Inequality as a Revolt Against Nature

The core of my philosophy, as a market anarchist, is the belief that equal exchange is mutually beneficial. Economic exploitation can only result from unequal exchange, which requires coercive interference in the normal process of market exchange. Many people find this dubious. So let’s take the argument for why this is so, and break it down into simple steps.

Equal exchange normally results in egalitarian outcomes because humans are utility maximizers. Adam Smith argued that exchange of goods and services tends to occur at a ratio reflecting the effort of producing them. If it takes a day’s work to trap three beaver or hunt two deer, the market price will tend toward an equilibrium of three beavers = two deer. The reason is that, if the deer is priced above three beavers, it will become more economical to hunt deer than to exchange beavers for them. The price premium on deer over beavers will cause labor, over time, to shift from trapping to hunting, bringing the price back toward its natural level.

So long as competition is free, people respond to unequal exchange by seeking more equal terms. And so long as no barriers to market entry exist, prices above the cost of production (including the disutility of labor) provide an incentive to enter the market at a lower price. So as Franz Oppenheimer argued, the market always tends toward an equilibrium at which goods exchange at a ratio that reflects the subjective disutilities of the producers.

This is the natural tendency, obtaining so long as the actors in a market are equal and power doesn’t enter into the equation. The only way to sell goods and services at prices greater than the production cost and subjective disutility entailed in producing them, in the long run, is through the use of force to suppress competition from cheaper providers.

Privilege is the use of direct or indirect force to suppress competition, to control the terms on which others work to procure consumption goods, so that they must work to support the holder of privilege as a condition for being allowed to work to support themselves.

Enforcing privilege is what states do. The classic example, which Oppenheimer set forth in “The State,” is artificial property in land. Exploitative wage labor is impossible so long as employers are subject to unfettered competition from self-employment.

In predominantly agrarian countries, this means specifically that so long as conveniently located vacant land is available for cultivation, competition from subsistence farming will push up wages and drive down profits. In agrarian countries, the state acts in collusion with landlords and employers to appropriate the land by political means. The landed oligarchy uses artificial property titles either to exclude producers from vacant land, or to extract rents from those who are the rightful owners by virtue of cultivation.

The same basic principle applies to all situations in which a privileged class interposes itself between production and consumption, charging a toll for the right to transform one’s own labor into subsistence. It takes the form of artificial property rights like patent and copyright, regulatory cartels that restrict price competition or artificially raise capital outlays and overhead required for production, and subsidies that conceal monopoly prices under the guise of tax bills.

For example, the 95% or more of the price of Nike sneakers that comes from the brand-name markup, over and above the cost of production, is an artificial property rent to the Nike corporation. Likewise the enormous “intellectual property” markup on a CD of Microsoft Windows or Office, or a drug under patent. Likewise the majority of the price of electronic goods that results from embedded rents on patents rather than actual parts and labor.

As R.A. Wilson argued in the Illuminatus! trilogy, whenever you see exchange systematically resulting in gain for one party and loss for another, you know it’s really not “free market” exchange at all. The game is rigged. Big Bill Haywood, one of the founders of the I.W.W. or “Wobblies,” put it this way: “For every man who gets a dollar he didn’t work for, there’s a man who worked for a dollar he didn’t get.”

Soccer mom liberals like to talk about people who “work hard and play by the rules,” yet don’t get ahead. Well, duh! Is anyone surprised when they play by the rules, in Vegas, and the house wins? Despite the “free market” rhetoric used by our plutocratic elite of billionaires, banksters and Fortune 500 CEOs, this is not a free market. It’s a rigged game in which the house always wins.

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Citations to this article:

Free Markets & Capitalism?
Markets Not Capitalism
Organization Theory
Conscience of an Anarchist