4.04.2010

Anarcho Capitalism, Fascism or Freedom?

There are several critiques about Anarcho-capitalism that when brought up go largely unanswered, rebutted, or even noticed by the proponents of the system. They are conveniently ignored, like children chained to tables in sweatshops. I can’t help but presume that the silence is because either the proponents of said system don’t have an answer, didn’t think about it, don’t want to think about it, or if they do answer it will be forced to admit that the system requires the very thing they allegedly oppose: centralized authority.

I’m going to pick on just one criticism, one that has yet to receive any coherent answer from anyone – even those who are articulate and well educated. Currency.

Let’s start from the very beginning, yes?

In order for capitalism to function, it requires some form of currency. At its base – some means of exchange is needed to keep track of one’s “participation in and contribution to society”. Now that itself is a point I could rant on about for pages, so I’ll save that for next time. Back to currency. In a system that uses currency, the currency must retain a specific value for all currency used in that particular area or region. The value can increase or decrease, but it must do so uniformly – lest it loses its value altogether and becomes worthless.

This brings up two major issues: One it requires a centralized authority to regulate the value of said currency, and two it intimates that the currency is only valid in a particular space or for a specific population, which is reminiscent of a country with borders.

Now, you might be thinking to yourself – “But, but…Rothbard explains that currency can be regulated by competing businesses!” or perhaps even “Never mind that, we’ll use gold!”. Well there’s a few problems with both thoughts. I’ll start with gold.

Gold does not have an inherent value. It’s a piece of metal. Soft metal, at that. The only reason gold has any value is because it is given a value by a centralized authority. And even then, the value of gold rises and falls. And the only reason anyone thinks it’s valuable is because it is a limited resource. In capitalism, limited or finite items have higher values because they’re harder to get – but the problem with finite currency is that…are you ready for this?....It’s a limited, and thus finite resource! Look at it mathematically. If x = a finite resource, and y = number of people, and n = number of living years of people, and a = number the population grows annually, and b = the number of additional years people live due to scientific advancement then:

So if X = Y*N then X can never = Y(a)*(N+b). Why? Because x is finite and can never change its number. Once you’ve outgrown your currency base, that’s it. There ain’t no more. Your population can never exceed the gold you have, either in numbers or years lived, and certainly not by both.

So fiat currency it is. Which leads me to my second point. If you have a fiat currency, you must have control over it. You must regulate it. If it goes unregulated, and anyone can just up and start printing money – on their own, or as a business – then you have more currency in the general population than you are supposed to, which causes value fluctuations. Further that, but you can’t have two or three competing currency companies for several reasons. Number one, they can’t change the value of the currency they print if they want the economy to live. SO they will not be in “competition” in any way other than their profits. And companies seeking profits will produce more goods than their competitors (because they can’t change the product or price) thus flooding the economy with too much money.
So the amount of money they can produce will also need to be regulated on top of the value they “sell” it for. There is no competition there, in fact it’s just a centralized authority broken down under two or three different names. Their products are uniform in every way. The only difference is that they must profit from it in order to stay in business, and that’s critique number three:

There’s only one way to make a profit from printing currency. Let me explain:

Let’s say you get an island, and you start your own country. One group says “we’ll handle the currency”. OK. “But for a price”. Say what?. How is a community going to buy currency if they need currency to buy the currency they need to buy it? Not gonna happen. You might argue that the first go-round will be a freebie – kinda like your first crack rock. But even then, you can’t privately profit from printing currency unless everyone contributes to the company that makes the currency to help keep them in business. Which sounds a lot like taxation……

Which must then be regulated and overseen.

Do you see where this is going?

Just in terms of the basic tools necessary to make capitalism run, you need centralized authorities in place, and overseeing and regulating it. And while some Ancaps may be thinking that it’s not so bad considering how much other freedom they will have, I’d like to remind everyone that private companies do not bend to the wishes of the public. You cannot even pretend to vote them out of control – and he with the money has the control.

That’s also known as….Fascism.

There are many more critiques of Anarcho-capitalism, however on the basic logic of it, it is an unstable economic system that requires centralized authority and regulation to even get off the ground.

22 comments:

Noor said...

As a former ancap I certainly oppose capitalism, but I do retain support for markets and currency. I don't think the problem with capitalism in itself is currency, that would be more specifically a problem with all markets (if it's a problem at all).

What would you say to a currency that was agreed upon by the locals, and based upon how much labor was put into a product? Basically what Proudhon advocated, I believe.

My problem with capitalism isn't so much the currency, but rather the problems with capitalist property becoming authoritarian, resulting in workers' exploitation and the like. And that is a problem specific to capitalism, not so much the free market. It's still extremely refreshing to read a critique of "anarcho-"capitalism from the perspective of currency, though.

Anok said...

Hey Noor :) The reason I picked this aspect is because I haven't met an Ancap yet who could refute the point, but I wanted to expand on it.

I actually have no problem with the use of various types of currency - or other bookkeeping tools - in small societies, however:

Ancaps claim that capitalism is better for the macro economics - that is to say the trade between groups of people and in long distances. If we are limiting the use of currency to such small groups, then Anarcho capitalism will have the same problems with the macroeconomics as say, collectivists or barters such as myself. Ergo, rendering their main point about the usefulness of capitalism moot.

SO my issue isn't really with "currency" but rather how currency is used in Ancap systems, and that it requires heavy handed regulation in order to function, and be successful in the macroeconomic department.

I have a lot of other issues with capitalism, but this is the most logical cut and dry one I can think of.

Noor said...

Hey Anok, we're in agreement then. xD

I haven't seen this angle brought up anywhere, but expect most ancap responses to be along the lines of "the market competition will ensure that no monopolies occur."

You'd be surprised how often I get shit like "let's just let the capitalist businesses and worker co-ops compete." I was that way for a long time actually. It's mostly from a laziness of not wanting to think beyond 'voluntaryism.'

Anok said...

Yeah that's pretty much the answer I always get. That or "You don't understand/know what you're talking about".

I just want people to think critically about this stuff. For example: I know that macro economics outside of heavily regulated capitalism is tough - and has it's issues. I think it's something that can be figured out - but it's not perfect. it's hard to do direct barter with a group across the globe. So I do see some value in the currency system, at the very least - but I still can't get that issue of regulation out of my head.

eugene said...

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in the meantime,you have a great week ahead

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Alex Peak said...

Trying to reply...

Alex Peak said...

Mrs. Kropotkin,

Before I begin commenting, I'd like to note for those reading that I do not call myself a capitalist.

You write, "In a system that uses currency, the currency must retain a specific value for all currency used in that particular area or region."

All individual valuations are subjective. They can only be measured as ordinals, never as intervals.

Market value for goods and services is intersubjective, and can be measured relative to one another as intervals.

The value of any given thing never needs to be assigned by any central authority. It arises spontaneously.

"Gold does not have an inherent value."

Nothing has intrinsic value.

"It’s a piece of metal."

And, like any other commodity, people desire it relative to other commodities ordinally.

"The only reason gold has any value is because it is given a value by a centralized authority."

False. Nothing is given a value, and even fiat money fluctuates in real value (as opposed to nominal value) based on the subjective desires of individuals to have more or less of the stuff relative to other things.

Will gold arise in a newly-freed society as the generally accepted medium of exchange? It's impossible to tell. But, for sake of argument, let's pretend it does. If it does, people will desire it subjectively relative to other things (e.g., bread, televisions, art, back-rubs) without any central authority telling them which items (or services) they must value more greatly than a gramme of gold, and which items (or services) they must value less than a gramme of gold.

"And even then, the value of gold rises and falls."

Relative to other things, yes.

The main reason the value of gold in nominal dollars has risen so much is that the real value of each individual dollar has dropped, and that is primarily the result of the greater supply of dollars in the money supply.

"And the only reason anyone thinks it’s valuable is because it is a limited resource."

More precisely, the reason it has market value (which, again, is intersubjective) is that it is scarce. It has subjective value for many people for two reasons: What we call "use value" (i.e., its usefullness as jewelry, ornaments, conductors, whatever) and what we call "exchange value" (i.e., people will value it more if they know they can exchange it for other things fairly easily in a market setting).

"In capitalism, limited or finite items have higher values because they’re harder to get – but the problem with finite currency is that…are you ready for this?....It’s a limited, and thus finite resource!"

If it were not a finite resource, it would have zero market value.

"So if X = Y*N..."

I'm sorry, but I do not understand the equation. Y and N are both numbers. X is not a number at all, but rather a set of things.

In any event, the paragraph appears to asume that the currency should increase in amount based on the number of people living. But this needs not be so, as as I've noted earlier, all individual valuations are subjective.

Let's say in year X the amount of gold in the market is 1,000 lbs, and the population is 100 people.

Let's say in year Y, the amount of gold in the market is still 1,000 lbs, and the population is now 200 people.

...

Alex Peak said...

...

Clearly, the population increased. But since all individual valuations are subjective, it doesn't matter. People will still value gold relative to milk at around the same amount they did back in time-period X, assuming the amount of gold and the amount of milk are relatively equal, and assuming people's demand for milk (or gold) has not increased (or decreased) dramatically. And even if demand does dramatically alter (let's say people decide that drinking milk is extremely healthy, and demand goes up), then: (1) production of milk will likely increase to account for this; and (2) even if, for whatever reason, milk production doesn't increase, it still doesn't matter because there's no reason subjective or intersubjective demand should not be permitted to spontaneously fluctuate.

"So fiat currency it is."

No.

"Which leads me to my second point. If you have a fiat currency, you must have control over it."

Since there is no need for a fiat currency, this point is moot.

"If it goes unregulated, and anyone can just up and start printing money – on their own, or as a business – then you have more currency in the general population than you are supposed to, which causes value fluctuations."

I would recommend reading about the history of free banking. Selgin and White are a valuable resource for learning about free banking.

"Further that, but you can’t have two or three competing currency companies for several reasons."

I disagree.

"And companies seeking profits will produce more goods than their competitors (because they can’t change the product or price) thus flooding the economy with too much money."

Any bank that acts too irresponsible will find demand for its currency quickly slipping, and they would run the risk of going bankrupt from a run on the bank.

"How is a community going to buy currency if they need currency to buy the currency they need to buy it? Not gonna happen."

I have no clue what you are attempting to say here.

Naturally, a commodity (or more than one) will arise as the generally accepted medium of exchange without any central planners to dictate that it must, or which commodity it should be. Banks, if they wish to do so, will offer bank notes redeemable in the commodity, and people will be free to accept or reject these notes based on their attitudes toward the reliability of the bank.

"But even then, you can’t privately profit from printing currency unless everyone contributes to the company that makes the currency to help keep them in business. Which sounds a lot like taxation……"

Typically, banks can make a profit through issuing loans. Taxation is not needed.

"There are many more critiques of Anarcho-capitalism, however on the basic logic of it, it is an unstable economic system that requires centralized authority and regulation to even get off the ground."

While I do not call myself a capitalist, I find your critique quite wanting. Absolutely no centralised authority is required for a generally-accepted medium of exchange to arise, so your entire critque breaks down at step one.

Please let me know if any part of my reply fails to make sense.

Your friend,
Alex Peak

domesticanarchist said...

even though the value of currency is subject to change, as population increases, and the amount of gold remains finite (of course), there would be less and less available. so, no matter how the value changed, this would still contribute to huge inequalities, where the minority is going to possess more and the minority less and less.
This reminded me of the Hitch-hikers Guide, when the Golgafrinchans, who were so severely entrenched in capitalism that they couldn't even develop a primitive society, decided that leaves were their currency and set about burning down all the forests to increase their value.
good points. and I rather liked the equation.

cclodfe said...

If a minority possesses gold and it is no longer used as a means of exchange in the market, a new commodity would replace gold (i.e. silver, copper, any commodity really). Gold only has value if there is a demand for it in the market. If a minority were hoarding it, there would be no value as it would not be a generally accepted means of exchange (although some may still value it, it would not back any form of currency). Gold is often used as an example because it is malleability, portability, high value to weight (several other items could fill this roll). You are failing to grasp economics 101. Money doesn't have value of exchange unless backed by a commodity (that is demanded for the use of trade)...or monopolized by a centralized authority. This would not be the case in ancap as you would have competing currencies backed by different commodities with a subjective value based on individual demand. This blog makes no sense.

justino said...

Hi there,

I agree with Alex. "Capitalism" is tainted because of the conflicting definitions.

Direct exchange and gifting are legitimate modes of exchange under a capitalist economy even though no currency is being exchanged. But you are right, it is indispensable for a medium of exchange to emerge if a society is going to develop a wide-ranging division of labor, increases in specialization, and advancements in economic calculation. The problems of a coincidence of goods and the indivisibility of goods are eliminated in a money economy.

In the barter economy, some traders will gradually begin to recognize that certain goods are more marketable than others. Others will recognize that success of other traders and begin to employ indirect exchange too. In history, all sorts of things have been used as money. In fact, shortly after WWII, cigarettes were widely used as money.

Anyhow, am curious of your other ciriticism of capitalism, as you define the word.

tikno said...

Hi Anok,
It sound like you are modeling of your own assumption.

Anon-Paranoid said...

Hi Anok...

Merry Christmas and a very Happy New Year.

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Halatir said...

"I agree with Alex. "Capitalism" is tainted because of the conflicting definitions."

It's also tainted because of it's prioritization on profit maximization. For example if you take a designers class for say woodcutting, you'll find something called 'planned obsolescence' is apart of the course. Planned obsolescence is the incorporation of a date in which the product is intended to fail. This is done for the sake of cost-effectiveness, as is the use of environmentally harmful products.

The Ancap rebuttal to this is the promotion of environmentally friendly goods or perhaps since there is supposedly no state or concentration of power, self-initiative. The problem is it is not as cost-effective to use environmentally friendly goods. The most obvious example is oil, which is so cheap because it is so abundant. It's also cheaper to convert oil and natural gas to energy, while converting solar power isn't as efficient compared to operating costs and the amount of energy actually produced.

"Direct exchange and gifting are legitimate modes of exchange under a capitalist economy even though no currency is being exchanged. But you are right, it is indispensable for a medium of exchange to emerge if a society is going to develop a wide-ranging division of labor, increases in specialization, and advancements in economic calculation. The problems of a coincidence of goods and the indivisibility of goods are eliminated in a money economy. "

In the past most of everything was localized. The further back in history you go, the lower global living standards are and the harder it is to simply feed yourself and your family. The time period that barter was around was thousands of years ago, they had currency as far back as the Roman Republic so we're talking some time ago. Most people at the time not only had near instantaneous communication across the entire planet but they had a hard time just feeding themselves. It also took a long time just to travel between towns, let alone provinces or "states".

As for division of labor, that is something that works itself out. In the Free Territory of Ukraine, workplace democracy as well as volunteerism was dominant. Community congresses attended by the community members such as peasants and factory workers and everybody really decided who was to do what. You might say "well there is no incentive". There have been plenty of studies that show that money is not a true incentive. Money is necessary to pay the bills and buy food, it is creation that is the truly gratifying reward. Of course there are unpleasant occupations out there which would be willingly filled by people who now don't have to pay bills or pay for gas or anything really.

What I find amazing is that people have been so conditioned that they actually believe a piece of paper is necessary for survival. This obviously took a long time of course, it's been around as far back as Rome, but it's still fairly impressive, I wonder what else a government can convince people of.

Halatir said...

"In the barter economy, some traders will gradually begin to recognize that certain goods are more marketable than others. Others will recognize that success of other traders and begin to employ indirect exchange too. In history, all sorts of things have been used as money. In fact, shortly after WWII, cigarettes were widely used as money."

You assume that traders will trade for the sake of trading or "making a profit". Without money there is no profit. Now you might say that people will attempt to hoard what may be viewed as valuable, say for example wood is becoming scarce so people begin to hoard wood.

The best rebuttal to this is that in today's present, the average Western citizen lives better than a medieval king did. There is more of virtually everything today and everything is also much easier to produce. Following World War II most cars were still built by hands on primitive "assembly" lines. Today it is completely done by machine. Conversely it there was a huge time difference between the invention of the wheel and the first carriage or use of the wheel. There was a significant time difference between the invention of throwing spears and the invention of the bow. Meanwhile the first computer came into existence in the 1930-40's, the first personal computer in the 1980's, and the internet in the late 1990's. 2011 comes around we know have hand-held, touch screen mini-computers in our hands.

"Any bank that acts too irresponsible will find demand for its currency quickly slipping, and they would run the risk of going bankrupt from a run on the bank."

Price-fixing is very common today and it is illegal. There is also the issue of monopolies, which are inevitable because one accumulates more money, they are likely to do whatever they can to ensure their income increases. If they make a large offer to buy out some traders, such as done today, I'm sure at least a few would cave (after-all, they are now set for life).

Halatir said...

"While I do not call myself a capitalist, I find your critique quite wanting. Absolutely no centralised authority is required for a generally-accepted medium of exchange to arise, so your entire critque breaks down at step one."

A central authority isn't required, all that is required is for an individual to believe the paper in his hand is worth something.

The problem is when an individual accumulates enough money to buy out competition or perhaps pay those who are not as financially fortunate to do certain tasks. This will obviously start out small but eventually it will grow into a state. Power is quite intoxicating as today's reality should have made quite clear.

That's also vice-versa, a state cannot exist without cash (unless it has quite a strong psychological grip on it's people).

I'll explain why there would be poorer individuals and how one would or could purchase competition later in the following post.

With money, there is a pool of currency. You cannot "create" wealth, there is only so much. Printing more money only devalues the currency as a whole (which is what banks do today). The question then is distribution, which is the problem politicians, economists, and bureaucrats face today.

Now since money is the primary way of procuring goods via purchase, it is only reasonable that most would want as much as they can get, either to "purchase" something now or store it later for a rainy day. This urgency to procure more money only increases as one's own expenses increase, such as bills and insurance.

Now if one is a gifted trader, they could find success in the market and therefore develop enough wealth to buy up competition. Or, if you've somehow set up a safe-guard or "check" to keep an individual from gaining to much an advantage of competition, then they could perhaps purchase the labor of those who are not gifted in the ways of finance or market mechanics. He can either hire thugs, perhaps servants, who knows what task he/she could use this hired labor for.

Now it is inevitable for their to be those who are less financially successful and therefore possess less capital. You cannot create a form of "welfare economy" without imposing rules and this cannot be done without a state unless a society is completely psychologically conditioned to do so, in which case it's simply not worth it because even a single dollar/shilling/rubles difference will be enough eventually.

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