Capitalism and the State are Inexorably Linked

There are so many instances in which I see people at this forum go off on rants about the evils of the state, and in their next breath go on about the wonders of capitalism and the free market. They speak of a world where the state recedes into the background, and a self governing market orders and arranges things based on it's own organic and internal logic. The problem with this narrative, is that capitalism and the state simply CANNOT be separated. The institutions of the modern state and capitalism are coterminous, and are bound up in the same logics.

The institutions of the modern state arose to service the needs of capitalism. Prior to the modern period, the governing structure was mainly concerned with extracting taxes from the populous, and in return providing nominal protection services. It was more complicated in most places(if not all), but that was the basic role the governing body played. It was only with the rise of industrial capitalism, mixed with enlightenment ideas, that we see anything resembling the modern state arising. It is in that time that we see attempts at standardization, universal education, stronger regulation, etc. Basically the state became concerned with the "rational" ordering of things. This concern arose, because capitalism requires order, open markets, stability, etc. It is the state which provided those conditions. They standardized languages, currencies, roads, built canals, railroads, protected markets, regulated trade, and the list goes on. All these things we consider hallmarks of modern state-making, are impossible to separate from the linkages those reforms had with the rise of capitalism.

The state removed all competing sources of power(meaning religion, guilds, village heads, sheiks, nobility, etc), in order to maintain stability. If the state has competing power sources, that is a challenge to stability. Those individuals and institutions also challenged capitalists for power, influence, and control. Something they also didn't want. They also often acted as middle men between the money and the population. Something neither the capitalist NOR the state wanted.

To be clear, this is NOT an anti-capitalist rant, this is also not exactly a rant against the state, though I am highly critical of both the modern state AND capitalism. Having said that, and as much as I find those things distasteful in many ways, I see no legitimate alternative. My goal with this OP is not to show the evils of either the state NOR capitalism, but instead to explain why the two things cannot be separated, because they are coterminous, share the same institutional logics, and reinforce the interests of one another.

PS. This post is also a rebuttal of all the people on the left who make similar anti-capitalist rants, and imagine the state is a solution to the problems they see in capitalism. It doesn't make sense.

 

You have a lofty perception of what the state has done for capitalism, which at its purest form is a voluntary exchange between two parties who mutually benefit from the exchange. You can try to weigh the good deeds of the state against how they have distorted markets, oppressed entrepreneurship, rewarded failure, punished success, not to mention used their collective power and theft to engage in the most reprehensible acts imaginable. Or maybe War of the State should be mentioned? I doubt you would find more good than bad from the collective theft and power of force.

Even so, it is assumed that the state, which is really just a justified mafia with guns to peoples' bellies, accomplished something that free men could not accomplish on their own. I guess we are too stupid to do voluntarily what pandering and bought off politicians do forcefully.

 

Voluntary exchange between parties within the confines of a market predates anything that could be called capitalism by thousands of years. It has existed through most of the course of human history. Capitalism is a uniquely modern form of economic organization. What defines it is NOT voluntary exchanges. What is unique about capitalism which distinguishes it from older forms of economic organization? It is access to large amounts of capital by private entities, market dependance for all(or almost all) members of society(which is different than free exchanges between individuals), industrial scale output of goods, and so on. Voluntary exchanges may be part of that equation at certain times, but it is no more fundamental to the system than it was to pre-capitalist economic organization.

 

If you see capitalism and the state as being inextricably linked to one another, then you have erroneously conflated "capitalism" with "the free market" in order to lump the latter in with the former. The "free market" is not "coterminous" with the "state"; in fact, the "state" has ever been an obstacle to the "free market", and only after economic and political power was radically decentralized away from the "state" (kings, mostly) did the "average" person start to see an appreciable and sustainable rise in their quality of life; "free market" economics is about decentralizing or devolving power to the "common" people who constitute the majority in most markets, and the empirical evidence supporting the efficacy of decentralization (or free markets) as an allocation mechanism is manifold and ubiquitous; so, if you are going to attack "capitalism", it behooves you not to lump "free markets" in with it.

Actually, many of those concerns and practices were commonplace in the Roman empire; in fact, there is nothing terribly novel about the modern state or its regulatory practices; FIAT money, for instance, is an ancient government construct dating back to the Song Dynasty in the 10th century.

I understand what you are trying to say but I think I disagree with the way you have said it. You are right insofar as "capitalism" in practice in the US has been dependent upon the state for enforcing contracts and claims to property, but that is not exactly the same as "free markets".

 

Ok, I accept your criticism, and think I should have been more careful with my choice of words. Though to be fair to myself, that was really just a flippant throw away line at the start of my post, and not that relevant to the majority of my post.

Not really. The Roman Empire was sort of an ad hoc collection of governing practices often borrowed from conquered peoples, but their main goal was the extraction of taxes from the provinces. They allowed local ruling elites to maintain power, as long as they effectively collected and turned over taxes to the Romans. They used a series of vassal kingdoms and other nominally independent governing structures to govern locally, and worried mostly about revenues. Though they DID have a common currency and standardized roads. So that is a good point, but most of the things I mentioned, ARE unique to modern states.

Again, I accept this critique, and concede that the free market and capitalism are not interchangeable terms, and I should have been more careful with my language.

 

Sorry but this has been a problem for advocates of "free market economics". They are always having to defend a system they do not support because people have become so casual with conflating the concept of "capitalism" with "free markets". Thank you for your concession of the point though. Really, if you concede that, then I don't have much issue with your post except perhaps your definition of "capitalism" being somewhat ill-defined.

They also had aqueducts, public bath houses, harbors, public forums and theaters, normalized trade relations with foreign entities, proliferated Latin through their courts, etc., and a great deal of these amenities were made available by the central governing authority's financing.

I appreciate that. It was a minor oversight.

 

Murray Rothbard would disagree with the premise of your thread.

 

Cool, and many far more impressive thinkers than Murray Rothbard would agree with me. Whether that is true or not is irrelevant to me. Explain to me in detail why YOU disagree with me, referencing directly the argument I made.

 

Really? Who is more impressive in your estimation than Murray Rothbard? I'm curious because many of those who would dispute Austrian economics tend to gravitate to who are, at least in my opinion, anachronistic thinkers.

 

Regardless of the economic system the state has the exact same role to play that allows markets to work. First, the protection of property rights and second the provision of public goods. You can't have strong markets in the absence of a strong state and visa versa, I agree with the underlying premise of the thread, not verbatim but something similar. So long as there is a need to enforce property rights and the rule of law, the state will have to be relative in size to the markets it protects.

 

No one outside the internet cares at all about what Rothbard thinks. He's a big part of the reason why the entire Austrian school is so marginal right now, they made great contributions in the past but the current incarnation lack the tools (rejecting empiricism) to explain phenomenon that have occurred more recently.

 

Well, that is a deficiency in trying to understand, predict, or promote a solution to a national economic failure in a global economy. Companies are not limited by national lines of sovereignty. They are unpatriotic, in a sense. There is no system--not Keynesian or Austrian that can adequately be called up to patch together an analysis or predict what will happen. There is ideal and there is what we have.

 

Some of the groups get parts of it right, Austrians hit the nail on the head with the local knowledge problem and pointing out the failures of central planning. Trouble is they lack the toolkit to explain firm behavior... or the existence of firms at all for that matter. There are no prophets, but some groups have answers applicable to modern times, I do not believe Austrians fall into that group.

 

Capitalism can't be entirely voluntary, any more than taxes are entirely voluntary. Capitalism requires the recognition and enforcement of property claims by a state that can guarantee martial supremacy in any dispute.

 

Yes, but my argument is that it goes much deeper than that. All but the most radical anarch-capitalists accept the role of the state as an enforcer of property rights, but what I am saying is that the institutions of the modern state are bound up with capitalism, and that capitalism is similarly bound to the state. I am also arguing that capitalism and the modern state share a logic, which connects them, and makes them inseparable. It is a deeper connection than just, oh the state needs to defend property rights.

 

I have no vast knowledge of economics to draw on, but my conception of state making draws from the ideas of people like Michel Foucault and other post-modern thinkers. Foucault examines the microphysics of the power relations and disciplinary structures the state constructs, and shows how modern states are a founded upon a very particular logic. A logic which revolves around a specific conception of ordering, rationality, disciplinary structuring, etc all of which are shared with capitalist logics.

The most obvious example of this sort of shared logic, is in public schooling. Our school system is a training ground for constructing what the state sees to be proper citizens. The modern public school seeks to discipline people into being not only good, patriotic, and docile citizens, but it also seeks to create industrious and docile workers. I don't buy it entirely, because I feel like it doesn't leave enough room for agency and resistance, but I think it is largely true but with the caveat that the subjects they are trying to discipline are constantly interacting with, resisting, and reconstituting these disciplinary structures to their own ends.

 

Has anyone even bothered to rigorously define "capitalism" yet, or are we just using "the US's economic system" as a working definition?

 

Post #3 in this thread is the sort of definition I am working with.


To that list of what makes capitalism unique, I should add that it shifts capital accumulation from a endeavor which revolved around mostly land and trade, to an endeavor which revolved around forms of production.

 

To thoroughly define Capitalism, one needs to not only address the basic tenets which constitute the fundamental meaning, but also the plethora of variants, including Free Market Capitalism and Laissez-Faire Capitalism. A highly comprehensive definition would necessitate an entire scholarly analysis of the semantics.

 

There are different theoretical conceptions of what capitalism COULD look like, but what it actually DOES look like and did look like, is a very different issue. Obviously what capitalism looks like is something that is mediated by the local realities on the ground. Local forces can obviously shape and change capitalism, so that the capitalism of the US does not look exactly like the capitalism of 19th century britain, or 21st century Argentina. I am not one who buys into certain conceptions of the universalizing nature of capitalism, where it is able to project itself across time and space, and impose itself upon diverse groups of people, in undifferentiated ways. I believe that local realities shape the sort of capitalism different places experience, however I think my conception in the 3rd post in this thread, and my last post before this one, are basically ALWAYS elements of capitalism in all places and all times.

 

To be honest, I don't even know what "capitalism" is anymore, or who exactly follows it; I get different definitions and interpretations all the time; I used to think I was a capitalist, that is, someone who believes in the liberal economic system espoused the founders, a system characterized by voluntary exchange, private property rights, wage labor, and common law traditions, but that no longer seems to be the accepted definition. I see all sorts of random qualifiers and aspects attributed to "capitalism" that I had never heard before and I am not sure if this is a purposeful attempt to undermine capitalist "theory" or if it's just a remnant of Marxist labeling schemes that is still batted around universities...no offense.

 

Rothbard is pretty idealistic. I agree with some of his ideas, but overall, I think Adam Smith, Milton Friedman, and John Kenneth Galbraith were more realistic in their assessment of the interaction between the market and the state.

Friedman had a lot of similarities to Rothbard, but even he didn't take his ideas quite as far along idealism as Rothbard. Mises and Hayek were also pretty idealistic as well.

 

I'm not sure I follow your logic. If you can simply list the "basic tenets" of capitalism then you have adequately defined what it is. If the "basic tenets" of "capitalism" are established rigorously and narrowly enough, then there shouldn't be any "variants". There should just be capitalism. One of the things that drew me to "capitalism" initially was how simply and objectively you could define its parameters, or so I thought. And this is one of the problems I have with economics and political "science" in general. In the hard sciences, there is no debate over the definition of an electron; it is an accepted convention that is promulgated by institutions of science and higher learning; but within the economics department, you could potentially find multiple different definitions for "capitalism" in theory or practice, and I find that, well, confusing, and troubling. I mean, "capitalism" is the most important economic system in history, you would think that economists and political theorists could get together and just agree on a basic definition that can be understood by anyone.

 

I like Milton Friedman, but actually I was just curious regarding the disdain for Austrians--or maybe I read it wrong.

 

I think the disdain comes from the rejection of empirical evidence.

Austrians place a pretty high faith on ideal conditions, when evidence should be the basis of any actual applied theory.