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<html>
<HEAD>

<TITLE> I.1 Isn't libertarian socialism an oxymoron?</TITLE>
</HEAD>
<BODY>

<h1>I.1 Isn't libertarian socialism an oxymoron?</h1>
<p>
In a word, no. This question is often asked by those who have come 
across the so-called "libertarian" right. As discussed in 
<a href="secA1.html#seca13">section 
A.1.3</a>, the word <i>"libertarian"</i> has been used by anarchists for far 
longer than the pro-free market right have been using it. Indeed, 
outside of North America <i>"libertarian"</i> is still essentially used 
as an equivalent of <i>"anarchist"</i> and as a shortened version of 
<i>"libertarian socialist."</i> 
<p>
This in itself does not, of course, prove that the term <i>"libertarian 
socialist"</i> is free of contradiction. However, as we will show below, 
the claim that the term is self-contradictory rests on the assumption 
that socialism requires the state in order to exist and that socialism 
is incompatible with liberty (and the equally fallacious claim that 
capitalism is libertarian and does not need the state). This assumption, 
as is often true of many objections to socialism, is based on a 
misconception of what socialism is, a misconception that many 
authoritarian socialists and the state capitalism of Soviet Russia 
have helped to foster. In reality it is the term <i>"state socialism"</i> 
which is the true oxymoron. 
<p>
Sadly many people take for granted the assertion of many on the right 
and left that socialism equals Leninism or Marxism and ignore the rich 
and diverse history of socialist ideas, ideas that spread from communist
and individualist-anarchism to Leninism. As Benjamin Tucker once noted,
<i>"the fact that State Socialism . . . has overshadowed other forms of
Socialism gives it no right to a monopoly of the Socialistic idea."</i> 
[<b>Instead of a Book</b>, pp. 363-4] Unfortunately, many on the left 
combine with the right to do exactly that. Indeed, the right (and, of
course, many on the left) consider that, by definition, <i>"socialism"</i> 
<b>is</b> state ownership and control of the means of production, along 
with centrally planned determination of the national economy (and 
so social life). This definition has become common because many Social 
Democrats, Leninists, and other statists <b>call</b> themselves socialists. 
However, the fact that certain people call themselves socialists does 
not imply that the system they advocate is really socialism (Hitler, 
for example, called himself a <i>"National Socialist"</i> while, in practice, 
ensuring and enhancing the power and profits of capitalists). We need 
to analyse and understand the systems in question, by applying critical, 
scientific thought, in order to determine whether their claims to the 
socialist label are justified. As we will see, to accept the above 
definition one has to ignore the overall history of the socialist 
movement and consider only certain trends within it as representing 
the movement as a whole. 
<p>
Even a quick glance at the history of the socialist movement indicates
that the identification of socialism with state ownership and control is
not common. For example, Anarchists, many Guild Socialists, council
communists (and other libertarian Marxists), as well as followers of Robert
Owen, all rejected state ownership. Indeed, anarchists recognised that
the means of production did not change their form as capital when the
state took over their ownership nor did wage-labour change its nature
when it is the state employing labour (for example, Proudhon argued that
if the <i>"State confiscate[d] the mines, canals and railways"</i> it would
only <i>"add to monarchy, and [create] more wage slavery."</i> [<b>No Gods, No
Masters</b>, vol. 1, p. 62]). For anarchists state ownership of capital 
is not socialistic in the slightest but rather a tendency <b>within,</b> 
not <b>opposed</b> to, capitalism just as the growth of larger and larger 
companies does not imply in any way a tendency to socialism (regardless 
of what Lenin or Marx argued -- see <a href="secH3.html#sech33">
section H.3.3</a> for more on this). 
Indeed, as Tucker was well aware, state ownership turned <b>everyone</b> 
into a proletarian (bar the state bureaucracy) -- hardly a desirable 
thing for a political theory aiming for the end of wage slavery!
<p>
So what <b>does</b> socialism mean?  And is it compatible with libertarian
ideals? What do the words <i>"libertarian"</i> and <i>"socialism"</i> actually mean?
It is temping to use dictionary definitions as a starting point, 
although we should stress that such a method holds problems as different 
dictionaries have different definitions and the fact that dictionaries
are rarely politically sophisticated. Use one definition, and someone 
else will counter with one more to their liking. For example, <i>"socialism"</i> 
is often defined as <i>"state ownership of wealth"</i> and <i>"anarchy"</i> as <i>"disorder."</i> 
Neither of these definitions are useful when discussing political ideas. 
Therefore, the use of dictionaries is not the end of a discussion
and often misleading when applied to politics. 
<p>
With that warning, what do we find?
<p>
<b>Webster's New International Dictionary</b> defines a libertarian as
<i>"one who holds to the doctrine of free will; also, one who upholds the
principles of liberty, esp. individual liberty of thought and action."</i> 
As we discussed earlier (see <a href="secB1.html">section B.1</a>, for example), capitalism denies 
liberty of thought and action within the workplace (unless one is the 
boss, of course). Therefore, <b>real</b> libertarian ideas <b>must</b> be 
based on workers self-management, i.e. workers must control and
manage the work they do, determining where and how they do it and 
what happens to the fruit of their labour, which in turn means 
the elimination of wage labour. The elimination of wage labour is the 
common theme of socialism (in theory at least, anarchist argue that 
state socialism does not eliminate wage labour, rather it universalises 
it). Or, to use Proudhon's words, the <i>"abolition of the proletariat."</i> 
[<b>Selected Writings of Pierre-Joseph Proudhon</b>, p. 179] It implies a 
classless and anti-authoritarian (i.e. libertarian) society in which 
people manage their own affairs, either as individuals or as part of 
a group (depending on the situation). In other words, it implies 
self-management in all aspects of life -- including work. It has 
always struck anarchists as somewhat strange and paradoxical (to say
the least) that a system of <i>"natural"</i> liberty (Adam Smith's term, misappropriated by supporters of capitalism) involves the vast 
majority having to sell that liberty in order to survive. 
<p>
According to the <b>American Heritage Dictionary</b> <i>"socialism"</i> is <i>"a social 
system in which the producers possess both political power and the means 
of producing and distributing goods."</i> This definition fits neatly with
the implications of the word <i>"libertarian"</i> indicated above. In fact, it 
shows that socialism is <b>necessarily</b> libertarian, not statist. For if 
the state owns the workplace, then the producers do not, and so they will
not be at liberty to manage their own work but will instead be subject to
the state as the boss. Moreover, replacing the capitalist owning class
by  state officials in no way eliminates wage labour; in fact it makes it
worse in many cases. Therefore <i>"socialists"</i> who argue for nationalisation 
of the  means of production are <b>not</b> socialists (which means that the 
Soviet Union and the other 'socialist"</i> countries are <b>not</b> socialist nor
are parties which advocate nationalisation socialist). 
<p>
Indeed, attempts to associate socialism with the state misunderstands
the nature of socialism. It is an essential principle of socialism that
(social) inequalities between individuals must be abolished to ensure
liberty for all (<b>natural</b> inequalities cannot be abolished, nor do 
anarchists desire to do so). Socialism, as Proudhon put it, <i>"is egalitarian
above all else."</i> [<b>No Gods, No Masters</b>, vol. 1, p. 57] This applies 
to inequalities of power as well, especially to <b>political</b> power. And
any hierarchical system (particularly the state) is marked by inequalities
of power -- those at the top (elected or not) have more power than 
those at the bottom. Hence the following comments provoked by the
expulsion of anarchists from the social democratic Second International:
<p><blockquote>
<i>"It could be argued. . . that we [anarchists] are the most logical and
most complete socialists, since we demand for every person not just
his entire measure of wealth of society, but also his portion of social
power, which is to say, the real ability to make his influence felt,
along with that of everybody else, in the administration of public
affairs."</i> [<b>No Gods, No Masters</b>, vol. 2, p.20]
</blockquote><p>
The election of someone to administer public affairs <b>for you</b> is not
having a portion of social power. It is, to use of words of Emile
Pouget (a leading French anarcho-syndicalist) <i>"an act of abdication,"</i> 
the delegating of power into the hands of a few. [<b>Op. Cit.</b>, p. 67] 
This means that <i>"<b>[a]ll political power inevitably creates a privileged
situation</b> for the men who exercise it. Thus it violates, from the
beginning, the equalitarian principle."</i> [Voline, <b>The Unknown 
Revolution</b>, p. 249]
<p>
From this short discussion we see the links between libertarian and
socialism. To be a true libertarian requires you to support workers'
control otherwise you support authoritarian social relationships. To
support workers' control, by necessity, means that you must ensure
that the producers own (and so control) the means of producing and 
distributing the goods they create (i.e. they must own/control what 
they use to produce goods). Without ownership, they cannot truly control 
their own activity or the product of their labour. The situation where 
workers possess the means of producing and distributing goods is
socialism. Thus to be a true libertarian requires you to be a
socialist.
<p>
Similarly, a true socialist must also support individual liberty of
thought and action, otherwise the producers "possess" the means 
of production and distribution in name only. If the state owns the 
means of life, then the producers do not and so are in no position
to manage their own activity. As the experience of Russia under
Lenin shows, state ownership soon produces state control and the
creation of a bureaucratic class which exploits and oppresses the 
workers even more so than their old bosses. Since it is an essential 
principle of socialism that inequalities between people must be 
abolished in order to ensure liberty, it makes no sense for a 
genuine socialist to support any institution based on inequalities 
of power. And as we discussed in <a href="secB2.html">section B.2</a>, 
the state is just such 
an institution. To oppose inequality and not extend that opposition
to inequalities in power, especially <b>political</b> power, suggests
a lack of clear thinking. Thus to be a true socialist requires you 
to be a libertarian, to be for individual liberty and opposed to 
inequalities of power which restrict that liberty.
<p>
Therefore, rather than being an oxymoron, <i>"libertarian socialism"</i> 
indicates that true socialism must be libertarian and that a libertarian
who is not a socialist is a phoney. As true socialists oppose wage 
labour, they must also oppose the state for the same reasons. Similarly,
libertarians must oppose wage labour for the same reasons they must 
oppose the state.
<p>
So, libertarian socialism rejects the idea of state ownership and 
control of the economy, along with the state as such. Through workers'
self-management it proposes to bring an end to authority, exploitation,
and hierarchy in production. This in itself will increase, not reduce,
liberty. Those who argue otherwise rarely claim that political democracy
results in less freedom than political dictatorship.
<p>
One last point. It could be argued that many social anarchists smuggle 
the state back in via communal ownership of the means of life. This, 
however, is not the case. To argue so confuses society with the state. 
The communal ownership advocated by collectivist and communist 
anarchists is not the same as state ownership. This is because it 
is based on horizontal relationships between the actual workers and 
the "owners" of social capital (i.e. the federated communities as a 
whole, which includes the workers themselves we must stress), not vertical 
ones as in nationalisation (which are between state bureaucracies and its
"citizens"). Also, such communal ownership is based upon letting 
workers manage their own work and workplaces. This means that it is
based upon, and does not replace, workers' self-management. In addition, 
all the members of a participatory anarchist community fall into one of 
three categories:  
<p><ol>
	(1) producers (i.e. members of a collective or self-employed 
	    artisans);<br> 
	(2) those unable to work (i.e. the  old, sick and so on, who 
	    <b>were</b> producers); or <br>
	(3) the young (i.e. those who <b>will be</b> producers).
</ol><p>
Therefore, workers' self-management within a framework of communal
ownership is entirely compatible with libertarian and socialist ideas
concerning the possession of the means of producing and distributing 
goods by the producers themselves. 
<p>
Hence, far from there being any contradiction between libertarianism 
and socialism, libertarian ideals imply socialist ones, and vice versa. 
As Bakunin argued in 1867:
<p><blockquote>
<i>"We are convinced that freedom without Socialism is privilege and 
injustice, and that Socialism without freedom is slavery and 
brutality."</i> [<b>Bakunin on Anarchism</b>, p. 127] 
</blockquote><p>
History has proven him correct. 
<p>
<a name="seci11"><h2>I.1.1 Didn't Ludwig von Mises's <i>"calculation argument"</i> prove that 
	socialism can not work?</h2>
<p>
In 1920, the right-wing economist Ludwig von Mises declared socialism 
to be impossible. A leading member of the <i>"Austrian"</i> school of economics, 
he argued this on the grounds that without private ownership of the means 
of production, there cannot be a competitive market for production goods 
and without a market for production goods, it is impossible to determine 
their values. Without knowing their values, economic rationality is 
impossible and so a socialist economy would simply be chaos -- <i>"the 
absurd output of a senseless apparatus."</i> [<i>"Economic Calculation in the 
Socialist Commonwealth"</i>, in <b>Collectivist Economic Planning</b>, F.A von 
Hayek (ed.), p.104] While applying his <i>"calculation argument"</i> to Marxist 
ideas of a future socialist society, his argument, it is claimed, is 
applicable to <b>all</b> schools of socialist thought, including libertarian 
ones. It is on the basis of his arguments that many right-wingers claim 
that libertarian (or any other kind of) socialism is impossible in 
principle.
<p>
As David Schweickart observes <i>"[i]t has long been recognised that von 
Mises's argument is logically defective. Even without a market in 
production goods, their monetary values can be determined."</i> [<b>Against 
Capitalism</b>, p. 88] In other words, economic calculation based on prices 
is perfectly possible in a libertarian socialist system. After all, to 
build a workplace requires so many tonnes of steel, of many bricks, so 
many hours of work and so on. If we assume a mutualist (i.e. market 
socialist/co-operative) libertarian socialist society, then the prices 
of these goods can be easily found as the co-operatives in question 
would be offer their services on the market. These commodities would 
be the inputs for the construction of production goods and so the 
latter's monetary values can be found (this does not address whether 
monetary values accurately reflect real costs, an issue we will discuss 
in the <a href="secI1.html#seci12">next section</a>). 
<p>
Ironically enough, von Mises <b>did</b> mention the idea of such a 
mutualist system in his initial essay. He wrote of a system 
in which <i>"the 'coal [miners'] syndicate' provides the 'iron 
[workers'] syndicate'"</i> with goods and argued that <i>"no price
can be formed, except when both syndicates are the owners of
the means of production employed in their business"</i> (which
may come as a surprise to transnational companies whose
different workplaces sell each other their products!) Such
a system is dismissed: <i>"This would not be socialisation
but workers' capitalism and syndicalism."</i> [<b>Op. Cit.</b>, p. 112]
<p>
However, his logic is flawed. Firstly, as we noted, modern
capitalism shows that workplaces owned by the same body
(in this case, a large company) can exchange goods via the
price form. That von Mises makes such a statement indicates
well the firm basis of his argument in reality. Secondly, 
such a system may be, as von Mises states, <i>"syndicalism"</i> (at 
least a form of syndicalism, as most syndicalists were and 
still are in favour of libertarian communism, a simple fact 
apparently unknown to von Mises) but it is not capitalist as
there is no wage labour involved as workers' own and control 
their own means of production. Indeed, von Mises ignorance
of syndicalist thought is striking. In <b>Human Action</b> he
asserts that the <i>"market is a consumers' democracy. The
syndicalists want to transform it into a producers' 
democracy."</i> [p. 809] Most syndicalists, however, aim to
<b>abolish</b> the market and <b>all</b> aim for workers' control
of production to <b>complement</b> (not replace) consumer
choice. Syndicalists, like other anarchists, do not aim 
for workers' control of consumption as von Mises asserts.
Given that von Mises asserts that the market, in which one
person can have a thousand votes and another one, is a
<i>"democracy"</i> his ignorance of syndicalist ideas is perhaps
only one aspect of a general ignorance of reality.
<p>
Indeed, such an economy also strikes at the heart of von 
Mises' claims that socialism was <i>"impossible."</i> Given that
von Mises accepted that there may be markets, and hence
market prices, for consumer goods in a socialist economy
his claims of the impossibility of socialism seems unfounded.
For von Mises, the problem for socialism is that <i>"because no 
production-good will ever become the object of exchange, it 
will be impossible to determine its monetary value."</i> [<b>Op. Cit.</b>, 
p. 92] The flaw in his argument is clear. Taking, for example,
coal, we find that it is both a means of production and of
consumption. If a market in consumer goods is possible for
a socialist system, then competitive prices for production
goods is also possible as syndicates producing production-goods
would also sell the product of their labour to other syndicates
or communes. Thus, when deciding upon a new workplace, railway 
or house, the designers in question do have access to competitive 
prices with which to make their decisions. Nor does his argument
work against communal ownership in such a system as the commune
would be buying products from syndicates in the same way as
one part of a multi-national company can buy products from 
another part of the same company under capitalism. That goods
produced by self-managed syndicates have prices does not
imply capitalism, regardless of von Mises' claims. 
<p>
Thus economic calculation based on competitive market prices 
is possible under a socialist system. Indeed, we see examples 
of this even under capitalism. For example, the Mondragon 
co-operative complex in the Basque Country indicate that a 
libertarian socialist economy can exist and flourish. There 
is no need for capital markets in a system based on mutual 
banks and networks of co-operatives (indeed, as we argue at 
the end of <a href="secI4.html#seci48">section I.4.8</a>, 
capital markets <b>hinder</b> economic 
efficiency by generating a perverse set of incentives and 
misleading information flows and so their abolition would 
actually <b>aid</b> production and productive efficiency). 
Unfortunately, the state socialists who replied to Mises 
did not have such a libertarian economy in mind. 
<p>
In response to von Mises initial challenge, a number of economists 
pointed out that Pareto's disciple, Enrico Barone, had already, 
13 years earlier, demonstrated the theoretical possibility of a 
<i>"market-simulated socialism."</i> However, the principal attack on 
von Mises's argument came from Fred Taylor and Oscar Lange (for a 
collection of their main papers, see <b>On the Economic Theory of 
Socialism</b>, Benjamin Lippincott (ed.), University of Minnesota, 
1938). In light of their work, Frederick von Hayek shifted the 
question from theoretical impossibility to whether the theoretical
solution could be approximated in practice. Thus even von Hayek, a 
major free-market capitalist guru, seemed to think that von Mises's 
argument could not be defended.
<p>
Moreover, it should be noted that both sides of the argument accepted 
the idea of central planning of some kind or another. This means 
that many of von Mises's and von Hayek's arguments did not apply 
to libertarian socialism, which rejects central planning along with 
every other form of centralisation. This is a key point, as most 
members of the right seem to assume that "socialists" all agree 
with each other in supporting a centralised economic system. In 
other words, they ignore a large segment of socialist thought 
and history in order to concentrate on Social Democracy and 
Leninism. The idea of a network of <i>"people's banks"</i> and 
co-operatives working together to meet their common interests 
is ignored, although it has been a common feature in socialist 
thought since the time of Robert Owen. 
<p>
Nor was Taylor and Lange's response particularly convincing 
in the first place. This was because it was based far more on 
neo-classical capitalist economic theory than on an appreciation 
of reality. In place of the Walsrian <i>"Auctioneer"</i> (the <i>"god in 
the machine"</i> of general equilibrium theory which ensures that all 
markets clear) Taylor and Lange presented the Planning Authority (the 
<i>"Central Planning Board"</i>), whose job it was to adjust prices so that 
all markets cleared. Neo-classical economists who are inclined to 
accept Walrasian theory as an adequate account of a working capitalist 
economy will be forced to accept the validity of Taylor and Lange's 
version of <i>"socialism."</i> Little wonder Taylor and Lange were considered, 
at the time, the victors in the <i>"socialist calculation"</i> debate by most 
of the economics profession (with the collapse of the Soviet Union, 
this decision has been revised somewhat -- although we must point out 
that Taylor and Lange's model was not the same as the Soviet system, a 
fact conveniently ignored by commentators). 
<p>
Unfortunately, given that Walrasian theory has little bearing to 
reality, we must also come to the conclusion that the Taylor-Lange 
"solution" has about the same relevance (even ignoring its 
non-libertarian aspects, such as its basis in state-ownership, 
its centralisation, its lack of workers' self-management and so 
on). Many people consider Taylor and Lange as fore-runners of 
<i>"market socialism."</i> This is incorrect -- rather than being market 
socialists, they are in fact "neo-classical" socialists, building 
a "socialist" system which mimics capitalist economic <b>theory</b> 
rather than its <b>reality</b>. Replacing Walrus's mythical creation 
of the <i>"Auctioneer"</i> with a planning board does not really get 
to the heart of the problem! Nor does their vision of "socialism" 
have much appeal -- a re-production of capitalism with a planning 
board and a more equal distribution of money income. Anarchists 
reject such "socialism" as little more than a nicer version of 
capitalism, if that.
<p>
With the collapse of the Soviet Union, it has been fashionable to 
argue that <i>"von Mises was right"</i> and that socialism is impossible
(of course, <b>during</b> the cold war such claims were ignored as
the Soviet threat had to boosted and used as a means of social
control and to justify state aid to capitalist industry). Nothing 
could be further from the truth. As we have argued in the 
<a href="secI1.html">previous section</a> and 
elsewhere, these countries were not socialist 
at all and did not even approximate the (libertarian) socialist 
idea (which is the only true form of socialism). Obviously the 
Soviet Union and Eastern European countries had authoritarian 
<i>"command economies"</i> with central bureaucratic planning, and so 
their failure cannot be taken as proof that a decentralised, 
libertarian socialism cannot work. Nor can von Mises' and von 
Hayek's arguments against Taylor and Lange be used against a 
libertarian mutualist or collectivist system as such a system 
is decentralised and dynamic (unlike the "neo-classical" socialist 
model they proposed). Libertarian socialism of this kind did, 
in fact, work remarkably well during the Spanish Revolution in 
the face of amazing difficulties, with increased productivity and 
output in many workplaces as well as increased equality and liberty 
(see Sam Dolgoff, <b>The Anarchist Collectives</b> or Gaston Leval's 
<b>Collectives in the Spanish Revolution</b> as well as 
<a href="secI8.html">section I.8</a> of this FAQ).
<p>
Thus von Mises <i>"calculation argument"</i> does not prove that socialism is
impossible. The theoretical work of such socialists as David Schweickart
(see his <b>Against Capitalism</b> for an extensive discussion of a dynamic,
decentralised market socialist system) and others on market socialism 
shows that von Mises was wrong in asserting that  <i>"a socialist system 
with a market and market prices is as self-contradictory as is the notion 
of a triangular square."</i> Indeed, by suppressing capital markets in favour
of simple commodity production, a mutualist system will improve upon
capitalism by removing an important source of perverse incentives
which hinder long term investment and social responsibility (see 
<a href="secI4.html#seci48">section I.4.8</a>) in addition to 
reducing inequalities, increasing
freedom and improving general economic performance.
<p>
So far, most models of market socialism have not been fully libertarian, 
but instead involve the idea of workers' control within a framework of 
state ownership of capital (Engler in <b>Apostles of Greed</b> is an exception 
to this, supporting community ownership). However, as we argue in 
<a href="secH7.html">section H.7</a>, libertarian forms of market socialism are indeed possible 
and would be similar to Proudhon's mutualism. As anarchist Robert Graham
points out, <i>"Market socialism is but one of the ideas defended by Proudhon 
which is both timely and controversial. . . Proudhon's market socialism 
is indissolubly linked with his notions of industrial democracy and 
workers' self-management."</i> [<i>"Introduction"</i>, P-J Proudhon, <b>General Idea 
of the Revolution</b>, p. xxxii] His system of agro-industrial federations
can be seen as a non-statist way of protecting self-management, liberty
and equality in the face of market forces (as he argued in <b>The Principle
of Federation</b>, <i>"[h]owever impeccable in its basic logic the federal
principle may be. . . it will not survive if economic factors tend 
persistently to dissolve it. In other words, political right requires
to be buttressed by economic right"</i> and <i>"in an economic context, 
confederation may be intended to provide reciprocal security in
commerce and industry. . . The purpose of such specific federal
arrangements is to protect the citizens. . . from capitalist and
financial exploitation. . . in their aggregate they form . . .
an <b>agro-industrial federation</b>"</i> [<b>The Principle of Federation</b>,
p. 67 and p. 70]).
<p>
Indeed, some Leninist Marxists recognise the links between Proudhon 
and market socialism. For example, the unorthodox Trotskyite Hillel 
Ticktin argues that Proudhon, <i>"the anarchist and inveterate foe of 
Karl Marx. . . put forward a conception of society, which is probably 
the first detailed exposition of a 'socialist market.'"</i> [<i>"The Problem 
is Market Socialism"</i>, in <b>Market Socialism: The Debate Among 
Socialists</b>, edited by Bertell Ollman, p. 56] In addition, see 
<b>Against the Market</b> in which the author, Dave McNally, correctly 
argues that Proudhon was a precursor of the current market socialists.
Needless to say, these Leninists reject the idea of market socialism
as contradictory and, basically, not socialist (while, strangely
enough, acknowledging that the transition to Marxist-communism 
under the workers' state would use the market!).
<p>
Thus it is possible for a socialist economy to allocate resources 
using a competitive market. However, does von Mises's argument mean 
that a socialism that abolishes the market (such as libertarian 
communism) is impossible? Given that the vast majority of anarchists
seek a libertarian communist society, this is an important question.
We address it in the <a href="secI1.html#seci12">next section</a>.
<p>
<a name="seci12"><h2>I.1.2 Does Mises' argument mean libertarian communism is impossible?</h2> 
<p>
In a word, no. While the <i>"calculation argument"</i> is often used by 
right-libertarian's as <b>the</b> "scientific" basis for the argument 
that communism (a moneyless society) is impossible, it is based 
on certain false ideas of what money does and how an anarchist 
society would function without it. This is hardly surprising, 
as Mises based his theory on the "subjective" theory of value 
and the Marxist social-democratic (and so Leninist) ideas of 
what a "socialist" economy would look like. As Libertarian 
Marxist Paul Mattick correctly argued:
<p><blockquote>
<i>"However divided the old [social-democratic] labour movement 
may be by disagreements on various topics, on the question of 
socialism it stands united. Hilferding's abstract 'General-Cartel',
Lenin's admiration for the German war socialism and the
German postal service. Kautsky's eternalisation of the
value-price-money economy (desiring to do consciously what
in capitalism is performed by blind market forces). Trotsky's
war communism equipped with supply and demand features, and
Stalin's institutional economics -- all these concepts have
at their base the continuation of the existing conditions
of production. As a matter of fact, they are mere reflections
of what is actually going on in capitalist society. Indeed,
such 'socialism' is discussed today by famous bourgeois
economists like Pigou, Hayek, Robbins, Keynes, to mention
only a few, and has created a considerable literature to
which the socialists now turn for their material."</i> 
[<b>Anti-Bolshevik Communism</b>, pp. 80-1]
</blockquote><p>
Therefore, there has been little discussion of what a true 
(i.e. libertarian) communist society would be like, one that 
utterly transformed the existing conditions of production by
workers' self-management and the abolition of both the wages 
system and money. However, it is useful here to indicate 
exactly why a moneyless (i.e. truly communist) "economy" 
would work and why the <i>"calculation argument"</i> is flawed as 
an objection to it. 
<p>
Mises argued that without money there was no way a socialist economy 
would make <i>"rational"</i> production decisions. Not even von Mises denied 
that a moneyless society could estimate what is likely to be needed 
over a given period of time (as expressed as physical quantities of 
definite types and sorts of objects). As he argued, <i>"calculation <b>in 
natura</b> in an economy without exchange can embrace consumption-goods 
only."</i> [<b>Collectivist Economic Planning</b>, F.A. Von Hayek (ed.), p. 104] 
Mises' argument is that the next step, working out which productive 
methods to employ, would not be possible, or at least would not be 
able to be done <i>"rationally,"</i> i.e. avoiding waste and inefficiency. 
As he argues, the evaluation of producer goods <i>"can only be done 
with some kind of economic calculation. The human mind cannot orient 
itself properly among the bewildering mass of intermediate products 
and potentialities without such aid. It would simply stand perplexed 
before the problems of management and location."</i> [<b>Op. Cit.</b>, p. 103] 
Mises' claimed that monetary calculation based on market prices is
the only solution.
<p>
This argument is not without its force. How can a producer be 
expected to know if tin is a better use of resources than iron 
when creating a product if all they know is that iron and tin
are available and suitable for their purpose? Or, if we have
a consumer good which can be made with A + 2B or 2A + B 
(where A and B are both input factors such as steel, oil
electricity, etc.) how can we tell which method is more efficient
(i.e. which one used least resources and so left the most
over for other uses)? With market prices, Mises' argued, it 
is simple. If the iron cost $5 and tin $4, then tin should be
used. Similarly, if A cost $10 and B $5, then clearly method
one would be the most efficient ($20 versus $25). Without
the market, von Mises argued, such a decision would be impossible
and so every decision would be a <i>"leap in the dark."</i> 
<p>
However, Mises' argument is based on a number of flawed assumptions. 
<p>
Firstly, he assumes a centralised, planned economy. While this 
was a common idea in Marxian social democracy (and the Leninism 
that came from it), it is rejected by anarchism. No small body 
of people can be expected to know what happens in society (<i>"No 
single brain nor any bureau of brains can see to this organisation,"</i> 
in the words of Issac Puente [<b>Libertarian Communism</b>, p. 29]). As 
Bakunin argued, it would lead in practice to <i>"an extremely complex 
government. This government will not content itself with administering 
and governing the masses politically . . . it will also administer the 
masses economically, concentrating in the hands of the State [all 
economic and social activity] . . . All that will demand an immense 
knowledge and many heads 'overflowing with brains' in this government. 
It will be the reign of <b>scientific intelligence</b>, the most aristocratic, 
despotic, arrogant, and elitist of all regimes. There will be a new 
class, a new hierarchy . . . Such a regime will not fail to arouse 
very considerable discontent in the masses of the people, and in order 
to keep them in check . . .[a] considerable armed force [would be 
required]."</i> [<b>Bakunin on Anarchism</b>, p. 319]  Hence anarchists can 
agree with Mises: central planning cannot work in practice. However, 
socialist ideas are not limited to Marxian Social Democracy, and so 
von Mises ignores far more socialistic ideas than he attacks. 
<p>
His next assumption is equally flawed. This is that without the market, 
no information is passed between producers beyond the final outcome of
production. In other words, he assumes that the final product is all that
counts in evaluating its use. Needless to say, it is true that without
more information than the name of a given product, it is impossible to
determine whether using it would be an efficient utilisation of resources.
But von Mises misunderstands the basic concept of use-value, namely the
utility of a good to the consumer of it. As Adam Buick and John Crump
point out, <i>"at the level of the individual production unit or industry,
the only calculations that would be necessary in socialism would be
calculations in kind. On the one side would be recorded the resources
(materials, energy, equipment, labour) used up in production and on the
other the amount of good produced, together with any by-products. . . .
Socialist production is simply the production of use values from use
values, and nothing more."</i> [<b>State Capitalism: The Wages System Under 
New Management</b>, p. 137]
<p>
The generation and communication of such information implies a 
decentralised, horizontal network between producers and consumers. 
This is because what counts as a use-value can only be determined
by those directly using it. Thus the production of use-values from
use-values cannot be achieved via central planning, as the central
planners have no notion of the use-value of the goods being used
or produced. Such knowledge lies in many hands, dispersed throughout 
society, and so socialist production implies decentralisation. 
Capitalist ideologues claim that the market allows the utilisation
of such dispersed knowledge, but as John O'Neil notes, <i>"the market 
may be <b>one</b> way in which dispersed knowledge can be put to good 
effect. It is not . . . the only way."</i> [<b>Ecology, Policy and 
Politics</b>, p. 118]
<p>
So, in order to determine if a specific good is useful to a person, that
person needs to know its <i>"cost."</i>  Under capitalism, the notion of cost has
been so associated with <b>price</b> that we have to put the word <i>"cost"</i> in
quotation marks. However, the real cost of, say, writing a book, is not 
a sum of money but so much paper, so much energy, so much ink, so much 
human labour. In order to make a rational decision on whether a given good 
is better for meeting a given need than another, the would-be consumer
requires this information. However, under capitalism this information 
is <b>hidden</b> by the price.
<p>
Moreover, a purely market-based system leaves out information on 
which to base rational resource allocations (or, at the very least, 
hides it). The reason for this is that a market system measures, at 
best, preferences of <b>individual</b> buyers among the <b>available</b> options. 
This assumes that all the pertinent use-values that are to be outcomes of 
production are things that are to be consumed by the individual, rather 
than use-values that are collectively enjoyed (like clean air). Prices 
in the market do not measure social costs or externalities, meaning 
that such costs are not reflected in the price and so you cannot have 
a rational price system. Similarly, if the market measures only 
preferences amongst things that can be monopolised and sold to 
individuals, as distinguished from values that are enjoyed 
collectively, then it follows that information necessary for 
rational decision-making in production is not provided by the market.
<p>
In other words, prices hide the actual costs that production involved 
for the individual, society, and the environment, and instead boils 
everything down into <b>one</b> factor, namely price. There is a lack of 
dialogue and information between producer and consumer. As John
O'Neil argues, <i>"the market distributes a little information and
. . . blocks the distribution of a great deal [more]. . . The 
educative dialogue exists not through the market, but alongside 
of it."</i> [<b>Ecology, Policy and Politics</b>, p. 143]
<p>
In the words of Joan Robinson:
<p><blockquote>
<i>"In what industry, in what line of business, are the true social
costs of the activity registered in its accounts? Where is the
pricing system that offers the consumer a fair choice between
air to breath and motor cars to drive about in?"</i> [<b>Contribution
to Modern Economics</b>, p. 10]
</blockquote><p>
Indeed, prices often <b>mis</b>-value goods as companies can gain a
competitive advantage by passing costs onto society (in the form
of pollution, for example, or de-skilling workers, increasing
job insecurity, and so on). This externalisation of costs is 
actually rewarded in the market as consumers seek the lowest
prices, unaware of the reasons <b>why</b> it is lower (such information
cannot be gathered from looking at the price). Even if we assume
that such activity is penalised by fines later, the damage is
still done and cannot be undone. Indeed, the company may be able
to weather the fines due to the profits it originally made by
externalising costs.
<p>
And do prices <b>actually</b> reflect costs, even assuming that they
accurately reflect social costs and externalities? The question 
of profit, the reward for owning capital and allowing others to 
use it, is hardly a cost in the same way as labour, resources and 
so on (attempts to explain profits as an equivalent sacrifice as 
labour have always been ridiculous and quickly dropped). When 
looking at prices to evaluate efficient use for goods, you cannot
actually tell by the price if this is so. Two goods may have 
the same price, but profit levels (perhaps under the influence 
of market power) may be such that one has a higher cost price 
than another. The price mechanism fails to indicate which uses 
least resources as it is influenced by market power. Indeed, 
as Takis Fotopoulos notes, <i>"[i]f . . . both central planning 
and the market economy inevitably lead to concentrations of 
power, then neither the former nor the latter can produce the 
sort of information flows and incentives which are necessary 
for the best functioning of any economic system."</i> [<b>Towards an 
Inclusive Democracy</b>, p. 252] Moreover, a good produced under 
a authoritarian state which represses its workforce would have 
a lower price than one produced in a country which allowed 
unions to organise and had basic human rights. The repression 
would force down the cost of labour, so making the good in 
question appear as a more <i>"efficient"</i> use of resources. In 
other words, the market can mask inhumanity as <i>"efficiency"</i> 
and actually reward that behaviour by market share.
<p>
Simply put, prices cannot be taken to reflect real costs
any more that they can reflect the social expression of
the valuation of goods. They are the result of a conflict
waged over these goods and those that acted as their inputs
(including, of course, labour). Market and social power,
much more than need or resource usage, decides the issue.
The inequality in the means of purchasers, in the market
power of firms and in the bargaining position of labour
and capital all play their part, so distorting any 
relationship a price may have to its costs in terms of
resource use. Prices are misshapen. Little wonder Kropotkin
asked whether <i>"are we not yet bound to analyse that
compound result we call price rather than to accept
it as a supreme and blind ruler of our actions?"</i> [<b>Fields,
Factories and Workshops Tomorrow</b>, p. 71]
<p>
Von Mises argued that anyone <i>"who wished to make calculations 
in regard to a complicated process of production will 
immediately notice whether he has worked more economically
than others or not; if he finds, from reference to the
exchange values obtaining in the market, that he will not
be able to produce profitably, this shows that others 
understand how to make better use of the higher-order
goods in question."</i> [<b>Op. Cit.</b>, pp. 97-8] However, this only
shows whether someone has worked more <b>profitably</b> that
others, not whether it is more economical. Market power
automatically muddles this issue, as does the possibility
of reducing the monetary cost of production by recklessly
exploiting natural resources and labour, polluting, or
otherwise passing costs onto others. Similarly, the issue
of wealth inequality is important, for if the production 
of luxury goods proves more profitable than basic essentials
for the poor does this show that producing the former is
a better use of resources? And, of course, the key issue
of the relative strength of market power between workers
and capitalists plays a key role in determining <i>"profitably."</i> 
<p>
Therefore, the claim that prices reflect real costs and so
efficiency can be faulted on two levels. Moreover, without
using another means of cost accounting instead of prices
how can supporters of capitalism know there is a correlation
between actual and price costs? One can determine whether
such a correlation exists by measuring one against the
other. If this cannot be done, then the claim that prices 
measure costs is a tautology (in that a price represents a
cost and we know that it is a cost because it has a price). 
If it can be done, then we can calculate costs in some other
sense than in market prices and so that argument that only
market prices represent costs falls.
<p>
Similarly, von Mises assumes that capitalism can accurately 
estimate the costs of investing. Using the example of a
new railroad, he asks <i>"[s]hould it be built at all, and if
so, which out of the number of conceivable roads should be
built? In a competitive and monetary economy, this question
would be answered by monetary calculation. The new road
will render less expensive the transport of some goods,
and it may be possible to calculate whether this reduction
of expense transcends that involved in the building and
upkeep of the new line."</i> [<b>Op. Cit.</b>, pp. 108-9] However,
this is <b>not</b> the case. An investment decision is made
based on estimating <b>possible</b> future events. The new
line <b>may</b> reduce transportation costs but the expected
reduction may be relatively less that predicted, so causing
the investment to fail. Moreover, an investment may fail
while it meets a social need simply because people may
need the product but cannot afford to pay for it. In
other words, von Mises example hardly shows the superiority
of monetary calculation as the decision to invest under
capitalism is as much a leap in the dark as it would
be an a socialist system (the future is uncertain, in
other words).
<p>
Lastly, Mises assumes that the market is a rational system. As 
O'Neil points out, <i>"Von Mises' earlier arguments against socialist 
planning turned on an assumption about commensurability. His central 
argument was that rational economic decision-making required a single 
measure on the basis of which the worth of alternative states of affairs 
could be calculated and compared."</i> [<b>Op. Cit.</b>, p. 115] This central 
assumption was unchallenged by Taylor and Lange in their defence of 
"socialism", meaning that from the start the debate against von Mises 
was defensive and based on the argument that socialist planning could 
mimic the market and produce results which were efficient from a 
capitalist point of view. Thus, no one challenged Mises' assumptions 
either about the centrally planned nature of socialism or about the 
market being a rational system. Little wonder that the debate put 
the state socialists on the defensive. As their system was little 
more than state capitalism, it is unlikely they would attack the 
fundamentals of capitalism (namely wage labour and centralisation). 
<p>
So, is capitalism rational? Well, it does exist, but that does not prove
that it is rational. The Catholic Church exists, but that shows nothing
about the rationality of the institution. To answer the question, we must
return to our earlier point that using prices means basing all decision
making on one criterion and ignoring all others. This has seriously
irrational effects, because the managers of capitalist enterprises are
obliged to choose technical means of production which produce the 
cheapest results. All other considerations are subordinate, in particular 
the health and welfare of the producers and the effects on the environment.
The harmful effects resulting from <i>"rational"</i> capitalist production
methods have long been pointed out. For example, speed-ups, pain, stress,
accidents, boredom, overwork, long hours and so on all harm the physical
and mental health of those involved, while pollution, the destruction of
the environment, and the exhaustion of non-renewable resources all have
serious effects on both the planet and those who live on it. As E. F.
Schumacher argued:
<p><blockquote>
<i>"But what does it <b>mean</b> when we say that something is uneconomic? . . .
[S]omething is uneconomic when it fails to earn an adequate profit in
terms of money. The method of economics does not, and cannot, produce
any other meaning. . . The judgement of economics . . . is an extremely
<b>fragmentary</b> judgement; out of the large number of aspects which in
real life have to be seen and judged together before a decision can
be taken, economics supplies only one -- whether a money profit 
accrues <b>to those who undertake it</b> or not."</i> [<b>Small is Beautiful</b>,
pp. 27-8]
</blockquote><p>
Schumacher stressed that <i>"about the <b>fragmentary</b> nature of the 
judgements of economics there can be no doubt whatever. Even
with the narrow compass of the economic calculus, these 
judgements are necessarily and <b>methodically</b> narrow. For one
thing, they give vastly more weight to the short then to the
long term. . . [S]econd, they are based on a definition of
cost which excludes all 'free goods' . . . [such as the]
environment, except for those parts that have been privately
appropriated. This means that an activity can be economic 
although it plays hell with the environment, and that a
competing activity, if at some cost it protects and conserves
the environment, will be uneconomic."</i> Moreover, <i>"[d]o not overlook 
the words 'to those who undertake it.' It is a great error to
assume, for instance, that the methodology of economics is
normally applied to determine whether an activity carried
out by a group within society yields a profit to society
as a whole."</i> [<b>Op. Cit.</b>, p. 29] 
<p>
To claim that prices include all these <i>"externalities"</i> is 
nonsense. If they did, we would not see capital moving to 
third-world countries with few or no anti-pollution or 
labour laws. At best, the <i>"cost"</i> of pollution would only 
be included in a price if the company was sued successfully 
in court for damages -- in other words, once the damage is 
done. Ultimately, companies have a strong interest in buying 
inputs with the lowest prices, regardless of <b>how</b> they are 
produced. As Noam Chomsky points out, <i>"[i]n a true capitalist 
society, . . . socially responsible behaviour would be
penalised quickly in that competitors, lacking such social 
responsibility, would supplant anyone so misguided as to be 
concerned with something other than private benefit."</i> 
[<b>Language and Politics</b>, p. 301] It is reductionist 
accounting and its accompanying <i>"ethics of mathematics"</i> 
that produces the <i>"irrationality of rationality"</i> which 
plagues capitalism's exclusive reliance on prices (i.e. 
profits) to measure <i>"efficiency."</i> Moreover, the critique 
we have just sketched ignores the periodic crises that hit 
capitalist industry and economies to produce massive 
unemployment and social disruption -- crises that are 
due to subjective and objective pressures on the operation 
of the price mechanism (see <a href="secC7.html">section C.7</a> 
for details). 
<p>
Ironically enough, von Mises also pointed to the irrational nature
of the price mechanism. He states (correctly) that there are
<i>"extra-economic"</i> elements which <i>"monetary calculation cannot
embrace"</i> because of <i>"its very nature."</i> He acknowledges that
these <i>"considerations themselves can scarcely be termed
irrational"</i> and, as examples, lists <i>"[i]n any place where
men regard as significant the beauty of a neighbourhood or
a building, the health, happiness and contentment of mankind,
the honour of individuals or nations."</i> He states that <i>"they are
just as much motive forces of rational conduct as are economic
factors"</i> but they <i>"do not enter into exchange relationships."</i> 
[von Mises, <b>Op. Cit.</b>, p. 99] How rational is an economic system
which ignores the <i>"health, happiness and contentment"</i> of people?
Or the beauty of their surroundings? Which, moreover, penalises
those who take these factors into consideration? For anarchists,
von Mises comments indicate well the inverted logic of capitalism.
That von Mises can support a system which ignores the needs of
individuals, their happiness, health, surroundings, environment
and so on by <i>"its very nature"</i> says a lot (his suggestion
that we assign monetary values to such dimensions [p. 100] 
begs the question and has plausibility only if it assumes what
it is supposed to prove. Indeed, the person who would put
a price on friendship simply would have no friends. They
simply do not understand what friendship is and are thereby
excluded from much which is best in human life. Likewise
for other <i>"extra-economic"</i> goods that individual's value,
such as beautiful places, happiness, the environment and 
so on).
<p>
Under communist-anarchism, the decision-making system used to 
determine the best use of resources is not more or less <i>"efficient"</i> 
than market allocation, because it goes beyond the market-based 
concept of <i>"efficiency."</i> It does not seek to mimic the market but 
to do what the market fails to do. This is important, because the 
market is not the rational system its defenders often claim. While 
reducing all decisions to one common factor is, without a doubt, 
an easy method of decision making, it also has serious side-effects 
<b>because</b> of its reductionistic basis (as discussed further in the 
<a href="secI1.html#seci13">next section</a>). As Einstein once pointed out, things should be made 
as simple as possible but not simplistic. The market makes decision 
making simplistic and generates a host of irrationalities and 
dehumanising effects. 
<p>
Sections <a href="secI4.html#seci44">I.4.4</a> and 
<a href="secI4.html#seci45">I.4.5</a> discusses one possible framework for a 
communist economic decision-making process. Such a framework is 
necessary because <i>"an appeal to a necessary role for practical 
judgements in decision making  is <b>not</b> to deny any role to general 
principles. Neither . . . does it deny any place for the use of 
technical rules and algorithmic procedures . . . Moreover, there 
is a necessary role for rules of thumb, standard procedures, the 
default procedures and institutional arrangements that can be 
followed unreflectively  and which <b>reduce</b> the scope for <b>explicit</b> 
judgements comparing different  states of affairs. There are limits 
in time, efficient use of resources and the dispersal of knowledge 
which require rules and institutions. Such rules and institutions 
can fee us for space and time for reflective judgements where 
they matter most."</i> [John O'Neil, <b>Op. Cit.</b>, pp. 117-8]
<p>
While these algorithmic procedures and guidelines can, and indeed
should be, able to be calculated by hand, it is likely that 
computers will be extensively used to take input data and process
it into a suitable format. Indeed, many capitalist companies
have software which records raw material inputs and finished
product into databases and spreadsheets. Such software could be
the basis of a libertarian communist decision making algorithm.
Of course, currently such data is submerged beneath money and
does not take into account externalities and the nature of the
work involved (as would be the case in an anarchist society).
However, this does not limit their potential or deny that 
communist use of such software can be used to inform decisions.
<p>
This, we must note, indicates that communist society would
use various <i>"aids to the mind"</i> to help individuals and groups
to make economic decisions. This would reduce the complexity
of economic decision making, by allowing different options
and resources to be compared to each other. Hence the
complexity of economic decision making in an economy with
a multitude of goods can be reduced by the use of rational
algorithmic procedures and methods to aid the process. Such
tools would aid decision making, not dominate it as these
decisions affect humans and the planet and should never be
made automatically.
<p>
It is useful to remember that von Mises argued that it is 
the <b>complexity</b> of a modern economy that ensures money is 
required. As he put it, <i>"[w]ithin the narrow confines of 
household economy, for instance, where the father can 
supervise the entire economic management, it is possible 
to determine the significance of changes in the processes 
of production, without such aids to the mind [as monetary 
calculation], and yet with more or less of accuracy."</i> However, 
<i>"the mind of one man alone -- be it ever so cunning, is too 
weak to grasp the importance of any single one among the
countlessly many goods of higher order. No single man
can ever master all the possibilities of production,
innumerable as they are, as to be in a position to make
straightway evident judgements of value without the aid
of some system of computation."</i> [<b>Op. Cit.</b>, p. 102]
<p>
That being the case, a libertarian communist society would 
quickly develop the means of comparing the real impact of
specific <i>"higher order"</i> goods in terms of their real costs
(i.e. the amount of labour, energy and raw materials used
plus any social and ecological costs). As we noted above, 
this essential decision making information would have to
be recorded and communicated in a communist society and used
to evaluate different options using an agreed methods of
comparison. This methods of comparison differs drastically
from the price mechanism as it recognises that mindless,
automatic calculation is impossible in social choices. Such 
choices have an unavoidable ethical and political dimension 
simply because they involve other human beings and the 
environment. As von Mises himself acknowledges, monetary 
calculation does not capture such dimensions. We, therefore, 
need to employ practical judgement in making choices aided 
by a full understanding of the <b>real</b> social and ecological 
costs involved using, of course, the appropriate <i>"aids to 
the mind."</i> 
<p>
In addition, a decentralised system will by necessity have
to compare less alternatives as local knowledge will eliminate
many of the options available. As von Mises acknowledged, 
a <i>"household economy"</i> <b>can</b> make economic decisions without
money. Being more decentralised than capitalism, a libertarian
communist economy will, therefore, be able to do so as well, 
particularly when it uses the appropriate <i>"aids to the mind"</i> 
to evaluate external resources versus locally produced ones. 
Given that an anarchist society would be complex and integrated, 
such aids would be essential but, due to its decentralised nature, 
it need not embrace the price mechanism. It can evaluate the
efficiency of its decisions by looking at the <b>real</b> costs 
involved to society rather than embrace the distorted system
of costing explicit in the price mechanism (as Kropotkin once
put it, <i>"if we analyse <b>price</b>"</i> we must <i>"make a distinction 
between its different elements"</i> in order to make rationale
allocation and investment decisions [<b>Op. Cit.</b>, p. 72]).
<p>
Thus, anarchists argue that von Mises' claims were wrong. 
Communism is viable, but only if it is libertarian communism. 
Economic decision making in a moneyless <i>"economy"</i> is possible. 
Indeed, it could be argued that von Mises' argument exposes 
difficulties for capitalism rather than for anarchism. Capitalist 
<i>"efficiency"</i> is hardly rational and for a fully human and 
ecological efficiency, libertarian communism is required. As 
two libertarian socialists point out, <i>"socialist society still 
has to be concerned with using resources efficiently and 
rationally, but the criteria of 'efficiency' and 'rationality' 
are not the same as they are under capitalism."</i> [Buick and 
Crump, <b>Op. Cit.</b>, p. 137] 
<p>
So, to claim that communism will be <i>"more"</i> efficient than 
capitalism or vice versa misses the point. Libertarian 
communism will be <i>"efficient"</i> in a totally different way 
and people will act in ways considered <i>"irrational"</i> only 
under the logic of capitalism.
<p>
<a name="seci13"><h2>I.1.3 What is wrong with markets anyway?</h2>
<p>
A lot. Markets soon result in what are termed <i>"market forces,"</i> 
<i>"impersonal"</i> forces which ensure that the people in the economy 
do what is required of them in order for the economy to function. 
The market system, in capitalist apologetics, is presented to appear 
as a regime of freedom where no one forces anyone to do anything, 
where we <i>"freely"</i> exchange with others as we see fit. However, the 
facts of the matter are somewhat different, since the market often 
ensures that people act in ways <b>opposite</b> to what they desire or 
forces them to accept <i>"free agreements"</i> which they may not actually 
desire. Wage labour is the most obvious example of this, for, as we 
indicated in <a href="secB4.html">section B.4</a>, most people have 
little option but to agree to work for others. 
<p>
We must stress here that not all anarchists are opposed to the market.
Individualist anarchists favour it while Proudhon wanted to modify
it while retaining competition. For many, the market equals capitalism.
However, this is not the case as it ignores the fundamental issue of
(economic) class, namely who owns the means of production. Capitalism
is unique in that it is based on wage labour, i.e. a market for labour
as workers do not own their own means of production and have to sell
themselves to those who do. Thus it is entirely possible for a market 
to exist within a society and for that society <b>not</b> to be capitalist. 
For example, a society of independent artisans and peasants selling 
their product on the market would not be capitalist as workers would 
own and control their means of production and so wage labour (and so 
capitalism) would not exist. Similarly, Proudhon's competitive system 
of self-managed co-operatives and mutual banks would be non-capitalist
(and socialist) for the same reason. Anarchists object to capitalism
due to the quality of the social relationships it generates between
people (i.e. it generates authoritarian ones). If these relationships
are eliminated then the kinds of ownership which do so are anarchistic.
Thus the issue of ownership matters only in-so-far it generates 
relationships of the desired kind (i.e. those based on liberty,
equality and solidarity). To concentrate purely on <i>"markets"</i> or
<i>"property"</i> means to ignore social relationships and the key aspect
of capitalism, namely wage labour. That right-wingers do this is
understandable (to hide the authoritarian core of capitalism) but
why (libertarian or other) socialists should do so is less clear.
<p>
In this section of the FAQ we discuss anarchist objections to the
market <b>as such</b> rather than the capitalist market. The workings of
the market do have problems with them which are independent of, or 
made worse by, the existence of wage-labour. It is these problems
which make most anarchists hostile to the market and so desire a
communist-anarchist society.
<p>
So, even if we assume a mutualist or market-socialist system of
competing self-managed workplaces, it's clear that market forces 
would soon result in many irrationalities occurring. Most obviously, 
operating in a market means submitting to the profit criterion. This 
means that however much workers might want to employ social criteria, 
they cannot. To ignore profitability would cause their firm to go 
bankrupt. Markets therefore create conditions that compel workers 
and consumers to decide things which are not be in their interest, 
for example introducing deskilling or polluting technology, longer 
hours, and so on. We could also point to the numerous industrial 
deaths and accidents which are due to market forces making it 
unprofitable to introduce adequate safety equipment or working 
conditions, (conservative estimates for industrial deaths in the 
USA are between 14 000 and 25 000 per year plus over 2 million 
disabled), or to increased pollution and stress levels which 
shorten life spans. 
<p>
In addition, a market-based system can result in what we have 
termed <i>"the ethics of mathematics,"</i> where things (particularly 
money) become more important than people. This can have a 
de-humanising effect, with people becoming cold-hearted 
calculators who put profits before people. This can be seen 
in capitalism, where economic decisions are far more important 
than ethical ones. And such an inhuman mentality can be
rewarded on the market. Merit does not <i>"necessarily"</i> breed 
success, and the successful do not <i>"necessarily"</i> have merit. 
The truth is that, in the words of Noam Chomsky, <i>"wealth and 
power tend to accrue to those who are ruthless, cunning, 
avaricious, self-seeking, lacking in sympathy and compassion, 
subservient to authority and willing to abandon principle for
material gain, and so on. . . Such qualities might be just the
valuable ones for a war of all against all."</i> [<b>For Reasons
of State</b>, pp. 139-140] Thorstein Veblen elaborated at length 
on this theme in <b>The Leisure Class</b>, a classic analysis of 
capitalist psychology. Needless to be said, if the market
does reward such people with success it can hardly be considered
as a <b>good</b> thing. A system which elevates making money to 
the position of the most important individual activity will 
obviously result in the degrading of human values and an 
increase in neurotic and psychotic behaviour. 
<p>
Little wonder, as Alfie Kohn has argued, competition can have 
serious negative effects on us outside of work, with it damaging 
both our personal psychology and our interpersonal relationships 
(see his excellent book <b>No Contest</b> for details). The market can 
impoverish us as individuals, sabotaging self-esteem, promoting 
conformity, ruining relationships and making use less than what 
we could be. This is a problem of markets as such, not only 
capitalist ones.
<p>
Any market system is also marked by a continuing need to expand 
production and consumption. This means that market forces ensure 
that work continually has to expand, causing potentially destructive 
results for both people and the planet. Competition ensures that 
we can never take it easy, for as Max Stirner argued, <i>"[r]estless 
acquisition does not let us take breath, take a calm <b>enjoyment</b>. 
We do not get the comfort of our possessions. . . Hence it is at 
any rate helpful that we come to an agreement about <b>human</b> labours 
that they may not, as under competition, claim all our time and toil."</i> 
[<b>The Ego and Its Own</b>, p. 268]
<p>
Value needs to be created, and that can only be done by labour. It is
ironic that supporters of capitalism, while usually saying that <i>"work"</i> is
and always will be hell, support an economic system which must continually
expand that <i>"work"</i> (i.e. labour) while deskilling and automating it and
those who do it. Anarchists, in contrast, argue that work need not be
hell, and indeed, that when enriched by skills and self-management, can be
enjoyable. We go further and argue that work need not take all our time
and that <b>labour</b> (i.e. unwanted and boring work) can and must be
minimised. Hence, while the <i>"anti-work"</i> capitalist submits humanity to
more and more labour, the anarchist desires the liberation of <i>"work"</i> and
the end of <i>"labour"</i> as a way of life. 
<p>
In addition, market decisions are crucially conditioned by the purchasing
power of those income groups that can back their demands with money. The
market is a continuous bidding for goods, resources, and services, with
those who have the most purchasing power the winners. This means that the
market system is the worst one for allocating resources when purchasing
power is unequally distributed. This is why orthodox economists make the
convenient assumption of a <i>"given distribution of income"</i> when they try
to show that a market-based allocation of resources is the best one (for
example, <i>"Pareto optimality"</i>). While a mutualist system should reduce
inequality drastically, it cannot be assumed that inequalities will 
not increase over time. This is because inequalities in resources 
leads to inequalities of power on the market. Any trade or contract
will benefit the powerful more than the powerless, so re-enforcing
and potentially increasing the inequalities and power between the
parties. This could, over time, lead to a return to capitalism (as
Proudhon himself noted, the <i>"original equality [between contractor
and workmen] was bound to disappear through the advantageous 
position of the master and the dependence of the wage-workers."</i> 
[<b>System of Economical Contradictions</b>, p. 201]).
<p>
With the means of life monopolised by one class, the effects of market
forces and unequal purchasing power can be terrible. As Allan Engler
points out, <i>"[w]hen people are denied access to the means of livelihood,
the invisible hand of market forces does not intervene on their behalf.
Equilibrium between supply and demand has no necessary connection with
human need. For example, assume a country of one million people in which
900,000 are without means of livelihood. One million bushels of wheat are
produced. The entire crop is sold to 100,000 people at $10 a bushel.
Supply and demand are in equilibrium, yet 900 000 people will face
starvation."</i> [<b>Apostles of Greed</b>, pp. 50-51] In case anyone thinks that
this just happens in theory, the example of African countries hit by
famine gives a classic example of this occurring in practice. There, rich
landowners grow cash crops and export food to the developed nations while
millions starve in their own. 
<p>
Lastly, there are the distributional consequences of the market system. 
As markets inform by 'exit' only -- some products find a market, others 
do not -- 'voice' is absent. The operation of 'exit' rather than 'voice'
leaves behind those without power in the marketplace. For example, the
wealthy do not buy food poisoned with additives, the poor consume it. This
means a division grows between two environments: one inhabited by those
with wealth and one inhabited by those without it. As can be seen from 
the current capitalist practice of <i>"exporting pollution"</i> to developing
countries, this problem can have serious ecological and social effects.
So, far from the market being a <i>"democracy"</i> based on <i>"one dollar, 
one vote,"</i> it is an oligarchy in which, for example, the <i>"79 000 
Americans who earned the minimum wage in 1987 have the same influence 
[or <i>"vote"</i>] as Michael Milken, who 'earned' as much as all of them 
combined."</i> [Michael Albert and Robin Hahnel, <b>The Political Economy
of Participatory Economics</b>, p. 21]
<p>
In other words, markets are always biased in favour of effective demand, 
i.e. in favour of the demands of people with money. A market may be 
Pareto-optimal, but it can never (except in the imaginary abstractions 
of mathematical welfare economics) allocate the necessities of life to 
those who need them the most.
<p>
In addition, markets never internalise external costs. Two people
(or companies) who strike a market-rational bargain between themselves 
need not consider the consequences of their bargain for other people 
outside their bargain, nor the consequences for the earth. Thus 
market exchanges are never bilateral agreements as their effects
impact on the wider society (in terms of, say, pollution, inequality
and so on). The market also ignores the needs of future generations
as they always discount the value of the long term future. A payment 
to be made 1 000 years from now (a mere speck in geological time) has 
a market value of virtually zero according to any commonly used discount 
rate. Even 50 years in the future cannot be adequately considered as
competitive pressures force a short term perspective on people harmful
to present and future generations, plus the ecology of the planet.
<p>
Also, markets do not reflect the values of things we do not put a price
upon (as we argued in <a href="secB5.html">section B.5</a>). 
It cannot protect wilderness, for 
example, simply because it requires people to turn it into property and 
sell it as a commodity. If you cannot afford to visit the new commodity, 
the market turns it into something else, no matter how much you value 
it. This ensures that the market cannot really provide the information
necessary for rational-decision making and so resources are inefficiently
allocated and we all suffer from the consequences of that.
<p>
Thus are plenty of reasons for concluding that efficiency and the 
market not only do not necessarily coincide, but, indeed, necessarily 
do not coincide. Indeed, rather than respond to individual needs,
the market responds to money (more correctly, profit), which by its 
very nature provides a distorted indication of individual preferences
(and does not take into account values which are enjoyed collectively,
such as clean air, or <b>potentially</b> enjoyed, such as the wilderness a 
person may never visit but desires to see exist and protected).
<p>
So, for all its talk of <i>"invisible hands"</i> and <i>"individual freedom,"</i> 
capitalism ignores the actual living individual in the economy and
society. The <i>"individual rights"</i> on which capitalists' base their <i>"free"</i> 
system are said to be <i>"man's rights,"</i> on what <i>"man needs."</i> But <i>"man,"</i> 
after all, is only an abstraction, not a real living being. By talking
about <i>"man"</i> and basing <i>"rights"</i> on what this abstraction is said to need,
capitalism and statism ignore the uniqueness of each person and the
conditions required to develop that uniqueness. As Max Stirner pointed
out, <i>"[h]e who is infatuated with <b>Man</b> leaves persons out of account so
far as that infatuation exists, and floats in an ideal, sacred interest.
<b>Man</b>, you see, is not a person, but an ideal, a spook."</i> [<b>The Ego and Its
Own</b>, p. 79] And like all spooks, it requires sacrifice -- the sacrifice
of individuality to hierarchy and authority. 
<p>
This anti-individual biases in capitalism can be seen by its top-down 
nature and the newspeak used to disguise its reality. For example, 
there is what is called <i>"increasing flexibility of the labour market."</i> 
<i>"Flexibility"</i> sounds great: rigid structures are unappealing and hardly
suitable for human growth. In reality, as Noam Chomsky points out
<i>"[f]lexibility means insecurity. It means you go to bed at night and don't
know if you have a job tomorrow morning. That's called flexibility of the
labour market, and any economist can explain that's a good thing for the
economy, where by 'the economy' now we understand profit-making. We 
don't mean by 'the economy' the way people live. That's good for the 
economy, and temporary jobs increase flexibility. Low wages also 
increase job insecurity. They keep inflation low. That's good for people 
who have money, say, bondholders. So these all contribute to what's called 
a 'healthy economy,' meaning one with very high profits. Profits are doing
fine. Corporate profits are zooming. But for most of the population, very
grim circumstances. And grim circumstances, without much prospect of a
future, may lead to constructive social action, but where that's lacking
they express themselves in violence."</i> [<b>Keeping the Rabble in Line</b>, 
pp. 283-4]
<p>
This does not mean that social anarchists propose to <i>"ban"</i> the market --
far from it. This would be impossible. What we do propose is to convince
people that a profit-based market system has distinctly <b>bad</b> effects on
individuals, society and the planet's ecology, and that we can organise
our common activity to replace it with libertarian communism. As Max
Stirner argued, <i>"competition. . .has a continued existence. . . [because]
all do not attend to <b>their</b> <b>affair</b> and come to an <b>understanding</b> 
with each other about it. . . .Abolishing competition is not equivalent 
to favouring the guild. The difference is this: In the <b>guild</b> baking, 
etc., is the affair of the guild-brothers; in <b>competition</b>, the affair 
of chance competitors; in the <b>union</b>, of those who require baked goods, 
and therefore my affair, yours, the affair of neither guildic nor the
concessionary baker, but the affair of the <b>united.</b>"</i> [<b>Ego and Its Own</b>,
p. 275]
<p>
Therefore, social anarchists do not appeal to <i>"altruism"</i> in their 
struggle against the de-humanising effects of the market, but rather, 
to egoism: the simple fact that co-operation and mutual aid is in our 
best interests as individuals. By co-operating and controlling <i>"the 
affairs of the united,"</i> we can ensure a free society which is worth 
living in, one in which the individual is not crushed by market forces 
and has time to fully develop his or her individuality and uniqueness:
<p><blockquote>
<i>"Solidarity is therefore the state of being in which Man attains the
greatest degree of security and wellbeing; and therefore egoism itself, 
that is the exclusive consideration of one's own interests, impels Man 
and human society towards solidarity."</i> [Errico Malatesta, <b>Anarchy</b>, p. 28]
</blockquote><p>
<a name="seci14"><h2>I.1.4 If capitalism is exploitative, then isn't socialism as well?</h2> 
<p>
Some <i>"Libertarian"</i> capitalists say yes to this question, arguing that 
the Labour Theory of Value (LTV) does not imply socialism but what they 
call <i>"self-managed"</i> capitalism. This, however, is not a valid inference. 
The LTV can imply both socialism (selling the product of ones labour) 
and communism (distribution according to need). The theory is a critique 
of capitalism, not necessarily the basis of a socialist economy, although 
it <b>can</b> be considered this as well. For example, Proudhon used the LTV 
as the foundation of his proposals for mutual banking and co-operatives, 
while Robert Owen used it as the basis of his system of labour notes. 
Marx, on the other hand, use the LTV purely as a critique of capitalism
while hoping for communism.
<p>
In other words, though a system of co-operative selling on the market 
(what is mistakenly termed <i>"self-managed"</i> capitalism by some) or exchanging 
labour-time values would not be communism, it is <b>not</b> capitalism. This
is because the workers are not separated from the means of production. Therefore, right-libertarians' attempts to claim that it is capitalism 
are false, an example of misinformed insistence that virtually <b>every</b> 
economic system, bar state socialism and feudalism, is capitalist. 
Some libertarian Marxists (as well as Leninists) claim, similarly, 
that non-communist forms of socialism are also just <i>"self-managed"</i> 
capitalism. Why libertarian Marxists desire to reduce the choices 
facing humanity to either communism or some form of capitalism is 
frankly strange, but also understandable because of the potential 
dehumanising effects of market systems seen under capitalism.
<p>
However, it could be argued that communism (based on free access and
communal ownership of resources) would mean that workers are exploited 
by non-workers (the young, the sick, the elderly and so on). While this 
may reflect the  sad lack of personal empathy (and so ethics) of the 
pro-capitalist defenders of this argument, it totally misses the point 
as far as communist anarchism goes. This is because of two reasons. 
<p>
Firstly, <i>"anarchist communism . . . means voluntary communism, communism 
from free choice"</i> [A. Berkman, <b>ABC of Anarchism</b>, p. 11], which means it 
is not imposed on anyone but is created and practised only by those who 
believe in it. Therefore it would  be up to the communities and syndicates 
to decide how they wish to distribute the products of their labour and 
individuals to join, or create, those that meet their ideas of right 
and wrong. Some may decide on equal pay, others on payment in terms 
of labour time, yet others on communistic associations (we have indicated 
elsewhere why most anarchists consider that communism would be in people's 
self-interest, so we will not repeat ourselves here). The important thing 
to realise is that co-operatives will decide what to do with their output, 
whether to exchange it or to distribute it freely. Hence, because it is
based on free agreement, anarchist communism cannot be exploitative. 
Members of a co-operative which is communistic are free to leave, after 
all. Needless to say, the co-operatives will usually distribute their 
product to others within their confederation and exchange with the 
non-communist ones in a different manner. We say <i>"usually,"</i> for in 
the case of emergencies like earthquakes and so forth the situation 
would call for mutual aid. 
<p>
Secondly, the so-called <i>"non-workers"</i> have been, or will be, workers.
As the noted Spanish anarchist De Santillan pointed out, <i>"[n]aturally,
children, the aged and the sick are not considered parasites. The 
children will be productive when they grow up. The aged have already 
made their contribution to social wealth and the sick are only 
temporarily unproductive."</i> [<b>After the Revolution</b>, p. 20] In other 
words, over their life time, everyone contributes to society and 
it so using the <i>"account book"</i> mentality of capitalism misses the 
point.
<p>
The reason why capitalism is exploitative is that workers <b>have</b> to 
agree to give the product of their labour to another (the boss) in 
order to be employed in the first place (see 
<a href="secB4.html">section B.4</a>). Capitalists 
would not remain capitalists if their capital did not produce a profit. 
In libertarian communism, by contrast, the workers themselves agree to 
distribute part of  their product to others (i.e. society as a whole, 
their neighbours, friends, and so forth). It is based on free agreement, 
while capitalism is marked by power, authority, and the firm hand of 
market forces. As resources are held in common, people have the option 
of working alone if they so desired. 
<p>
Similarly, capitalism by its very nature as a <i>"grow or die"</i> system, 
needs to expand into new areas, meaning that unlike libertarian 
socialism, it will attempt to undermine and replace other social 
systems (usually by force, if history is any guide). As freedom 
cannot be given, there is no reason for a libertarian-socialist 
system to expand beyond the effect of a <i>"good example"</i> on the 
oppressed of capitalist regimes.
<p>
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