An ‘anarcho-capitalist’ explains
Last November voters in Argentina elected as President, Javier Milei, who must have styled himself at one time an ‘anarcho-capitalist’ since that’s what the media keep calling him. In January he was invited to the gathering of global elites in Davos in Switzerland and gave a speech in which he expounded his views. He had some harsh things to say about the state, seeing it, as individualist anarchists do, as the negation of ‘freedom’:
‘The state is financed through tax and taxes are collected coercively. . . This means that the state is financed through coercion and that the higher the tax burden, the higher the coercion and the lower the freedom’ (tinyurl.com/29vuvjwr).
Strict anarcho-capitalists want to abolish the state completely and transfer all its functions, including the judiciary and the armed forces, to profit-seeking private enterprises. Milei doesn’t go that far as he sees a very limited role for the state (to protect and enforce private property rights and commercial contracts) and so is technically what has been called a ‘minarchist’ (en.wikipedia.org/wiki/Night-watchman_state).
Defining his ‘libertarianism’ he said:
‘Its fundamental institutions are private property, markets free from state intervention, free competition, and the division of labour and social cooperation, in which success is achieved only by serving others with goods of better quality or at a better price. In other words, capitalist successful business people are social benefactors who, far from appropriating the wealth of others, contribute to the general well-being. Ultimately, a successful entrepreneur is a hero.’
Adding ‘and this is the model that we are advocating for the Argentina of the future’. So, it looks as if he is going to try to introduce ‘minarchy’ there. The result could well be some sort of ‘anarchy’.
Capitalist heroes?
It is a measure of the desperation of workers in Argentina that they were prepared to vote into the top office a person who calls capitalists heroes.
Are successful capitalists really heroes? To have a chance to be successful you first have to obtain money to invest in producing some good or providing some service. You can get this in various ways — inherit it, borrow it, even acquire it illegally — but you have to get it. Having identified what you think might be a profitable market you use the money to rent premises, buy machinery and materials, and hire workers. You put the workers to work at producing your product which you hope to sell at a price that covers these expenses plus a mark-up for profit. If your hope is realised you end up with more money than you started with. You have made a profit.
But what is the source of this profit? Since the only way that wealth can be produced is by applying human labour to materials that originally came from nature (usually after having been fashioned and refashioned many times) the source can only be the work of those who produced what capitalists sell. It’s the difference between the value of what workers add to the materials and what they are paid as wages. The source of profits is the unpaid labour of workers. Contrary to Milei’s assertion, capitalists do appropriate wealth produced by others. That’s not very heroic.
It is true that while some capitalists succeed others fail, and that how well you know your market or can identify a new market can affect how much profit you make and whether you succeed or fail. But this doesn’t increase the amount of wealth that has been produced. It is competition between capitalists to get a share of that part of new wealth produced by the working class over and above what it costs to maintain them. ‘Capitalist successful business people’ are those who do best in this competition at the expense of their capitalist rivals.
All on their own?
Milei argued that it is ‘free trade’, ‘free enterprise’ capitalism that has been responsible for the immense increase in both productive capacity and the amount produced since 1800.
It is a bold claim to say that this was achieved by private enterprises acting all on their own in pursuit of profits without any state intervention; in fact in spite of such intervention. We hold no brief for those pro-capitalists who favour state intervention, but we must point out that the state provides a range of key services that help private enterprises to operate and succeed. For instance, by arranging for a supply of literate and educated workers, or a health service to patch up workers so they can go back to work as quickly as possible, or payments to workers who are temporarily unemployed during a slump so that their ability to work doesn’t deteriorate for when they are needed in the next boom.
Milei denounced this state provision of services for capitalist enterprises as a whole as ‘collectivism’ (and also, as might be expected, as ‘socialism’):
‘The problem is that social justice is not just, and it doesn’t contribute to general well-being. Quite on the contrary, it’s an intrinsically unfair idea because it’s violent. It’s unjust because the state is financed through tax and taxes are collected coercively.’
In his view, taxing capitalist enterprises to pay for such collective services amounts to stealing some of their profits by force:
‘[T]he market is a discovery process in which the capitalists will find the right path as they move forward. But if the state punishes capitalists when they’re successful and gets in the way of the discovery process, they will destroy their incentives, and the consequence is that they will produce less.’
There is an element of truth in this in that, if the state goes too far in this direction — as reformist politicians want as a way of trying to improve conditions for workers under capitalism — this will have the consequence both of undermining the quest for profit that drives the capitalist economy and of rendering capitalist enterprises uncompetitive compared with their rivals from other states. It’s why all reformist governments fail and are doomed to fail. But if a state which did not provide these services for its capitalists and left their provision to profit-seeking private enterprises — as ‘anarcho-capitalists’ and ‘minarchists’ want — then this too would undermine the competitiveness of its capitalists.
It’s the job of governments, as the executive committee of their capitalist class, to get the balance right. In any event, no state has ever not provided such services, so it cannot be claimed that capitalist development since 1800 has been due to private capitalist enterprises alone. In fact, capitalism has never existed without the state. The state helped it to come into being and has helped maintain it ever since.
Can the market fail?
Milei also took a pot shot at neo-classical economic theory which, he said, ‘designs a set of instruments that, unwillingly or without meaning to, end up serving intervention by the state, socialism and social degradation’. He had in mind in particular its theory that the state should intervene to correct ‘market failures’.
According to him, market failures are impossible:
‘The market is a mechanism for social cooperation, where you voluntarily exchange ownership rights. Therefore based on this definition, talking about a market failure is an oxymoron. There are no market failures. If transactions are voluntary, the only context in which there can be market failure is if there is coercion and the only one that is able to coerce generally is the state, which holds a monopoly on violence.’
Notable ‘market failures’ that he rejected as such were the emission of too much CO2 into the atmosphere and the emergence of monopolies. He says they are not examples of the market failing. Okay, let’s accept this and see them as the result of ‘free market capitalism’ working normally. That rather weakens his case for ‘free market’ capitalism. These are indeed results of how the capitalist market economy does work and why its operation prevents states from dealing effectively with problems such as climate change. In any event, state intervention to try to correct what are perceived as market failures has nothing to do with socialism.
Milei began his address by saying that he was there to tell his audience, made up of the world’s leading capitalists and political rulers, that ‘the Western world is in danger’. This danger, he told them, came from continuing to practise ‘collectivism’. At the end he remarked: ‘I know, to many it may sound ridiculous to suggest that the West has turned to socialism’. He was right. It does sound ridiculous but that’s because it is ridiculous.
ADAM BUICK