The Root of Inequality: The Free Market or the State?

In early September, Reuters reported on a new Federal Reserve survey showing widening wealth and income gaps in the United States. “All of the income growth,” Reuters reports, “was concentrated among the top earners …  with the top 3 percent accounting for 30.5 percent of all income.”

The Fed survey will no doubt disconcert those on both the left and the right who mistakenly regard the United States as “the land of the free,” home of opportunity where anyone can get ahead with a little hard work. Indeed, the data seem to show a reality very different from that rosy misconception, a reality in which connections between elites in the business and political worlds ensure that the rich get richer while the poor get poorer.

Presented with such a bleak vision of American economic and class structures, those genuinely unsettled by growing wealth inequality are often quick to blame “the free market,” cutthroat competition that puts profits above people. But what a free market actually is and whether we have one today are themselves separate questions which we must address in order to analyze American inequality. The American left may be surprised to learn that the radical socialist tradition includes a whole species of anti-state, free market libertarians.

By conceding that markets and competition in themselves are part of the social problem to be solved, the left needlessly disadvantages itself, capitulating to the misbelief that the capitalist ruling class has simply won the day fair and square. After all, if in the here and now we really do have a genuine free market, to what can we really object?

Most anti-capitalists thus share a foundational myth with the worst apologists for existing capitalism and its many inequalities. Both groups maintain that the economies of today are essentially free markets. Market anarchists like Ezra Heywood and Benjamin Tucker did not believe this untruth — that labor could not hope to compete with capital where the two met on fair and level playing field.

Rather, they argued that the most common and inequitable features of capitalism were in fact the poisonous fruits of profound affronts to generally accepted free market principles. Remove the state’s aids to big business, the manifold privileges handicapping working people, and true voluntary exchange and cooperation would dissolve capitalism as we know it.

As Ezra Heywood wrote in The Great Strike, “The ‘survival of the fittest’ is beneficently inevitable; the capitalist is powerless against labor, unless the State … steps in, and helps him catch and fleece his victims. The old plea of despotism, that liberty is unsafe, reappears now in the mistaken notion that competition is hostile to labor.”

Heywood offered a lesson for the contemporary American left: That capitalism is a system of land theft, legal and regulatory bars to competition, intellectual property monopolies and huge handouts to big business in the forms of subsidies and government contracts. What, then, is all this talk about “the free market?”

Market anarchism is a form of decentralism, a libertarian socialism that sees voluntary exchange and cooperation as solutions to the widespread inequality we struggle with today. Politicians and CEOs rather like the system we have in the United States; they depend on it, and it depends on them. The rest of us, quite unlike political and economic elites, don’t mind working for a living, aren’t asking for special legal privileges, and just want to be left free to undertake our own projects and pursue our own goals. That kind of free market offers an exit from present day inequalities, not an encouragement to them.

Translations for this article:

Anarchy and Democracy
Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory