On Capitalism
A Critical Analysis of Popular Theories of Political Economy
Preface
The discourse of capitalism and resistance, increasingly popular amongst the young and educated, is a very hopeful sign. It is in principle, in theory, a good thing that these issues are being studied and talked about – after all, the ‘capitalist system’ we live under is profoundly (and by design) exploitative and toxic, and a dialogue about what it is about our society that makes this so and how we can resist and, ultimately, change the system is the first step along the way to a better world. All of which is to say that this is necessary, but it is not, however, sufficient. The character of the dialogue will affect the results; it is essential that it be careful, rational, and ultimately correct in its assessment and diagnosis. Imprecise and dogmatic thinking, on the other hand, will hobble the potential of anti-capitalist action before it has even begun, and sadly this appears to be what is happening. Popular understandings of political economy are for the most part hopelessly confused and ideologically shaped, and there is no dialectical spirit to debate and inquiry, only assertive pigheadedness and dogma. It is one purpose of this essay to clear up some of the confusion, to critically analyse leading theories, and to offer a clear, evidence-based theory of political economy and activism. Our vehicle will be the exploration of one crucial question: whether a ‘free market’ would be more or less oppressive and exploitative than the system we have in place.
1. Chomsky’s Cage and its “Principle Architects”
1.1 -- The Cage: Chomsky’s Theory of Markets and Capitalism
Professor Chomsky is an ideal case study for a couple of reasons. Firstly, he is one of the most cited scholars in the world, often introduced at talks as the “worlds most famous intellectual,” and he has gained prominence, especially in the last twenty-something years, increasingly for his commentary on matters of political economy. He is someone who is respected, listened to, and cited; his opinions matter and influence popular understandings of political economy. Secondly, though, his understanding of capitalism, of government regulation, and of ‘free markets’ are representative of the orthodox theory of anti-capitalism.
The role of political intervention according to this theory has been expressed by Chomsky in a public appearance by way of metaphor: the State as a cage. In short, the oppressive apparatus of the State may be compared to a cage – it is a severe and objectionable limitation on our freedom, it entraps us, deprives us of autonomy. But, Chomsky says, it also protects us; for if the State were a cage, then corporations may be imagined as beasts stalking outside the cage. For all that is wrong with it, we are better off inside the cage. The argument put forth here, and elsewhere in his work, is that in our society it is largely the State, partially responsive to the people, which protects us from the far greater exploitation which would exist in a free market. This is also reflected in the frequent implication in his work that deregulation is axiomatically bad. In fairness, it could be argued that he means deregulation carried out by the ruling elite is likely to leave pro-corporate regulations in tact and only remove genuinely beneficial (to the people) regulation. This is a more valid claim, but one which Chomsky never explicitly makes. There are possible ideological reasons for this, but we will come back to that point. In either case, he does not make the distinction between particular deregulation and regulation per se.
To agree with his theory thus far, we would have to accept certain basic assumptions which are not at all obvious. Crucially, if the State protects the public from corporate greed and an even greater degree of exploitation which would exist in a free market, then economic regulation must result in a net reduction of oppression. This is a dubious proposal to say the least. In another context, he is fond of quoting Adam Smith’s conclusion that “the ‘principle architects’ of policy in England were ‘merchants and manufacturers,’ who ensured their own interests are ‘most peculiarly attended to,’ however ‘grievous’ the effect on others, including the people of England.” “Smith’s maxim still holds,” Chomsky continues, “though today the ‘principal architects’ are multinational corporations and particularly the financial institutions whose share in the economy has exploded since the 1970’s.” This is the inescapable truth which market anarchists base their theory of capitalism and markets on, as we shall see later, but is it compatible with Chomsky’s other theory, that economic policy, though written by corporations, is on the whole anti-corporate? This would be a difficult argument to make, which is perhaps why he has not tried.
This exposes a clear cognitive dissonance in his thinking. One the one hand, the concentrated power of the leviathan state and its ubiquitous manipulations of and distortions of the market are alleged to be of a predominantly beneficial nature – they “protect us” from something much worse which would exist in their absence. But on the other hand, it is recognized (as one must recognize if they are to be at all credible) that the primary purpose and effect of government intervention for several centuries has been the enrichment and the empowerment of the corporate ruling class. We are asked to believe that the “principle architects” of government policy somehow bungled their total domination of the State so badly that the result was a restraint on their ability to exploit the population. We’re asked to believe government policy protects us from the corporate interests who wrote it. Well, this would certainly be an awkward position to take if, like Chomsky, you claim to be an anarchist, and that anarchism subjects power to harsh examination and seeks its destruction if it cannot justify its existence. One can only conclude, despite the lack of any such examination as would exonerate the State, that Chomsky is nonetheless satisfied it has justified itself.
It is hard not to believe that ideology lies behind this uncharacteristic lack of academic rigour. Chomsky has earned his reputation, and deservedly so, for his always careful and robust scholarship. When he writes about a topic, he does so armed with hundreds of citations, years of research, and a near-encyclopaedic grasp of the relevant facts. The only exception, in a long career, is his writing on political economy in the last twenty years. On this subject he is content with assumptions, allusions and dogma. Unlike the rest of his oeuvre, when he makes a claim about political economy he rarely condescends to furnish evidence for it. Perhaps there is another I haven’t thought of, but the most obvious explanation is, as I say, ideological: he does not bother to furnish evidence for his claims about the government-as-protector theory because it doesn’t stand up to evidence. It cannot be demonstrated in his customary style because it is a pure fabrication. But, it is a useful fabrication. By paradoxically defending the status quo, he can condemn free markets. In order to attack libertarian theory, he must conclude that by removing the web of privileges, subsidies, de facto grants of monopoly protection, etc., which corporations have spent the last two hundred years building for themselves, the libertarian program would somehow benefit the very corporations these policies prop up. This conclusion isn’t consistent with logic, or even with what little evidence Chomsky himself provides, all of which shows that government regulation is a tool of exploitation – but it is consistent with the anti-market dogma of libertarian socialism. One merely needs to ask which is more important to Chomsky here...
2. Discourse
For the most part, popular understandings of -and discourse about- political economy are deeply confused, often incoherent. There may be many reasons for this, but the most obvious and likely the most significant involve language. For one thing, discussions are often framed in very simplistic and dichotomous terms like “left and right,” or “liberal” and “conservative,” which can hardly do justice to a subject as complex and nuanced as political economy. And then there is the flippant and pervasive use of contested terms, like capitalism, neoliberalism, and “free markets.”
2.1 -- Conflationism
Capitalism in particular is one of the most abused words in our discourse. It is used in several distinct and mutually exclusive ways, and it is rare that somebody writing about “capitalism” specifies which meaning he gives it. Often people have lengthy arguments about “capitalism” without realizing they’re talking about different things. But most importantly, such sloppy use of language affects the quality of our thought, and misunderstandings and distortions in the use of words result in the same in our conclusions and opinions. There are three major definitions of the word. The first refers to the system we actually have, and have always had in the modern era, a system with significant state involvement in the economy and enormous concentrations of wealth and power. The second refers to the ideal of a free market, one with no government involvement. And the third refers to something like ‘consumerism’ and mass production specifically. Among clear definitions of the word, these are the three most prominent ones. Note that the first and second definitions are actually mutually exclusive. The result of this unexamined variation is that in popular usage, “capitalism” is generally understood as a combination of all three, a usage which carries the embedded false premise that the system we have is a free market. The ramifications of this false premise are constantly evident in political discussions, as detractors attribute the abuses of corporate capitalism to the mythical “free market” and confused proponents defend aspects of corporate capitalism under the same misapprehension.
It is necessary to clarify these issues in order to have a productive conversation about resisting the present system and about what an alternative system may look like. The most crucial aspect of our system to understand is the origin of those features (centralized power, concentrated wealth, massive inequality characterized by extreme wealth for a tiny minority and poverty for the masses, exploitation, etc.) which anti-capitalists oppose. It is only by clearly defining the causes of these issues that we may consistently oppose them.
2.2 -- The Weak Link Effect
Of course, some division of labour is as necessary in intellectual work as in any other, and we can hardly expect every scholar to independently verify the claims of every other scholar they reference. The issue we’re concerned with today is when an entire field of study is given over to laziness and arrogance and fails to do due diligence in verifying its claims. It is precisely because of the division of labour that exists in intellectual pursuits that this is so damaging. A philosopher or sociologist may be forgiven for deferring to political economists on questions of political economy, and it is not unreasonable to assume that if their is a consensus among them on some question he may justly refer to that consensus without independently verifying it. But when a distorted worldview becomes the orthodoxy of an entire discipline, especially one as important as political economy, then this distortion begins to affect all other disciplines which have cause to reference the subject. There are few thinkers today who don’t make reference to capitalism, in fact it is very often crucial to their theories; and because the orthodoxy of political economics is wrong and poorly disciplined, so are all our theories.
To the extent that any intellectual discipline today references political economic orthodoxies, that discipline is corrupted by the inclusion of false premises and false claims. In order to rescue academia as a whole, it is necessary for all intellectuals, not just political economists, to overhaul the discourse of capitalism.
For instance, Panjak Mishra’s Age of Anger is an intelligent and perceptive work, and its thesis is certainly worth engaging with, but it suffers from the pervasive myths of political economy. He writes that “the Great Depression revealed the costs of unregulated capitalism,” which is an absurd proposition given the non-existence of “unregulated capitalism.” He goes on to quote Karl Polanyi summarizing the mood in the 1940’s that “the utopian experiment of a self-regulating market will be no more than a memory.” Of course, to be a memory, there would have to have been such a utopian experiment in the first place. Rather, the “self-regulating market” remains, as it has always been, no more than a myth. And so in an instant he goes from intelligent to incredulous because he took the popular narrative of capitalism seriously.
3. The Role of Government in Capitalism
It is often claimed that the role of government intervention in the economy is to restrain corporate power and greed, to prevent the worst abuses of a free market. According to this concept of what we’ll call “really existing capitalism”, the system which we actually have, a market economy leads naturally to ever greater concentrations of wealth, the expansion and aggrandizement of business, and to profound inequality. The centralization, exploitation, and inequality which exists in our system, it follows, are not the result of anything unique to the system, it is simply that it is an ostensible (distinctly un-free) “market” economy. A free market, in which government does not “restrain” corporate power, would not be fundamentally different, the explanation goes – indeed, many argue it would only be worse.
3.1: The Mythology of the “Progressive” Era
We will now look to history to explain the dubious bases of the interventionist theory, for it is partly the fault of lazy or ideologically motivated American historians that certain assumptions and claims of questionable veracity have become embedded in popular thought. In particular, the mythology of the so-called “Progressive Era” and its corresponding theory of markets are foundational to interventionist theory. This mythology essentially places the theory in a historical setting, It holds that the beginning of the 20th century was characterized by the unchecked and seemingly unrestrainable growth of corporations, by the monopolization of industries by big players and by mergers, and that it was only in the face of this grim reality that government stepped in to regulate the economy. It was thanks to government policy, the mythology goes, particularly under progressive hero Theodore Roosevelt, that these corporations were brought under control and prevented from acquiring monopoly control over their industries and eventually total domination of the economy and the society. As my use of the term ‘mythology’ implies, this is simply not true. And yet this is the narrative that the orthodoxy of historians gave to the era without bothering to prove it, to themselves or their readers; it was simply taken for granted. And thereafter it was repeated by other who naturally took it for granted that the sources they were repeating had taken the trouble to establish the truth of their assumptions before presenting them as facts. And so on, down the line, the narrative was repeated for so long that it became an accepted ‘truth’, and therefore a systemic error.
The truth is that what few genuine efforts at reform there were, were motivated by the need to control dissent by granting a few concessions without allowing any fundamental changes. Howard Zinn describes this tactic of appeasement, quoting Wiebe:
The panic of 1907, as well as the growing strength of the Socialists, Wobblies, and trade unions, speeded the process of reform. According to Wiebe: “Around 1908 a qualitative shift in outlook occurred among large numbers of these men of authority. . . .” The emphasis was now on “enticements and compromises.” It continued with Wilson, and “a great many reform-minded citizens indulged the illusion of a progressive fulfilment.”
Meanwhile, a majority of legislation was, as ever, composed with the interests of corporations and privileged parties in mind. Richard Hofstadter writes of the President who presided over a significant part of this era:
The advisers to whom Roosevelt listened were almost exclusively representatives of industrial and finance capital—men like Hanna, Bacon, and George W. Perkins of the House of Morgan, Elihu Root, Senator Nelson W. Aldrich . . . and James Stillman of the Rockefeller interests.
Similarly, James Weinstein writes of the era that while the “original impetus” for reforms supposedly came from radicals and protestors, there was nonetheless “a conscious and successful effort to guide and control the economic and social policies of federal, state, and municipal governments by various business groupings in their own long-range interest,” and that, “particularly on the federal level, few reforms were enacted without the tacit approval, if not the guidance, of the large corporate interests.” At no time has the character of government, or its interventions in the economy, differed from this.
Gabriel Kolko has written a very detailed account of the Progressive Era with an eye to correcting the its myths. In The Triumph of Conservatsm, Kolko sets out a wealth of research and information, which he uses to examine, critically and empirically, various claims and assumptions about what happened in the economy during the period under examination. Using the public records of letters, meetings, statements, speeches, books, and so on, he also provides ample context for events and for legislation, showing which individuals and institutions were responsible for writing and enacting particular legislation, which rallied behind it, and their publicly and privately stated reasons. Among other things, this record shows open and prolific communication between the President (and more generally the Executive Branch) and executives of some of America’s wealthiest businesses, communication which demonstrates the eagerness of lawmakers to ensure their policies were satisfactory to big business.
It is seen throughout Kolko’s book that movements for regulation were often initiated and led by the very industries which were to be regulated. Lightbulb manufacturers desired lightbulb regulation, bankers desired banking legislation, and so on. The reason for this can be seen in the way markets really act; they are competitive and subject to innovation and flux. In order to continue making profits, a business has to consistently offer a better product for cheaper than the competition; they have to give customers reason to continue to buy from them rather than any one of a large range of alternatives, they have to innovate. To hear Progressive rhetoric, you would think profit was automatic, that large companies need only exist to exert a gravitational force on the economy and once they reach a critical mass everything falls into their orbit. In reality, at any size corporations may be put out of business by a skilful competitor or a changing market, and it was this, that a fair market was not easy and advantageous to entrenched interests, which prompted the move towards ever more regulation. Kolko writes, the “dominant tendency in the American economy at the beginning of this century was toward growing competition,” which was “unacceptable to many key businesses and financial interests.” The merger movement, which we shall return to, was “to a large extent a reflection of voluntary, unsuccessful business efforts to bring irresistible competitive trends under control.” Note, this is the opposite of the interventionist explanation. In other words, the government intervened not because corporations using legitimate means could achieve monopoly control but because they couldn’t.
As Kolko explains, “business control over politics rather than political regulation of the economy [is] the significant phenomenon of the Progressive Era,” and provided the means for what Kolko calls “political capitalism” which is “the utilization of political outlets to attain conditions of stability, predictability, and security -to attain rationalization- in the economy.” Rationalization, in this context, is “the organization of the economy and the larger political and social spheres in a manner that will allow corporations to function in a predictable and secure environment permitting reasonable profits over the long run.” Additionally, federal regulation served as a bulwark against state legislation and “the democratic ferment that was nascent in the states,” which posed a special risk because the states were “far more responsible to the more radical, genuinely progressive local community.” In sum, the market is naturally the enemy of entrenchment and concentration, of easy money, and lazy businessmen; so the greedy corporate class turned to government to render the market controllable, predictable, simple, safe and profitable. Profitable to themselves rather than others. This is a profoundly and inherently centralizing program.
To return to the merger movement, like the potential for monopoly, it took on a greatly inflated importance in subsequent accounts as it was seen as further evidence of the trend in the economy to concentration and business gigantism. Mergers were supposedly one of the methods by which big businesses could dominate industries without government assistance. The facts tell a different story, as we shall see. Of course the intention of the merger movement was to achieve greater concentration, but the impetus for this attempt was the fact that such concentration had not been achieved by other means, that the reality of the economy defied attempts at dominance by any one organization or group of organizations. And –what’s more– it did not achieve its goals.
The extent of concentration is shown by the following:
Of the nine manufacturing industries with a product value of $500 million and up in 1909, only one, the iron and steel industry, had less than 1,000 establishments, and the exception had 446. In the thirty-nine industries with products valued at $100-500 million, only three had less than one hundred establishments.
As to the efficacy of the mergers themselves, Kolko collates the following data:
Forty-eight pre-World War I manufacturing mergers studied by the National Industrial Conference Board had a nominal return on their net worth in 1903-1910 averaging 5.8 per cent—no greater than the average to other firms. Arthur S. Dewing, studying thirty-five mergers of five or more firms in existence at least ten years before 1914, discovered...the earnings of the pre-merger firms were about one-fifth greater than the ten-year average profits of the new consolidation. Promoter estimates of expected ten-year earning turned out to be about twice the actual performance.
Another study by Dewing reveals that heavy fixed charges on the basis of expected earnings, administrative difficulties, and continued competition caused ten mergers to earn an average of 65 per cent of their preconsolidation profits.
Shaw Livermore, in a study seeking to defend the success of 328 mergers formed during 1888-1905, nevertheless was forced to conclude that only 49 per cent were “successes” in the sense that their rate of earnings compared favorably after 1918 to other companies in their field. Forty per cent failed altogether, and 11 per cent limped along at lower than average profit levels.
The inescapable conclusion, Kolko writes, “is that mergers were not particularly formidable and successful, and surely were incapable of exerting control over competitors within their own industries.” That this result is so contrary to what the interventionist theory would predict is partially because the assumption, then popular, that the larger the company the greater its power for winning business and dominating markets, turns out to be not just overly simplistic but generally false. As the publication Iron Age noted in 1908, “mere bulk, whether of capital or of production, is not, per se, an element of strength...”
“Some of the new plants are better equipped, carry less dead weight of unproductive assets and can produce more cheaply per unit of output than the consolidations can. So far as can be judged, the great industrial aggregations, instead of discouraging competition, have rather encouraged it.”
Having failed to achieve the desired degree of concentration through voluntary, private means, big business looked to the government for a political solution to the ‘instability’ of the market. Then as now, politicians relied on the patronage and donations of the wealthy to fund their election campaigns, so it was not especially difficult for those bankrolling the party to get an audience with the President. Roosevelt’s opening address to Congress was carefully written to appease this constituency. He gave a draft to George Perkins, a partner of J. P. Morgan, for comment. He then also told Douglas Robinson, another business associate, he would “in strict secrecy let you show such parts of it as you think best to prominent men from whom we think we can get advantageous suggestions or who may state objections….” If it had contained the least bit that was unacceptable to “prominent men” in its first draft, it certainly didn’t when he came to deliver it:
“It is not true that as the rich have grown richer the poor have grown poorer…. The captains of industry who have driven the railway systems across this continent , who have built up our commerce, who have developed our manufactures, have on the whole done great good to our people.”
And yet, Roosevelt came to be part of the Progressive myth. He has been called ‘the trust buster’ – though he only initiated action against trusts on a couple of occasions and was generally malleable to the trusts interests, the public perception (subsequently and uncritically adopted by historians) was that he must be breaking up trusts left and right. This perception arose not because anybody actually heard of specific instances where this happened, for the most part there were none; it was just the impression that one got. Perhaps we have grown more cynical over the last century, but I hope we now understand that politics is the art of giving a carefully curated impression to the public whilst pursuing ones actual agenda.
What was the reality of Roosevelt’s relation to the corporate giants? One informative example is the agreement he came to with Judge Gary of US Steel, agreeing that US Steel would be immune from prosecution if it complied with investigation. Since the Bureau of Corporations, which was to conduct the investigation, could compel US Steel to comply and hand over records, this was quite simply a gift on Roosevelt’s part. Similar arrangements were also made with International Harvester and Standard Oil, and ultimately served to make the Bureau a shield behind which favoured companies could protect themselves from state and congressional investigation and prosecution.
Perhaps when it is realized that the government has not acted to restrain corporate power in the past, more people will reconsider the possibility it will do so in the future. At any rate, the facts of the Progressive Era are unambiguous, whatever the myth.
3.2 -- The Political Means
I have borrowed this phrase, the 'political means', from Franz Oppenheimer, who described two ways of acquiring wealth: there is the economic means, through productivity and trade, and there is the political means, through force. As we shall see, the State is the organization of the political means of acquiring wealth; it is a channel for the orderly and systematic predation of private property. If we were to collate here every instance of force being used to obtain wealth, we would be compelled to write a very large book on the subject, so we will have to choose some key examples. For the beginnings of such a book, however, one may look to Kevin Carson’s Studies In Mutualist Political Economy.
3.3 -- Primitive Accumulation
To begin with, it is worth noting that the political economies of countries like Australia and the United States, colonial possessions, were born in blood, created by force, when these huge continents were taken from the native populations. From then on, the land was thought to belong to the State, and while some of the better off ordinary people, members of the masses, were allowed to purchase land to cultivate, the State always stood ready to give generously to friends, favoured persons and business interests. These people did not have to work the land to legitimize their claims but could claim absentee ownership over millions of acres due solely to the force of the State behind them.
In his history of the United States, Howard Zinn recounts, “under Governor Benjamin Fletcher, three-fourths of the land in New York was granted to about thirty people. He gave a friend a half million acres for a token annual payment of 30 shillings. Under Lord Cornbury in the early 1700s, one grant to a group of speculators was for 2 million acres.” This is barely to scrape the surface, but it gives you an idea of the nature and scale of the pillaging that took place in every State in the union and every colonial possession of the British crown.
This is contrary to the natural principles on which a truly free market would have emerged. Though the governors of these ‘new’ lands often looked to Locke, they certainly did not heed is concept of property. According to Locke, man (or woman, a human) owns that which they alter by their labour; the lumber which they cut down and the field which they sow. It is by the act of government that such an aberration as absentee ownership of massive tract of land exists; and it is on this basis that many fortunes have grown. Contrast these extravagant claims with the very reasonable belief of freed slaves after the war that they were to receive “forty acres and a mule,” a phrase that became famous. They were certainly owed that, and much more. And as they said, they were quite capable of taking care of themselves, contrary to the claims of racist Southerners, if only they had land, without which nobody could sustain themselves. Of course, the forty acres never came, since the powerful interests in the South with the tacit (and sometimes overt) support of the North preferred to keep them helpless, poor, and dependent on and compelled to sell their labour to white land owners for wages. This episode of American history is quite shameful enough before you realize that parcels of land in the millions of acres were given to well-connect white men without thought, and the illegitimate 5 millions acre holding of one of these well-to-do plutocrats could have sustained 125,000 freed slaves and their families, granting them independence and the chance to increase their own wealth by their labour.
3.3.1 -- The Importance of Primitive Accumulation
To fully understand the significance of enclosure and the political occupation of land, we must remember the foundational myth of capitalist apologetics. In describing the relationship between labourers and the wealthy capitalists who employ them, defenders of capitalism usually explain that since the one man owns property, and the other man is in need of property to work, they reach a mutually advantageous agreement. The propertied man is doing the worker a service by providing him an opportunity greater than the alternatives available to him. The problem with this story, of course, is that it takes the distribution of property as a given, and does not bother itself about how it came to be that a few men possessed all the property while most men possessed none. The analysis is correct, if we ignore this question; assuming the distribution of property is a natural occurrence, then the arrangement between worker and boss is indeed just. But nothing could be further from the truth.
In critically examining this fact, Oppenheimer showed that exploitation could not have arisen in a free society by means of a market, and not force. A more extensive discussion can be found in Kevin Carson’s Studies In Mutualist Political Economy, but Oppenheimer’s proof is as follows:
All teachers of natural law, etc., have unanimously declared that the differentiation into income-receiving classes and propertyless classes can only take place when all fertile lands have been occupied. For so long as man has ample opportunity to take up unoccupied land, "no one," says Turgot, "would think of entering the service of another"; we may add, "at least for wages, which are not apt to be higher than the earnings of an independent peasant working an unmortgaged and sufficiently large property"
“But on examination,” Carson explains “Oppenheimer pointed out ... [that] the land could not have been occupied by natural and economic means. Even in the twentieth century, and even in the Old World, the population was not sufficient to bring all arable land into cultivation.” Instead, the land was occupied politically – by government simply creating titles to occupied land and enforcing them by force. The motivations for this, like any government intervention, are not hard to discover. Adam Smith noted that a “problem” for capitalists in settler societies was that plentiful land meant that labour was scarce, as people preferred to work for themselves on their own land.
And it goes without saying, of course, that slavery is the most sinister, overt and extensive use of force to obtain wealth, in which hundreds of thousands were robbed of their autonomy and the fruits of their entire lifetime of hard labour. It was not only through land grants but upon the bent and broken backs of the slave population that the Southern aristocracy gained its wealth. After the Civil War, however, they looked to the example of the North:
Woodward says: “By means of appropriations, subsidies, grants, and bonds such as Congress had so lavishly showered upon capitalist enterprise in the North, the South might yet mend its fortunes—or at any rate the fortunes of a privileged elite.” These privileges were sought with the backing of poor white farmers, brought into the new alliance against blacks. The farmers wanted railroads, harbor improvements, flood control, and, of course, land—not knowing yet how these would be used not to help them but to exploit them.
For example, as the first act of the new North-South capitalist cooperation, the Southern Homestead Act, which had reserved all federal lands—one-third of the area of Alabama, Arkansas, Florida, Louisiana, Mississippi—for farmers who would work the land, was repealed. This enabled absentee speculators and lumbermen to move in and buy up much of this land. (Zinn, quoting C. Vann Woodward, Reaction and Reconstruction.)
3.4: Public Spending for Private Gain
Then there was the vast investments the government made in infrastructure such as railroads, investments of money and land given to private companies who set up railroads and other infrastructure to use for profit. The representatives of the railroad companies travelled to Washington and to state capitals “armed with money, shares of stock, free railroad passes,” to buy the favour of politicians. “Between 1850 and 1857 they got 25 million acres of public land, free of charge, and millions of dollars in bonds—loans—from the state legislatures.” And “in Wisconsin in 1856, the LaCrosse and Milwaukee Railroad got a million acres free by distributing about $900,000 in stocks and bonds to fifty-nine assemblymen, thirteen senators, the governor.” Yet again, the government simply took land and gave it to the rich; they simply invented money in the form of bonds and gave it to the rich; and as I said, by this effort they enabled these people to gain a significant edge through the possession of the infrastructure of trade and therefore considerable power to affect business by giving favourable prices to corporate entities who could return favours and shutting out poorer traders.
3.5 -- Tariffs (Protectionism With A Side of Xenophobia)
The Morrill Tariff was passed by Congress in 1861. This “made foreign goods more expensive, allowed American manufacturers to raise their prices, and forced American consumers to pay more.” The supposed “need” for tariffs is always the existence of competition, that great leveller in the economy, which shows up from time to time in the form of cheaper prices for products than entrenched interests can afford to sell at. These cheaper prices benefit consumers (the poor masses) and usually new, smaller businesses (the middle class) at the expense of corporations; that is, competition and cheaper prices have the effect of lowering the cost of living while promoting the movement of capital from the richest members of society to poorer members. This frequently prompts corporate interests to lobby for, and government to enact, tariffs, which prevent this from happening and force people to pay the inflated prices of privileged businesses. The Morrill Tariff is just one example, though; the International Trade Commission lists 12,000 specific tariffs on imports to America. This long list of anti-competitive tariffs raise the price of many essential products, including most vegetables, most auto parts, shoes, and tobacco; while the first three tariffs are about 20%, tobacco is a whopping 300%. Andrew Carnegie made his fortune selling steel at uncompetitive prices with the help of Congress who, by a high tariff, kept his competitors out of the country. And Grover Cleveland appointed a millionaire as Secretary of the Navy who built a “Steel Navy” from Carnegie’s steel at artificially high prices.
3.6 -- Legal Discrimination/Bias
According to Zinn, in the thirty years leading up to the Civil War, “the law was increasingly interpreted in the courts to suit the capitalist development of the country. Studying this, Morton Horwitz (The Transformation of American Law) points out that the English commonlaw was no longer holy when it stood in the way of business growth.”
Mill owners were given the legal right to destroy other people’s property by flood to carry on their business. The law of “eminent domain” was used to take farmers’ land and give it to canal companies or railroad companies as subsidies. Judgments for damages against businessmen were taken out of the hands of juries, which were unpredictable, and given to judges. Private settlement of disputes by arbitration was replaced by court settlements, creating more dependence on lawyers, and the legal profession gained in importance...
Contract law was supposed to be impartial, but in practice this was not often the case. Horwitz gives this example: “the courts said that if a worker signed a contract to work for a year, and left before the year was up, he was not entitled to any wages, even for the time he had worked. But the courts at the same time said that if a building business broke a contract, it was entitled to be paid for whatever had been done up to that point.”
3.7 -- Subsidies (Free Money for Rich People)
Next to tariffs, subsidies are the State’s favoured means of transferring wealth to favoured companies. The Central Pacific Railroad company spent $200,000 in Washington on bribes, and was rewarded with 9 million acres and $24,000,000 in bonds. Meanwhile, the workers who constructed their railway line were paid $1 or $2 a day. The Union Pacific received 12 million acres and $27,000,000 in bonds. In 1887, President Cleveland vetoed an appropriations bill to provide $100,000 in relief to Texas farmers to help them buy seeds during a drought. He said that such support “encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character.” Oddly enough, he did not hold the wealthy to the same standard. That same year he paid out wealthy bond holders at $28 over their $100 worth, amounting to a gift of $45 million. As he presciently said, “a transfer of executive control from one party to another does not mean any serious disturbance of existing conditions.”
3.8 -- Human Bondage
And we mustn’t forget the 13th amendment, either; this proclaimed an end to slavery with one conspicuous exception: it didn’t apply to anyone who had committed a crime. It is a better known fact today that the government can invent crimes and criminalize peaceful people, giving it an effective monopoly on the institution of slavery. This was made use of in the 19th century, when thousands of poor black and white men who had been incarcerated were contracted out in gangs to private companies, building roads and other infrastructure.
3.9 -- The Military Industrial Complex
Nor can we forget American imperialism, and that it was driven by the need for foreign markets which American businesses could sell their products to, as production increasingly exceeded consumption. An additional function is to secure access to resources for American business – the Middle East may look different today if stability in the region hadn’t been repeatedly sacrificed for American access to oil. Or that wealthy business interested and friends of government were awarded the lucrative contracts to manufacture American arms, ammunition, transport, and all other military necessaries at prices advantageous to business, such as Carnegie providing all the steel for the Navy at inflated prices.
4. The Free Market Farce
We come again to the concept of conflationism. Throughout modern political history, it has always been common for politicians to invoke “free markets” as a goal or a value. Needless to say, this is never accompanied by genuine belief or action. Of course, this kind of empty posturing should be roundly criticized and resisted, but too often opposition to politicians of this stripe blurs the distinction between what they advocate and what they merely claim to advocate. Criticisms, for example, often make repeated reference to “free markets,” and although these references are usually mocking in tone it is often unclear, sometimes deliberately ambiguous, as to whether the notion of a free market is being mocked or rather the claim that their policies have any relation to a free market. Take two examples of how a criticism may be worded. One: ‘x politician’s claims to advocate a free market a farcical; what he actually advocates is a strong pro-corporate state.’ And two: ‘x politicians “free market” policies only advance the interests of the corporate class.’ The first example is explicitly clear. The second example can be interpreted to have the same meaning, and yet is phrased in exactly the same way as if it were a criticism of actual free market policies except for the addition of quotation marks; and the function of the quotation marks is simply to attach derision and doubt to actual free markets. Again, the second serves the dual purposes of libertarian socialist dogma: while criticizing pro-corporate policies, it also manages to impugn the completely antithetical concept of a free market. The result of this deliberately obtuse language is to further associate the two and, thus, the conflationist fallacy that the actually existing, heavily regulated, pro-corporate economy is also somehow a free market, or at the very least that the former somehow discredits the latter.
4.1-- Neoliberalism
The term ‘neoliberalism’ is rarely defined in the scholarly literature which discusses it, which is not the usual pattern when concepts with no clear consensus about their meaning are discussed in journal articles, but this loose standard of scholarship is, again, suited to the correspondingly lazy caricatures it discusses. Nonetheless, we can identify one common use of the word which is heavily rooted in conflationism. In political science courses, it is often referred to as something like “the free market ideology popularized by Reagan and Thatcher in the 1980’s,” which is, yet again, an incoherent definition as it is based on the false premise that the ideology of Reagan and Thatcher was actually “a free market ideology.” It wasn’t. But this is more or less how the word is understood – it is the “free market” ideology of the ruling class.
And that being the case, it is easy to render the term coherent with a rudimentary understanding of the actual policies and ideology which prop up the ruling class, to which the scholars of neoliberalism intend to refer despite their misstep. And as above, this would include the fact that this ideology is often disguised by rhetoric about free markets; an intelligent definition would simply be clear about the distinction between a free market ideology and an anti-free market ideology propagandistically presented as a free market ideology, and thereby avoid conflationism, incoherence, and ultimately irrelevance to serious scholarship.
An informative definition would go something like the following: Neoliberalism refers to the predominant ideology of establishment politicians and the ruling class generally. What this ideology entails may be concluded from their policies. Neoliberalism, then, is a distinctly pro-corporate ideology. While its exponents often portray their agenda in terms of “free markets,” it’s clear that the actual extent of free market policies is limited and conditional. That is, elements of a free market are only left in tact if they are considered benign to corporate interests; they are imposed if they are to the advantage of corporate interests; and they are militantly suppressed if they run counter to corporate interests or subject them to genuine competition or reform. If one assumes that a free market is predominantly beneficial to corporate interests, it would follow that neoliberalism is for the most part a generally free market ideology. The facts, on the other hand, suggest otherwise; the actual policies lean heavily towards systematic state control and manipulation of markets and intervention on behalf of privileged corporations.
To be continued