Most political economy discussions are about crafting contemporary policy responses, such as increasing or lowering tax rates, setting regulatory bodies to enforce labor laws, and other similar center-left and center-right electoral issues, with a class of think tank staffers and media pundits arguing back and forth. In this discussion almost all political fundamentals are agreed upon, bosses and landlords have a legal right to exist, taxation is legitimate, and property rights are not sacred e nor are tyrannical policies prohibited.
Underneath this chatter is a second layer of discussions, mostly on the internet and among some academics: the debate of capitalism vs socialism. The dominant currents in these debates are two major strains, right-libertarians and some form of state-socialism. There is a rough consensus that capitalism is about markets and private ownership, while socialism is about social ownership — that is either government ownership outright or private ownership with the government controlling critical resources and heavy taxation and a huge regulatory body.
In this debate, a common attack vector is to list all the failures of socialism and waves of red terror across the globe, with a bucket list of countries, and always ending with Venezuela. This is usually followed by throwing a canned argument, usually of the following “but you say that is not ‘real’ socialism isn’t it? That is what a socialist would say before they take over. That our revolution this time is different. Every single time. Aha! ” While this talking point is indeed funny, and puts the opponent in a hard position where he or she has to fight uphill, the issue here is about the vague definition of socialism. Socialism means many things to many people, but the only thing that seems to be universal, is that there is some shared intuition about economic egalitarianism, and pretty much that is it.
The most coherent definition of socialism is probably by marxist professor Richard Wolff, in which he simply describes it as calling out the failed promises that capitalism did not deliver under the slogans of the French Revolution, liberty, equality, and fraternity. In other words, socialism is the collection of critiques of capitalism rooted in The Enlightenment tradition. This should also explain how different critiques of capitalism could be contradictory with others, while still being under the umbrella term of socialism. So socialism has been the ideology in direct opposition to capitalism while still claiming to be the legitimate egalitarian successor. To clarify further, not all criticisms of capitalism can be considered socialism. Some Western literature considers capitalism to be the work of the devil for being too free, or too liberal and giving rights to the savage peasantry. At the same time, African mineral miners or Indian farmers under colonial rule had legitimate grievances working as laborers to enrich their overlords, and the ideologies that came out to reject such social conditions were always not based on the same tradition of The Enlightenment, but relied on something else such as a local religion or an indigenous philosophy, so they can’t really be classified as socialism, even if the intended outcomes are also egalitarian.
With the success of the Bolsheviks in 1917, Leninism became the dominant strain of socialism, and as a result most of the twentieth century was a discussion between marxist-leninist economists and the likes of Mises, Hayek, and Friedman. This has given the appearance that the exclusive feature of capitalism is markets, while socialism is about government planning and national industry. This artifact still exists today with statements such as “socialism is the government doing things,” and “capitalism is private business,” and the idea that the best system is a hybrid of both like Sweden and Norway where they have capitalism with a healthy dose of socialism. That has given the apologists of capitalism tremendous leeway. For example, the Calculation Debate of the 20s and 30s, which was supposedly where most of the intellectual friction occurred, was a discussion about different methods of organizing society, whether decisions should be made collectively or distributed. Even if, for sake of argument, every point made by the Austrians was objectively superior, that only proves that markets triumph over government planning, and still does not validate the legitimacy of the employer class to exist.
The issue is, there appears to be a gulf between communism and markets, and then a vacuum in between. This might help build the intuition that socialism and markets are complete opposites and contradictions, but looking at the early labor movement, there has been a gray area that tolerated markets without comprising the rights of labor. The early nineteenth century shows the beginning of socialism, of a pre-marxist variety, with English liberals such Thomas Hodgskin who used the classical liberal labor theory of value to argue that workers are entitled to all they produce, and French anarchist Pierre Joseph Proudhon, and finally American individualist anarchist Benjamin Tucker. All considered markets to be a fundamental part of their political philosophy.
It wasn’t until later in the century that the socialist movement started to demand more than labor’s full product and demanded a communist society. This can be seen in the numbers of the First International, which was universally occupied by marxists and social anarchists. By the beginning of the twentieth century markets had withered away from the socialist movement, and direct labor struggle was the only praxis, by both marxist and anarchist organizations. So by the time the Calculation Debate started, it would appear that capitalism and markets were synonymous, with a big vacuum between markets and communism. And to be charitable to the libertarians, that scene was for a long time the only ideology that tolerated markets. Even the less popular libertarian marxists, such as Luxembourg and De Leon simply wanted more democratic control for the workers and agreed with Leninists that markets would be abolished with a revolution. The same was true of the council communists and the Spanish anarchists.
While it is probably for the better that the labor movement has evolved to demand communism, it has created a confusion that considers capitalism and markets one of the same, this has given market libertarians more space to go unchallenged in defending a less rigorous model of capitalism. Market socialists have managed to fit that niche and to distinguish between markets as a whole, and capitalism as a political economy, and probably had better insight to define what capitalism exactly is.
If socialism is best understood as a critique of capitalism, then capitalism itself can be better defined as a critique of feudalism. It is very much agreed upon that capitalism is an ideology that emerged in late feudal Europe, so there is a space and time for the development of capitalism, and anything outside these two parameters should be excluded from the definition of capitalism for more rigour. For example, the Silk Road has existed in Asia for a millennium outside of Europe, and before Adam Smith was even born. So to describe capitalism as simply the free exchange between two parties is not sufficient. This has been a common talking point among libertarians, however, to claim that capitalism is part of human nature, and that the earliest forms of barter among hunter gatherers are evidence of this claim., They then switch immediately to give credit to Smith, Ricardo, and The Enlightenment as the foundations of capitalism. So capitalism is as ill defined as socialism in that sense, allowing both sides to claim “but that is not real socialism,” or “but that is not real capitalism, that is crony capitalism” once they are challenged on the concentration of wealth or the inter-generational compound accumulation of capital. So there really needs to be some housekeeping by market libertarians to better articulate what they mean by capitalism, rather than becoming just the political front for landlords and bosses to bust unions, or rallying behind a politician to deprive working moms of welfare money.
Benjamin Tucker is a controversial figure, social anarchists like to proclaim him as one of their own, while market libertarians would say he is the predecessor to Rothbardian market libertarianism. It is likely that neither are correct to claim him exclusively, but Tucker was a unique case of organic North American anarchism that shows the evolution of classical liberal thought midway, in which social anarchism and market libertarianism both have classical liberal DNA. And just like biological evolution, some species can still mate with other species that branch off from a common ancestor but only for some time until they further evolve into more distinct species. Tuckerism is that point where social anarchism and libertarianism can still ‘mate’ with it but not necessarily with each other as they would appear too different on the fundamentals.
Tucker gives us a theory of four monopolies that capitalism relies on to exist. Money, land, tariffs, and patents. Without these four, capitalism wouldn’t be able to sustain itself and Tucker envisioned a different form of markets — but still not communism — which would take shape in a more egalitarian society. Tucker’s theory probably defined capitalism better then any communist theorist did, since they could never manage to decouple markets from capital accumulation in a clear manner. Modern Tuckerites have tried to extend his theory to many more monopolies, such as healthcare, and infrastructure. While it is true that modern capitalism has new forms of monopoly, it is not necessary to extend the list further than the original four as that would be repetitive to Tucker’s theory. I’ll discuss this issue in detail later. What Tucker noticed was what was exactly unique to capitalism: a set of new property regimes, sanctioned by the state, that hadn’t been seen before in other human societies.
Every political economy has some arbitrary set of property norms, even the ones that claim to abolish private property, such as communism, would simply radically redefine private property to be privately owned by the commune. And every political economic theory is about questioning who gets to own what and for what reason. Capitalism is no different, whatever the classical liberals of the 1700s might claim. They thought they had invented unique ideas for the first time, using extremely simple labels, such as Private Property, The Free Marketplace, Natural Rights, as if no one before them had a theory of rules for exchanging eggs with bread. And the bourgeois political revolutions they mounted enshrined property rights as the highest and most sacred political right equal to the importance of a free citizenry.
Capital accumulation, which was the exclusive domain of lords and kings, became a universal right for common men and peasants, merchants, and artisans all gained the same legal rights to obtain property equally and be protected by the state — as long they are able to afford it. While it might be true that hard working protestants with a good work ethic would inevitably rise on the top as a result of their frugal living and labor discipline, Weber’s theory of the origins of capitalism would have remained a spirit without a legal political regime to embody and take shape materially. It conflates the results with the cause. The “free” in free markets is not an objective freedom, but a subjective one — a freedom to and freedom from. In the case of Smith, it was a market free from the hereditary legal privileges of kings and lords and the political extensions of those, such as guilds and mercantilists. Which liberal capitalist democracies have indeed abolished, and created an environment for protestant work ethic to take place.
As for Tucker, his theory of free markets instead advocated markets free from the authority of railroad tycoons and industrial robber barons, none of whom had political privileges for their last name, and most of whom accumulated their wealth within a generation or two. The only privilege they had was being ahead of everyone else in terms of the compound rate of capital accumulation. Tucker pointed out to the four monopolies that without them the existing ruling elite would lose their advantage over land, tariffs, money, and patents. What Tucker pointed out, was not simply a series of monopolies, but the four unique property regimes introduced by capitalism.
Capitalist democracy meant that citizens could legally acquire property as much as possible with equal rules applying to all. And most of the wealth created can be traced back to four property classes: real estate, finance, stocks, and intellectual property. Capitalism also tolerates other classes of property, such as commodity goods, but the latter doesn’t have any structural advantage when accumulated in large quantities. After all, no one has made a fortune by hoarding oranges in a warehouse. What usually comes to mind when fortunes are made from commodities is oil or gold, but in reality no one has ever made a fortune by actually owning oil, but rather by owning stocks in a company that drills and sells oil which also owns the land itself. The same goes for gold mining and the California Gold Rush happens to be a good example of how no one party could have a structural advantage once the word got out and had to compete with independent miners with almost no money So the unique property norms of capitalism are, the land regime, monetary regime, equity regime, and intellectual property regime.
Land regime. The protection of independent land owners under the rule of law is in itself a social positive, meant to answer the problem of land appropriation under feudalism. What this has allowed is the equal opportunity for absentee landlordism, and the accumulation of land without natural limits, such as defining land rights by personal occupation. Such property norms make it rational to invest in real estate with the guarantee that property rights will be respected under the state, and this has created inegalitarian conditions always favoring the landed incumbent against the landless.
Equity regime. Arguably the most symbolic form of capitalism is the corporation. And a corporation cannot exist in society as an entity without being sanctioned by the state. Just like real estate, the corporation allows the founder to accumulate capital beyond the individual’s natural limit. This way, capital can continue to accumulate autonomously even after the initial founder’s death, and enable the extraction of rent from the laboring classes who keep the wheels of the corporation running. The existence of private and public equity wouldn’t be possible as a property norm without deliberate government policy.
Monetary regime. It is practically impossible to imagine society without money, but the reality is that for most human history people have managed to live without it. The narrative popularized by Adam Smith of the evolution of money, of barter which later evolved into a single commodity as the store of value, and later became currency, has been under scrutiny in recent decades. Anthropologists such as David Graeber have argued that money is created by state coercion through means such as taxation, which as a second effect gives money utility as a means of exchange. While writers like Graeber do provide good evidence to their claims, it still only proves that most money is created by states, such as the Roman government, not all money. There is still some evidence that money can be socially constructed without coercion, but this approach occupies a much smaller niche in human societies. Which brings us to all the alternatives to fiat currency: barter in goods and services, credit networks, labor notes, different scales of communism, all of these have the potential to replace fiat currency, and which one is better or worse is another discussion to have. But what is important here is that fiat currency is a unique feature of capitalism, and without government policy to enforce such social norms around cash, market relations — if they would exist — would be drastically different. Even the most moderate alternative, that many right-libertarians envision to replace The Fed, of private and civic organizations issuing their own currency, would make idle capital accumulation harder since a multitude of currencies with high volatility between them means there is no safe place to park the accumulated money.
Intellectual Property regime. At the time Tucker pointed at the “patent monopoly,” intellectual property was of secondary value, but with industrial progress, intellectual property started to take a bigger share of total value. Intellect as a finite resource commodity to be distributed and treated like any other scarce physical resource is a new property norm that was socially constructed with the rise of the capitalist political economy as well. The right to copy ideas and information — a copyright — is a permissionless right. Under capitalism, copying ideas becomes a permissioned right granted by the state, a monopoly on who gets to use ideas from the intellectual commons. The rationale behind this is that by creating a synthetic property right, states could “promote the Progress of Science and Useful arts.” This is also a unique property norm that is exclusive to capitalism.
The property regimes of capitalism aren’t necessarily separate from each other. For example, equity and monetary property rights converge to create the stock market, and industries such as Hollywood that rely mostly on IP still cement themselves as incumbents by owning large tracts of real estate for their studios in expensive southern California. So each capitalist industry is a combination of these four sets of property, with the exception of professional athletes and doctors, every rich person has made their fortune not by labor, but by owning one of these four assets. As for doctors and lawyers, their inflated wages don’t come from owning capital, but by using government policy to give themselves an advantage in the labor market. Such a practice, though, is secular to capitalism and predates it being used in medieval guilds, as well as in modern times such as under state socialism.
While capitalism has introduced new property norms, it has also abolished old ones, mainly the commons and chattel slavery. The history of The Enclosure shows how the peasantry lost its autonomy by the privatization of land and was pushed to wage labor, forging the modern working class. Leftists are comfortable with this narrative, because it gives the working class the moral high ground. Slaves too were pushed into wage labor. Slavery has existed along with the earliest signs of human civilization, and the social relations of slavery vary from different times and too complex to go through for now. But what is important, Liberalism in its different currents, has always pushed back against slavery in varying degrees. Slave markets are legitimate functioning markets, they share the basic fundamentals of a market, prices, exchange, and are affected by supply and demand. Both right-libertarians and left-market anarchists claim that the status quo is not a “true free market” and the free market is something else. The thing is all markets are legitimate markets with different basic building blocks, and the political conflict is about what are these building blocks. Capitalism is one without chattel slavery as a legitimate property regime.
“that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness” the most famous sentence in the American Constitution, the oldest and most important liberal democracy, says exactly what it means. Everyone has the freedom to accumulate property — including intellectual property which was mentioned later — while also having the freedom from slavery as equal citizens regardless of who they are. Even if some of The Founding Fathers owned slaves themselves, it still was a contested issue during the time that required a political compromise to be up to the individual states. It only took two generations to bring these ideals into reality, The Abolitionists, were a militant minority who agitated and made their argument on moral grounds. But what eventually ended slavery was a war won by sheer physical firepower from the Yankee industrialist elite, led from top by moderate Republican Abraham Lincoln, and the bottom by poor Union soldiers who were as racist and crass as the average white man in the nineteenth century.
In order to improve the living conditions for the working class, it is necessary to have concrete definitions for terms such as capitalism and socialism in order to better critique things. Marxism has always been confusing for not decoupling capitalism from markets, markets under worker control is still not communism, but for sure it is not capitalism. Tucker’s reading of capitalism, as based on the four regimes, gives us the ability to do this while avoiding the confusion of the modern economic debate. In order to live in a society on the principle “From each according to his ability, to each according to his needs,” we need to ask what the property norms would look like in such a society. The fundamentals of communism are not clear, and have been limited to the distinction between private property and personal property which does not explain much. A discussion is needed to envision what a libertarian communist society would look like.