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In a truly free market, as mutualists understand it, labor's pay will equal the value it produces; and the "higgling of the market" will tie the amount of disutility laborers are willing to undergo producing value to their perceived consumption needs.
Thus, purchasing power will be related directly to the amount of output. In a statist economy, on the other hand, various forms of statist privilege reduce the purchasing power of those who produce wealth and transfer it to those who have no subjective sense of the effort entailed in production.
For Tucker, the fundamental difference between nineteenth century capitalism and a real free market lay in the four privileges or monopolies by which the state robbed the laborer of the proper market returns on his labor: the money monopoly, by which the state limited free entry into the money and credit markets, and thus enabled the suppliers of credit to charge a monopoly price; the land monopoly, by which the state enforced absentee "property" claims not founded on occupancy and cultivation; the tariff monopoly; and the patent monopoly. The abolition of the money monopoly (capitalization requirements, licensing, legal tender laws, and other regulations on the private issuance of currency) would result in free market entry into the banking market until the price of credit fell to the labor cost of administering loans. Abolition of the landlord monopoly would cause the price of land to fall to the labor value of improvements (making allowance for economic rent). The effect of removing all four monopolies would be to lower the rate of profit, as such, to zero. (152)
The first two monopolies are an issue of dispute among right-libertarians. As to the money monopoly, there is room for legitimate disagreement over how much of existing interest rates is due to monopoly, and how much to risk premium or time-preference, and to how much they would be reduced by free banking. The mainstream libertarian right is predominantly Lockean on the land issue, although the followers of George, Spencer and Nock comprise a large undercurrent of honorable exceptions. But the illegitimacy of tariffs and patents is a matter of agreement for the great majority of libertarians. Hilferding, Schumpeter and Mises viewed the tariff as the largest single enabling factor for cartelization of the domestic economy.
As for patents, their effect has been almost beyond comprehension. Tucker focused on their function of giving monopoly privileges to the individual inventor, while ignoring their effect on the institutional structure of corporate capitalism. Patents are a mighty weapon for cartelizing an industry in under the control of a handful of producers. According to David Noble, patent control is one of the chief means by which manufacturing corporations have maintained their market share. And the leading firms in an industry may cartelize it by exchanging their patents and jointly using their shared patents to close the market to the entry of new competition. For example, General Electric and Westinghouse effectively cartelized the electrical appliance industry by a large-scale exchange of patents. The American chemical industry was created almost from nothing during World War I, when the U.S. Justice Department seized the German chemical patents and then gave them away free to fledgling American companies. (153) The expansion of international patent law through the GATT regime has served to cartelize industry on a global scale. Patents on general-use technologies, especially, lock western TNCs into permanent control of modern productive technologies and protect them from the emergence of native competition in the Third World. (154)
Tucker himself neglected two major forms of state intervention, which had long been or were currently becoming decisive in his time: primitive accumulation and transportation subsidies. Without the state's role in robbing the peasantry of rights of copyhold, commons, and other traditional rights in the land, and turning them into tenants at-will in the modern sense, there would have been no majority of propertyless laborers forced to "sell their lives in order to live." Without the system of social control imposed by the state, the working class would have been a lot harder to manage. In England, for example, the Poor Laws and Vagrancy Laws amounted to a Stalinesque internal passport system; the Combination Act, and various police meaures by Pitt like the Riot Act and suspension of habeas corpus, together placed everyone below the small middle class beyond the protection of so-called rights of Englishmen. The creation of the so-called "world market" was brought about by the brutal and heavy-handed mercantilist policies of Great Britain.
As for transportation subsidies, every wave of concentration of capital in the past 150 years has followed some centralized transportation or communications infrastructure whose creation was initiated by the state. The heavily state-subsidized railroads led, in the United States, to the first manufacturing corporations on a continental scale. Federal subsidies to the numbered state highways in the 1920s, followed by the interstates of the 1950s had a massive effect on the concentration of retailing and agriculture; the civil aviation system (and especially the postwar jumbo jets--see above) was almost entirely a creation of the state. And the ability of TNCs to direct operations around the world in realtime, from a single headquarters, was made possible by the state-initiated telecommunications infrastructure (especially the worldwide web, in whose creation the Pentagon's DARPA played a major role).
"Actually existing capitalism," even in the supposedly "laissez faire" nineteenth century, would not be capitalism without its state capitalist features. Capitalism was defined by state capitalist features from its very beginnings. As early radicals like Paine and Cobbett, and market-oriented Ricardian socialists like Hodgskin understood it, the statist features of capitalism were analogous to the use of the state by landed interests under the Old Regime. It is a useful exercise for anyone who views the nineteenth century as "largely laissez-faire" to consider the effects, severally, of patents, tariffs, and railroad subsidies, and then try to mentally ecompass the synergistic effect of all of them together.
So a mutualist treatment of Marx's "declining rate of profit" would characterize it as a continuing increase in the rate of state intervention necessary for profits to exist at all. In the nineteenth century, it required only the kinds of legal privileges Tucker described, which were largely embedded in the general legal system, and thus disguised as a "neutral" framework governing a free society.
The larger-scale state capitalist intervention, generally identified with Whigs and Republicans in the mid-nineteenth century, led to a centralization of the economy in the hands of large producers. This system was inherently unstable, and required still further state intervention to solve its contradictions. The result was the full-blown state capitalism of the twentieth century, in which the state played a direct role in subsidizing and cartelizing the corporate economy. As regulatory cartelization advanced from the "Progressive" era on, the problems of overproduction and surplus capital were further intensified by the forces described by Stromberg, with the state resorting to ever greater, snowballing foreign expansionism and domestic corporatism to solve them. They eventually led to New Deal corporate state, to a world war in which the U.S. was established as "hegemonic power in a system of world order" (Huntington), and an almost totally militarized high tech economy.
A positive rate of profit, under twentieth century state capitalism, was possible only because the state underwrote so much of the cost of reproduction of constant and variable capital, and undertook "social investment" which increased the efficiency of labor and capital and consequently the rate of profit on capital. (155) And monopoly capital's demands on the state are not stable over time, but steadily increase:
...the socialization of the costs of social investment and social consumption capital increases over time and increasingly is needed for profitable accumulation by monopoly capital. The general reason is that the increase in the social character of production (specialization, division of labor, interdependency, the growth of new social forms of capital such as education, etc.) either prohibits or renders unprofitable the private accumulation of constant and variable capital. (156)
O'Connor did not adequately deal with a primary reason for the fiscal crisis: the increasing role of the state in performing functions of capital reproduction removes an ever-growing segment of the economy from the market price system. The removal of the price feedback system, which in a free market ties quantity demanded to quantity supplied, leads to ever-increasing demands on state services. When the consumption of some factor is subsidized by the state, the consumer is protected from the real cost of providing it, and unable to make a rational decision about how much to use. So the state capitalist sector tends to add factor inputs extensively, rather than intensively; that is, it uses the factors in larger amounts, rather than using existing amounts more efficiently. The state capitalist system generates demands for new inputs from the state geometrically, while the state's ability to provide new inputs increases only arithmetically. The result is a process of snowballing irrationality, in which the state's interventions further destabilize the system, requiring yet further state intervention, until the system's requirements for stabilizing inputs exceed the state's resources. At that point, the state capitalist system reaches a breaking point.
Probably the best example of this phenomenon is the transportation system. State subsidies to highways, airports, and railroads, by distorting the cost feedback to users, destroy the link between the amount provided and the amount demanded. The result, among other things, is an interstate highway system that generates congestion faster than it can build or expand the system to accomodate congestion. The cost of repairing the most urgent deteriorating roadbeds and bridges is several times greater than the amount appropriated for that purpose. In civil aviation, at least before the September 11 attacks, the result was planes stacked up six high over O'Hare airport. There is simply no way to solve these crises by building more highways or airports. The only solution is to fund transportation with cost-based user fees, so that the user perceives the true cost of providing the services he consumes. But this solution would entail the destruction of the existing centralized corporate economy.
The same law of excess consumption and shortages manifests itself in the case of energy. When the state subsidizes the consumption of resources like fossil fuels, business tends to add inputs extensively, instead of using existing inputs more intensively. Since the incentives for conservation and economy are artificially distorted, demand outstips supply. But the energy problem is further complicated by finite reserves of fossil fuels. According to an article in the Oil and Gas Journal last year,
....The world is drawing down its oil reserves at an unprecedented rate, with supplies likely to be constrained by global production capacity by 2010, "even assuming no growth in demand," said analysts at Douglas-Westwood Ltd., an energy industry consulting firm based in Canterbury, England.
"Oil will permanently cease to be abundant," said Douglas-Westwood analysts in the World Oil Supply Report issued earlier this month. "Supply and demand will be forced to balance-but at a price."
The resulting economic shocks will rival those of the 1970s, as oil prices "could double and treble within 2 or 3 years as the world changes from oil abundance to oil scarcity. The world is facing a future of major oil price increases, which will occur sooner than many people believe," that report concluded.
"The world's known and estimated 'yet to find' reserves cannot satisfy even the present level of production of some 74 million b/d beyond 2022. Any growth in global economic activity only serves to increase demand and bring forward the peak year," the report said.
A 1% annual growth in world demand for oil could cause global crude production to peak at 83 million b/d in 2016, said Douglas-Westwood analysts. A 2% growth in demand could trigger a production peak of 87 million b/d by 2011, while 3% growth would move that production peak to as early as 2006, they said.
Zero demand growth would delay the world's oil production peak only until 2022, said the Douglas-Westwood report.
However, the International Energy Agency recently forecast that world oil demand would reach 119 million b/d by 2020. (157)
During the shortages of the late '70s, Warren Johnson predicted that a prolonged energy crisis would lead, through market forces, to a radical decentralization of the economy and a return to localism. (158) Like every other kind of state intervention, subsidies to transportation and energy lead to ever greater irrationality, culminating in collapse.
Other centralized offshoots of the state capitalist system produce similar results. Corporate agribusiness, for example, requires several times as much synthetic pesticide application per acre to produce the same results as in 1950--partly because of insect resistance, and partly because pesticides kill not only insect pests but their natural enemies up the food chain. At the same time, giant monoculture plantations typical of the agribusiness system are especially prone to insects and blights which specialize in particular crops. The use of chemical fertilizers, at least the most common simple N-P-K varieties, strips the soil of trace elements--a phenomenon noted long ago by Max Gerson. The chemical fillers in these fertilizers, as they accumulate, alter the osmotic quality of the soil--or even render it toxic. Reliance on such fertilizers instead of traditional green manures and composts severely degrades the quality of the soil as a living biological system: for example, the depletion of mycorrhizae which function symbiotically with root systems to aid absorption of nutrients. The cumulative effect of all these practices is to push soil to the point of biological collapse. The hardpan clay on many agribusiness plantations is virtually sterile biologically, often with less than a single earthworm per cubic yard of soil. The result, as with chemical pesticides, is ever increasing inputs of fertilizer to produce diminishing results.
In every case, the basic rule is that, whenever the economy deviates from market price as an allocating principle, it deviates to that extent from rationality. In a long series of indices, the state capitalist economy uses resources or factors much more intensively than would be possible if large corporations were paying the cost themselves. The economy is much more transportation-intensive than a free market could support, as we have seen. It is likewise more capital-intensive, and more intensively dependent on scientific-technical labor, than would be economical if all costs were borne by the beneficiaries. The economy is far more centralized, capital intensive, and high-tech than it would otherwise be. Had large corporate firms paid for these inputs themselves, they would have reached the point of zero marginal utility from additional inputs much earlier.
At the same time as the demand for state economic inputs increases, state capitalism also produces all kinds of social pathologies that require "social expenditures" to contain or correct. By subsidizing the most capital-intensive forms of production, it promotes unemployment and the growth of an underclass. But just as important, it undermines the very social structures--family, church, neighborhood, etc.--on which it depends for the reproduction of a healthy social order.
Those who believe the market and commodity production as such inevitably suck all social relations into the "cash nexus," and undermine the stability of autonomous social institutions, are wrong. But this critique, while not valid for the market as such, is valid for state capitalism, where the state is driven into ever new realms in order to stabilize the corporate system. State intervention in the process of reproducing human capital (i.e., public education and tax-supported vocational-technical education), and state aid to forms of economic centralization that atomize society, result in the destruction of civil society and the replacement by direct state intervention of activities previously carried out by autonomous institutions. The destruction of civil society, in turn, leads to still further state intervention to deal with the resulting social pathologies.
The free market criticism of these phenomena closely parallels that of Ivan Illich in Tools For Conviviality.(159) Illich argued that the adoption of technologies followed a pattern characterized by two thresholds (or "watersheds"). The first threshold was one of high marginal utility for added increments of the new technology, with large increases in overall quality of life as it was introduced. But eventually a second threshold was reached, at which further increments produced disutilities. Technologies continued to be adopted beyond the level at which they positively harmed society; entire areas of life were subject to increased specialization, professionalization, and bureaucratic control; and older forms of technology that permitted more autonomous, local and individual control, were actively stamped out. In all these areas of life, the effect was to destroy human-scale institutions and ways of doing things, amenable to control by the average person.
In medicine, the first threshold was identified with the introduction of septic techniques, antibiotics, and other elementary technologies that drastically reduced the death rates. The second was identified with intensive reliance on extremely expensive medications and procedures with only marginally beneficial results (not to mention iatrogenic diseases), the transformation of medicine into a priesthood governed by "professional" bureaucracies, and the loss by ordinary people of control over their own health. The automobile reached the second threshold when it became impossible for most people to work or shop within walking or bicycle distance of where they lived. The car ceased to be a luxury, and became a necessity for most people; a lifestyle independent of it was no longer an option.
Those who criticize such aspects of our society, or express sympathies for the older, smaller-scale ways of life, are commonly dismissed as nostalgic, romantic--even luddites. And such critiques are indeed, more often than not, coupled with calls for government regulation of some kind to protect quality of life, by restraining the introduction of disruptive technologies. The worst such critics idealize the "Native American" practice of considering the effects of a technology for "six generations" before allowing it to be adopted. Illich himself fell into this general category, considering these issues to be a proper matter for grass-roots political control ("convivial reconstruction").
But in fact, it is quite possible to lament the loss of human scale society ("Norman Rockwell's America"), and to resent the triumph of professionalization and the automobile, all the while adhering to strictly free market principles. For government, far from being the solution to these evils, has been their cause. Illich went wrong in treating the first and second thresholds, respectively, as watersheds of social utility and disutility, without considering the mechanism of coercion that is necessary for social disutility to exist at all. In a society where all transactions are voluntary, no such thing as "social disutility" is possible. Net social disutility can only occur when those who personally benefit from the introduction of new technologies beyond the second threshold, are able to force others to bear the disutilities. As we have already seen in our citations of O'Connor's analysis, this is the case in regard to a great deal of technology. The profit is privatized, while the cost is socialized. Were those who benefited from greater reliance on the car, for example, for example, forced to internalize all the costs, the car would not be introduced beyond the point where overall disutilities equalled overall utilities. As Kaveh Pourvand elegantly put it in a private communication recently, the state's intervention promotes the adoption of certain technologies beyond Pareto optimality. (160) Coercion, or use of the "political means," is the only way in which one person can impose disutility on another.
The state capitalist system thus demands ever greater state inputs in the form of subsidies to accumulation, and ever greater intervention to contain the ill social effects of state capitalism. Coupled with political pressures to restrain the growth of taxation, these demands lead to (as O'Connor's title indicates) a "fiscal crisis of the state," or "a tendency for state expenditures to increase faster than the means of financing them." (161) The "'structural gap' ...between state expenditures and state revenue" is met by chronic deficit finance, with the inevitable inflationary results. Under state capitalism "crisis tendencies shift, of course, from the economic into the administrative system..." This displaced crisis is expressed through "inflation and a permanent crisis in public finance." (162)
The problem is intensified by the disproportionate financing of State expenditures by taxes on the competitive sector (including the taxes on the monopoly capital sector which are passed on to the competitive sector), and the promotion of monopoly capital profits at the expense of the competitive sector. This depression of the competitive sector simultaneously reduces its purchasing power and its strength as a tax base, and exacerbates the crises of both state finance and demand shortfall.
Parallel to the fiscal crisis of the state, state capitalism likewise moves towards what Habermas called a "legitimation crisis." State capitalism involves "[r]e-coupling the economic system to the political.... The state apparatus no longer, as in liberal capitalism, merely secures the general conditions of production..., but is now actively engaged in it." (163) That is, capitalism abandons the "laissez-faire" model of state involvement mainly through the enforcement of a general legal framework, and resorts instead to direct organizational links and direct state inputs into the private sector.
To the extent that the class relationship has itself been repoliticized and the state has taken over market replacing as well as market supplementing tasks..., class domination can no longer take the anonymous form of the law of value. Instead, it now depends on factual constellations of power whether, and how, production of surplus value can be guaranteed through the public sector, and how the terms of the class compromise look. (164)
The direct intervention of the state on behalf of corporate elites becomes ever greater, and impossible to conceal. This fundamentally contradicts the official ideology of "free market capitalism," in which the state simply acts as a neutral guarantor of a social order in which the most deserving win by their own efforts. Therefore, it undermines the ideological basis on which its popular legitimacy depends.
According to bourgeois conceptions that have remained constant from the beginnings of modern natural law to contemporary election speeches, social rewards should be distributed on the basis of individual achievement.... Since it has been recognized, even among the population at large, that social force is exercised in the forms of economic exchange, the market has lost its credibility as a fair... mechanism for the distribution of life opportunities conforming to the system. (165)
When the state capitalist system finally reaches its limits, the state becomes incapable of further increasing the inputs on which the system depends. The fundamental contradictions of the system, displaced from the political/administrative realm, return with a vengeance in the form of economic crisis. The state capitalist system will reach its breaking point. When that day comes, a "nunc dimittis" might be in order.
152. For an excellent statement of the nature and effects of these four monopolies, see Tucker's "State Socialism and Anarchism," in Instead of a Book, By a Man Too Busy to Write One Gordon Press facsimile of second edition (New York: 1897/1973), pp. 3-18. Online text available at http://flag.blackened.net/daver/anar...r/tucker2.html
153. David Noble, America by Design,op. cit., pp. 10, 16, 84-109.
154. Chakravarthi Raghavan, Recolonization: GATT, the Uruguay Round & the Third World (Penang, Malaysis: Third World Network, 1990), pp. 119-120.
155. See references to O'Connor op. cit., above, notes 66-68.
156. O'Connor, op. cit., p. 8.
157. "World Oil Supplies Running Out Faster than Expected," Oil and Gas Journal, August 12, 2002.
158. Warren Johnson. Muddling Toward Frugality (San Francisco: Sierra Club Books, 1978).
159. Ivan Illich, Tools for Conviviality (New York: Harper & Row, 1973).
160. Kaveh Pourvand, private email, Oct. 29, 2003.
161. O'Connor, op. cit., p. 9.
162. Jurgen Habermas, Legitimation Crisis. Translated by Thomas McCarthy (United Kingdom: Polity Press, 1973, 1976), pp. 61, 68.
163. Ibid., p. 36.
164. Ibid., p. 68.
165. Ibid., p. 81.
With a note on Libertarianism:
The views of the present system as essentially exploitative, and of the state as the foundation for its exploitative features, are held both at the same time by only a very small segment of either the libertarian Left or Right. Despite occasional lip service to the state capitalist nature of the corporate system, collectivist-oriented libertarian socialists like Chomsky argue for increased state intervention against "private concentrations of power," and seem to be motivated by a largely aesthetic revulsion to markets.
Perhaps most annoyingly, they play into the hands of the state capitalists by using the terms "free market" and "free trade" as they have been defined by neoliberal politicians and intellectuals, and in the corporate press. In so doing, they concede the definition of "free market" to our class enemies.
The editors of In These Times, in the magazine's mission statement, speak of the need to replace "market values" with "human values"--forgetting that a market, as such, is simply a realm where all human relationships and transactions are based on consent and voluntary cooperation rather than coercion. There is as much--indeed more--room in a genuine free market for the values of Kropotkin, of Colin Ward and Paul Goodman, as there is for those of Milton Friedman and Leonard Peikoff. As Tucker argued, in a genuine market all transactions are exchanges of labor between producers.
Mainstream right libertarians, in turn, seem to have largely abandoned the "petty bourgeois" economic populism of the early classical liberal period; in most cases they minimize the statism of the present corporate system, and treat big business (for aesthetic reasons of their own) as the victim rather than the beneficiary of the regulatory state. The early classical liberalism and Enlightenment radicalism of Godwin, Paine, Cobbett, and Hodgskin was decidedly left-wing in spirit. It was motivated by a populist reaction against quasi-feudal landlordism and mercantilism, both of which were forms of exploitation which depended on the use of the state by plutocratic interests against the producing classes. It was unambiguously on the side of the "little guy." And there is a great deal of continuity between classical liberalism and the later populist radicalism of Hodgskin, George, and Nock. To the extent that Hodgskin--the best of the Ricardian socialists--criticized industrial capitalism as exploitative, it was because of the features of statism and privilege that it shared with the older mercantilist system. But from a revolutionary ideology aimed at breaking down the powers of feudal and mercantilist ruling classes, mainstream libertarianism has evolved into a reflexive apology for the institutions today most nearly resembling a feudal ruling class: the giant corporations. To the extent it affects a populist veneer, it is akin to the populism mocked by Cool Hand Luke: "Yeah, them pore ole bosses need all the help they can get."
A great deal of right-libertarian boilerplate is written on the theme of Bill Gates as John Galt, when he is in fact James Taggart. All too often, the real modus operandi is to use libertarian rhetoric in defense of a predetermined set of "good guys," defined by standing the Left's list of god-figures and devil-figures on its head: "Two legs good, four legs baaaaad." In some cases, the motivation seems to be a visceral affinity for big business as "our sort." In others, it seems to reflect an almost Stalinist level of cynicism in treating big business as an "objective ally" to be defended regardless of the truth. In both cases, the corporate liberal views of Art Schlesinger are simply mirror-imaged. The real fault line between genuine libertarians and "vulgar libertarian" apologists for big business seems to be defined by how closely they view the present system as an approximation of a free market.
But if both facets of our understanding of the present system (that corporate capitalism is exploitative; and that its exploitation depends solely on the state) were sincerely held by libertarians of left and right, it could serve as the basis for an alliance against state capitalism. The Left must be made to understand that their proper grievance is not against private property (properly understood), or markets (in the sense of free exchange between equal, unprivileged producers), but with the state. The Right must be made to understand the extent to which Wal-Mart, Microsoft, and GM are parasitic outgrowths of the state, and not products of "good old American know-how" or "elbow grease." If both sides are sincerely motivated primarily by an oppostion to statist coercion, rather than a reflexive sympathy for big business or aversion to market exchange, the potential exists for coexistence on the basis of something like Voltairine de Cleyre's "anarchism without adjectives."
http://www.mutualist.org/id10.html?source=patrick.net
Thus, purchasing power will be related directly to the amount of output. In a statist economy, on the other hand, various forms of statist privilege reduce the purchasing power of those who produce wealth and transfer it to those who have no subjective sense of the effort entailed in production.
For Tucker, the fundamental difference between nineteenth century capitalism and a real free market lay in the four privileges or monopolies by which the state robbed the laborer of the proper market returns on his labor: the money monopoly, by which the state limited free entry into the money and credit markets, and thus enabled the suppliers of credit to charge a monopoly price; the land monopoly, by which the state enforced absentee "property" claims not founded on occupancy and cultivation; the tariff monopoly; and the patent monopoly. The abolition of the money monopoly (capitalization requirements, licensing, legal tender laws, and other regulations on the private issuance of currency) would result in free market entry into the banking market until the price of credit fell to the labor cost of administering loans. Abolition of the landlord monopoly would cause the price of land to fall to the labor value of improvements (making allowance for economic rent). The effect of removing all four monopolies would be to lower the rate of profit, as such, to zero. (152)
The first two monopolies are an issue of dispute among right-libertarians. As to the money monopoly, there is room for legitimate disagreement over how much of existing interest rates is due to monopoly, and how much to risk premium or time-preference, and to how much they would be reduced by free banking. The mainstream libertarian right is predominantly Lockean on the land issue, although the followers of George, Spencer and Nock comprise a large undercurrent of honorable exceptions. But the illegitimacy of tariffs and patents is a matter of agreement for the great majority of libertarians. Hilferding, Schumpeter and Mises viewed the tariff as the largest single enabling factor for cartelization of the domestic economy.
As for patents, their effect has been almost beyond comprehension. Tucker focused on their function of giving monopoly privileges to the individual inventor, while ignoring their effect on the institutional structure of corporate capitalism. Patents are a mighty weapon for cartelizing an industry in under the control of a handful of producers. According to David Noble, patent control is one of the chief means by which manufacturing corporations have maintained their market share. And the leading firms in an industry may cartelize it by exchanging their patents and jointly using their shared patents to close the market to the entry of new competition. For example, General Electric and Westinghouse effectively cartelized the electrical appliance industry by a large-scale exchange of patents. The American chemical industry was created almost from nothing during World War I, when the U.S. Justice Department seized the German chemical patents and then gave them away free to fledgling American companies. (153) The expansion of international patent law through the GATT regime has served to cartelize industry on a global scale. Patents on general-use technologies, especially, lock western TNCs into permanent control of modern productive technologies and protect them from the emergence of native competition in the Third World. (154)
Tucker himself neglected two major forms of state intervention, which had long been or were currently becoming decisive in his time: primitive accumulation and transportation subsidies. Without the state's role in robbing the peasantry of rights of copyhold, commons, and other traditional rights in the land, and turning them into tenants at-will in the modern sense, there would have been no majority of propertyless laborers forced to "sell their lives in order to live." Without the system of social control imposed by the state, the working class would have been a lot harder to manage. In England, for example, the Poor Laws and Vagrancy Laws amounted to a Stalinesque internal passport system; the Combination Act, and various police meaures by Pitt like the Riot Act and suspension of habeas corpus, together placed everyone below the small middle class beyond the protection of so-called rights of Englishmen. The creation of the so-called "world market" was brought about by the brutal and heavy-handed mercantilist policies of Great Britain.
As for transportation subsidies, every wave of concentration of capital in the past 150 years has followed some centralized transportation or communications infrastructure whose creation was initiated by the state. The heavily state-subsidized railroads led, in the United States, to the first manufacturing corporations on a continental scale. Federal subsidies to the numbered state highways in the 1920s, followed by the interstates of the 1950s had a massive effect on the concentration of retailing and agriculture; the civil aviation system (and especially the postwar jumbo jets--see above) was almost entirely a creation of the state. And the ability of TNCs to direct operations around the world in realtime, from a single headquarters, was made possible by the state-initiated telecommunications infrastructure (especially the worldwide web, in whose creation the Pentagon's DARPA played a major role).
"Actually existing capitalism," even in the supposedly "laissez faire" nineteenth century, would not be capitalism without its state capitalist features. Capitalism was defined by state capitalist features from its very beginnings. As early radicals like Paine and Cobbett, and market-oriented Ricardian socialists like Hodgskin understood it, the statist features of capitalism were analogous to the use of the state by landed interests under the Old Regime. It is a useful exercise for anyone who views the nineteenth century as "largely laissez-faire" to consider the effects, severally, of patents, tariffs, and railroad subsidies, and then try to mentally ecompass the synergistic effect of all of them together.
So a mutualist treatment of Marx's "declining rate of profit" would characterize it as a continuing increase in the rate of state intervention necessary for profits to exist at all. In the nineteenth century, it required only the kinds of legal privileges Tucker described, which were largely embedded in the general legal system, and thus disguised as a "neutral" framework governing a free society.
The larger-scale state capitalist intervention, generally identified with Whigs and Republicans in the mid-nineteenth century, led to a centralization of the economy in the hands of large producers. This system was inherently unstable, and required still further state intervention to solve its contradictions. The result was the full-blown state capitalism of the twentieth century, in which the state played a direct role in subsidizing and cartelizing the corporate economy. As regulatory cartelization advanced from the "Progressive" era on, the problems of overproduction and surplus capital were further intensified by the forces described by Stromberg, with the state resorting to ever greater, snowballing foreign expansionism and domestic corporatism to solve them. They eventually led to New Deal corporate state, to a world war in which the U.S. was established as "hegemonic power in a system of world order" (Huntington), and an almost totally militarized high tech economy.
A positive rate of profit, under twentieth century state capitalism, was possible only because the state underwrote so much of the cost of reproduction of constant and variable capital, and undertook "social investment" which increased the efficiency of labor and capital and consequently the rate of profit on capital. (155) And monopoly capital's demands on the state are not stable over time, but steadily increase:
Probably the best example of this phenomenon is the transportation system. State subsidies to highways, airports, and railroads, by distorting the cost feedback to users, destroy the link between the amount provided and the amount demanded. The result, among other things, is an interstate highway system that generates congestion faster than it can build or expand the system to accomodate congestion. The cost of repairing the most urgent deteriorating roadbeds and bridges is several times greater than the amount appropriated for that purpose. In civil aviation, at least before the September 11 attacks, the result was planes stacked up six high over O'Hare airport. There is simply no way to solve these crises by building more highways or airports. The only solution is to fund transportation with cost-based user fees, so that the user perceives the true cost of providing the services he consumes. But this solution would entail the destruction of the existing centralized corporate economy.
The same law of excess consumption and shortages manifests itself in the case of energy. When the state subsidizes the consumption of resources like fossil fuels, business tends to add inputs extensively, instead of using existing inputs more intensively. Since the incentives for conservation and economy are artificially distorted, demand outstips supply. But the energy problem is further complicated by finite reserves of fossil fuels. According to an article in the Oil and Gas Journal last year,
"Oil will permanently cease to be abundant," said Douglas-Westwood analysts in the World Oil Supply Report issued earlier this month. "Supply and demand will be forced to balance-but at a price."
The resulting economic shocks will rival those of the 1970s, as oil prices "could double and treble within 2 or 3 years as the world changes from oil abundance to oil scarcity. The world is facing a future of major oil price increases, which will occur sooner than many people believe," that report concluded.
"The world's known and estimated 'yet to find' reserves cannot satisfy even the present level of production of some 74 million b/d beyond 2022. Any growth in global economic activity only serves to increase demand and bring forward the peak year," the report said.
A 1% annual growth in world demand for oil could cause global crude production to peak at 83 million b/d in 2016, said Douglas-Westwood analysts. A 2% growth in demand could trigger a production peak of 87 million b/d by 2011, while 3% growth would move that production peak to as early as 2006, they said.
Zero demand growth would delay the world's oil production peak only until 2022, said the Douglas-Westwood report.
However, the International Energy Agency recently forecast that world oil demand would reach 119 million b/d by 2020. (157)
Other centralized offshoots of the state capitalist system produce similar results. Corporate agribusiness, for example, requires several times as much synthetic pesticide application per acre to produce the same results as in 1950--partly because of insect resistance, and partly because pesticides kill not only insect pests but their natural enemies up the food chain. At the same time, giant monoculture plantations typical of the agribusiness system are especially prone to insects and blights which specialize in particular crops. The use of chemical fertilizers, at least the most common simple N-P-K varieties, strips the soil of trace elements--a phenomenon noted long ago by Max Gerson. The chemical fillers in these fertilizers, as they accumulate, alter the osmotic quality of the soil--or even render it toxic. Reliance on such fertilizers instead of traditional green manures and composts severely degrades the quality of the soil as a living biological system: for example, the depletion of mycorrhizae which function symbiotically with root systems to aid absorption of nutrients. The cumulative effect of all these practices is to push soil to the point of biological collapse. The hardpan clay on many agribusiness plantations is virtually sterile biologically, often with less than a single earthworm per cubic yard of soil. The result, as with chemical pesticides, is ever increasing inputs of fertilizer to produce diminishing results.
In every case, the basic rule is that, whenever the economy deviates from market price as an allocating principle, it deviates to that extent from rationality. In a long series of indices, the state capitalist economy uses resources or factors much more intensively than would be possible if large corporations were paying the cost themselves. The economy is much more transportation-intensive than a free market could support, as we have seen. It is likewise more capital-intensive, and more intensively dependent on scientific-technical labor, than would be economical if all costs were borne by the beneficiaries. The economy is far more centralized, capital intensive, and high-tech than it would otherwise be. Had large corporate firms paid for these inputs themselves, they would have reached the point of zero marginal utility from additional inputs much earlier.
At the same time as the demand for state economic inputs increases, state capitalism also produces all kinds of social pathologies that require "social expenditures" to contain or correct. By subsidizing the most capital-intensive forms of production, it promotes unemployment and the growth of an underclass. But just as important, it undermines the very social structures--family, church, neighborhood, etc.--on which it depends for the reproduction of a healthy social order.
Those who believe the market and commodity production as such inevitably suck all social relations into the "cash nexus," and undermine the stability of autonomous social institutions, are wrong. But this critique, while not valid for the market as such, is valid for state capitalism, where the state is driven into ever new realms in order to stabilize the corporate system. State intervention in the process of reproducing human capital (i.e., public education and tax-supported vocational-technical education), and state aid to forms of economic centralization that atomize society, result in the destruction of civil society and the replacement by direct state intervention of activities previously carried out by autonomous institutions. The destruction of civil society, in turn, leads to still further state intervention to deal with the resulting social pathologies.
The free market criticism of these phenomena closely parallels that of Ivan Illich in Tools For Conviviality.(159) Illich argued that the adoption of technologies followed a pattern characterized by two thresholds (or "watersheds"). The first threshold was one of high marginal utility for added increments of the new technology, with large increases in overall quality of life as it was introduced. But eventually a second threshold was reached, at which further increments produced disutilities. Technologies continued to be adopted beyond the level at which they positively harmed society; entire areas of life were subject to increased specialization, professionalization, and bureaucratic control; and older forms of technology that permitted more autonomous, local and individual control, were actively stamped out. In all these areas of life, the effect was to destroy human-scale institutions and ways of doing things, amenable to control by the average person.
In medicine, the first threshold was identified with the introduction of septic techniques, antibiotics, and other elementary technologies that drastically reduced the death rates. The second was identified with intensive reliance on extremely expensive medications and procedures with only marginally beneficial results (not to mention iatrogenic diseases), the transformation of medicine into a priesthood governed by "professional" bureaucracies, and the loss by ordinary people of control over their own health. The automobile reached the second threshold when it became impossible for most people to work or shop within walking or bicycle distance of where they lived. The car ceased to be a luxury, and became a necessity for most people; a lifestyle independent of it was no longer an option.
Those who criticize such aspects of our society, or express sympathies for the older, smaller-scale ways of life, are commonly dismissed as nostalgic, romantic--even luddites. And such critiques are indeed, more often than not, coupled with calls for government regulation of some kind to protect quality of life, by restraining the introduction of disruptive technologies. The worst such critics idealize the "Native American" practice of considering the effects of a technology for "six generations" before allowing it to be adopted. Illich himself fell into this general category, considering these issues to be a proper matter for grass-roots political control ("convivial reconstruction").
But in fact, it is quite possible to lament the loss of human scale society ("Norman Rockwell's America"), and to resent the triumph of professionalization and the automobile, all the while adhering to strictly free market principles. For government, far from being the solution to these evils, has been their cause. Illich went wrong in treating the first and second thresholds, respectively, as watersheds of social utility and disutility, without considering the mechanism of coercion that is necessary for social disutility to exist at all. In a society where all transactions are voluntary, no such thing as "social disutility" is possible. Net social disutility can only occur when those who personally benefit from the introduction of new technologies beyond the second threshold, are able to force others to bear the disutilities. As we have already seen in our citations of O'Connor's analysis, this is the case in regard to a great deal of technology. The profit is privatized, while the cost is socialized. Were those who benefited from greater reliance on the car, for example, for example, forced to internalize all the costs, the car would not be introduced beyond the point where overall disutilities equalled overall utilities. As Kaveh Pourvand elegantly put it in a private communication recently, the state's intervention promotes the adoption of certain technologies beyond Pareto optimality. (160) Coercion, or use of the "political means," is the only way in which one person can impose disutility on another.
The state capitalist system thus demands ever greater state inputs in the form of subsidies to accumulation, and ever greater intervention to contain the ill social effects of state capitalism. Coupled with political pressures to restrain the growth of taxation, these demands lead to (as O'Connor's title indicates) a "fiscal crisis of the state," or "a tendency for state expenditures to increase faster than the means of financing them." (161) The "'structural gap' ...between state expenditures and state revenue" is met by chronic deficit finance, with the inevitable inflationary results. Under state capitalism "crisis tendencies shift, of course, from the economic into the administrative system..." This displaced crisis is expressed through "inflation and a permanent crisis in public finance." (162)
The problem is intensified by the disproportionate financing of State expenditures by taxes on the competitive sector (including the taxes on the monopoly capital sector which are passed on to the competitive sector), and the promotion of monopoly capital profits at the expense of the competitive sector. This depression of the competitive sector simultaneously reduces its purchasing power and its strength as a tax base, and exacerbates the crises of both state finance and demand shortfall.
Parallel to the fiscal crisis of the state, state capitalism likewise moves towards what Habermas called a "legitimation crisis." State capitalism involves "[r]e-coupling the economic system to the political.... The state apparatus no longer, as in liberal capitalism, merely secures the general conditions of production..., but is now actively engaged in it." (163) That is, capitalism abandons the "laissez-faire" model of state involvement mainly through the enforcement of a general legal framework, and resorts instead to direct organizational links and direct state inputs into the private sector.
152. For an excellent statement of the nature and effects of these four monopolies, see Tucker's "State Socialism and Anarchism," in Instead of a Book, By a Man Too Busy to Write One Gordon Press facsimile of second edition (New York: 1897/1973), pp. 3-18. Online text available at http://flag.blackened.net/daver/anar...r/tucker2.html
153. David Noble, America by Design,op. cit., pp. 10, 16, 84-109.
154. Chakravarthi Raghavan, Recolonization: GATT, the Uruguay Round & the Third World (Penang, Malaysis: Third World Network, 1990), pp. 119-120.
155. See references to O'Connor op. cit., above, notes 66-68.
156. O'Connor, op. cit., p. 8.
157. "World Oil Supplies Running Out Faster than Expected," Oil and Gas Journal, August 12, 2002.
158. Warren Johnson. Muddling Toward Frugality (San Francisco: Sierra Club Books, 1978).
159. Ivan Illich, Tools for Conviviality (New York: Harper & Row, 1973).
160. Kaveh Pourvand, private email, Oct. 29, 2003.
161. O'Connor, op. cit., p. 9.
162. Jurgen Habermas, Legitimation Crisis. Translated by Thomas McCarthy (United Kingdom: Polity Press, 1973, 1976), pp. 61, 68.
163. Ibid., p. 36.
164. Ibid., p. 68.
165. Ibid., p. 81.
With a note on Libertarianism:
The views of the present system as essentially exploitative, and of the state as the foundation for its exploitative features, are held both at the same time by only a very small segment of either the libertarian Left or Right. Despite occasional lip service to the state capitalist nature of the corporate system, collectivist-oriented libertarian socialists like Chomsky argue for increased state intervention against "private concentrations of power," and seem to be motivated by a largely aesthetic revulsion to markets.
Perhaps most annoyingly, they play into the hands of the state capitalists by using the terms "free market" and "free trade" as they have been defined by neoliberal politicians and intellectuals, and in the corporate press. In so doing, they concede the definition of "free market" to our class enemies.
The editors of In These Times, in the magazine's mission statement, speak of the need to replace "market values" with "human values"--forgetting that a market, as such, is simply a realm where all human relationships and transactions are based on consent and voluntary cooperation rather than coercion. There is as much--indeed more--room in a genuine free market for the values of Kropotkin, of Colin Ward and Paul Goodman, as there is for those of Milton Friedman and Leonard Peikoff. As Tucker argued, in a genuine market all transactions are exchanges of labor between producers.
Mainstream right libertarians, in turn, seem to have largely abandoned the "petty bourgeois" economic populism of the early classical liberal period; in most cases they minimize the statism of the present corporate system, and treat big business (for aesthetic reasons of their own) as the victim rather than the beneficiary of the regulatory state. The early classical liberalism and Enlightenment radicalism of Godwin, Paine, Cobbett, and Hodgskin was decidedly left-wing in spirit. It was motivated by a populist reaction against quasi-feudal landlordism and mercantilism, both of which were forms of exploitation which depended on the use of the state by plutocratic interests against the producing classes. It was unambiguously on the side of the "little guy." And there is a great deal of continuity between classical liberalism and the later populist radicalism of Hodgskin, George, and Nock. To the extent that Hodgskin--the best of the Ricardian socialists--criticized industrial capitalism as exploitative, it was because of the features of statism and privilege that it shared with the older mercantilist system. But from a revolutionary ideology aimed at breaking down the powers of feudal and mercantilist ruling classes, mainstream libertarianism has evolved into a reflexive apology for the institutions today most nearly resembling a feudal ruling class: the giant corporations. To the extent it affects a populist veneer, it is akin to the populism mocked by Cool Hand Luke: "Yeah, them pore ole bosses need all the help they can get."
A great deal of right-libertarian boilerplate is written on the theme of Bill Gates as John Galt, when he is in fact James Taggart. All too often, the real modus operandi is to use libertarian rhetoric in defense of a predetermined set of "good guys," defined by standing the Left's list of god-figures and devil-figures on its head: "Two legs good, four legs baaaaad." In some cases, the motivation seems to be a visceral affinity for big business as "our sort." In others, it seems to reflect an almost Stalinist level of cynicism in treating big business as an "objective ally" to be defended regardless of the truth. In both cases, the corporate liberal views of Art Schlesinger are simply mirror-imaged. The real fault line between genuine libertarians and "vulgar libertarian" apologists for big business seems to be defined by how closely they view the present system as an approximation of a free market.
But if both facets of our understanding of the present system (that corporate capitalism is exploitative; and that its exploitation depends solely on the state) were sincerely held by libertarians of left and right, it could serve as the basis for an alliance against state capitalism. The Left must be made to understand that their proper grievance is not against private property (properly understood), or markets (in the sense of free exchange between equal, unprivileged producers), but with the state. The Right must be made to understand the extent to which Wal-Mart, Microsoft, and GM are parasitic outgrowths of the state, and not products of "good old American know-how" or "elbow grease." If both sides are sincerely motivated primarily by an oppostion to statist coercion, rather than a reflexive sympathy for big business or aversion to market exchange, the potential exists for coexistence on the basis of something like Voltairine de Cleyre's "anarchism without adjectives."
http://www.mutualist.org/id10.html?source=patrick.net
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