This article was originally published in Outside Looking In: Critiques of American Policies and Institutions, Left and Right. New York: Harper and Row, 1972, pp. 60-74. Reprinted in The Logic of Action Two: Applications and Criticism from the Austrian School. Glos, UK: Edward Elgar Publishing Ltd., 1997, pp. 185-199.]
From the very first we run into grave problems with the term "capitalism." When we realize that the word was coined by capitalism's most famous enemy, Karl Marx, it is not surprising that a neutral or a pro-"capitalist" analyst might find the term lacking in precision. For capitalism tends to be a catchall, a portmanteau concept that Marxists apply to virtually every society on the face of the globe, with the exception of a few possible "feudalist" countries and the Communist nations (although, of course, the Chinese consider Yugoslavia and Russia "capitalist," while many Trotskyites would include China as well). Marxists, for example, consider India as a "capitalist" country, but India, hagridden by a vast and monstrous network of restrictions, castes, state regulations, and monopoly privileges is about as far from free-market capitalism as can be imagined.[1]
If we are to keep the term "capitalism" at all, then, we must distinguish between "free-market capitalism" on the one hand, and "state capitalism" on the other. The two are as different as day and night in their nature and consequences. Free-market capitalism is a network of free and voluntary exchanges in which producers work, produce, and exchange their products for the products of others through prices voluntarily arrived at. State capitalism consists of one or more groups making use of the coercive apparatus of the government — the State — to accumulate capital for themselves by expropriating the production of others by force and violence.
Throughout history, states have existed as instruments for organized predation and exploitation. It doesn't much matter which group of people happen to gain control of the State at any given time, whether it be oriental despots, kings, landlords, privileged merchants, army officers, or Communist parties. The result is everywhere and always the coercive mulcting of the mass of the producers — in most centuries, of course, largely the peasantry — by a ruling class of dominant rulers and their hired professional bureaucracy. Generally, the State has its inception in naked banditry and conquest, after which the conquerors settle down among the subject population to exact permanent and continuing tribute in the form of "taxation" and to parcel out the land of the peasants in huge tracts to the conquering warlords, who then proceed to extract "rent." A modern paradigm is the Spanish conquest of Latin America, when the military conquest of the native Indian peasantry led to the parceling out of Indian lands to the Spanish families, and the settling down of the Spaniards as a permanent ruling class over the native peasantry.
To make their rule permanent, the State rulers need to induce their subject masses to acquiesce in at least the legitimacy of their rule. For this purpose the State has always taken a corps of intellectuals to spin apologia for the wisdom and the necessity of the existing system. The apologia differ over the centuries; sometimes it is the priestcraft using mystery and ritual to tell the subjects that the king is divine and must be obeyed; sometimes it is Keynesian liberals using their own form of mystery to tell the public that government spending, however seemingly unproductive, helps everyone by raising the GNP and energizing the Keynesian "multiplier." But everywhere the purpose is the same — to justify the existing system of rule and exploitation to the subject population; and everywhere the means are the same — the State rulers sharing their rule and a portion of their booty with their intellectuals. In the nineteenth century the intellectuals, the "monarchical socialists" of the University of Berlin, proudly declared that their chief task was to serve as "the intellectual bodyguard of the House of Hohenzollern." This has always been the function of the court intellectuals, past and present — to serve as the intellectual bodyguard of their particular ruling class.
con't
excerpted
In fact, it is instructive to make a list of the universally acknowledged problem areas of our economy and our society, and we will find running through that list a common glaring leitmotif: government. In all the high problem areas, government operation or control has been especially conspicuous.
Let us consider:
- Foreign policy and war: Exclusively governmental.
- Conscription: Exclusively governmental.
- Crime in the streets: The police and the judges are a monopoly of government, and so are the streets.
- Welfare system: The problem is in government welfare; there is no special problem in the private welfare agencies.
- Water pollution: Municipally owned garbage is dumped in government owned rivers and oceans.
- Postal service: The failings are in the government owned Post Office, not, for example, among such highly successful private competitors as bus-delivered packages and the Independent Postal System of America, for third-class mail.
- The military-industrial complex: Rests entirely on government contracts.
- Railroads: Subsidized and regulated heavily by government for a century.
- Telephone: A government-privileged monopoly.
- Gas and electric: A government-privileged monopoly.
- Housing: Bedeviled by rent controls, property taxes, zoning laws, and urban renewal programs (all government).
- Excess highways: All built and owned by government.
- Union restrictions and strikes: The result of government privilege, notably in the Wagner Act of 1935.
- High taxation: Exclusively governmental.
- The schools: Almost all governmental, or if not directly so, heavily government subsidized and regulated.
- Wiretapping and invasion of civil liberties: Almost all done by government.
- Money and inflation: The money and banking system is totally under the control and manipulation of government.
Examine the problem areas, and everywhere, like a red thread, there lies the overweening stain of government. In contrast, consider the frisbee industry. Frisbees are produced, sold, and purchased without headaches, without upheavals, without mass breakdowns or protests. As a relatively free industry, the peaceful and productive frisbee business is a model of what the American economy once was and can be again — if it is freed of the repressive shackles of big government.
