In Defense of Small Business: On the Price Gouging/Looting Debate

As the world responds to the COVID-19 (or coronavirus) pandemic, we’re seeing many opportunities to highlight the anarchist perspective. Right now, mutual aid is the shining star of the last-ditch efforts to minimize the impact on the global north. 

From communities passing the hat for those who are out of work, to neighbors dropping off groceries and other necessities to their immunocompromised neighbors, small, humane networks are picking up the slack of governments the world over. A lot of anarchists are also seeing an opportunity to fight for concessions from the state right now. From rent and eviction freezes, to reduced police presence, and even a potential universal basic income scheme — we’re closer than ever to a lot of big wins. In fact, some have suggested we roll the work stoppage resulting from coronavirus right into a general strike. After all, we’ll have built up fundraising infrastructure to keep us fed while we’re not working, and we’ll have a lot of practice exercising the kind of discipline that makes strikes work. Finally, many anarchists are pointing out the ways in which states have enabled a pandemic situation and all the many many ways the US, in particular, has bungled the response. 

For now, I want to put these broader considerations aside and address a somewhat niche debate going on in market anarchist circles. In a conversation that perhaps could only exist in the market anarchist world, some of us have been taking the libertarian line in defense of price gouging in times of crisis and potential shortage. Others of us, however, see price gouging as ineffective and inequitable and have advocated looting as an optimal crisis response under capitalism. So let’s dig into the debate on the ideal anarchist crisis response, and price gouging in particular. 

The libertarians (and liberal anarchists) make two good points in favor of price gouging (or in  more neutral terms, “emergency pricing”):

  • They point out that higher prices can prevent hoarding by signaling to customers that resources are scarce. This preserves some supply for those with greater need. The classic example is ice during a hurricane when power has gone out. Price gouging on ice ensures that someone who needs it to, say, keep insulin cool, is more likely to get it over someone who just wants to chill their beer. 
  • Secondly, price gouging stimulates increased local supply, thus preventing shortages. Suppliers ramp up production once it’s financially feasible to produce and transport more product, thanks to higher prices. The prices also signal to suppliers where the resources are needed most, ensuring they get there first. 

This is a heavily consequentialist approach to the problem, but there are other ethical reasons to prefer price increases to other approaches too. In particular, a price approach respects the right of sellers and buyers to set terms of sale on their own.  For many market anarchists at least, this right to truck and trade at will is a right worth protecting. 

Many anarchists note, however, that there’s another solution that doesn’t rely on price mechanisms to prevent hoarding by the wealthy — looting — and they also note that price gouging is not wildly effective at preventing such hoarding in the first place. After all, when the wealthy are so much wealthier than everybody else, they can afford to hoard at higher relative prices. Looting is necessary, they claim, because this allows the poorest among us to access life-saving resources. Remember, while there are non-market institutions that support “the poor” they often leave those most in need in the lurch, especially under the pearl-clutching rules of the American welfare system and in our church-based charity sector.  Looting ensures that people who get kicked off welfare rolls for imbibing unapproved substances, or for being sex workers, or for working too much, have their immediate needs met in times of crisis. 

In the current social context, I think both factions are right: both price gouging and looting must exist simultaneously for the best outcomes for all. Libertarians are correct that stimulating local supply helps to prevent shortages by making it worth it (or even just financially feasible) to transport more product to areas most affected. Price laws should be violated. But so should laws against petty theft. 

Why? Prices — especially when they’re set by large and sometimes nationwide retail corporations — aren’t flexible enough to account for legitimate need and they don’t allow sellers to make humane decisions about who to charge and how much. Why can’t Walmart create a policy whereby prices would be high for all customers reasonably able to pay, but waived for those with legitimate need? Well, they’d have to trust their checkout clerks to make those kinds of calls. As we all know, they barely trust their clerks not to loot the store themselves. Looting allows people in dire situations to meet basic human needs and, while we should not necessarily encourage it, we should absolutely not snitch on looters and shoplifters if we see them and we should resist police responses to such theft as well. In short, we shouldn’t be picking and choosing which laws to break — we should break them all. 

While looting and price gouging are both necessary adaptations to crisis under capitalism, I don’t think they would be in a truly anarchist society. The key change is the elimination of huge, multinational, retail corporations in favor of small, worker-owned and run enterprises. Keep in mind I’m discussing specifically distribution here. I’m not certain whether large scale production with global supply chains would or should exist in a post-capitalist society. Kevin Carson’s recent piece on pandemic risk lays out one case against such large scale production. On the other hand, some ideas from mainstream Austrian economics still hold water for me: namely, that specialization and division of labor are efficient (up to a point) and that global supply chains might have positive knock-on effects in terms of generating a more cosmopolitan outlook. 

Putting that discussion aside, we can focus on localist distribution as divorced (to an extent) from production. After all, small businesses currently often buy their stock (or inputs) from larger, separate, producers. In a crisis, a system of small scale retailers would be able to make snap decisions to waive or discount payment for people they know to be in need. Neighborhood scale distribution makes it a lot easier to tell who these people are and to verify claims of need. And beyond that, there’s the Adam Smith point that physical closeness paired with repeated economic transactions does help to generate fellow-feeling between people in a community, which makes businesspeople more inclined to give their neighbors a break. Similarly, worker ownership empowers clerks to make the call, without the need for long communication chains up and down a corporate bureaucracy. 

Throughout this crisis, I’ve actually been thinking a lot about the role small enterprises might play in the unique vision of market anarchists. Not all of us agree, of course, on what counts as small, whether these forms of social arrangement are universally good, or even whether they would be necessary in a post-capitalist world. Indeed, many anarchists would prefer a fully-communal set of economic institutions. Still, it seems clear to me, that the more we can bring decisions down to the human scale, the easier it will be for people to make humane decisions and treat others well. 

An example from my own life is perhaps illuminating here. 

As restaurants close down and working-class people brace for the economic impact of coronavirus, I know many who are either stuck having to work and risk exposure or are without hours and therefore without pay. This is especially true of those who work for larger corporations and multinationals like Walmart and Amazon. I, however, work for a small establishment — a local bar. While it’s far from ideal and there are serious problems with how even this organization runs, I’m lucky right now to work for owners who made the call to close down relatively early and are taking aggressive measures to make sure we as employees continue to get paid throughout the closure. The owners are personally kicking in some money, and they’re working on a to-go only procedure so we can partially reopen soon. Again, there’s a lot left to desire there, but it sure beats working at Walmart right now. 

And this is the heart of the left-libertarian, individualist anarchist, mutualist, and left-wing market anarchist alliance: we cover a spectrum regarding what is and isn’t a proper and desirable market institution. But what we all agree on is this: there is some mix of radical action and market function that makes up the ideal future. We don’t know exactly what the right mix is, but I’m excited to experiment with new social forms and to build a better world together — through looting, through small enterprise, and with every other tool and technology we have at our disposal.

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