turns into earlier version of Mises! This reminds me of how the Joseph of the Old Testament gets transformed into the Joseph (Jesus) of the New Testament. It is a common observation in critical studies of the Bible, namely, older traditions get reworked into later traditions. Another example is how the story of Daniel in the Old Testament gets rewritten into the tomb story in the New Testament (see Richard C Carrier, Proving History: Bayes’s Theorem and the Quest for the Historical Jesus, 199-204, “But even using those criteria alone it’s sufficiently strong to be clear…that Matthew made all this up to equate the tomb of Jesus with Daniel’s den of lions”). As Endres tells us “Say becomes, in Rothbard’s hands, a ‘praxeologist.'”

What it all seems to boil down to is this: our “Old Testament” characters in economic history are all foreshadowing our “New Testament” character of the “marginalist revolution” that ushered in the Austrian School of Economics later in history. And we can see that Endres seems to be thinking that Rothbard is “sticking words into the mouths” of historical characters when he sums up by saying:

As Skinner argues “the only plausible answer is of course fatal to the claim [made by Rothbard] itself; that the author [J. B. Say in this case] did not (or even could not) have meant after all to enunciate such a doctrine.”

Let me mention a few other things quickly, that suggest that this “Biblical Form Critical” approach might be very useful in dissecting the Austrian School of Economics. Notice how Price emphasized that what is useful for the Church is what gets passed down to later followers of Christianity (aka what we get to read about in the New Testament). If it is useful it gets passed down; if it is not useful it gets discarded.  Maybe this will explain some of the “bombshell” observations–i.e., shocking observations–made by the blogger Lord Keynes.  For example, Lord Keynes has a blog entitled Friedrich von Wieser and Eugen von Philippovich von Philippsberg: Austrian Economists and Fabian Socialists and we get this shocker:

And now for what might be a bombshell for some people. Two of the first generation of Austrian economists were clearly supporters of Fabian socialism. Yes, you heard me right: they were advocates of early 20th century Fabian socialism.

Or take a quick look at Lord Keynes’s blog, Rescuing Menger from the Austrians, where we find this rather shocking statement from Lord Keynes:

That book shows that the founder of Austrian economics was worlds apart from the modern cult of anarcho-capitalism.

Why does Lord Keynes say this:

All in all, the founder of Austrian economics appears to have accepted the existence of the state and a number of interventions, perhaps on utilitarian grounds.

One rarely hears from modern anarcho-capitalists the fact that Mises thought that natural law theory would lead to tyranny. In Mises’s Economics as a Bridge for Interhuman Understanding we see Mises dismissing natural law, yet I am told by some that Mises is an anarcho-capitalist (hence Mises is “safely” in the Rothbard natural law camp):

The doctrine of natural rights can be traced back to ancient and medieval philosophy. It was easy to coin this natural rights doctrine into popular catchwords which appealed to the masses [maybe “non-aggression principle”]. It supplied the revolutionaries with fanatical fervor. But its illusiveness again and again frustrated the initial success of the reforms inaugurated, and resulted in terrorism and tyranny. (Ludwig von Mises, Economic Freedom and Interventionism: An Anthology of Articles and Essays,258, bold emphasis mine)

So I am thinking, following this Biblical Form Critical approach, that to understand the Austrian school, we have to study how ideas get “passed on” from one generation to the next. What gets passed on. What gets dropped.

And finally, the form critical idea of Sitz-im-Leben or life situation might be relevant for understanding the Austrian school literature. If we look at the Handbook of Biblical Criticism, 2nd edition, by Richard N Soulen we see that Sitz-im-Leben means:

setting in life, or life situation…in Form Criticism to refer to that sociological setting within the life of Israel or the early Church in which particular rhetorical forms (legends, sayings, liturgical formulae, psalms, prophecies, parables, etc.) first took shape. (178)

In other words, maybe the Austrian school’s “praxeology” is not so much their “methodology” of science but rather, maybe praxeology is their “rhetorical form” that emerged in a particular Sitz-im-Leben in the past. Praxeology, this “literary form” then gets passed down because of its usefulness in beating off uncomfortable empirical evidence, such as administered prices. What might this particular Sitz-im-Leben be?

I am thinking that one of the comments on Lord Keynes’s blog might be the answer to the question I just asked, what might have been the Sitz-im-Leben behind the “literary form” of “praxeology”? The article is called Barrotta’s Kantian Critique of Mises’s Epistemology, and the comment in particular is by Georg Thomas:

I suspect, Mises was traumatised by the terrible attacks levelled against the Austrian school by the hugely preponderant German Historical School. The latter denied the possibility of a general science of economics, and so Mises developed an exaggerated rationalist ambition to provide an unshakable epistemological foundation for economics, and ended up with his highly questionable praxeology – which really is rather an unsavoury attempt at cornering absolute truth. This attitude attracted truly dogmatic minds, especially that of Rothbard who transplanted Mises rationalistic ambition into his hubristic system building efforts in the area of ethics and political theory.

In other words, the life situation or Sitz-im-Leben for the creation of a “literary form” of “praxeology” might have been the “terrible attacks levelled against the Austrian school by the hugely preponderant German Historical School.”

Please understand that this essay is a collection of inchoate thoughts by me. So I am still developing my ideas in this area. That is why this essay is a bit disjointed and the arguments are not fully developed. That is because I am still developing them in my own mind. But I wanted to write it down and share it with some of you!

More on James J Hill: Putative Market Entrepreneur Extraordinaire

James J Hill

In my previous article, entitled Doubting the Right Wing Libertarian Robber Baron Revisionism, I mentioned a review article by William L Lang from Portland State University. His review article directly contradicts the capitalist apologetic version of history found in Thomas J DiLorenzo’s book How Capitalism Saved America. To briefly recap the conflicting theses let me quickly cite the germane points, first DiLorenzo then Lang.

Thus, all of the railroad men of the late nineteenth century have gone down in history as “robber barons,” although this designation definitely does not apply to James J. Hill. It does apply to his subsidized competitors, who deserve all the condemnation that history has provided them. (Also deserving of condemnation are the politicians who subsidized them, enabling their monopoly and corruption). (Thomas J DiLorenzo, How Capitalism Saved America, 120-121)

And now from the review article by Lang, which I also cited in my previous article. If you follow the link to my previous article you can read all the germane quotations that I pulled out for consideration. For this article, let me focus in on the most important part of Lang’s review article:

But the equally familiar story of Hill as the only railroad tycoon who built his lines free of government aid is demolished in this revisionist treatment….In Malone’s perceptive account, we see him as clearly the beneficiary of government investment and action, a far cry from earlier depictions of Hill as the self-made man who built an empire with little more than his bare hands. (William L Lang, An Imperial Ego in the Age of Industrial Capitalism)

The good news is this: I found a copy of Michael P Malone’s James J Hill: Empire Builder of the Northwest. This allows me to check the review article by William L Lang. I mentioned in my previous article that I was a bit worried because I had not checked the originals in order to verify the Lang version of events. But, I can do that now! That is the purpose of this article, to present some of my preliminary results of looking through Malone’s book.

Just as a quick aside, DiLorenzo is aware of Malone’s book because he cites it. On page 115 of How Capitalism Saved America, DiLorenzo writes: “Hill’s Great Northern was, consequently, the ‘best constructed and most profitable of all the world’s major railroads,’ as Michael P. Malone points out.” DiLorenzo ends the sentence with “end note 15” which simply mentions that he is citing page 102 of Malone.

Observation 1: The Kolko Factor as a Source of Austrian Inconsistency

Gabriel Kolko, the New Left historian, seems to be a darling of the Austrian School when it comes to the history of the Progressive Era. In fact, I first learned about Gabriel Kolko’s existence from Thomas J DiLorenzo’s other book, Hamilton’s Curse. DiLorenzo writes the following about Kolko’s book The Triumph of Conservatism:

In the important and influential 1963 book The Triumph of Conservatism, the historian Gabriel Kolko meticulously documented how American businesses, far from resisting political control, sought such regulation because they could use it to their advantage. (Thomas J DiLorenzo, How Capitalism Saved America, 141)

DiLorenzo is not the only Austrian School Economist to appeal to Kolko’s work, in order to defend the Austrian approach to the history of economics, Hans-Hermann Hoppe cites Gabriel Kolko in Hoppe’s A Theory of Socialism and Capitalism:

G. Kolko, a left-winger and thus certainly a trustworthy witness, at least for the critics from the left, sums up his research into this question as follows… (210)

Just as I criticized DiLorenzo in my previous article for being too assertive when using the phrase “definitely does not apply to James J. Hill,” so too I will apply this same criticism to the mises.org material on Gabriel Kolko. Take, for instance, Jeff Riggenbach’s article entitled John T Flynn: Revisionist Journalist, where we are told the truth of the Progressive Era. I suppose that all other opinions on the Progressive Era must be rejected as lies, since mises.org has discovered the truth!

The truth is otherwise. The truth is that the New Deal was what the revisionist historian Gabriel Kolko called a “triumph of conservatism.” Kolko used that phrase as the title of a seminal 1963 book in which he showed that the wave of federal regulation of business that came in with the Progressive Era in the early years of the 20th century was in fact spearheaded by large corporations, which wanted the regulations in order to put smaller competitors out of business and enable the large corporations to enjoy a large, virtually guaranteed market share without having to take the trouble to compete in order to get it. In many cases, Kolko showed, the big corporations that lobbied for these new regulations actually wrote the regulations that were eventually adopted. (Jeff Riggenbach, John T Flynn: Revisionist Journalist, bold emphasis mine)

I guess I can shut down my investigation because Riggenbach has given us the truth. Unfortunately, I am not willing to take his pronouncement as the truth. All this talk about “the truth” coming from the Austrian School of Economics’s homepage,  reminds me of another interesting criticism of this school. In his humorously entitled article, Natural Law, or Don’t Put a Rubber on Your Willy, Robert Anton Wilson argues that natural law types–such as the followers of Rothbard–are just a priesthood class pretending to be “philosophers”:

All the arguments in modern Natural Law theory would immediately make some kind of sense if one inserted the word “God” in them at blurry and meaningless places in the jargon. It seems that the word is left out because the Natural Law cultists do not want it obvious that they are setting up shop as priests; they want us to consider them philosophers. (Robert Anton Wilson, Natural Law, or Don’t Put a Rubber on Your Willy, 21/51, bold emphasis mine)

I suppose I will have to play the role of “the heretic” by denying “the truth” as “revealed” to me by my priests over at mises.org. So I will not be able to tell you “the truth” of the Progressive Era. All I can offer is an argument based on some research I did that suggests to me an inconsistency in this entire Austrian school story. Let me present my basic argument in numbered points, followed by some evidence that I have collected:

1. Paeans to James J Hill by the Austrians as this textbook “market” entrepreneur (who suffers from the vituperative abuse of the historians who mistakenly lump him in with the evil and minacious “robber barons” or “political” entrepreneurs)
2. Panegyrics to Gabriel Kolko, the (angelic?) bringer of Progressive Era and business regulatory “truth”
3. Thomas J DiLorenzo praising 1. Hill and 2. Kolko, while citing Malone
4. The problem comes when we try to reconcile Hill, Kolko, and Malone. This problem arises because Malone makes a rather fascinating claim, namely, Hill contradicts Kolko! 

In other words, I think there is some tension here in the land of Austrian revealed “truth” when one tries to synthesize all of these stories. Let us now turn to what Malone has to say about James J Hill and Gabriel Kolko, and how they contradict each other:

The fact that Hill accepted the inevitability of federal regulationdid not mean, however, that he welcomed it or felt that he really benefited from it. His example fails to uphold historian Gabriel Kolko’s famous assertion that rail executives supported and then secured federal regulation and that they won from it a benevolent federal oversight of the industry, oversight running counter to the public interest. Hill’s perspective tends, rather, to affirm the interpretations of Edward Purcell, Albro Martin, and others: railroad men divided over the nascent Interstate Commerce Commission (ICC), grudgingly accepting its political necessity but sharing gains and losses with producers and other interested groups.

Hill and other railroad leaders watched approvingly during the conservative 1890s as the U. S. Supreme Court ruled that the ICC lacked the authority to set maximum rates. Similarly, the courts cut the railroads considerable slack regarding Section Four of the Interstate Commerce Act, which nebulously outlawed the notorious “long-and-short-haul,” whereby railroads charged higher rates to inland cities than to ports even when the interior city lay nearer the point of embarkation. (Michael P Malone, James J Hill: Empire Builder of the Northwest, pages 200-201 or 401-403/618 in Adobe Digital Editions, bold emphasis mine)

My suspicion at this point is simply that the Austrian version of economic history contains a serious problem: they are holding two contradictory views simultaneously. They uphold Kolko’s version of history because it lets them create a distinction between the “good clean” capitalists and the “dirty regulatory loving” capitalists. Now they can “blame the government” instead of blaming the market or the capitalist system. They also like Kolko because he let’s them say that government regulation is not the result of “market failure” but rather government regulation is the result of “crony” capitalists using government regulation to shut down competition. But they also like James J Hill because his entrepreneurial life is seen as the apotheosis of the “good” “clean” “market” entrepreneur in action. But if Malone is right–or if these other interpretations from Purcell and Martin are correct–then Hill’s life contradicts Kolko’s thesis. You can’t have it both ways, but that seems to be what the Austrian version of history is trying to do. It seems like they want the good parts of Kolko and the good parts of Hill, because those good parts seem to be consistent with the story the Austrians are trying to weave.

So maybe there is some way to reconcile this apparent contradiction between Hill and Kolko. That would help resolve the problem for the Austrian version of history. Or, maybe there is no solution to this apparent contradiction. Maybe the contradiction is real. Maybe Hill’s life is a piece of evidence contradicting Kolko’s interpretation of federal railroad regulation. Maybe the Austrian version of economic history is based on holding two contradictory views at once. This question needs to be studied in future research, because I honestly don’t know the answer at this point. I still maintain my agnosticism. This is precisely why I objected to DiLorenzo’s bold statement in my previous article when he said that Hill was “definitely” not a robber baron. My point is simply that coming to such a bold conclusion is premature, and probably incorrect. The more I look at this problem, the more problems I find in trying to interpret the life of James J Hill.

Observation 2: He Hates Politics! He Loves Politics! He’s Janus on Politics!

Another inconsistency pertaining to James J Hill is the question of whether he “loves” politics or he “hates” politics. I am not being sarcastic in my section header; this is precisely the problem we are confronted with when we compare DiLorenzo’s book to Malone’s book. Let me begin by mentioning DiLorenzo’s How Capitalism Saved America, in which DiLorenzo paints Hill as some sort of “hater” of politics. This obviously is consistent with DiLorenzo’s thesis, namely, Hill was a “good” market entrepreneur while his competitors were “bad” political entrepreneurs. DiLorenzo tells us that Hill “detested” politics:

While James J. Hill detested politicians and politics and paid little attention to them, things were very different with the UP [Union Pacific]. (Thomas J DiLorenzo, How Capitalism Saved America, 118, bold emphasis mine)

Now we find the direct opposite assertion in Malone’s book, when it comes to James J Hill’s position on politics:

Jim Hill loved politics, both the bare-knuckled manipulation offavors and patronage and the philosophical discussion of the issues. He took it as a fact of life that his sweeping economic power especially political in nature, since it entailed monopolies and near-monopolies over transportation naturally brought with it political interests and sway. Ever since the frenetic days of 1878 79, Twin Cities rumor mills had claimed that he played rough and mean, bribing or otherwise “influencing” politicians when need be. No one ever proved that Hill gave a bribe, and when a radical “Grit” politician from Manitoba made such an accusation, Jim forced him to retract it. However, Hill never hesitated to give politicians favored deals for stocks and properties. Quite naturally, he quickly became a key Democratic power in Minnesota, and that power soon transcended his home state. (Michael P Malone, James J Hill: Empire Builder of the Northwest, page 157 or 317-318/618 in Adobe Digital Editions, bold emphasis mine)

So there you go. DiLorenzo tells us one thing about Hill, but one of DiLorenzo’s source documents–Malone’s book–says the complete opposite. What are we to make of this? At this point in my research, all I want to say is that, once again, DiLorenzo should not be making such bold and “definite” claims about Hill. One of his own source documents seems to be directly contradicting his thesis.

I am going to save a deeper discussion of Hill’s activities with regard to politics–both in his immediate area in the American northwest in areas such as Minnesota and Montana and westward, and also American federal politics–for later articles. Briefly, Malone’s book does not look good for DiLorenzo’s thesis. As I looked through Malone’s book quickly, Hill’s name keeps popping up in rather suspicious places if he were truly the “market” entrepreneur in the manner suggested by DiLorenzo. If I can break from my style of citing sources for a minute and just give a personal hunch for a second, I would say that Hill seems to be involved in politics for land and gold money reasons. He seems to be making a lot of his money–or at least purchasing power of his gold money holdings–from a deflationary depression in the United States. There was a movement to change from gold to silver in the United States. So I suspect that part of his federal American activities are about making more money by protecting his gold holdings and by profiting off the deflationary depression. But this is just my hunch at the moment, and I could be wrong. The reason I mention it is because of the next obvious link to the Austrian school of economics, namely, a defense of gold money holders. In particular, I am alluding to this statement here in Malone:

When the Democratic Party, at its 1896 convention, dumped Cleveland and nominated a Populist-style orator, William Jennings Bryan, for president, Hill joined other conservative Democrats in looking toward the Republicans, who had nominated a safe, gold standpatter, William McKinley. (page 160 or 323-324/618 in Adobe Digital Editions)

Concluding Remarks

I will conclude this essay by saying that the entire DiLorenzo exercise of splitting “robber barons” of the Progressive Era into “good” market entrepreneurs and “bad” political entrepreneurs is probably a dead-end approach to economic historical research. In fact, Malone goes so far as to tell us that it is probably impossible to “classify” James J Hill in any meaningful way. In other words, trying to stick him into the “market” entrepreneur category or the “political” entrepreneur category is most likely a waste of time. Malone tells us that James J Hill–the man–is very mercurial and he defies categorization. This seems to confirm what I said in my previous article, Hill is a mixture of views:

A closer assessment of Hill’s speeches and writings, however, clearly reveals that he in fact was a serious thinker who pursued issues to a logical conclusion and who defied deft categorization. He could be, on occasion, either optimistic or pessimistic, nationalistic or cosmopolitan, materialistic or idealistic. (Michael P Malone, James J Hill: Empire Builder of the Northwest, page 194 or 389-390/618 in Adobe Digital Editions, bold emphasis mine)

Doubting the Right Wing Libertarian Robber Baron Revisionism

In this article I plan to look at the right wing libertarian attempt to revise the historical record pertaining to the so called “robber barons” from the late 19th century and early 20th century.  In particular, I will use chapter 7 of Thomas J. DiLorenzo’s How Capitalism Saved America as the springboard for my discussion because this is the sort of literature that I used to read back in my anarcho-capitalist days. Then I want to discuss the probably reason–the most likely “why”–right wing libertarians want to change our perspective of the robber barons from the so called evil “political entrepreneurs” to the righteous “market entrepreneurs.” Briefly, my view is that this is all about creating a bizarre category of “non-monopoly monopoly,” i.e., a special category of businesses that look like monopolies, act like monopolies, smell like monopolies, but aren’t really monopolies after all. Or to be more blunt, this is a way of creating a justification for massive concentration of capital. I will then conclude my article by going through some of the evidence that I have found that makes me doubt the legitimacy of the putative market entrepreneurs held up by Thomas J DiLorenzo. Since I am still investigating this topic, I must emphasis that I am not trying to draw any definitive conclusions at this point. All I am trying to do is to bring to light some reasons to suggest that this hypothesis of “good” market entrepreneurs versus “bad” political entrepreneurs is probably false and probably needs to be rejected as an erroneous distinction. In other words, I want to suggest some possible angles of attack that could possibly be used to refute this attempt to make the robber barons look like the “good guys” of history.

Part 1: The “Good” Robber Barons Have Been Unjustly Traduced!

Thomas J DiLorenzo’s book, How Capitalism Saved America, contains a rather interesting chapter, chapter 7, called The Truth About the “Robber Barons.” DiLorenzo’s chapter attempts to defend the capitalists from the scurrilous claims of “most” historians:

To most historians writing on this period, these entrepreneurs committed thinly veiled acts of larceny to enrich themselves at the expense of their customers. (110)

DiLorenzo tells us that these historians are “confused about the role of capitalism in the American economy” (110). Why are all these historians confused? Will the esteemed economist please enlighten us. Thankfully, he does! The historians have committed a heinous sin, because they have failed

to make an important distinction–the distinction between what might be called a market entrepreneur and a political entrepreneur. (110-111)

DiLorenzo then defines his terms. Notice how all of this pivots around one and only one major distinction: the government. Basically the story is really simple. The good guys are the market entrepreneurs because they become rich without government assistance, while the bad guys are the political entrepreneurs because they become rich with government assistance. Let me just cite DiLorenzo’s definitions so nobody can think I am making this distinction up.

A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect.

 

By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors. (111)

The rest of the chapter is basically DiLorenzo’s attempt to show how the market entrepreneur route to wealth accumulation is awesome, while the political entrepreneur route to fame and fortune sucks. He spends most of his time on two robber barons whose reputations have been besmirched by historians who have failed to make his political versus market entrepreneur distinction. If only historians would make this vital distinction then the record would be set straight. This is precisely what DiLorenzo tells us is the case:

the lesson here is that most historians are hopelessly confused about the rise of capitalism in America. They usually fail to adequately appreciate the entrepreneurial genius of men like James J. Hill, John D. Rockefeller, and Cornelius Vanderbilt, and more often than not they lump these men (and other market entrepreneurs) in with genuine “robber barons” or political entrepreneurs. (132)

In other words, the sin of “most’ historians is to falsely lump the market entrepreneurs in with the flagitious political entrepreneurs. If we make this distinction we can separate the good capitalists from the evil Robber Barons. That seems to be the basic story here. And DiLorenzo makes sure that we “get” his thesis by saying it over and over again. For example, on page 112 we read that

the resentment that this naturally generated among the public was unfairly directed at other entrepreneurs who succeeded in the railroad industry without political interference that tilted the playing field in their direction.  Thanks to historians who fail to (or refuse to) make this crucial distinction, many Americans have an inaccurate view of American capitalism. (112)

And again on page 120 we read the same basic thesis. Notice the absolutist language that DiLorenzo uses. He doesn’t say “maybe” or “strongly suggests” or anything like that. Oh no! He makes it very clear that we are dealing with genuine market entrepreneurs here. There is just no room for doubt, according to DiLorenzo’s pronouncements:

And on top of that, usually the free market, not government intervention, gets the blame. Thus, all of the railroad men of the late nineteenth century have gone down in history as “robber barons,” although this designation definitely does not apply to James J. Hill. It does apply to his subsidized competitors, who deserve all the condemnation that history has provided them. (Also deserving of condemnation are the politicians who subsidized them, enabling their monopoly and corruption. (120-121, bold emphasis mine)

Moreover, DiLorenzo paints the market entrepreneurs as the victims of not only government interference such as anti-trust laws, but also the victims of indolent cry-baby less competitive rivals. If only the competitors worked harder, then they too would be successful. But they didn’t, so they deserve to go out of business:

This is a common, ordinary business practice–offering volume discounts to one’s largest customers in order to keep them–but Rockefeller’s less efficient competitors complained bitterly. Nothing was stopping them from cutting their costs and prices and winning similar railroad rebates other than their own inabilities or laziness, but they apparently decided that it was easier to complain about Rockefeller’s “unfair advantage” instead. (125)

I think that captures the essence of DiLorenzo’s argument. We need to distinguish between the “good” market entrepreneurs who got their wealth legitimately through genuine “clean” capitalism and the cry baby “bad” political entrepreneurs who are lazy, indolent, and run to their mommy aka the government or the political process in order to wipe away the tears produced by their inability to compete with the good market entrepreneurs.

I will ignore the fact that DiLorenzo’s definition of capitalism as “genuine market entrepreneur” is not how socialists use the term. My suspicion is that a socialism would say, “so what”? You concentrated capital using the “correct” market entrepreneur means instead of using the “incorrect” political entrepreneur means. But how does that change the relationship between labor and capital? How does this make the situation any different from the point of labor? In both cases, the laboring classes still have to sell their labor, since they do not have access to capital or land. I suspect that a socialist would reject DiLorenzo’s entire approach as just one big exercise in cherry picking of history. Now DiLorenzo can comb through the historical record and every time he sees an entrepreneur getting rich without the assistance of government he can say, “see, a good capitalist,” but every time he finds someone getting some assistance from the government he can say, “not a capitalist” but rather a “neomercantilist” (111). In other words, we can never find a “bad capitalist” in history because by definition capitalists are only the good guys. That does come across as a bit self-serving, I would hazard to guess.

Nevertheless, for argument sake, I will try my best to play along with DiLorenzo’s definitions, and see what I can find, and what conclusions I can draw.

Part 2: Why Do they Do it? Or, the non-monopoly monopoly!

I think that the reason why DiLorenzo and the Austrian school historians such as Murray N Rothbard attempt to reinterpret economic history this way is because they are trying to claim that the “evil” monopoly problem is not caused by free market capitalism, but rather, monopoly is simply a problem of the State. If we can eliminate the State, then we can eliminate the “political” entrepreneurs. Then, all we will be left with are “market entrepreneurs.” Since these “market entrepreneurs” get their wealth through the putatively “just means” of voluntary exchange, then the concentrations of wealth into the hands of a few market entrepreneurs is totally legitimate. Massive income inequalities are not one-hundred percent legitimate because they were arrived at through the “proper” and “just” market entrepreneurial means. The logical corollary of this is that any attempt at income redistribution must be wrong, because the super rich got their wealth legitimately. To take their wealth and redistribute it to the poor would be an unforgivable act of aggression by the poor against the rich. In other words, the poor, the labor unions, etc., will all be violators of the “non-aggression principle” if they dare to question legitimacy of the accumulated wealth of the market entrepreneurs by suggesting anything that might be construed as “aggression,” such as food stamps for the poor, or unemployment insurance for unemployed workers and so on.

In other words, this sounds like a justification for income inequality and serves to legitimize the concentration of property into relatively few hands.

All of this reminds me of the blogger, Lord Keynes, and his article entitled Rothbard on Monopoly Price on the Unhampered Market. In this article, Lord Keynes summarizes everything I have said so far this way:

Rothbard rejects the definition of monopoly as the control of the supply of a commodity, and thinks that there is no distinction between competitive and monopoly prices on a completely free market.

 

On pp. 662ff. of Man, Economy, and State, Rothbard engages in a tortuous and utterly unconvincing attempt to deny any difference between a small producer in a competitive market and a larger corporation with a large share of production. Rothbard’s eventual definition of monopoly only as a right of exclusive production granted by the state to some entity is a piece of legerdemain that allows him to argue that “monopoly can never arise on a free market” (Rothbard 2009: 670).

In other words, if we were to abolish the state, then the “political” entrepreneur problem could never exist, since there would be no state for the “political” entrepreneur to turn to for salvation from the market competition of the market entrepreneurs. And so what we will end up with are gigantic concentrated pools of capital that look like monopolies because they are so huge but aren’t really monopolies after all because they got their concentrated wealth through non-governmental means, hence they will be what I like to call “non-monopoly monopolies!”

Part 3: Some Preliminary Evidence to Make Us Doubt the Good Robber Barons

So what can we do, then, to critique this approach to economic history that tries to salvage the reputation of some of these robber barons from putatively unfair attacks leveled against them by “most” historians.

Well, my guess is that one approach is to demonstrate that these terms “political” entrepreneur and “market” entrepreneur are meaningless distinctions when it comes to trying to explain actual economic history. Debates trying to employ these terms will just degrade into a fight over how to classify historical characters. My suspicion is that the verdict will always come back as “inconclusive,” i.e., historical characters will display a bit of both, and so this good/bad distinction is of little use in explaining what is actually going on. At best, I think DiLorenzo’s argument boils down to a claim that some people in history were more “political” than others in the process of wealth acquisition, and since characters such as James J Hill or John D Rockefeller were supposedly “less political” or “more market” oriented in their process of wealth acquisition, then these individuals come closer to the preconceived ideal type that DiLorenzo and Rothbard are trying to demonstrate the existence of. They seem to be jumping to the conclusion that “closer” to the ideal type can be used to “illustrate” the ideal type in action. This might explain why DiLorenzo uses such strong language, such confident language, about how “this designation,” of robber baron “definitely does not apply to James J. Hill” (120). There is no room left for doubt when one uses words like “definitely.” My suspicion is that he is jumping from a “closer” approximation to an ideal type to the “actual” ideal type.

This “ideal type” issue seems to be an important consideration to make when attempting to understand what is going on when right wing libertarians attempt to do history. Maybe it is the key to understanding what they are doing when they revise history. I will now quote at length (with bold emphasis being mine) from Tony Endres’s An Austrian Perspective on the History of Economic Thought (Review Article) found in the History of Economics Review. The point is that Rothbard and company search diligently through history in order to find precursors of modern day Austrian economics when these precursors are not really there after all:

in the second volume on classical economics Rothbard continues as before; he searches for approximations to his mandatory themes, and as before he must dig deep to bring to the fore many ‘minor’ theorists. Adam Smith’s “errors and wilful neglect of his own forbears” (II, 3) did not mislead Jean Baptiste Say. While he was a populariser of Smith,Say becomes, in Rothbard’s hands, a “praxeologist” (12, 42) who exposed “the fallacies of the mathematical method in economics” (17) and who expressed “laissez-faire and libertarian” views (40). Compared with his study of Smith’s contribution, Rothbard writes with an easy limpidity on Say. Like many of his heroes in the history of economics, Rothbard expresses disappointment that Say slips on some crucial points. For instance, “Say proceeds to fall prey to [the]…Galbraithian trap by attacking luxury and ostentation, and by maintaining that ‘real wants’ are more important to the community than ‘artificial wants'” (21). Now this is a very un-Austrian attitude for J. B. Say! As Skinner (1969: 10) maintained, and as this reviewer is bound to repeat, this (Rothbard’s) method of writing the history of economics produces a mythology: to paraphrase Skinner, if J. B. Say meant to articulate everything that is constitutive of Austrian doctrine (with which he is being credited by Rothbard)why is it that he is so signally failed to do so on some fundamental points (such as consumer sovereignty)? As Skinner argues “the only plausible answer is of course fatal to the claim itself; that the author [J. B. Say in this case] did not (or even could not) have meant after all to enunciate such a doctrine.”(154, bold emphasis mine)

I suspect that this approach to criticism of historical research methods could be applied to our current discussion of how right wing libertarians are trying to find “good” market entrepreneurs among the robber barons. The approach to criticism is then as follows:

1. Identify the “mandatory themes” or “pure ideal forms”
2. Find the hero of economic history
3. We fault our hero for coming up short on the “mandatory” theme from step 1 above
4. We claim that our hero did not or could not have meant to be an example of the “mandatory theme”

Step 1 is to “identify the ‘mandatory theme.'” I tried to do so all along in this article by noting how dogmatic DiLorenzo is when saying that people such as James J Hill are “definitely” not robber barons. In other words, these people are “definitely” not political entrepreneurs. Consequently, these people are “definitely” market entrepreneurs.

Step 2 requires us to find the hero of economic history. DiLorenzo picked James J Hill and John D Rockefeller.

Step 3 requires that we demonstrate that our hero or heroes “come up short” on the mandatory theme of being “definite” market entrepreneurs.

I looked around in other books to see if James J Hill is a “definite” market entrepreneur or not, and, unsurprisingly, it was quite easy to find passages that make him sound more like a “political” entrepreneur than a “market” entrepreneur. For example, when I looked up James J Hill in Gabriel Kolko’s Railroads and Regulation 1877-1916, Hill’s name is found in the context of calling for more government regulation of industry.

The new agitation for railroad legislation caught many railroad men off guard. Although the Elkins Act did not solve the rebating problem entirely, it had helped end what was equivalent to perhaps a 10 per cent drain on gross railroad revenues until 1903. From 1900 to 1905, railroad income rose for the first time in many years, both in freight revenue per ton mile and revenue per ton. Dividends nearly doubled. The great incentive to railroad advocacy of federal legislation in earlier years had been declining rates and cutthroat competition. In a period of relative prosperity the railroads were less interested in legislation, even though Cassatt, James J Hill, and others were said by some Congressmen to favor stronger legislation. (117, bold emphasis mine)

And again, Gabriel Kolko mentions James J Hill in the context of further expanding railroad regulations:

Robert Mather, vice-president of the Rock Island, confessed to the National Civic Federation in October 1907 that he had once opposed rate regulation before the Senate Committee on Interstate Commerce, which had recommended legislation. “I come here to-day to admit that the action taken in pursuance of that recommendation was wise, and to advocate an enlargement of the rate-making power of the Federal commission.” The reason: since 1906 the states have been setting rates and imposing regulation “in a degree unparalleled in any previous period.”  “…the operations of our railroads should be regulated properly by wholesome and fair laws; and quite as necessary that they should not be regulated improperly,” James J. Hill concluded in the mildest verdict of all. (167-168, bold emphasis mine)

Then I found this article online that seems to contradict the claim that James J Hill “did it all himself” (i.e., he was a self-made man) and built his railroad empire in the American northwest without government assistance. I found this review by William L Lang (Portland State University) of Michael P. Malone’s James J. Hill: Empire Builder of the Northwest. In this review, Lang mentions some very revealing things. In fact, they are so important that I plan to investigate them further, and I will have to write future articles on what I will find. In other words, Lang’s comments provide future direction for my own research on this particular question in American economic history. So my position on this is that I am not completely sure how reliable my source is at the moment (since I haven’t read the original book yet); however, if this scholarly review article checks out as truthful, then it is definitely a contradiction of what DiLorenzo tells us. Let me start pulling out the important quotations from this review article:

But the equally familiar story of Hill as the only railroad tycoon who built his lines free of government aid is demolished in this revisionist treatment. Not only did Hill benefit from land grants when he began erecting his railroad network in Minnesota, but he also played the government for all the financial aid, direct and indirect, that he could glean. In Malone’s perspective account, we see him as clearly the beneficiary of government investment and action, a far cry from earlier depictions of Hill as the self-made man who built an empire with little more than his bare hands. (bold emphasis mine)

This next quotation also needs to be examined because if it can be verified as true, then DiLorenzo’s thesis of a market entrepreneur in the railroad industry during this time period (i.e., the Progressive Era) will be further undermined:

In the end, Malone presents Hill as a sometimes ruthless pragmatist who fixed his attention on what was best for his railroad, not what might be best for the commonweal–although those interests often coincided. In politics, for example, Hill “preferred the free-trade, Jeffersonian Democratic Party of the 1880s to the protectionist Republicans, but he consistently placed his political support where it would do him the most good regardless of political preference” (p. 92). And when his plans to extend the Manitoba westward through Indian lands faltered in 1887, Hill “directly solicited the president,” Grover Cleveland, applying as much pressure as he dared and successfully influencing the federal executive branch to compromise tribal control of lands in Dakota and Montana. (bold emphasis mine)

So I have to now find the underlying original book being reviewed here by William L Lang in order to go and verify that all of these quotations are valid representations of what actually happened in history. I will do that in a future article. However, the source of the review that I am quoting from seems to be legitimate:

An international consortium of scholars and teachers, H-Net creates and coordinates Internet networks with the common objective of advancing teaching and research in the arts, humanities, and social sciences. H-Net is committed to pioneering the use of new communication technology to facilitate the free exchange of academic ideas and scholarly resources. Among H-Net’s most important activities is its sponsorship of over 100 free electronic, interactive newsletters (“lists”) edited by scholars in North America, South America, Europe, Africa, and the Pacific.

Finally, I want to quickly mention some of the preliminary research I have done to check DiLorenzo’s claims pertaining to the “market” entrepreneur status of John D. Rockefeller. What is very interesting here is that I am noticing some overlap with another common issue raised by right wing libertarians, namely the ubiquitous cry of “who will build the roads?” What I mean, of course, is that they will often talk about the need to privatize the roads and highways. However, my quick look at the behavior of John D Rockefeller is suggesting that land ownership can be used to deliberately deny people the right of passage over land, in order to suppress competition and to consolidate economic power (aka build a bigger Trust).

The book I checked out yesterday is called The Robber Barons, written by Matthew Josephson. The story he tells about Rockefeller is really quite interesting, especially since he is supposed to be a “market” entrepreneur, after all. The “independent” oil producers try to gang up on him by building this pipeline route in Pennsylvania. The initial response is a big no-no for a putative market entrepreneur. Rockefeller first tries to get the Legislature of Pennsylvania to shut down his competition, making him look like a “political” entrepreneur or “robber baron.” When that fails, he tries to buy up all the land in order to block his competitors from building their pipeline. So land acquisition is a tool for deliberately blocking and denying other people the free movement of their goods:

The overproduction could not be stopped. The oil men raged at the great machine which held them in bonds. Once more the independents gathered all their forces together to form a protective combination of their own. They founded the Parliament of Petroleum. They raised funds to construct an immense “free” pipe line running over the mountains to the seaboard, and ridding them at last of the railroads which hemmed them in. The new Tidewater Pipe Line would break Standard’s control over railroad rates and bring crude oil to the sea.

 

Rockefeller’s agents now lobbied in the state legislature of Pennsylvania to have the proposed pipeline banned. Failing of this his emissaries were thrown out over the state to buy up right of way in the path of the enemy’s advance. But the Tidewater’s engineers moved with equal speed and secrecy, eluded the defenses which Rockefeller threw in their way and by April 1879, completed their difficult project. (pdf 187/330, bold emphasis mine)

Step 4: Conclude that James J Hill and John D Rockefeller would probably reject being labeled “market” entrepreneurs by Thomas J DiLorenzo. Why? I think both men would be honest enough to say that they did use the government as a means to their own desired personal ends.

Part 4: A Few Concluding Remarks

The “truth” of the situation is that men like James J Hill and John D Rockefeller are probably a mixture of a whole bunch of different things, and their behavior is probably conditioned by personal growth and experience over time, by the vicissitudes of life and business, by reading books and probably a whole bunch of other things that I am not aware of. Are they “market” entrepreneurs? Are they “political” entrepreneurs? Are they more “market” entrepreneurial than the other railroad tycoons of this era? Are they more “political” entrepreneurial than the other railroad tycoons? I would guess that they are a bit of both–that they have “good” “entrepreneurial” aspects and they have “bad” “political” or “State” like aspects. I don’t think we can classify people into neat little categories like this. I guess the damage that this will do to the right wing libertarians and Austrian school historians is that it will weaken the thesis that it is possible to become a super rich railroad tycoon by only applying “market” entrepreneurial means. Obviously, there could be other railroad tycoons out there in the course of world history and maybe they did pull this off and actually do what DiLorenzo is saying market entrepreneurs can do. I am certainly not claiming to have found some sort of definitive proof that will echo throughout the ages as something nobody can ever refute. I am not so arrogant as to claim to have discovered a “law of nature” or some “a priori” truth! What I am trying to say is that if the sales campaign of right wing libertarianism and the Austrian school of economics is going to be marketed through books written by Thomas J DiLorenzo, then I would suggest a change in marketing strategy for my worthy opponents. If James J Hill and John D Rockefeller are some of the “best,” or at least “better,” examples of the idea that “market” entrepreneurship can transform Robber Barons into respectable businesspeople, then I fear that the entire concept of “market” entrepreneurship is suspect. Maybe they will need a better system of classification, but I don’t know if their entire system can survive additional nuances of classification that try to capture the impurities of real human behavior, since nuance smells too much like an implacable foe of the “absolute truth” they desire.

 

Bifurcation Fallacies in Right Wing Libertarianism Use of Terms

William Graham Sumner

Back when I used to believe in anarcho-capitalism–and “believe” is the right term to use, since it does have many qualities of a religious faith–I remember reading this following quotation from William Graham Sumner. I used to believe it; in fact, I remember sharing it on some Facebook anarchist pages. It comes from a short post on the Molinari Institute’s website, called W. G. Sumner–On Anarchy:

Gentlemen, the time is coming when there will be two great classes, Socialists, and Anarchists. The Anarchists want the government to be nothing, and the Socialists want the government to be everything. There can be no greater contrast. Well, the time will come when there will be only these two great parties, the Anarchists representing the laissez faire doctrine and the Socialists representing the extreme view on the other side, and when that time comes I am an Anarchist.

So the world, according to William Graham Sumner–a man who has been appropriated by the right wing libertarian author Thomas J DiLorenzo in his book Hamilton’s Curse, which incidentally is also a bifurcated argument between the “evil” Alexander Hamilton and the “good” Thomas Jefferson–can be broken down into the two competing camps of

1. Anarchists who, apparently are ignorant of the history of anarchist thought, are supporters of laissez faire capitalism
2. Socialists who, apparently are ignorant of the history of socialist thought, are supporters of total government

This theme of dividing the world into two and only two camps is the thesis of the Philip Pilkington paper, which I mentioned before, entitled The Austrian Disease–Poor Scholarship, a Priori Bias. Pilkington’s thesis, to quickly recap, is

Because the libertarian’s world is divided up into ‘good’ ideologies and ‘bad’ ideologies it is inevitable that they should actively seek out some reason that the ‘bad’ ideologies will eventually be punished. When one engages in this sort of moralistic and theological dividing up of the world, it is not surprising that one soon falls back on the old religious ways of thinking about Judgement and Punishment. What is so fascinating is that, not unlike the stories of the anti-evolutionists, this dogma is so impervious to facts.

Let me present some illustrations of this “good” versus “evil” approach in right wing libertarian literature. We have the “good” businessmen and women who use the market mechanism to make their wealth versus the “bad” businessmen and women who use the political mechanism to make their wealth. We see this in Thomas J DiLorenzo’s How Capitalism Saved America

A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect….By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors. (111)

1. The market entrepreneur seems to be just another version of Sumner’s laissez faire capitalist, i.e., no government involvement
2. The political entrepreneur seems to be just another version of Sumner’s socialist, i.e., with government involvement

I will just mention in passing that this definition of “capitalist” as a person who gets financial success without any government assistance is probably just a textbook example of “special pleading.” Take for example Michael Perelman’s book The Invention of Capitalism. If we look at the book quickly, do we see capitalists getting their wealth by totally eschewing government and state intervention in the economy? Are we going to get this lovely history of market entrepreneurship in action? I when I look at this history book, it seems as though the creation of capitalism involved coercion and violence, and the use of government laws. In other words, it sounds as though the market entrepreneur might be an imaginary creation of capitalist apologetics:

To make sure that people accepted wage labor, the political economists actively advocated measures to deprive people of their traditional means of support. The brutal acts associated with the process of stripping the majority of the people of the means of producing for themselves might seem far removed from the laissez-faire reputation of classical political economy. In reality, the dispossession of the majority of small-scale producers and the construction of laissez-faire are closely connected, so much so that Marx, or at least his translators, labeled this expropriation of the masses as “primitive accumulation.” (2)

Perelman then goes on to mention some of the laws or “government interventions” that were needed to “create capitalism,” or, in other words, to suggest that the history is more about the “political entrepreneur” than “market entrepreneur”:

Although the origin of the Game Laws was feudal, their application and their ferocity peaked during the Industrial Revolution. They were a useful instrument to separate rural people from a major source of sustenance, adding considerable weight to the pressures to accept wage labor. They also incited many poor people in the countryside to rebel. (5)

Similarly, if we look at Noam Chomsky’s Chomsky on Anarchism, the picture of capitalism’s history does NOT look like the rosy and sanguine history of “market entrepreneurs.” Instead, we see the complete opposite. We see what looks like riot police beating the hell out of the average people. I wonder if capitalist apologists are combing through the history books to find a few examples that might look like their “market entrepreneur” character while ignoring the massive amounts of evidence for the “political entrepreneur” character. In other words, are they turning the exception to the rule into the general norm? That is my suspicion, especially when you read things such as this from Chomsky on our putative “market entrepreneurs”:

It is useful to remember what happened when the laws of economic rationalism were formulated and imposed–in the familiar dual manner: market discipline for the weak, but the ministrations of the nanny state, when needed, to protect the wealthy and privileged. By the 1830s, the victory of the new ideology was substantial, and it was established more fully a few years later. There was a slight problem, however. People couldn’t seem to get it into their heads that they had no intrinsic rights. Being foolish and ignorant, they found it hard to grasp the simple truth that they have no right to live, and they reacted in all sorts of irrational ways. For some time, the British army was spending a good part of its energies putting down riots. Later things took a more ominous turn. People began to organize. The Chartist movement and later the labor movement became significant forces. At that point, the masters began to be a bit frightened, recognizing that we can deny them the right to live, but they can deny us the right to rule. Something had to be done. (206-207, emphasis in the original)

And there are other examples of the bifurcated nature of right wing libertarianism. Let me mention two more for this article, namely, the consumer versus producer sovereignty distinction and the public versus private ownership of the means of production distinction.

1. Public versus Private Ownership of the Means of Production

Obviously, capitalists and other right wing libertarians spend an inordinate amount of time discussing property. The right wing libertarians tend to bifurcate this particular issue by seeing the world as simply:

1. Private Ownership of the Means of Production
2. Public Ownership of the Means of Production

Take for example Ludwig von Mises’s assertions about how we can reduce everything down to this simple distinction, from his book Liberalism: The Classical Tradition. Mises makes this distinction very early on in his book, on page 2 in fact! He writes that

we wish to consider two different systems of human cooperation under the division of labor–one based on private ownership of the means of production, and the other based on communal ownership of the means of production. The latter is called socialism or communism; the former, liberalism or also (ever since it created in the nineteenth century a division of labor encompassing the whole world) capitalism. The liberals maintain that the only workable system of human cooperation in a society based on the division of labor is private ownership of the means of production. They contend that socialism as a completely comprehensive system encompassing all the means of production is unworkable and that the application of the socialist principle to a part of the means of production, though not, of course, impossible, leads to a reduction in the productivity of labor, so that, far from creating greater wealth, it must, on the contrary, have the effect of diminishing wealth. (2)

So the world is reduced to communism versus capitalism, public versus private ownership of the means of production. One way to break this black-and-white thinking is to look at the provocative writings of the anarchist writer Pierre Joseph Proudhon. Chapter 4 of Proudhon’s What is Property is entitled That Property is Impossible. Obviously if “property is impossible” or as Proudhon says, “without force, property is null and void” then we have a third option to consider. Proudhon starts with the bold thesis:

It is property which is a contradiction, a chimera, a utopia.

So maybe there is no such thing as property; hence, we might wonder if neither public nor private property exists. Therefore, Mises’s distinction might be rendered as meaningless.

I will mention one other related issue, the question of “just” versus “unjust” property. In a right wing libertarian environment “just” property would be market and voluntarily acquired property while “unjust” property is going to be “socialist” or “communist” public property–i.e., state property.  Consider Hans Hermann Hoppe’s The Economics and Ethics of Private Property where he spells out this distinction between “just” property (private property) and “unjust” property (state or public property).  Hoppe writes (notice again the “good” versus “bad” distinction):

According to them, antagonistic interests do not exist between capitalists as owners of factors of production and laborers, but between, on the one hand, the producers in society, i.e., homesteaders, producers, and contractors, including businessmen as well as workers, and on the other hand, those who acquire wealth nonproductively and/or noncontractually, i.e., the state and state-privileged groups, such as feudal lords. (96)

So this seems to be a version of private versus public property but cast in the form of:

1. Producers (i.e., private property), versus
2. Nonproducers (i.e., state or public property)

What is very interesting about this is that it smacks of what is called Producerism. “Producerism” is a model that seems to be a type of right wing populism. It is defined as follows:

Producerism begins in the US with the Jacksonians, who wove together intra-elite factionalism and lower-class Whites’ double-edged resentments. Producerism became a staple of repressive populist ideology.  Producerism sought to rally the middle strata together with certain sections of the elite. Specifically, it championed the so-called producing classes (including White farmers, laborers, artisans, slaveowning planters, and “productive” capitalists) against “unproductive” bankers, speculators, and monopolists above—and people of color below.  (The Producerist Narrative in Repressive Right Wing Populism)

The big red flag here is the fact that Producerism began in the United States with the Jacksonians. If you pull out right wing libertarian Thomas J DiLorenzo’s book Hamilton’s Curse, you will also see that he spends a lot of time praising the Jacksonians.

The Producerist idea is that the “producers” who got their property “justly” are being robbed by “parasitical” leeches above and below them. These parasites obviously got their property “unjustly.” A picture of the setup is as follows:

So the “justly acquired” property holders in the central circle are being robbed by the “unjustly acquired” property holders from above (the elites) and by the “unjustly acquired” property holders from below (the lower class parasites).  So we have the following parasites or “unjustly acquired” property holders in this right wing populism model:

1. Elite or Top Parasites such as bankers from the Federal Reserve System and other “political entrepreneurs”
2. Lower Class Parasites such as people wanting Civil Rights or food stamps for the poor

And of course, the central circle represents the market entrepreneurs of justly acquired property holders.

This suggests to me that one of the reasons for why we are picking up this bifurcated tendency in right wing libertarian thought is that right wing libertarian thought is meant for a class of people who feel squeezed from above and below. It is probably symptomatic of the death of the middle class or the American Dream.

I think this theme of trying to related Producerism to the writings of right wing libertarians from the Austrian school is a good one and I want to expand upon it in later articles.

I will quickly add that this idea of “just” and “unjust” property sounds like a bifurcation fallacy to me. Assuming that property actually exists (recall my point above from Proudhon), I would guess that most people would view the concept of “just” property as a continuum, or scale.

I think this is the case because I am fairly confident that there is no such thing as “purely justly” acquired property. I am sure that if I were to look hard enough and if I were to look far enough back into history, I could demonstrate that all property has some “impurities” to it. In other words, all existing property would fail Hoppe’s definition of “justly acquired property” if we were trying to be “purists.”

For example, if I were to launch a military invasion of Libya in order to steal oil resources, I think most people would agree that I am engaged in a process of “unjustly” acquiring property. This is because I assume that most people would view murdering other people as something that is wrong.

But what about wage labor. Is that an example of “justly” acquired property? I used to be a marker grader and instructor at a university in Ontario.  Now the province created the university through some sort of “enabling” legislation, so the university itself is probably an example of “unjust” property, since it is a creature of the State. Then, the government engaged in taxation to raise money to pay for the university, including my wages. So this would be “unjust” property acquisition again. But, I signed a contract of employment with the university, so that part would probably get classified as “justly” acquired property.  I then engaged in wage labor, which again would be an example of “justly” acquired property. But then I had to pay taxes on my income, which introduces some more “unjustly” acquired property, i.e., unjustly acquired by the governments of Ontario and Canada.  The remainder of the money was deposited in my bank account and mutual funds. Now, I earned interest and dividends on my investments, which might be considered “justly” acquired property if I were a capitalist or it might be considered “unjustly” acquired property if I were to stick with my anarchist views. And so on.

In other words, it seems like all of our daily transactions could be classified as a mixture of “justly” and “unjustly” acquired property.  Maybe there are examples of the “pure” cases of either “justly” or “unjustly” acquired property. I am not sure. It probably depends on how a person wants to interpret a situation. Moreover, it seems to me that these terms are subjective. What is “just” to one person might be considered “unjust” to someone else. So this could be another way to undermine the black-and-white thinking of right wing libertarianism.

2. Producer versus Consumer Sovereignty

A common theme in the writings of right wing libertarian Ludwig von Mises is the distinction between producer and consumer sovereignty. In fact, the first Mises book that I read is called Economic Freedom and Interventionism: An Anthology of Articles and Essays, and right on page 4 we see a strong emphasis on the idea of “the supremacy of the consumers”:

The economic foundation of this bourgeois system is the market economy in which the consumer is sovereign. The consumer, i.e., everybody, determines by his buying or abstention from buying what should be produced, in what quantity and of what quality. The businessmen are forced by the instrumentality of profit and loss to obey the orders of the consumers. Only those enterprises can flourish that supply in the best possible and cheapest way those commodities and services which the buyers are most anxious to acquire. Those who fail to satisfy the public suffer losses and are finally forced to go out of business. (4)

The opposite of “consumer sovereignty” is “producer sovereignty,” an idea that Mises dismisses derisively. In one of Ludwig von Mises’s earliest books, the 1919 book Nation, State, and Economy: Contributions to the Politics and History of Our Time, he brusquely dismisses the idea of arranging production around the needs of producers:

One of the great ideas of liberalism is that it lets the consumer interest alone count and disregards the producer interest. No production is worth maintaining if it is not suited to bring about the cheapest and best supply. No producer is recognized as having a right to oppose any change in the conditions of production because it runs counter to his interest as a producer. The highest goal of all economic activity is the achievement of the best and and most abundant satisfaction of wants at the smallest cost.

Preferring the producer interest over the consumer interest, which is characteristic of antiliberalism, means nothing other than striving artificially to maintain conditions of production that have been rendered inefficient by continuing progress.

The ideal of centralist socialism is at least discussible; that of syndicalism is so absurd that one need waste few words on it. (164-165)

I will mention a few issues that undermine this black-and-white way of looking at the world of economics. One way is to question Mises’s initial assertion that the entire capitalist economic system is based on the self-regulation of the profit and loss system. It is one thing to assert a theory about how capitalism “ought” to work; it is another thing to go and check whether this “is” how capitalism works in our world. The blogger Lord Keynes takes a more empirical research approach to studying what capitalism is actually like, by looking at the decision making process of actual business managers, as opposed to looking at the theories of economists. Lord Keynes spends a lot of time discussing the idea of “administered prices,” and some of their important implications, one being that short term profit and loss changes do not have the adjustment effects suggested by Mises. In other words, the highly flexible and adjustable world described by Mises doesn’t exist in most industries. From memory, when Lord Keynes searches for empirical evidence regarding how widespread administered prices are, the numbers cited are usually around 50 to 70% of businesses. In his article John Kenneth Galbraith on Administered Prices, we see that

the first benefit of administered prices to a firm is stability of profit, and a minimum profit level. Truly flexible prices or price wars are shunned by many businesses as a grave threat to stability of profit.

The second point I will make comes from Noam Chomsky’s Chomsky on Anarchism. Instead of looking at the world as either producer or consumer sovereignty, maybe we could look at it as a harmony of these two interests. This seems to be Chomsky’s point in his Chapter 4 article entitled The Relevance of Anarcho-Syndicalism (1976). When asked by the interviewer whether the value of output would collapse under Chomsky’s anarcho-syndicalist ideas that would benefit the workers/producers, Chomsky thinks that making work more meaningful will cause more output to be produced:

And over and above that there is the pride and the self-fulfillment that comes from a job well done–from simply taking your skills and putting them to use. Now I don’t see why that should in any way harm, in fact I should think it would enhance, the value of what’s produced. (145)

And of course, I am only scratching the surface on how one could go about creating a much more nuanced argument with regard to the issues raised by Mises’s consumer versus producer distinction. Just to mention it quickly before I go onto the next section, one could challenge the whole notion of consumer sovereignty, by claiming that it really doesn’t exist under capitalism in the first place.  One place to start would be the article by the Anarchist Writers entitled C.1 What is wrong with economics? In particular, we see a number of objections, the most obvious being “demand management” (or manipulation!) by firms:

While capitalist apologists go on about “consumer sovereignty” and the market as a “consumers democracy,” the reality is somewhat different. Firstly, and most obviously, big business spends a lot of money trying to shape and influence demand by means of advertising. Not for them the neoclassical assumption of “given” needs, determined outside the system. So the reality of capitalism is one where the “sovereign” is manipulated by others.

Concluding Remarks

I fear that the right wing libertarians are losing a lot of nuance in their arguments by trying to reduce the world to black-and-white or good versus evil type arguments. This approach is a great idea if I were running a religion. Preach the gospel of truth and fight the lies of the political economic devils! It provides for clear cut solutions in a world that really isn’t very clear cut. Maybe my views on anarchism are wrong. Maybe we really need coercion for society to work. Maybe capitalism really is the correct system of economic organization. Maybe, maybe, maybe. This is why this “absolutist” approach that seems to permeate the right wing libertarian literature is probably a sign of intolerant dogmatism. I end this post with an interesting and appropriate quotation from Bertrand Russell:

History and Ideology: The Frustrating Search for Successful Examples of Capitalism in Action

The blogger, Lord Keynes, in his article entitled Government Intervention, James J. Hill and the Great Northern Railway presents a reasonable thesis about the right wing libertarian attempt to turn James J Hill, the railway tycoon, into a shining historical example of how an “economic” entrepreneur can outperform a “political” entrepreneur, to use language redolent of that used by Thomas J DiLorenzo in his book How Capitalism Saved America (111). Lord Keynes’s thesis is simply this:

James J. Hill is often invoked as a hero by apologists for extreme laissez faire, because his railway was allegedly built completely privately, without any government subsidies or land grants. Unfortunately, there [are] some inconvenient facts the free market ideologues leave out when they discuss Hill and the Great Northern Railway.

When I first learned about this material pertaining to an alleged successful railroad built entirely privately, I was an anarcho-capitalist myself and so I had read books such as Thomas DiLorenzo’s Hamilton’s Curse, The Real Lincoln, How Capitalism Saved America; Murray N Rothbard’s The Origins of the Federal Reserve; Wall Street, Banks, and American Foreign Policy; The Case Against the Fed; Hans-Hermann Hoppe’s Democracy: The God that Failed; A Theory of Socialism and Capitalism, just to name a few. I was really a totally addicted anarcho-capitalism; I was voraciously reading as much anarcho-capitalist literature as I could at the time. I hated the State and authority (still do with a passion), but I thought socialism was tyrannical while capitalism was economic salvation. My economic views at the time were influenced by the fact that my family on my dad’s side came to Canada from the Ukraine, back when it was still part of the Soviet Union. So I just assumed that socialism was the tyranny of Lenin and Stalin. Consequently, I think that blogger Lord Keynes’s thesis is a fair representation of the anarcho-capitalist position. I know that I used to believe it.

But then doubt slowly crept into my mind. The first thing that bothered me is how anarcho-capitalists like to cite the historian Gabriel Kolko for history pertaining to government regulation during the Progressive Era. One of the earliest examples for me, when I think back about how I learned my anarcho-capitalism, is from DiLorenzo’s Hamilton’s Curse. I can remember it is page 140 of this book just from memory because I used to cite it all the time (oh, I guess my memory was slightly off, it is page 141 not 140):

In fact, nearly a century later scholars still clung to the theory that increased federal government regulation of business was a response to “market failure.” But in the important and influential 1963 book The Triumph of Conservatism, the historian Gabriel Kolko meticulously documented how American businesses, far from resisting political control, sought such regulation because they could use it to their advantage. (141, emphasis in the original)

I thought this was great! Here was historical evidence to demonstrate that the anarcho-capitalist scheme could work in the real world. Being very interested in this, I bought two of Kolko’s books, The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916; and his book Railroads and Regulation 1877-1916. The first thing that struck me from the back cover is that it states that “Gabriel Kolko is Professor of History at York University.” I received my Bachelor’s degree from York University in Toronto and I was a bit shocked that an anarcho-capitalist historian would come from York. York University from my experience is a pretty left wing pro-union school. I was in my second year as an undergraduate the year of (one of) their notorious labor strikes. Here is a picture of me getting my Bachelor’s degree wearing nice anarcho-syndicalist colors of black and red!

When I looked up Gabriel Kolko on Wikipedia, he certainly does NOT appear to be an anarcho-capitalist. In the Wikipedia entry, Kolko is mentioned as a leading thinker of the New Left. Maybe this is the product of Murray N Rothbard’s shifting alliance partners. Roughly from memory, Rothbard originally worked for a right-wing conservative journal but then he had this big blow up with the owner. This caused him to leave (I think Rothbard got fired from his job), and then Rothbard found a new alliance with some from the New Left. This all happened in maybe the late 1950s or early 1960s. So maybe that is why the anarcho-capitalist version of Progressive Era history draws upon the work of the New Left. Nevertheless, I found it somewhat strange for anarcho-capitalists to be in bed with the New Left.

Then when I got Kolko’s books, a few more doubts crept into my mind. One of them in particular that bothered me was the inconsistency between Gabriel Kolko and Ludwig von Mises. It made me wonder whether Rothbard and company were selectively quoting from Kolko’s book. Let me give you the Mises passage first and then I will provide the contradictory evidence from Kolko. First consider Mises’s book Bureaucracy in which he writes

Highbrows turn up their noses at Horatio Alger’s philosophy. Yet Alger succeeded better than anybody else in stressing the most characteristic point of capitalist society. Capitalism is a system under which everybody has the chance of acquiring wealth; it gives everybody unlimited opportunity. Not everybody, of course, is favored by good luck. Very few become millionaires. But everybody knows that strenuous effort and nothing less than strenuous effort pays. All roads are open to the smart youngster. (76)

The problem, as I see it, is that Kolko does NOT share Mises’s sanguine view of capitalism. In fact, Kolko dismisses this entire line of argumentation by dismissing the entire philosophy of Horatio Alger. It creates an inconsistency, and I fear that the anarcho-capitalists might be “cherry picking” Kolko’s history to fit in with their ideological story of “good guy” laissez faire capitalism versus “bad guy” socialism. I am certainly not the first person to notice this simplistic view of “good cop” versus “bad cop.” In fact that was one of the points of the Pilkington article I wrote about in my last entry. Mises does it too in Bureaucracy on page xv where he divides the world into “socialist” central planning versus “consumer sovereignty.” But this all stinks of special pleading. I know you can find Rothbard arguing against consumer sovereignty in Man, Economy, and State with Power and Market (631) when he begins with the line “the metaphorical shibboleth of ‘consumers’ sovereignty’ has misled even the best economists.” Post Keynesians would argue that the consumers do not have sovereignty because of how administered pricing works. And of course many socialists would object to Mises’s claim that socialism means central planning, i.e., “people are anxious to substitute all-around planning by a central authority–i.e., socialism–for the supremacy of the consumers as operative in the market economy” (xv). Anarcho-communists, anarcho-syndicalists, and mutualists, for example are socialists and none of them support centralized planning. Read Bakunin, for instance, and the whole idea of collectivist-anarchism is to arrange the world from the bottom up, not the top down. So I do fear that the anarcho-capitalists might be trying to cherry pick in order to create a “good cop” versus “bad cop” view of history.

Now let me pull out Gabriel Kolko’s The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916 and Kolko’s rejection of Mises’s views on Horatio Alger:

It is, of course, true that the economic and industrial mobility described does not warrant a belief in the Horatio Alger myth which has been so thoroughly analyzed, and largely disproven, by William Miller and his associates….the burden of Miller’s work has been in critically examining the oversimplified notions of apologists of the status quo on the social origins of the business elite. (55)

Yet somehow Kolko’s book is supposed to be a foundational book of anarcho-capitalist historical revisionism. There are other reasons that suggest that maybe Kolko isn’t the best source for anarcho-capitalism, when it comes to this James J Hill as the apotheosis of the “market entrepreneur” (the initial thesis from blogger Lord Keynes at the start of my entry). My concern is that when I look up James J Hill in Kolko’s books, he does NOT sound like the perfect little anarcho-capitalist after all. He seems to support government regulation of the railroad industry. So maybe there are multiple versions of James J Hill–and early version and a later version of the man. Maybe his views changed over time. Maybe the anarcho-capitalists and right wing libertarians are wrong in holding James J Hill up as a shining example of the “market entrepreneur.” I don’t know for sure. But what I do know is that when you look up James J Hill in Kolko’s books, he doesn’t seem to be spouting off anarcho-capitalist ideology.

Using Kolko’s book Railroads and Regulation 1877-1916, Kolko mentions James J Hill in the context of promoting more government regulation of the railroad industry. Kolko writes

The great incentive to railroad advocacy of federal legislation in earlier years had been declining rates and cutthroat competition. In a period of relative prosperity the railroads were less interested in legislation, even though Cassatt, James J. Hill, and others were said by some Congressmen to favor stronger legislation. (117, bold emphasis mine).

Then on pages 167-168 James J Hill seems to be openly supporting government regulation of the railroad industry:

The reason: since 1906 the states have been setting rates and imposing regulations “in a degree unparalleled in any previous period.”  “…the operations of our railroads should be regulated properly by wholesome and fair laws; and quite as necessary that they should not be regulated improperly,” James J. Hill concluded in the mildest verdict of all. (168, bold emphasis mine)

My general impression at this point is that maybe I need to investigate James J Hill further. For someone who is sold to right wing libertarians as a beautiful textbook example of right wing libertarianism in action, such support of government regulation seems to be a glaring inconsistency. Specifically, I wonder about the validity of DiLorenzo’s comment, for example, in How Capitalism Saved America when he writes:

James J. Hill detested politicians and politics and paid little attention to them (118)

But that doesn’t fit too well with Kolko describing Hill as wanting stronger legislation especially when it sounds like Congressmen specifically know Hill’s position on future legislation. If Congressmen know his personal position, then Hill must have had at least some contact with political decision makers. Then the question becomes, how much? How much was legislation being influenced by Hill?

So my official position is agnosticism at this point. I am not sure what to make of it all, but my suspicion is that maybe our right-wing libertarians and anarcho-capitalism are engaged in a bit of “myth making,” i.e., making a beautiful myth of James J Hill as the poster boy of how “free markets” beat “government interventionists” in the economy. The reason why I suspect that maybe the solution will be found by looking for possible right wing libertarian “myth making” is due to a very critical article by Tony Endres. It is a review of Murray N Rothbard’s methods of historical economic research. It is called An Austrian Perspective on the History of Economic Thought in History of Economics Review.

Now Endres concludes with this rather scathing summary of the non-historical procedure being used by Rothbard:

Rothbard establishes an ideal type economic doctrine from the outset of the first volume. The hallmark of his approach to the history of economic ideas is a remorseless search for approximations to the ideal type. The outcome is a form of non-history which is almost entirely given over to pointing out earlier ‘anticipations’ of later ‘Austrian’ doctrines. (bold emphasis mine)

Endres dismisses the entire Rothbard approach to history as “the mythology of doctrines.” And I wonder if that is what is going on with James J Hill. Are we seeing this “mythology of doctrines” process in action? Are we reading the right wing libertarian’s “myth” of James J Hill? Is James J Hill being squished into the Rothbardian “ideal type”? I will look into it, and write another article with my findings someday!