Nothing is Free, Including Capitalism and Markets

(Part 7 of a series on political economy on my blog. Read the introduction to the series here.)

“But I thought capitalism was freedom?” “Nope.” (Source: College Confidence Coach)

Introduction

As noted in our previous posts on markets and on pricing in capitalism, the notion that markets are “free” is a misunderstanding. Fundamentally, all economies are planned economies. The key distinction between what we would colloquially refer to as a “market” economy vs. a “planned” economy is the presence of competition. What I aim to do in this piece is continue to investigate the intersection of our idea of “freedom” with capitalism.

A Return to “Free Market” Ideology

What is the impetus behind free market ideology? Why do people think capitalism is free? Well, as I noted in a previous post, there’s an immediate emotional appeal to our colloquial “market” economy:

Consider it a single point of failure: even if everyone is an idiot, chances are at least a few people will accidentally get something right and run successful firms so this colloquial “market economy” seems to beat a system where a small group of nerds (who may also be idiots and/or delusional) try to manage everything.

But the emotional appeal of this seems to fall short of the ferocity of free market ideology. We already noted that all economies are planned economies, but that doesn’t seem to explain the entirety of this ideology’s fervor. The issue is:

People believe in “political freedom.” They believe that “the government” should “stay out of the way” of businesses and individuals. (There’s frequently more nuance to this but this is the underlying motivation) In other words: People want the opportunity to direct and drive their own lives and perceive the government as being antithetical to this.

Here’s the problem:

1. “Political freedom” is nonsensical. The very principles of libertarianism end up contracting themselves. All branches of Liberalism are incoherent. All politics are authoritarian.
2. The government is not “staying out of the way” of anything. In fact, it establishes and enforces capitalism itself.
3. Your “freedom” under capitalism is surface-level and more illusion than reality. (So, if we actually hold some kind of economic “freedom” to be important, what is it? and can a non-capitalist system acheive it better? More on this later)

Let’s address the 2nd and 3rd points.

Sovereign as “The Maker”: Creating and Maintaining Capitalism

The Sovereign (call it the State/Government/King/”The People”/etc., whatever gets the final say in governance decisions) always establishes property norms, whether they be capitalistic, communistic, or something else entirely. Returning to Singer:

“The relation between property and sovereignty is contested. The protection of both persons and property are two core government functions. These functions come into conflict when the exercise of a property right harms others. How do we determine when that exercise is legitimately viewed as a self-regarding act that does not affect others, and when such an exercise does harm others and thus comes within the legitimate sphere of government regulation? Property norms help answer this question by orienting us in a moral universe through background understandings that define legitimate interests. Norms orient us, first, by telling us who is an owner with regard to any particular entitlement in a resource, and second, by telling owners when they are obligated to take into account the effects of their actions on others. In so doing, property norms define which externalities we must pay attention to and seek (if possible) to prevent.”

(from “How property norms construct the externalities of ownership” by Joseph Singer)

The Sovereign’s decision is based on the moral-political framework it believes is righteous, as Singer notes. There is nothing more or less free with Capitalism in that sense than with any other economic system. In every single one, the Sovereign establishes the norms necessary for the system to function. Similarly, rules and regulations of the system are also embedded in this moral-political background: they do not make a system “less free.”

What Truly is “Economic Freedom”

So what are we referring to when we discuss “economic freedom?” I would argue the best correlate is something along the lines of “free association.” In other words, “I am allowed to do business with who I want, under the conditions I agree to, so long as there is consent amongst all parties.”

Putting aside questions of whether or not consent is ever complete (it isn’t) or whether it is necessary and/or sufficient for justification, let’s ask: Does capitalism does a good job at this? I will argue it does not.

Hayek attempts to argue that Capitalism provides negative freedom, first and foremost. But there is no real distinction between negative and positive freedoms, and his own claims are insufficient to defend these. In fact, as Lafollette puts it,

Therefore, to introduce negative general rights and duties, as the libertarian does, is to admit that there are non-consensual limitations on freedom. And these limits — as I argued — are sometimes significant and far-reaching. They arise — and this is crucial — without consent; each person has them simply because he is a person. Now if one’s freedom can be limited without consent by negative rights, then it is unreasonable to hold that these are the only limitations on freedom which can legitimately arise without consent. This is particularly apparent when we realize that in a number of cases the limitations on freedom imposed by negative duties are more — even much more — than limitations which would be imposed if some claims of positive rights or duties were recognized.

(from “Why Libertarianism is Mistaken” by Hugh LaFollette)

You can’t just “leave” the economic system. Where will one go? Run off to the forests owned by some state government or private organization? Certainly if every single person rose up they could force change in the system, but this isn’t really feasible. I discuss incentives a lot in this series (they are central to solving the foundational problems of political economy). The social cost of being the only one defecting is simply too great of a incentivize against defecting for this to make much sense for most rational people in an industrialized country. The same problems with any ideology based around “exit” exist here:

…The other mechanism, “Exit”, involves ensuring that there is a free market of diverse polities so that folks are all equally free to “vote with their feet”. The only large-scale government allowed will have the sole purpose of ensuring the superman this universal equal freedom to choose the kind of society he wants to live in from the free market of available societies.

Setting aside the ludicrous positivism involved in thinking that civilizations are the kind of thing that can be designed…

(from “Exit or Voice, or, do you prefer your liberalism grape or cherry?” by ZippyCatholic)

and here:

In the face of a steep decline in the power of organized labor and the defunding and defanging of federal regulatory agencies, options for American workers to highlight corporate abuses — without risking their job or reputation — are extremely limited. In the choice between exit and voice, most people just try to find a different job, or voice their concerns by griping to their coworkers rather than confronting their boss. This leaves rotten practices and people in place, perpetuating abuse and malfeasance.

(From “Corporations Would Literally Kill You to Turn a Profit” by Nicole Aschoff in Jacobin)

So let’s return to the second question we posed above: can a non-capitalist system acheive freedom of association better? It is obvious an economic system cannot literally change geography. To some degree, you will be limited by material realities and necessities. But, I will argue that capitalism allows for far less freedom of association than a properly designed non-capitalist system would. In capitalism, unless you own property (capital and/or land), you have to sell your labour in order to survive (let’s ignore the welfare state for now). This limits who you’re allowed to engage with. Money adds an additional barrier between who you would like to associate with and who you able to associate with. Can we develop a system that eliminates this barrier? I am, of course, referring to the replacement of money. Such a system will obviously need to balance the real necessity of producing certain products (food, water, clothing, shelter, etc.) with the ideal ability to produce what you want, for who you want. Even Marx himself discusses this needed balance. So, this potentiality for a greater breadth of freedom of association (by removing money as a barrier to it) already exists throughout leftist literature. If we believe this is truly something we should attempt to pursue, we should keep this in mind while constructing our post-capitalist system.