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Title: The Economics of Anarchy
Author: Anarcho
Date: Fri, 09/04/2009
Language: en
Topics: economics
Source: http://anarchism.pageabode.com/anarcho/the-economics-of-anarchy

Anarcho

The Economics of Anarchy

To quote someone who sums up the intellectual times in which we live,

Sarah Palin: “now is not the time to experiment with socialism” This,

during the worse crisis since the 1930s! Anarchists would say that is

precisely the time – but only as long as we are talking about

libertarian socialism!

Capitalism in crisis (again!) and the failure of state socialism could

not be more clear. Social democracy has become neo-liberal (New Labour?

New Thatcherites!) while this year also marks the 20^(th) anniversary of

the collapse of Stalinism in Eastern Europe. With its state capitalism

and party dictatorship, Stalinism made the disease (capitalism) more

appealing than the cure (socialism)! In this anarchists should be feel

vindicated – the likes of Bakunin predicted both these outcomes decades

before they became reality.

So there is an opening for a real alternative. For we must not forget

that capitalism is but the latest form of economy. To Proudhon: “the

radical vice of political economy, consists ... in affirming as a

definitive state a transitory condition, – namely, the division of

society into patricians [a wealthy elite] and proletaires.” So we have

seen slave labour, followed by serfdom, followed by capitalism. What is

capitalism? As Proudhon put it, the “period through which we are now

passing ... is distinguished by a special characteristic: WAGE LABOUR”

(“la salariat”, to use the Frenchman’s favourite term for it).

So capitalism is an economic system based on hired labour, that is

selling your labour (liberty) piecemeal to a boss. For anarchists, this

is best called “wage slavery”

Anarchism aims for associated labour, free labour in other words – the

situation where those who do the work manage it. In the longer term, the

aim is for abolition of work (work/play becoming the same thing). To

quote Kropotkin, we aim to “create the situation where each person may

live by working freely, without being forced to sell [their] work and

[their] liberty to others who accumulate wealth by the labour of their

serfs.”

Origins of anarchism

Anarchism was not thought-up by thinkers in a library. Its origins, as

Kropotkin stressed in his classic work “Modern Science and Anarchism”,

lie in the struggle and self-activity of working class people against

exploitation and oppression.

We do not abstractly compare capitalism to a better society, rather we

see the structures of new world being created in struggle within, but

against, capitalism. Thus the assemblies and committees created to

conduct a strike are seen as the workplace organisations which will

organise production in a free society. To quote the Industrial Workers

of the World: Building the new world in the shell of the old.

Different schools of anarchism

There are generally three different schools of anarchism (or libertarian

socialism): Mutualism, Collectivism and Communism. Anarcho-Syndicalism

more a tactic than a goal and so its adherents aim for one of these

three (usually, anarcho-communism although Bakunin, who first formulated

anarcho-syndicalist tactics, called himself a collectivist). In

practice, of course, different areas will experiment in different

schemes depending on what people desire and the objective circumstances

they face. Free experimentation is a basic libertarian principle.

While these three schools differ on certain issues, they share certain

key principles. In fact, if someone claims something as “anarchism” and

it rejects any one of these then we can safely say it is not anarchism

at all.

The first principle is possession, not private property. Following

Proudhon’s “What is Property?”, use rights replace property rights in a

free society. This automatically implies an egalitarian distribution of

wealth. The second is socialisation. This means free access to

workplaces and land, so the end of landlords and bosses (this is

sometimes called “occupancy and use”). The third is voluntary

association, in other words self-management of production by those who

do it. While the name given to these worker associations vary

(co-operatives, syndicates, collectives, workers companies are just

four), the principle is the same: one person, one vote. The last key

principle is free federation. This is based on free association, which

is essential for any dynamic economy, and so horizontal links between

producers as well as federations for co-ordination of joint interests.

It would be rooted in decentralisation (as both capitalist firms and the

Stalinist economies prove, centralisation does not work). It would be

organised from the bottom-up, by means of mandated and recallable

delegates

Bakunin summarised this kind of economy well when he stated that the

“land belongs to only those who cultivate it with their own hands; to

the agricultural communes ... the tools of production belong to the

workers; to the workers’ associations.” The rationale for decision

making by these self-managed workplaces would be as different from

capitalism as their structure. To quote Kropotkin, economics in a sane

society should be the “study of the needs of mankind, and the means of

satisfying them with the least possible waste of human energy.” These

days we would need to add ecological considerations – and it is almost

certain Kropotkin would have agreed (his classic Fields, Factories and

Workshops has an obvious ecological perspective even if he does not use

the term).

Critique of Property

To understand anarchist visions of a free economy, you need to

understand the anarchist critique of capitalism. As is well known,

Proudhon proclaimed that “property is theft”. By that he meant two

things. First, that landlords charged tenants for access to the means of

life. Thus rent is exploitative. Second, that wage labour results in

exploitation. Workers are expected to produce more than their wages. To

quote Proudhon:

“Whoever labours becomes a proprietor – this is an inevitable deduction

from the principles of political economy and jurisprudence. And when I

say proprietor, I do not mean simply (as do our hypocritical economists)

proprietor of his allowance, his salary, his wages, – I mean proprietor

of the value his creates, and by which the master alone profits ... The

labourer retains, even after he has received his wages, a natural right

in the thing he was produced.”

This feeds into Proudhon’s “property is despotism.” In other words, that

it produces hierarchical social relationships and this authority

structure allows them to boss workers around, ensuring that they are

exploited. To quote Proudhon again:

“Do you know what it is to be a wage-worker? It is to labour under

another, watchful for his prejudices even more than for his orders ...

It is to have no mind of your own ... to know no stimulus save your

daily bread and the fear of losing your job. The wage-worker is a man to

whom the property owner who hires him says: What you are to do is to be

none of your business; you have nothing to control in it.”

To achieve this, as noted above, use rights replace property rights.

Personal possession remains only in the things you use. To quote

Alexander Berkman, anarchism

“abolishes private ownership of the means of production and

distribution, and with it goes capitalistic business. Personal

possession remains only in the things you use. Thus, your watch is your

own, but the watch factory belongs to the people. Land, machinery, and

all other public utilities will be collective property, neither to be

bought nor sold. Actual use will be considered the only title – not to

ownership but to possession. The organisation of the coal miners, for

example, will be in charge of the coal mines, not as owners but as the

operating agency. Similarly will the railroad brotherhoods run the

railroads, and so on. Collective possession, co-operatively managed in

the interests of the community, will take the place of personal

ownership privately conducted for profit.”

Proudhon summarised this well as “possessors without masters”

Socialisation

While not all anarchists have used the term “socialisation”, the fact

this is the necessary foundation for a free society and, unsurprisingly,

the concept (if not the word) is at the base of anarchism. This is

because it ensures universal self-management by allowing free access to

the means of production. As Emma Goldman and John Most argued, it

“logically excludes any and every relation between master and servant”

This has been an anarchist position as long as anarchism has been called

anarchism. Thus we find Proudhon arguing in 1840 that “the land is

indispensable to our existence” and “consequently a common thing,

consequently insusceptible of appropriation” and that “all accumulated

capital being social property, no one can be its exclusive proprietor.”

This means “the farmer does not appropriate the field which he sows” and

“all capital ... being the result of collective labour” is “collective

property.” Unsurprisingly, Proudhon argued for “democratically organised

workers associations” and that “[u]nder the law of association,

transmission of wealth does not apply to the instruments of labour, so

cannot become a cause of inequality.”

As economist David Ellerman explains, the democratic workplace “is a

social community, a community of work rather than a community residence.

It is a republic, or res publica of the workplace. The ultimate

governance rights are assigned as personal rights ... to the people who

work in the firm ... This analysis shows how a firm can be socialised

and yet remain ‘private’ in the sense of not being government-owned.”

Self-management

Socialisation logically implies that there would be no labour market,

simply people looking for associations to join and association looking

for associates. Wage-labour would be a thing of the past and replaced by

self-management.

This is sometimes termed “workers’ control” or, in the words of

Proudhon, “industrial democracy” and the turning of workplaces into

“little republics of workers.” For Kropotkin, a libertarian economy

would be based on “associations of men and women who ... work on the

land, in the factories, in the mines, and so on, [are] themselves the

managers of production.”

This would be based on one member, one vote (and so egalitarian

structures and results); administrative staff elected and recallable;

integration of manual and intellectual work; and division of work rather

than division of labour.

Thus, as Proudhon suggested, workplaces “are the common and undivided

property of all those who take part therein” rather than “companies of

stockholders who plunder the bodies and souls of the wage workers.” This

meant free access, with “every individual employed in the association”

having “an undivided share in the property of the company” and has “a

right to fill any position” as “all positions are elective, and the

by-laws subject to the approval of the members.”

While these principles underlie all schools of anarchism, there are

differences between them.

Mutualism

The first school of anarchism was mutualism, most famously associated

with Proudhon. [1]

This system has markets. This does not imply capitalism, as markets are

not what define that system. Markets pre-date it by thousands of years.

What makes capitalism unique is that it has the production of

commodities and wage labour. [2] So this means that mutualism is based

on producing commodities but with wage labour replaced by

self-employment and cooperatives.

This implies that distribution is by work done, by deed rather than

need. Workers would receive the full product of their labour, after

paying for inputs from other co-operatives. This does not mean that

co-operatives would not invest, simply that association as a whole would

determine what faction of their collective income would be distributed

to individual members and would be retained for use by the co-operative.

It should be noted here that neo-classical economics argues that

co-operatives produce high unemployment. However, like the rest of this

ideology this is based on false assumptions and is, ultimately, a theory

whose predictions have absolutely nothing to do with the observed facts.

As well as co-operatives, the other key idea of mutualism is free

credit. People’s Bank would be organised and would charge interest rates

covering costs (near 0%). This would allow workers to create their own

means of production. Again, neo-classical economics suggest that there

would be a problem of inflation as mutual banks would increase the money

supply by creating credit. However, this is flawed as credit is not

created willy-nilly but “rationed”, i.e., given to projects which are

expected to produce more goods and services. Thus it would not be a case

of more and more money chasing a set number of goods but rather money

being used to create more and more goods!

Lastly, there is the Agro-industrial federation. Proudhon was well aware

of the problems faced by isolated co-operatives and so suggested

associations organise a federation to reduce risk by creating

solidarity, mutual aid and support. As all industries are interrelated,

it makes sense for them to support each other. In addition, the

federation was seen as a way to stop return of capitalism by market

forces. It would also be for public services (such as railways, roads,

health care and so forth) which would be communally owned and run by

workers co-operatives.

Mutualism is reformist in strategy, aiming to replace capitalism by

means of alternative institutions and competition. Few anarchists

subscribe to that perspective.

Collectivism

The next school of anarchist economics is collectivism, most famously

associated with Bakunin. It is similar to mutualism, less market based

(although still based on distribution by deed). However, it has more

communistic elements and most of its adherents think it will evolve into

libertarian communism.

So it can be considered as a half-way house between mutualism and

communism, with elements of both. As such, it will not be discussed here

as its features are covered in these two. Like libertarian communism, it

is revolutionary, considering that capitalism cannot be reformed.

Communism

First, this is not like Stalinism/Leninism! That was state capitalism

and not remotely communistic, never mind libertarian communist. Most

anarchists are libertarian communists and the theory is most famously

associated with Kropotkin.

Unlike mutualism and collectivism, there are no markets. It is based on

the abolition of money or equivalents (labour notes). So no wage labour

AND no wages system (“From each according to their abilities, to each

according to their needs”).

Communist-anarchism extends collective possession to the products of

labour. This does not mean we share toothbrushes but simply that goods

are freely available to those who need it. To quote Kropotkin:

“Communism, but not the monastic or barrack-room Communism formerly

advocated [by state socialists], but the free Communism which places the

products reaped or manufactured at the disposal of all, leaving to each

the liberty to consume them as he pleases in his [or her] own home.”

These anarchists urge the abolition of money because there are many

problems with markets as such, problems which capitalism undoubtedly

makes worse but which would exist even in a non-capitalist market

system. Most obviously, income does not reflect needs and a just society

would recognise this. Many needs cannot be provided by markets (public

goods and efficient health care, most obviously). Markets block

information required for sensible decision making (that something costs

£5 does not tell you how much pollution it costs or the conditions of

the workplace which created it). They also systematically reward

anti-social activity (firms which impose externalities can lower prices

to raise profits and be rewarded by increased market share as a result).

Market forces produce collectively irrational behaviour as a result of

atomistic individual actions (e.g., competition can result in people

working harder and longer to survive on the market as well as causing

over-production and crisis as firms react to the same market signals and

flood into a market). The need for profits also increases uncertainty

and so the possibility of crisis and its resulting social misery.

Rather than comparing prices, resource allocation in anarcho-communism

would be based on comparing the use values of specific goods as well as

their relative scarcities. The use-values compared would be both

positive (i.e., how well does it meet the requirements) and negative

(i.e., what resources does it use it, what pollution does it cause, how

much labour is embodied in it, and so on). In this way the actual cost

information more often then not hidden by the price can be communicated

and used to make sensible decisions. Scarcity would be indicated by

syndicates communicating how many orders they are receiving compared to

their normal capacity – as syndicates get more orders, their product’s

scarcity index would rise so informing other syndicates to seek

substitutes for the goods in question.

Evidence

Fine, it will be said, but that is just wishful thinking! Not true as

the empirical evidence is overwhelming for libertarian economic ideas.

For example, workers’ participation in management and profit sharing

enhance productivity. Worker-run enterprises are more productive than

capitalist firms. A staggering 94% of 226 studies into this issue showed

a positive impact, with 60% being statistically significant.

Interestingly, for employee ownership to have a strong impact on

performance, it needs worker participation in decision making.

Co-operatives, moreover, have narrow differences in wages and status

(well under 1 to 10, compared to 1 to 200 and greater in corporations!).

Unsurprisingly, high levels of equality increase productivity (as

workers don’t like slaving to make others rich off their labour!).

What about a lack of stock market? No real need to discuss how stock

markets are bad for the real economy in the current cycle but suffice to

say, they serious communication problems between managers and

shareholders. Moreover, the stock market rewards short-term

profit-boosting over long-term growth so leading to over-investment in

certain industries and increasing risk and gambling. Significantly,

bank-centred capitalism has less extreme business cycle than stock

market one.

The successful co-operatives under capitalism, like Mondragon, are

usually in groups, which shows sense of having an agro-industrial

federation and are often associated with their own banking institutions

(which, again, shows the validity of Proudhon’s ideas).

Then there is the example of various social revolutions around the

world. No anarchist talk would be complete with a reference to the

Spanish Revolution of 1936 and this is no exception. Yet we do so for a

reason as this shows that libertarian self-management can work on a

large-scale, with most of industry in Catalonia successfully

collectivised while vast areas of land owned and managed collectively.

More recently, the revolt against neo-liberalism in Argentina included

the taking over of closed workplaces. These recuperated factories show

that while the bosses need us, we do not need them!

Getting there

So, with the desirability and validity of libertarian socialism

sketched, the question becomes one of how do we get there. Obviously,

one elements of this would be creating and supporting co-operatives

within capitalism (Proudhon: “That a new society be founded in the heart

of the old society”) This could include promoting socialisation and

co-operatives as an alternative to closures, bailouts and

nationalisation.

However, most anarchists see that as just a part of encouraging a

culture of resistance, or encouraging collective struggles against

capitalism and the state. In other words, encouraging direct action

(strikes, protests, occupations, etc.) and ensuring that all struggles

are self-managed by those within them and that any organisations they

create are also self-managed from below. The goal would be for people to

start occupying workplaces, housing, land, etc., and so making

socialisation a reality. By managing our struggles we learn to manage

our lives; by creating organisations for struggles against the current

system we create the framework of a free society.

Together we can change the world!

More information:

section I

An Anarchist FAQ

)

(Based on a talk give at the Radical Routes Conference “Practical

Economics: radical alternatives to a failed economic system” on the

23^(rd) May. Radical Routes is a network of co-operatives and can be

contacted at Radical Routes Enquiries, c/o Cornerstone Resource Centre,

16 Sholebroke Avenue, Leeds, LS7 3HB)

[1] It should be noted that in academic economics this system is often

called “syndicalism” or “market syndicalism”, which shows you that

knowing little about a subject is no barrier to writing about it such

circles.

[2] If quoting Engels is not too out of place, the “object of production

— to produce commodities — does not import to the instrument the

character of capital” as the “production of commodities is one of the

preconditions for the existence of capital ... as long as the producer

sells only what he himself produces, he is not a capitalist; he becomes

so only from the moment he makes use of his instrument to exploit the

wage labour of others.” (Collected Works, Vol. 47, pp. 179–80) In this,

he was simply repeating Marx’s analysis in Capital (who, in turn, was

repeating Proudhon’s distinction between property and possession).