James R. Otteson. The End of Socialism (New York: Cambridge University Press, 2014).
Otteson’s book is an eloquent defense of an economic system which maximizes decentralism and autonomy; it’s just not, as he supposes, a defense of capitalism. Likewise, it’s a good critique of centralized planning and top-down authority — but not of “socialism.”
Otteson goes wrong starting with the basic conceptual categories underlying his analysis through the rest of the book. He defines “socialist-inclined” policy as a preference for centralized over decentralized decision making, a distrust for local autonomy and self-organization, and a preference for equality over liberty. “Capitalist-inclined” policy is the opposite.
Otteson is fundamentally wrong-headed in equating centralism and authority with equality, because in fact — an argument which will be the focus of my review — the main function of all systems of centralized authority throughout history has been to maintain and enforce inequality.
Otteson’s program is to analyze the general approach he calls “socialist-inclined,” and judge it both in terms of its ethical presuppositions and its practicability.
He defines socialism as public ownership of the means of production. Although the content of the term “means of production” has changed over time, socialism, to obtain its ends, will always require a society “to centrally organize political-economic decision-making.” “Other things being equal, the more fully an economy is centralized… the more fully is the economy socialist.” Capitalism, on the other hand, is a system that favors “allowing individuals or voluntary groups of individuals to make political-economic decisions for themselves with little state interference…”
In terms of its basic values and assumptions, socialism views human beings as more altruistic than self-interested, prefers cosmopolitanism to localism, and views human nature as relatively unconstrained (i.e., to dismiss attacks on the practicality of socialism based on “human nature”). Capitalism, on the other hand, takes essentially the opposite point of view: humans are more self-interested than altruistic, localism is better than cosmopolitanism, and human nature is relatively constrained.
Localism means, in particular, that people’s concerns are part of their
individualized familiarity. They tend… to deal with people, places, and facts known and familiar to people personally, rather than with global or other large-scale entities. Some… [conceive] human concern for others as a scarce resource that must be husbanded to be effective — and can thus be dissipated by spreading too thin or invoking indiscriminately.
And a constrained view of human nature means that “human motivation and other important putative facts about human nature are more enduring and thus more immune from attempts at institutional engineering than other positions might suppose.”
Interestingly, although Otteson identifies localism and personal knowledge and attachments as capitalist values opposed to the “cosmopolitanism” of socialism, a few pages later he is elaborating (in language reminiscent of the right-libertarian sacred text “I, Pencil”) on a capitalist model of market-mediated cooperation over vast distances, between people who do not know one another.
Take the computer on which I am writing this book: I have no idea where its parts were made, who made them, what people who made it were paid, or what alternatives were available to them aside from their contribution to this computer. To bring this computer to my desk required the efforts of literally thousands of people, the vast majority of whom are totally unknown not only to me but to each other as well. This is cooperation based not on personal knowledge, on personal bonds, or on personal affections; it is instead cooperation based on mutual self-interest across vast networks of unfamiliarity…. Capitalist theory… is willing to sacrifice… mutual need-serving based on personal familiarity in order to enable the far-flung cooperation among strangers that maximizes prosperity.
Otteson’s description of how cooperation is organized through the cash nexus uses language diametrically opposed to the earlier homely, Burkean language he used to describe localism. So he fails not only to acknowledge how corporate capitalism may in fact promote “cosmopolitanism” of a sort to the destruction of local ties, but also to consider the possibility that there was something besides increased efficiency — namely centralized social engineering of the sort he associates with “socialism” — involved in the degree to which the cash nexus prevails, the length of supply chains, and the size of firms and market areas.
20th century models of mass-production corporate capitalism and 20th century models of socialism have more in common, in terms of both centralism and social engineering, than they respectively do with other variants of socialism and markets. Both state socialist models like Leninism and Social Democracy, and American-style corporate capitalism, presuppose extreme capital-intensiveness, centralism, managerialism and hierarchy; both have a strong affinity for Taylorist “best practices” and Weberian work rules and job descriptions, and a desire to minimize the hidden/distributed knowledge of those engaged in actual work processes.
It’s also sad that Otteson ignores not only forms of market socialism (like individualist anarchism) and decentralist, self-organized socialism (like Kropotkin’s), but also contemporary forms like the autonomist Marxism of Antonio Negri and Michael Hardt (with its focus on commons-based peer production, exodus and horizontalism). And the main line of historic anarchism (or libertarian socialism — a phrase that should give Otteson pause) has always been a branch of the socialist and working class movement.
Chris Dillow, a British Marxist who blogs at Stumbling and Mumbling, takes as his main enemy managerialism — both state and corporate — and argues on Hayekian grounds for an economy of worker-managed cooperative enterprise competing in free markets. From his standpoint the emphasis on executive talent, “vision” and “leadership” in the corporate hierarchy, which is used to justify enormous CEO salaries, is an exact mirror-image of the technocratic cult of central planning in state socialist regimes.
Otteson quotes socialist Michael Newman to the effect that “socialists… have challenged the property relationships that are fundamental to capitalism.” But it is at least as accurate to see capitalism, as a historic system, as having been established by the large-scale violation of property rights in the interest of the rich, and sustained by ongoing state intervention to transfer income from poor to rich. There was a great deal of continuity between the property titles of the Old Regime and early capitalism.
As Immanuel Wallerstein argued, a segment of the landed classes under bastard feudalism reinvented themselves as agrarian capitalists and survived the transition to the capitalist era, and then used the early modern state to expropriate the peasantry’s remaining land — a majority of the arable land in Europe — through enclosures of one sort or another. In Britain the Whig landed oligarchy which had thus engrossed most of the land to themselves became the new capitalist ruling class. And contrary to Mises’ fable of the Industrial Revolution being financed by abstemious small masters saving and investing in factories, most industrialization was actually financed (according to Maurice Dobb) by the Whig oligarchy or old capitalist families that had become rich through mercantilism acting as silent partners to those petty capitalists.
Likewise, most titles to the oil and mineral wealth of the Third World today dates back to Western robbery in colonial days, with global corporations taking the place of British, French and Dutch colonial authorities.
And both Otteson and Newman take the term “property” at face value, making no distinction between forms of property that protect possessions like living space and the immediate fruits of individual labor, and artificial property rights like large-scale absentee ownership of engrossed land or “intellectual property” that entail the extraction of rents from other people’s labor. As Karl Hess noted over forty years ago, libertarianism isn’t about property rights — it’s about the right to legitimate property. There’s a huge difference.
He derives the “moral values” of socialism and capitalism from a couple of “paradigmatic examples,” G.A. Cohen and Adam Smith respectively. I can’t help thinking of the scene in the The Illuminatus! Trilogy where Hagbard Celine, in a room otherwise full of bankers, confronts an idealistic disciple of Mortimer Adler.
Somehow the conversation got around to a new book by somebody named Mortimer Adler…. One banker type at the table was terribly keen on this Adler…. “He says that we and the Communists share the same Great Tradition” (I could hear the caps by the way he pronounced the term) “and we must join together against the one force that really does threaten civilization — anarchism!”
There were several objections, in which Drake [Robert Putney Drake, a leading figure in the global banking aristocracy] didn’t take part (he just sat back, puffing his cigar and looking agreeable to everyone, but I could see boredom under the surface) and the banker tried to explain the Great Tradition, which was a bit over my head, and, judging by the expressions around the table, a bit over everybody else’s head, too, when [Hagbard Celine] spoke up suddenly.
“I can put the Great Tradition in one word,” he said calmly. “Privilege.”
Old Drake suddenly stopped looking agreeable-but-bored — he seemed both interested and amused. “One seldom encounters such a refreshing freedom from euphemism,” he said, leaning forward. “But perhaps I am reading too much into your remark, sir?”
…”I think not,” [Celine] said at last. “Privilege is defined in most dictionaries as a right or immunity giving special favors or benefits to those who hold it. Another meaning in Webster is ‘not subject to the usual rules or penalties.’ The invaluable thesaurus gives such synonyms as power, authority, birthright, franchise, patent, grant, favor and, I’m sad to say, pretension. Surely, we all know what privilege is in this club, don’t we, gentlemen? Do I have to remind you of the Latin roots, privi, private, and lege, law, and point out in detail how we have created our Private Law over here, just as the Politburo have created their own private law in their own sphere of influence?”
“But that’s not the Great Tradition,” the banker type said (later, I learned that he was actually a college professor; Drake was the only banker at that table). “What Mr. Adler means by the Great Tradition –“
“What Mortimer means by the Great Tradition,” hawk-face interrupted rudely, “is a set of myths and fables invented to legitimize or sugar-coat the institution of privilege. Correct me if I’m wrong,” he added more politely but with a sardonic grin. “He means,” the true believer said, “the undeniable axioms, the time-tested truths, the shared wisdom of the ages, …the basic bedrock of civil society, of civilization. And we do share that with the Communists. And it is just that common humanistic tradition that the young anarchists, on both sides of the Iron Curtain, are blaspheming, denying and trying to destroy. It has nothing to do with privilege at all.”
“Pardon me,” [Celine] said. “Are you a college professor?”
“Certainly. I’m head of the Political Science Department at Harvard!”
“Oh,” the dark man shrugged. “I’m sorry for talking so bluntly before you. I thought I was entirely surrounded by men of business and finance.”
The professor was just starting to look as if he spotted the implied insult in that formal apology when Drake interrupted.
“Quite so. No need to shock our paid idealists and turn them into vulgar realists overnight. At the same time, is it absolutely necessary to state what we all know in such a manner as to imply a rather hostile and outside viewpoint?…”The professor, taken aback a foot or so by this turn in the conversation, sat perplexed as Drake replied:
“So. Civilization is privilege — or Private Law, as you say so literally. And we all know where Private Law comes from, except the poor professor here — ‘out of the barrel of a gun,’ in the words of a gentleman whose bluntness you would appreciate. Is it your conclusion, then, that Adler is, for all his naivete, correct, and we have more in common with the Communist rulers than we have setting us at odds?…
“Privilege implies exclusion from privilege, just as advantage implies disadvantage,” Celine went on. “In the same mathematically reciprocal way, profit implies loss. If you and I exchange equal goods, that is trade: neither of us profits and neither of us loses. But if we exchange unequal goods, one of us profits and the other loses. Mathematically. Certainly. Now, such mathematically unequal exchanges will always occur because some traders will be shrewder than others. But in total freedom — in anarchy — such unequal exchanges will be sporadic and irregular. A phenomenon of unpredictable periodicity, mathematically speaking. Now look about you, professor — raise your nose from your great books and survey the actual world as it is — and you will not observe such unpredictable functions. You will observe, instead, a mathematically smooth function, a steady profit accruing to one group and an equally steady loss accumulating for all others. Why is this, professor? Because the system is not free or random, any mathematician would tell you a priori. Well, then, where is the determining function, the factor that controls the other variables? You have named it yourself, or Mr. Adler has: the Great Tradition. Privilege, I prefer to call it. When A meets B in the marketplace, they do not bargain as equals. A bargains from a position of privilege; hence, he always profits and B always loses. There is no more Free Market here than there is on the other side of the Iron Curtain. The privileges, or Private Laws— the rules of the game, as promulgated by the Politburo and the General Congress of the Communist Party on that side and by the U.S. government and the Federal Reserve Board on this side — are slightly different; that’s all. And it is this that is threatened by anarchists, and by the repressed anarchist in each of us,” he concluded, strongly emphasizing the last clause, staring at Drake, not at the professor.
And, for another example of where the real world of privilege trumps Otteson’s Adleresque approach to idealized “capitalism” and “socialism,” the main directions of state intervention and central planning under actual Western “socialist” regimes like European Social Democrats, the British Labour Party and the American New Deal, were in fact undertaken in the interest of the long-term stability of corporate capitalism.
Back in the days when even state socialists understood that centralized ownership and control of the economy as such did not equate to “socialism,” Engels wrote in Anti-Duhring that the nationalization of industry was something that happened when capitalism became too complex to be managed through joint-stock corporations alone. At that point, the capitalists began to act collectively through their state to administer things like telegraphs and railroads. And the main constituency behind the New Deal was the segment of the corporate economy (represented by figures like General Electric CEO Gerard Swope) engaged in capital-intensive, export-oriented manufacture.
It’s especially ironic that Otteson approaches his analysis from a perspective he calls “Smithian political economy.” Smith himself, far from being an uncritical apologist for the capitalism of his day, had a great deal to say — in language quite similar to Hagbard Celine’s at times — about the power of actual landed and capitalist elites. This book would benefit a great deal from an injection of actual Smithian analysis from The Wealth of Nations.
The conceptual framework Otteson lays out at the beginning of the book is as cliched and formulaic, and reflective of stereotyped ideological categories, as a Thomas Sowell column.
In the rest of the book, which follows this framework, he goes on to analyze socialism — or rather what he calls “socialism” — first in terms of its feasibility, and then of its morality.
THE DIFFICULTIES OF SOCIALISM
This section of the book is taken up by a lengthy analysis of practical difficulties of socialism, which he begins by summarizing briefly:
1. Limits of human knowledge.
Socialist-inclined policy, which relies on centralized political-economic decision making, requires for its effectiveness an enormous body of knowledge, as well as the abilities to analyze, assess, and comprehend it, neither of which does anyone possess…. The limits of what we do, and even can, know generate costs by failing to incorporate crucial facts about better ways to use scarce resources, better ways for people to cooperate, and better ways to achieve people’s ends.
2. Day Two Problem. On the second day after a redistribution, new inequalities and other difficulties immediately begin to arise under whatever new set of incentives exist. (Of course, Otteson has already stated his assumption that existing inequalities under capitalism result from differences in ability, effort, foresight, etc.)
The rest of Part I is taken up with an analysis of these problems in detail.
Otteson restates the common description of prices as an information mechanism that conveys to the market actor the relative scarcity of various inputs, and the comparative need for various uses of them, so that resources may be directed to their best use. He distinguishes between real prices, based on the spontaneous fluctuation of the market, and artificial prices set by authority (which, in socialist economies, result in irrationality, shortages or gluts by conveying inaccurate information to market actors).
Once we get past Otteson’s generalizations about “socialism” and “capitalism,” his actual discussion of the knowledge problem is quite useful, independently of his grossly inadequate conceptual framework. Although he shows no awareness of it, one of the most interesting uses of Hayek’s knowledge problem is the analysis of corporate planned economies and the internal information problems of hierarchy. The internal transfer pricing mechanism used by the large corporation is virtually identical to the proposals of Oskar Lange and Frederick Taylor, which Mises dismissed as “playing at market.” Internal transfer prices are set very much like those set by Soviet central planners — indirectly, several removes from the spot prices of real markets. The large corporation, particularly the large corporation in an oligopoly cartel of the kind that dominates most advanced capitalist economies, resembles the Soviet economy far more closely than it does Leonard Read’s “I, Pencil” (which Otteson of course trots out).
And Hayekian arguments about distributed knowledge are as applicable to critiques (like James Scott’s) of Taylorist management within the corporation — or David Graeber’s “everyday communism” as a means of aggregating knowledge and organizing cooperation despite the interference of both state planners and corporate managers — as to criticisms of state planning.
Otteson’s discussion of people in authority making decisions for others, without being disciplined by experiencing feedback from the consequences of those decisions, applies very much to the decision-making in a corporate hierarchy.
If I follow your proposed policy and it does not benefit me, or perhaps even harms me, on whom do the negative consequences fall? It is not on you; it is on me. But because you did not get that feedback, it may not incline you to correct, or even respond to, this consequence of your policy. I, on the other hand, who did suffer the negative consequence, would presumably respond to it, but since I am not making the decisions about the policy, my response has muted effectiveness…. Now, if I am the one making the decisions…, I will probably respond relatively quickly to the effects of those decisions. I am not infallible, of course, so my responses will not be perfect. But you are not infallible either, and I, unlike you, have the considerable benefit of directly receiving the feedback from my actions…. Because I actually experience the consequences, I have strong incentives to get decisions right….
Anyone who has worked under bosses in a large organizational hierarchy, whether it be in a centrally planned Soviet enterprise or in a corporation governed by a C-suite (our name for Gosplan in Corporate America), will find that passage quite familiar. Hierarchies of all kinds, whether state or corporate, are means of shifting benefits and authority upward, while shifting cost and blame downward. And corporate capitalism is characterized far more by bureaucratic authority relations than by market competition relations.
The common description of corporate capitalism as the “socialization of cost and risk” and “privatization of profit” is also relevant here. The main purpose of state intervention in the economy is not, as in Otteson’s Great Ideas world, an idealistic effort to right wrongs and remedy inequality. In the real world of Hagbard Celine, it is to socialize costs like long-distance transportation, training “human resources,” and the like, and to protect business from competition through regulatory entry barriers and artificial property rights like patent and copyright.
I regularly see, at the corporate chain-owned hospital where I work, examples of the boys in the C-suite treating the people doing the actual work as “pieces on a chess-board” as egregious as anything Adam Smith attributed to a legislator. It’s not by coincidence that one of the most devilishly effective tactics of labor struggle is “work-to-rule,” which means for us production workers to cease using the common sense by which we normally treat management interference as irrationality and route around it, and instead literally “just do what we’re told.”
The whole purpose of Taylorist “Scientific Management,” and of today’s “best practices,” is to plan individual judgement and local knowledge out of production as much as possible, in order to render individual knowledge and judgement superfluous (to “deskill labor” in Harry Braverman’s terms) and make the individual replaceable. This is done even at the expense of reduced efficiency, because corporate management — like the Soviet apparat — would rather have a big slice of a small pie than a smaller slice of a big pie.
If there’s any one single part of Otteson’s book that indicates the topsy-turvy nature of his assumptions, it’s his discussion of the question of what would be entailed in achieving rough economic equality. He frames the question in terms of what needs to be done (i.e. what new state policies need to be enacted, what new ways the state needs to intervene to override the judgement of individuals or the spontaneous outcome of the market).
He might or might not be astonished to know — although he demonstrates no awareness of the fact — that a major school of socialism (individualist anarchism) and radical schools of free market thought (like Georgism), not only treat state intervention as the primary source of inequality, but treat state intervention in the market to increase inequality as the defining feature of capitalism. These schools of thought see artificial property rights and artificial scarcities, and the economic rents deriving from them, as the main sources of income for the rich. Abolishing these artificial property rights, and the rents extracted by means of them — in other words, making the market freer — would reduce inequality.
It was capitalism, and the system of inequality resulting from it, that were created by state intervention. Enclosures, police state controls on the free movement and free association of labor in industrial Britain, enslavement, colonial appropriation of the Global South’s most valuable land and mineral resources, and suppression of competing industry in the colonial world.
And the patterns of property distribution resulting from that large-scale theft persist to the present day. Not only the arable land formerly belonging to peasants now used for large-scale cash crop production, or the mines and oil fields all over the world engrossed and enclosed by capitalist elites with the help of states, but the millions of acres of vacant and unimproved land held out of use by absentee title. The main focus of United States foreign policy in recent decades has been to keep this ill-gotten gain in the hands of the expropriators, and to overthrow any regime that attempts to alter that state of affairs (witness America’s response to land reform by Arbenz in Guatemala, and the role of Africa’s mineral wealth in American backing for the murderous Mobutu and its extraction of concessions from Mandela as a condition for release from prison and black majority rule).
American corporate capitalism as it emerged in the late 19th century was largely the creation of “experts” and “centralized authorities”: among other things, the experts and centralized authorities whose railroad land-grants and subsidies centralized the economy on a national scale, and whose “intellectual property” laws facilitated the formation of industrial cartels through the pooling and exchange of patents. The formation of the corporate economy was very nearly statist as the USSR’s First Five-Year Plan.
The most important forms of inequality are not those that result from Cohen’s (Otteson’s Adlerian “paradigmatic socialist”) “luck” and “accident,” but those that result from robbery. And to remedy such inequality it’s not necessary to resort to grand abstractions like Rawls’s “original position” or Rousseau’s “Great Mind” — only to remove the forms of state intervention that facilitate the upward redistribution of wealth.
In distinguishing Adam Smith’s “negative freedom” (or justice) from the positive “beneficence” required to achieve equality, Otteson begs the question. The bulk of inequality results directly from violations of negative justice, inflicted by privileged classes with the help of the state.
Moving on to the Day Two Problem, Otteson argues that on the second day after equalization people would immediately begin acting in ways, and taking society in directions, not intended or foreseen by planners. And each attempt by the state to remedy these unforeseen problems by more regulation would result in still more misallocations and irrationalities, snowballing with increasing layers of state regulation to correct the previous side-effects of state regulation envisioned by Mises in Socialism.
But this is in fact the path actually taken under capitalism. All the capitalist state’s secondary interventions, like health and safety regulations, a social safety net, counter-cyclical economic policies, etc., are undertaken to remedy the destabilizing side-effects of its primary intervention: robbing the poor through monopoly and privilege and transferring the rents upward to the rich. It is because of rents on artificial property and artificial scarcity that income and wealth are concentrated in the hands of those with a high propensity to save and invest in the first place, and the purchasing power of workers with a high propensity to consume is thereby reduced; and it is the resulting chronic tendencies towards overinvestment, idle capacity and underconsumption that the state intervenes to counteract with “progressive” welfare state measures.
THE MORALITY OF SOCIALISM
In the second half of the book, dealing with the morality of socialism, Otteson adopts the moral framework of Adam Smith, which defines human agency in terms of autonomy and independent judgement. And the faculty of judgement develops in response to feedback from the results of our past decisions. One of the most important aspects of independent judgement is the ability to enforce one’s personal boundaries by saying “No” to demands. That ability, and respect for it, are entailed in human dignity.
Equal moral agency and respect for human dignity are at the root of the mutual trust on which cooperation and conviviality depend.
In this moral system, it is necessary both for individuals to be free to make decisions according to their own lights, and to be held accountable for the results of those decisions.
Smith’s conception of justice is entirely negative — that is, refraining from violating the rights of others — as opposed to exercising the positive, or beneficent virtues. It follows that no one has a right to the beneficence or generosity of another, and the state has no business enforcing some to be generous or benevolent towards others.
This negative justice Otteson calls “capitalist justice,” as opposed to “socialist justice.” As Otteson frames it, Smithian justice “fails… to rectify, or even address, material inequality.”
Actually, no. Genuine Smithian justice, applied on a principled basis, would do a great deal to remedy material inequality. That’s because most of the material inequality that exists under capitalism results not from the spontaneous action of an unfettered market, but from the systematic violation of the principles of negative justice in the interests of the privileged or propertied classes. Simply ceasing to violate negative justice on behalf of the rich would significantly reduce material inequality.
Otteson goes on to construct a Smithian defense of negative justice based on local knowledge, trust, and the lack of entitlement to compensation for mere disappointment or bad luck that does not involve actual rights violations.
The local knowledge argument supports state intervention only in response to actual violations of negative justice, because the requirements of negative justice and the violations of it are fairly straightforward. Needs for beneficence, on the other hand, are more open-ended and location-specific and beyond the knowledge of a central authority. High levels of mutual trust are central to economic growth and prosperity. “…[I]f people do not trust one another to keep their promises and not to steal…, then there is incentive not to enter into cooperative agreements — thereby negatively affecting the production of prosperity.”
The irony is that the corporate form as it currently exists under capitalism — and predominates to an artificially high degree thanks to the state — is extremely prone to exactly the sort of agency problem Otteson describes as the result of lack of trust. Because the bylaws of the corporate form and the Iron Law of Oligarchy make senior management the de facto residual claimant in the corporation, but management can use their theoretical legal status as agent of the shareholder to block internal stakeholders from a say in decisions or share in profits proportionate to their contribution to production, management is able to expropriate value created by the workforce.
Workers accordingly have an incentive to do the bare minimum to avoid getting fired, and refuse to contribute their hidden, job-specific knowledge, because anything extra they do to contribute to productivity will simply be expropriated by management (by downsizing the labor force and/or giving themselves bonuses). In an era where the human capital and social relationships of the labor force contribute more to productivity than physical capital, this lack of trust is a powerful hindrance to progress. And management, conversely, has an incentive to hollow out human capital and strip-mine their organizations of long-term productive capability in the interest of massaging short-term earnings to game their own compensation.
Otteson also argues that the “fatal error” of socialism is treating individuals as members of classes because the latter are completely abstract categories, and that our individual differences in hopes, dreams, desires, etc., outweigh our fortuitous membership in the same income bracket. This is begging the question: assuming that different levels of wealth are in fact the result of random or morally neutral differences in outcome, rather than differences in outcome that are systematically skewed in one direction or another. Otteson uses the term “class” in its logical sense of a mere category, rather than a functional sense.
I do not claim that people do not form groups or associations; of course they do. I also do not claim that it is not fruitful and in appropriate in some contexts to think of people as members of groups or classes, even to ascribe… causal agency to the group. We can speak of people as Roman Catholics or Jews, as New Yorkers or as Americans; we can speak of the New York Giants as having won the 2011 Super Bowl… and so on….
Human beings are members of classes only metaphorically, not literally. The classes into which we group them — “rich” and “poor,” “bourgeoisie” and “proletariat” — have class purposes and class interests only metaphorically, not literally. On the contrary, human beings are literally individuals. Their purposes and interests are literally only their own…. Their relationships with others are real…; but their consciousesnesses remain their own….
Socialist-inclined policy tends to view human beings as if they were literally members of classes, and as if the purported purposes and intentions of the classes either organized them somehow into a single collective actor or were the purposes and intentions of every single individual in the class.
But if classes consist, not of a fortuitous assortment of people who just happened to have similar incomes through the spontaneous action of the free market, but of a collection of people who are all worse off because of a system rigged to benefit others at their expense, then class is a very useful concept indeed.
And that is exactly what analysts of class on the Left mean by it. That includes left-wing market anarchists like Thomas Hodgskin, Benjamin Tucker and Franz Oppenheimer, who all treated the state (in alliance with landlords and capitalists) as central to economic exploitation, and defined the ruling and ruled classes in terms of their status as beneficiaries or victims of state action. As all these thinkers argued, it becomes possible to exploit labor only when the employer is protected from the need to compete against opportunities of self-employment, or when the number of competing opportunities for employment are artificially reduced relative to the supply of labor-power. And this is exactly what the state does.
Power — POWER! — is the missing element in Otteson’s Adlerian analysis. In the real, Hagbardian capitalist world we live in, the positions of ruling and ruled classes, capitalist and proletarian, etc., are all defined by their respective relations to a system of power with the coercive state at its center.
Otteson continues his question-begging in discussing the “zookeeper theory of political economy,” comparing the spiritual atrophy of a caged animal with guaranteed food and shelter from the benevolence of the zookeeper, to the state of the free animal who is truly alive despite the uncertainty and danger. Again, he assumes that most economic misfortunes result not from the uncertainty of living free, but from a government that keeps its thumb on the scales in the interest of capitalists. Reducing economic inequality does not require robbing human beings of the dignity associated with freedom to succeed or fail, and reduce them to the status of a caged panther; in fact the opposite is true.
In discussing the costs and benefits of “decentralist capitalism,” he notes that “[w]hen people decide to trade, exchange, or otherwise cooperate with one another, they benefit — but not at each others’ expense. Believing otherwise is falling prey to the Zero-Sum Fallacy, which holds that one person’s gain must come at the expense of some other person.”
…[E]xchange is predicated on equal benefit. We must show the other person that the exchange serves his purposes, whatever they are, not that they serve ours…
But Otteson’s argument is a strawman. Nobody, or hardly anybody, of any political ideology believes that one person’s gain must come at another’s expense. Many, on the other hand, argue that such gain at others’ expense does in fact occur under capitalism as we have known it. And Otteson is begging the question in asserting otherwise. If we look at capitalism as a historical political-economic system five hundred years or so old, the evidence is overwhelming that most of the wealth of its ruling classes has in fact come at the expense of the majority of producers.
As the free market anarchist — and self-proclaimed socialist — Benjamin Tucker put it, under the system of class privilege we live under, one person’s “deficit” is precisely equal to another person’s “efficit.” Every increment that the income of labor is reduced by the artificial scarcity of land and capital, or reduced competition among manufacturers, becomes an increment of economic rents flowing to privileged landlords, capitalists, holders of “intellectual property,” and other monopolists. To quote Big Bill Haywood, “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.” And the overwhelming majority of the income going to propertied classes under capitalism — real, Hagbardian capitalism, not Adlerian or “paradigmatic” capitalism — is money they didn’t earn.
As for exchange, equal exchange is predicated on equal benefit. Unequal exchange — in which one party benefits from special privilege enforced by the state — is not. Rather, one party is in the position of a monopolist engaged in targeted pricing, leaving just enough benefit to the other party to make the exchange barely worth their while in absolute terms while coercively closing off all more attractive alternatives, and appropriating the lion’s share of benefit to themselves.
Otteson goes on to add qualifications to the “equal benefit” argument — the absence of force, fraud or privilege. But he clearly frames the discussion in an apologetic manner, of defending a system which is presumptively a satisfactory proxy for his “decentralist capitalism” against proposals for coercive redistribution. In every case his description of the “free enterprise system” is in the present indicative. So his force, fraud and privilege are atypical, largely theoretical exceptions to a system that is by and large just and good.
And some forms of socialism — including Tucker’s free market kind, and socialistic models based on commons-based peer production — are very much centered on voluntary, positive-sum cooperation.
Otteson points to the much higher levels of general prosperity and measures of quality of life in “economically capitalist countries,” taking as a proxy for the latter the countries’ “respective places on the continuum from decentralized or capitalist economies to centrally managed or socialist economies…”
He ignores the fact that even these economies which he regards as the most free are overwhelmingly statist in their history and structure. And by approaching his analysis (much as with his earlier analysis of class) as just a bunch of individual countries that happen to have this or that level of freedom and this or that quality of life, he ignores the ongoing functional relationship between countries which is decidedly un-free. The countries of the global North which fit into the “high freedom, high quality of life” quadrant of the graph not only were founded on massive robbery, conquest, and enslavement — during which they benefited at the expense of the countries of the global South their ruling classes robbed — but continue to extract wealth on a massive scale based on the persistent title of Western corporations to mineral wealth and land plundered from Third World countries under colonialism.
Look up from your Great Books and your “paradigmatic” socialism and capitalism, professor, and take a look at the hundreds of billions of dollars in stolen loot siphoned off each year from global South to global North. It might explain some of those quality of life indices better than your AEI economic freedom rankings.
Otteson repeats in Chapter 10 that “differential outcomes” will increase, as we allow individual freedom without external interference. “On the other hand, the more that we attempt to achieve equality, the more we will… have to limit the scope of people’s individual liberty.”
And I repeat, no. The only thing necessary is for the state to stop restricting the liberty of the poor, and stop helping the rich rob them.
The last part of the book is an inspiring homily to individual freedom and autonomy, and human dignity and self-actualization. The problem, to repeat my statement at the outset of this review, is that what he describes is not capitalism, and it is not in any way at odds with increased equality of condition. In fact the indignities of economic exploitation and the worst of material inequality are direct results of the very kinds of inequality — inequality in dignity and autonomy — that Otteson finds objectionable.
His discussion of the issue of fairness presupposes that an increase in fairness as understood by egalitarians would require all sorts of state interventionism, when arguably it is the state interventions central to the capitalist system as it exists that are implicated in existing deviations from fairness. And his distinction between “procedural” and “distributive” fairness presupposes a tradeoff between the two, when more often procedural unfairness is the main culprit in distributive unfairness.
So, to repeat: as a critique of “socialism,” and a defense of “capitalism,” this book fails utterly. As a critique of authority and a defense of human autonomy, it’s not half bad.