The New Economy and the Cost Principle

Jeremy Rifkin heralds “The Rise of Anti-Capitalism” (New York Times, March 15), citing a paradox whereby

“[t]he inherent dynamism of competitive markets is bringing costs so far down that many goods and services are becoming nearly free, abundant, and no longer subject to market forces.”

Rifkin’s arguments about how reductions in marginal cost affect economic relationships remind me of American anarchist Josiah Warren. An inventor and advocate of sweeping social reform, Warren contended that cost is the equitable limit of price and that legitimate competition would erase the rent, interest and profit streams of the privileged. His work influenced a generation of radicals who looked to competition to solve the economic problems of the day.

This group of nineteenth century American anarchists assailed capitalism in a manner that may surprise its contemporary critics, attacking it from the left, but using free market arguments. For these market anarchists, it was true that capitalism represented a system of privilege and exploitation, a successor to earlier economic frameworks like feudalism and mercantilism. Instead of conflating capitalism and free markets, however, these arch-individualists saw the remedy to capitalism’s predatory, usurious relationships in a genuine freeing of economic relations: True voluntary exchange, open competition and the abolition of special privilege.

This group of laissez faire anarchists argued that capitalists’ “power of increase,” their ability to take an income without actually working, came from what they labeled “class legislation” — political barriers to real competition that gave employers unfair advantage. Continuing this strain of thought, today’s market anarchists see coercive governmental power as skewing economic relationships in favor of elites with political clout.

As free marketers, decentralists and individualists, we occupy a corner of the libertarian movement. At the same time, as critics of wealth inequality and champions of the poor and working classes, we find ourselves within today’s anti-capitalist movements for economic justice. Given the most commonly repeated terms of debate, the false dichotomies bleated on cable news and opinion pages day after day, these commitments may seem to present a contradiction. Free marketers are regarded as defenders of a plutocratic economic status quo, with the state cast as bulwark against cutthroat competition and protector of the little guy.

But this story misapprehends the historical role of the state in the economic system, placing it in a conflict with capital that has never actually existed. Indeed, political and economic elites have always and at all times worked together. The revolving door culture of Washington bears out this story of power and collusion, finding business executives into bureaucratic roles in the federal government and vice versa.

Rifkin is right to see the “creeping reality of a zero-marginal-cost economy” as a threat to capitalism. New technologies truly allow us to route around (to reference the famous expression about the Internet) the impediments to exchange that have always been the source of capital’s monopolistic power. Warren’s dream, “Cost the Limit of Price,” — or at least something very close — is all the time becoming more and more of a possibility.

Translations for this article:

Citations to this article:

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