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Introduction to Part II: Exploitation and the Political Means


The question remains: if labor is the source of normal exchange-value for reproducible goods, and the natural wage of labor in a free market is its full product, what is the explanation for profit in "actually existing capitalism"?

A central point of contention between Marx and the utopians was the extent to which the labor theory of value was a description of existing commodity exchange, or a prescription for rules of exchange in a reformed system. Marx criticized the utopians for erecting the law of value into a normative standard for a utopian society, rather than a law descriptive of existing capitalism. For him, the law of value described the process of exchange under capitalism as it was; the law of value was fully compatible with the existence of exploitation. His generalizations about exploitation assumed that commodities were exchanged according to their labor value; far from making profits impossible, exchange according to the law of value was presupposed as the foundation for surplus-value. Profit resulted from the difference in value between labor-power, as a commodity, and the labor-product; this was true even (or rather, especially) when all commodities exchanged at their value.

Some "utopians" (including Proudhon, the Owenites, and some Ricardian socialists), it is true, saw the labor theory as a call for a mandated set of rules (like Labor Notes, or modern proposals for government backing of a LETS system). For these, the law of value ruled out exploitation; but rather than seeing it as an automatically operating law of the market, they saw it as requiring the imposition of egalitarian "rules of the game."

But besides these two opposing theories, there was a possible third alternative that differed significantly from the first two. This third alternative considered all exploitation to be based on force; and the exploitative features of existing society to result from the intrusion of the element of coercion. Unlike utopianism, the third theory treated the law of value as something that operated automatically when not subject to interference. Unlike Marxism, it believed the unfettered operation of the law of value to be incompatible with exploitation. This school included, especially, the market-oriented Ricardian socialist Thomas Hodgskin, and the later individualist anarchists in America; they saw capitalism as exploitative to the extent that unequal exchange prevailed, under the influence of the State. Without such intervention, the normal operation of the law of value would automatically result in labor receiving its full product. For them, exploitation was not the natural outcome of a free market; the difference between the value of labor power as a commodity and the value of labor's product resulted, not from the existence of wage labor itself, but from state-imposed unequal exchange in the labor market. For them, the law of value was both the automatic mechanism by which a truly free market operated, and at the same time incompatible with exploitation.

It followed that the law of value was not something to be surpassed. Unlike the Marxists, who looked forward to an economy of abundance based on a principle of "from each according to his ability, etc.," the individualists and market Ricardians saw the link between effort and reward as fundamental to distributive justice. The defining feature of exploitation was the benefit of one party at the expense of another's labor. As Benjamin Tucker wrote in "Should Labor Be Paid or Not?"

[Johann] Most being a Communist, he must, to be consistent, object to the purchase or sale of anything whatever; but why he should particularly object to the purchase and sale of labor is more than I can understand. Really, in the last analysis, labor is the only thing that has any title to be bought or sold. Is there any just basis of price except cost? And is there anything that costs except labor or suffering (another name for labor)? Labor should be paid! Horrible, isn't it? Why, I thought the fact that is not paid was the whole grievance. "Unpaid labor" has been the chief complaint of all Socialists, and that labor should get its reward has been their chief contention. Suppose I had said to Kropotkin that the real question is whether Communism will permit individuals to exchange their labor or products on their own terms. Would then Most have been as shocked? ....Yet in another form I said precisely that.1

Given the moral basis of the labor theory of value, as understood by the petty bourgeois socialists, in the principle of self-ownership and ownership of one's labor product, it followed that payment according to work was not a holdover from capitalist society, but the rightful basis of a future socialist order. It was no more acceptable for the collective to appropriate the product of the individual's labor for general use, than for the landlord and capitalist to appropriate it for their own use.

Maurice Dobb, in his introduction to A Contribution to the Critique of Political Economy, pointed to the strategic difficulties presented to Marxists by this position. As exemplified by Marx's assertion in Value, Price and Profit, Marxists recoiled from the idea that profit was the result of unequal exchange:

To explain the general nature of profits, you must start from the theorem that, on an average, commodities are sold at their real value, and that profits are derived from selling them at their values, that is, in proportion to the quantity of labour realised in them. If you cannot explain profit upon this supposition, you cannot explain it at all.2

"The point of this can the better be appreciated," Dobb said,

if it is remembered that the school of writers to whom the name of the Ricardian Socialists has been given..., who can be said to have held a "primitive" theory of exploitation, explained profit on capital as the product of superior bargaining power, lack of competition and "unequal exchanges between Capital and Labour" (this bearing analogy with Eugen Dühring's "force theory" which was castigated by Engels). This was the kind of explanation that Marx was avoiding rather than seeking. It did not make exploitation consistent with the law of value and with market competition, but explained it by departures from, or imperfections in, the latter. To it there was an easy answer from the liberal economists and free traders: namely, "join with us in demanding really free trade and then there can be no "unequal exchanges" and exploitation".3

This "easy answer" was exactly the approach taken by Thomas Hodgskin and the individualist anarchists of America. The greatest of the latter, Benjamin Tucker, reproached as merely a "consistent Manchester man," wore that label as a badge of honor.

The great importance of Marx's idea of the difference between the value of labor-power and the value of labor's product, Dobb wrote,

lay precisely in its enabling him to show how there could be inequality and non-equivalence in "equivalent exchange"--or exploitation and appropriation of what was created by the producers consistently with the theory of value (i. e., demonstrating how "profits are derived by selling them at their values"). Labour-power, converted into a commodity by the historical process whereby a proletariat was created and from thenceforth freely bought and sold on the market, acquired a value like other commodities in terms of the amount of labour that its production (or reproduction) cost.4

This leaves two questions still unresolved: 1) if the "historical process" of primitive accumulation involved the use of force, how essential was force to that process; and if force was essential to the process, does it not follow that past force, as reflected in the present distribution of property, underlies the illusion of "free contract"; 2) how is it possible for employers to consistently pay a price for labor-power less than its product, if labor is free to bargain for the best possible deal? (Recourse to vague ideas of "social power" or "market power," without an explicit examination of their nature, is not a satisfactory explanation.)

Dobb, in Political Economy and Capitalism, denied that exploitation of labor could take place through unequal exchange alone, in "an order of free contract." After quoting the same passage from Marx on the assumption of normal exchange values as consistent with exploitation, Dobb went on:

Tudor monopolies or feudal liens on the labour of others could no longer be used to explain how a class drew income without contributing any productive activity. Gains of chance or of individual "sharp practice" could exert no permanent influence in a regime of "normal values". Universal and persistent cheating of the productive by the unproductive seemed impossible in an order of free contract.5

Of course, this is begging the question. The extent to which the so-called "laissez-faire" era was "an order of free contract" is precisely the point at issue. And Dobb's argument was tautological. By definition, a system of free contract excludes unequal exchange enforced by state intervention in the market. To the extent that such politically-enforced unequal exchange prevailed, the economic system was not "a regime of 'normal values.'" The questions remain: to what extent was the actual economy of the nineteenth century a system of privilege, and a departure from the free market; and to what extent was this departure the main cause of profit on capital? Of course, Dobb was right that a general rate of profit could not result from "individual 'sharp practice.'" Such deviations would cancel each other out in an equilibrium economy, like the Austrian entrepreneurial profit. To explain a rate of profit as a general phenomenon, one must have recourse to some systemic cause. The Austrians seek it in time preference as a fundamental characteristic of human nature. The mutualists seek it, rather, in systematic state intervention in the market on behalf of privileged interests.

Ronald Meek raised essentially the same question--how the historically universal phenomenon of exploitation could continue to take place in a society in which the sale of labor-power was, ostensibly, regulated by free contract:

A "theory of distribution" which said only that unearned income was the fruit of the surplus labour of those employed in production would hardly qualify as a theory at all.... At the best, such a "theory" could be little more than a generalized description of the appropriation by the owners of the means of production, in all types of class society, of the product of the surplus labour of the exploited classes. But surely there are two salient points which a theory of distribution appropriate to our own times should concentrate on explaining: First, how is it that unearned incomes continue to be received in a society in which the prices of the great majority of commodities are determined on an impersonal market by the forces of supply and demand, and in which the relation between the direct producer and his employer is based on contract rather than status? And second, how are the respective shares of the main social classes in the national income determined in such a society? Unless one is content to rely on some sort of explanation in terms of "force" or "struggle", ... it is impossible to give adequate answers to these questions without basing one's sentiment on a theory of value.6

Rather than clarifying such issues, Marxists have (perhaps for good reason) generally been quite ambiguous concerning the relationship between state coercion and economic exploitation. For example, Maurice Dobb wrote vaguely of coercion by "class circumstances" in the absence of legal coercion by the state, avoiding the issue of past force in creating those circumstances or present force in maintaining them:

Since the proletarian was devoid of land or instruments of production, no alternative livelihood existed for him; and while the legal coercion to work for another was gone, the coercion of class circumstance remained.... [W]ithout the historical circumstance that a class existed which had the sale of its labour-power as a commodity for its only livelihood to confront the capitalist with the possibility of this remunerative transaction, the capitalist would not have been in a position to annex the surplus-value to himself.7

And without the state to rob the peasantry of their land, to terrorize the urban proletariat out of organizing, and to legally proscribe alternative working class forms of self-organized credit, this propertyless condition of the working class arguably would never have come about, and would have been unsustainable even after it did come about.

Taking his tautologies and question-begging a step further, Dobb asserted that Pareto's distinction between free exchange and robbery, and the parallel distinction between Pareto-optimality and a zero-sum situation, were meaningless in a "free competitive market."

Pareto has pointed to the significant distinction between "activities of men directed to the production or transformation of economic goods", and the appropriation of goods produced by others". Clearly if one views the economic problem simply as a pattern of exchange relations, separated from the social relations of the individuals concerned--treating the individuals who enter into exchange simply as so many x's and y's, performing certain "services", but abstracted from the concrete relation to the means of production...--then Pareto's distinction can have no [?] in a free competitive market. "Appropriation of goods produced by others" can only result from the incursion of monopoly or of extra-economic fraud or force. From the regime of "normal" exchange-values it is excluded by the very definition of a free market.8

Quite right. Zero-sum relations are excluded by the very definition of a free market. But the question, again, is whether the existing market is free or competitive. To abstract production relations and patterns of property ownership from a theory of the exchange process, without first examining the role of coercion in those relations and patterns, is of course to render the paradigm irrelevant to the real world. Only when all the data is considered, is it a useful model for evaluating reality. Unfortunately, the more vulgar apologists for capitalism, as well as its more vulgar opponents, share the error of taking the present system as a proxy for the "market." The myth of the nineteenth century, or even the Hoover administration, as a time of "laissez-faire" is cynically adopted by both corporate propagandists and state socialists for their own reasons.

Marx and Engels vacillated a great deal in their analysis of the role of force in creating capitalism, and in their judgment of whether such force had been essential in its rise. In the Grundrisse, Marx repeatedly raised the issue of the "pre-bourgeois" or "extra-economic" origins of the capitalist economy, but never with an unambiguous answer. Marx understood that the existing situation, in which a propertyless worker confronted "the objective conditions of his labour as something separate from him, as capital..., presuppos[ed]

an historical process, however much capital and wage labour themselves reproduce this relation and elaborate it in its objective scope, as well as in depth. And this historical process, as we have seen, is the history of the emergence of both capital and wage labour.

In other words, the extra-economic origin of property means nothing but the historical origin of the bourgeois economy....

The original conditions of production cannot initially be themselves produced, cannot be the results of production.... What requires explanation is not the unity of living and active human beings with the natural, inorganic conditions of their exchange of matter with nature, and their appropriation of nature; nor of course is this the result of an historical process. What we must explain is the separation between these inorganic conditions of human existence and this active being....9

Marx ridiculed the idea that the "primitive accumulation" had been accomplished by the diligent and thrifty gradually saving until they had acquired enough capital, and then turning to the laborer with the offer of work:

Nothing is therefore more foolish than to conceive of the original formation of capital as having created and accumulated the objective conditions of production--means of subsistence, raw materials, instruments--and then having offered them to workers stripped of them. For it was monetary wealth which had partly helped to strip of these conditions the labour power of the individuals capable of work. In part this process of separation proceeded without the intervention of monetary wealth. Once the formation of capital had reached a certain level, monetary wealth could insinuate itself as mediator between the objective conditions of life thus become free and the freed but also uprooted and dispossessed living labour powers, and buy the one with the other.10

Unfortunately, though, Marx was not explicit on exactly how "monetary wealth" did this stripping.

It is clear, however, that Marx understood the origins of the process to be extraordinary, and outside the normal process of exchange; once the process was underway, it was intensified through commodity exchange.

We have thus seen that the transformation of money into capital presupposes an historical process which has separated the objective conditions of labour from, and made them independent of, the worker. Once capital has come into being, the effect of its process is to subject all production to itself, and everywhere to develop and complete the separation between labour and property, between labour and the objective conditions of labour.11

The first part of the sentence is a tautology. "Capital," by Marx's definition, is the material conditions of production not controlled by labor. So the separation of the means of production from the worker is, of course, a precondition of transforming money into capital. But is it a sufficient condition? Is the owner of the means of production able to pay labor less than its product, and thus obtain a return on capital, in a genuinely non-coercive exchange process? Is the creation of surplus value inherent in wage labor as such, or does it require the weakened bargaining power resulting from forcible robbery by the state? And can such exploitation continue without the ongoing intervention of the state to handicap labor's bargaining power and enforce unequal exchange?

In Capital, Marx was more explicit on the requirement for robbery by actual force, at least to get the ball rolling.

The dull compulsion of economic relations completes [emphasis added] the subjection of the labourer to the capitalist. Direct force, outside economic conditions is of course still [emphasis added] used, but only exceptionally. In the ordinary run of things, the labourer can be left to the "natural laws of production," i.e., to his dependence on capital, a dependence springing from, and guaranteed in perpetuity by the conditions of production themselves. It is otherwise during the historic genesis of capitalist production [emphasis added]. The bourgeoisie, at its rise, wants and uses the power of the state [emphasis added] to "regulate" wages, i.e., to force them within the limits suitable for surplus value making, to lengthen the working day and to keep the labourer himself in the normal degree of dependence. This is an essential [emphasis added; cf. Engels' contrary claims in Anti-Dühring] element of the so-called primitive accumulation.12

First of all, if force was essential to creating the system (and we will see in the chapter on primitive accumulation below the horrifying scale of that force, as described by Marx himself), the fact that it runs in its grooves without further direct intervention does not make the system any less statist in its structure. But in fact, the "conditions of production" require massive state intervention for their continuation; some of the forms of this intervention were described by Benjamin Tucker in his analysis of the alleged "laissez-faire" system of the nineteenth century.

Indeed, Marx himself admitted the more than "exceptional" influence of state policy on the ongoing process of accumulation in his own century. State finance, tariffs, etc., greatly intensified the process above what it would have been in a free market:

The system of protection was an artificial means of manufacturing manufacturers, of expropriating independent labourers, of capitalizing the national means of production and subsistence, of forcibly abbreviating the transition from the mediaeval to the modern mode of production.13

Engels, to render the Marxian theory consistent (and to deflect the strategic threat from the market socialists mentioned above), was forced to retreat on the role of force in primitive accumulation. (And if we take his word on the importance of Marx's input and approval during his writing of Anti-Dühring, Marx himself was guilty of similar backpedalling). In Anti-Dühring, Engels vehemently denied that force was necessary at any stage of the process; indeed, that it did little even to further the process significantly.

Every socialist worker [like every British schoolboy?]... knows quite well that force only protects exploitation, but does not cause it; that the relation between capital and wage labour is the basis of his exploitation, and that this arose by purely economic causes and not at all by means of force [emphasis added].14

This raises the question of to what extent the legal system is presupposed in even "purely economic" relations, and whether more than one "purely economic" state of affairs is possible, depending on the degree of such state involvement. For example, are combination laws, laws of settlement, and laws on the issuance of credit without specie backing essential to the process of free exchange itself, or only to the capitalist character of such exchange?

Engels stated the case in even more absolute terms later on, denying that force was necessary (or even especially helpful, apparently) at any stage of the process.

...even if we exclude all possibility of robbery, force and fraud, even if we assume that all private property was originally based on the owner's own labour, and that throughout the whole subsequent process there was only exchange of equal values for equal values, the progressive development of production and exchange nevertheless brings us of necessity to the present capitalist mode of production, to the monpolization of the means of production and the means of subsistence in the hands of a numerically small class, to the degradation into propertyless proletarians of the other class, constituting the immense majority, to the periodic alternation of speculative production booms and commercial crises and to the whole of the present anarchy of production. The whole process can be explained by purely economic causes; at no point whatever are robbery, force, the state or political interference of any kind necessary.15

As Dobb suggested in the earlier quote, theories of the role of the state in exploitation were a strategic threat to Marxism. As a leading continental proponent of such a force theory, Dühring presented a threat which could not be ignored. And ironically, even though Marx's own treatment of primitive accumulation was among the most eloquent and incisive ever written, Engels was forced to make a strategic retreat from this treatment in order to maintain a defensible position against the state-centered exploitation theories of Dühring and other thinkers. Indeed, he was forced to deny that the history of primitive accumulation, "written in letters of blood and fire," played any necessary role in the rise of capitalism at all. So to defeat the claims of "consistent Manchesterism," Engels (and by implication Marx) was forced to retreat from the eloquent history, "written in letters of fire and blood," of primitive accumulation in Volume I of Capital. Engels resurrected the very same "bourgeois nursery tale" that Marx had put so much effort into killing off.

To counter Dühring's force thesis, Engels had to resort to an incredible mass of sophistry and non sequiturs--not at all a credit to Engels' position, given the utter crankiness of Duhring. In response to Dühring's Robinson Crusoe example, in which Crusoe could only exploit Friday after enslaving him, Engels remarked:

The childish example specially selected by Herr Dühring in order to prove that force is "historically the fundamental thing", therefore, proves that force is only the means, and that the aim, on the contrary, is economic advantage. And "the more fundamental" the aim is than the means used to secure it, the more fundamental in history is the economic side of the relationship than the political side.16

So much straw, so little time! The proper initial reaction to this is a resounding "Huh?" Of course the use of force is aimed at the benefit of the user--who ever denied it? Who in his right mind would claim that exploitation is motivated by pure E-vill, rather than material gain? And since, by definition, means are always subordinate to ends, the ends are always more fundamental. What has that to do with the question of whether a particular means is necessary to a particular end? The point is that the aim of economic exploitation cannot be accomplished without the means of force. The fact that the goal is exploitation does not change the dependence of exploitation on force.

Next, Engels brought out his big cannon: the forcible exploitation of Friday presupposed preexisting economic means of production!

However, let us get back again to our two men. Crusoe, "sword in hand", makes Friday his slave. But in order to manage this, Crusoe needs something else besides his sword. Not everyone can make use of a slave. In order to be able to make use of a slave, one must possess two kinds of things: first, the instruments and material for his slave's labour; and secondly, the means of bare subsistence for him. Therefore, before slavery becomes possible, a certain level of production must already have been reached and a certain inequality of distribution must already have appeared....

....The subjugation of a man to make him do servile work, in all its forms, presupposes that the subjugator has at his disposal the instruments of labour with the help of which alone he is able to employ the person placed in bondage, and in the case of slavery, in addition, the means of subsistence which enable him to keep his slave alive. In all cases, therefore, it presupposes the possession of a certain amount of property, in excess of the average. How did this property come into existence? In any case it is clear that it may in fact have been robbed, and therefore may be based on force, but that this is by no means necessary. It may have been got by labour, it may have been stolen, or it may have been obtained by trade or by fraud. In fact, it must have been obtained by labour before there was any possibility of its being robbed.17

Indeed, "how did this come about?" Where did these preexisting means of labor and subsistence come from? Either they are the result of past robbery, in which the issue of force is simply regressed another stage; they are the result of past concentration of wealth through a pure market mechanism (a thing to be demonstrated, not assumed); or they are the result of abstention by the capitalist, in the person of Robinson Crusoe. If either of the latter two, it's remarkable that Engels is abandoning the original, violent expropriation process of Marx for the "nursery tale" of peaceful accumulation so beloved of the "vulgar political economists." But if Crusoe did, indeed accumulate the preexisting means of production and subsistence from the action of his labor on nature, this assumption carries certain clear implications. If Friday is not forcibly deprived of similar access to the island's free natural goods (by, e.g., Crusoe acting as absentee landlord over all the natural resources of the island), Crusoe will have to offer him a reward for his labor, at least equal to the likely return on Friday's toil and trouble from duplicating Crusoe's course of labor and abstention. It is the availability of alternatives, and the absence of compulsion, that makes exploitation impossible.

As for the fact that the pre-existing economic means must have been gotten by someone's labor, once again, so what? Who said that force created production? One might as well say that the pre-existence of a host organism negates the principle of parasitism. And Engels himself admitted that the economic means might be in the hands of the ruling class as a result of past force. If the means of production under their control may indeed be the result of forcible robbery, what becomes of Engels assertion of these pre-existing means as a telling point against the force theory? In any case, it is quite consistent to posit a process in a series of stages, in which the progressive accumulation of capital, and the increasing exploitation of labor, are a mutually reinforcing synergistic trend, with force as still the primary cause of exploitation. In every case, the accumulated economic means that make heightened exploitation possible are the result of past robbery. As the Hindu theologian said of turtles, it's force all the way down.

In yet another argument which was entirely beside the point, Engels made much of the material prerequisites of force. That sword didn't just fall out of a tree, you know:

....Crusoe enslaved Friday "sword in hand". Where did he get the sword? ....[F]orce is no mere act of the will, but requires the existence of very real preliminary conditions before it can come into operation, namely, instruments, the more perfect of which gets the better of the less perfect; moreover..., these instruments have to be produced, which implies that the producer of more perfect instruments of force... gets the better of the producer of the less perfect instruments, and that, in a word, the triumph of force is based on the production of arms, and this in turn on production in general--therefore, on "economic power", on the "economic situation", on the material means which force has at is disposal.

....[A]nd so once more force is conditioned by the economic situation, which furnishes the means for the equipment and maintenance of the instruments of force.18

For the third time, so what? Engels still did not show that exploitation was inherent in a given level of productive forces, without the use of coercion. He needed to show, not that parasitism depends on the preexistence of a host organism (duh!), but that it cannot be carried out without force. Every increase in economic productivity has created opportunities for robbery through a statist class system; but the same productive technology was always usable in non-exploitative ways. The fact that a given kind of class parasitism presupposes a certain form of productive technology, does not alter the fact that that form of technology has potentially both libertarian and exploitative applications, depending on the nature of the society which adopts it.

Engels, in making such arguments, seems to be ignoring the actual thesis of Dühring (and of Hodgskin and Tucker), that exploitation depends on force, and instead disproving a thesis of his own invention: that the development of productive forces depends on force. "If, in accordance with Herr Dühring's theory, the economic situation and with it the economic structure of a given country were dependent simply on political force...."19 "Economic order" means what? Productive technology, or the exploitative use of that technology? The anarchist theory of the state is entirely different from what Engels seems to imply: it holds that the rise of the state is made possible when the development of productive forces by the free labor of the people reaches a point at which they produce a sufficient surplus to support a parasitic ruling class.

As we have already shown, Meek's and Dobb's analyses above beg the question of the extent to which, in fact, economic relations under capitalism (even in the nineteenth century) have been governed by force, and to what extent by uncoerced market exchange. The distinction between the latter-day regime of "free contract," and previous eras of exploitation by naked force, is more apparent than real.

Unlike mainstream libertarians of the right, who typically depict twentieth century state capitalism as a departure from a largely "laissez-faire" nineteenth century idyll, Hodgskin, Tucker et al. were much more thorough-going. It was precisely the capitalism of the nineteenth century that Hodgskin and Tucker described as a statist system of privilege. Although the United States was well into the corporate revolution, and "internal improvements" and railroad subsidies were a large part of national economic life, at the time Tucker wrote, he dealt with these matters almost not at all. The four privileges he attacked--the money and land monopolies, tariffs, and patents--had been an integral part of capitalism from its beginnings. The last-named privileges, tariffs and patents, indeed played a large part in the cartelizing and concentration of the corporate economy during the latter part of the nineteenth century. But Tucker largely neglected their effects on the overall structure of capitalism. So Tucker's critique of capitalism as fundamentally statist was almost completely abstracted from the nascent capitalism of the Gilded Age. The capitalism which Tucker denounced for its statism was, rather, the very capitalism that conventional right-libertarians today point to as a "free market" utopia.

Besides the emergent monopoly capitalism of the late nineteenth century, Tucker's analysis likewise ignored the statist roots of capitalism in the so-called "primitive accumulation" process. Although Tucker treated existing absentee landlordism as a way for the landlord class to live off of other people's labor, he ignored the historical effects of expropriation of the land in initially creating the basic structure of capitalism.

In contrast to the confusion of Marxists as to the role of coercion in exploitation, then, we will proceed from this insight that force is essential to the process, and that the history of the state has been a history of intervention in voluntary relations between human beings in order to benefit one at the expense of another. This is the guiding principle from which Thomas Hodgskin and the American individualist anarchists started. Throughout history, the state has been a means by which the producing classes were robbed of their produce in order to support an idle ruling class. Without state intervention in the marketplace, the natural wage of labor would be its product. It is statism that is at the root of all the exploitative features of capitalism. Capitalism, indeed, only exists to the extent that the principles of free exchange are violated. "Free market capitalism" is an oxymoron.

Thomas Hodgskin, the greatest of the Ricardian socialists, argued that the exploitation of labor in his time resulted from the legal privileges of capitalists and landlords. His was a more radical version of Adam Smith's principle that, when the government undertakes to regulate the relations of masters and workmen, it has the masters for its counselors.

Laws being made by others than the labourer, and being always intended to preserve the power of those who make them, their great and chief aim for many ages, was, and still is, to enable those who are not labourers to appropriate wealth to themselves. In other words, the great object of law and of government has been and is, to establish and protect a violation of that natural right of property they are described in theory as being intended to guarantee....

Those who make laws, appropriate wealth in order to secure power. All the legislative classes, and all the classes whose possessions depend not on nature, but on the law, perceiving that law alone guarantees and secures their possessions, and perceiving that government as the instrument for enforcing obedience to the law, and thus for preserving their power and possessions, is indispensable, unite one and all, heart and soul to uphold it, and, as the means of upholding it, to place at its disposal a large part of the annual produce of labour....20

Hodgskin followed Ricardo in understanding profit and rent as deductions from a pool of exchange-value created by labor, and thus the livelihoods of capitalists, landlords and church as inversely related to the wages of labor.

At present, besides the government, the aristocracy, and the church, the law also protects, to a certain extent, the property of the capitalist, of whom there is somewhat more difficulty to speak correctly than of the priest, because the capitalist is very often a labourer. The capitalist as such, however, whether he be a holder of East India stock, or of a part of the national debt, a discounter of bills, or a buyer of annuities, has no natural right to the large share of the annual produce the law secures to him. There is sometimes a conflict between him and the landowner, sometimes one attains a triumph, and sometimes the other; both however willingly support the government and the church; and both side against the labourer to oppress him; one lending his aid to enforce combination laws, while the other upholds game laws, and both enforce the exaction of tithes and of the revenue. Capitalists in general have formed a most intimate union with the landowners, and except when the interest of these classes clash, as in the case of the corn laws, the law is extremely punctilious in defending the claims and exactions of the capitalist.21

The effect of these parasitic classes, in living off the produce of labor, was to impoverish the people, discourage industry, and check improvements.

As these people [the great mass of the laboring classes] are very industrious and very skilful, very frugal and very economical--as their labour pays taxes, tithes, rent, and profit--it cannot be for one moment doubted... that the immediate and proximate cause of their poverty and destitution, seeing how much they labour, and how many people their labour nourishes in opulence, is the law which appropriates their produce, in the shape of revenue, rent, tithes, and profit.

I also pass by the manner in which the legal right of property operates in checking all improvement.... It is, however, evident, that the labour which would be amply rewarded in cultivating all our waste lands, till every foot of the country became like the garden grounds about London, were all the produce of labour on those lands to be the reward of the labourer, cannot obtain from them a sufficiency to pay profit, tithes, rent, and taxes.22

Hodgskin dismissed out of hand the claim that government existed to secure the "general welfare" or to maintain "social order." The intrusion of coercion into the realm of voluntary exchange, rather, disrupted the natural social order.

The great object contemplated by the legislator... was to preserve his own power, and the dominion of the law, and with that view to keep in the possession of the landed aristocracy, and the clergy, and the government, all the wealth of society....

Allow me... to notice that the pretexts which the legislator puts forth, about preserving social order, and promoting public good, must not be confounded with his real objects.... If by social order he meant the great scheme of social production, mutual dependence, and mutual service, which grows out of the division of labour, that scheme I will boldly assert the legislator frequently contravenes, but never promotes--that grows from the laws of man's being, and precedes all the plans of the legislator, to regulate or preserve it.23

The preservation of the power of the unjust appropriators has been called social order, and mankind have believed the assertion. To maintain their dominion is the object and aim of all human legislation.24

Although their work preceded that of Pareto, and they did not use such terms, free market socialists like Hodgskin and Tucker were quite familiar with the substance of Pareto-optimality and the zero-sum transaction. In an order of free and voluntary exchange, all transactions are mutually beneficial to both parties. It is only when force enters the picture that one party benefits at the expense of the other. Indeed, the use of force necessarily implies exploitation, since by definition force is used only to compel one party or the other to do something other than he would otherwise have done, were he free to maximize his utilities in the way he saw fit.

Benjamin Tucker wrote of coercion as the fundamental support of privilege, and of the violence privilege did to the natural harmony of interests.

To-day (pardon the paradox!) society is fundamentally anti-social. The whole so-called social fabric rests on privilege and power, and is disordered and strained in every direction by the inequalities that necessarily result therefrom. The welfare of each, instead of contributing to that of all, as it naturally should and would, almost invariably detracts from that of all. Wealth is made by legal privilege a hook with which to filch from labor's pockets. Every man who gets rich thereby makes his neighbors poor. The better off one is, the worse the rest are.... The laborer's Deficit is precisely equal to the Capitalist's Efficit.

Now, Socialism wants to change all this. Socialism says that what's one man's meat must no longer be another's poison; that no man shall be able to add to his riches except by labor; that in adding to his riches by labor alone no man makes another man poorer; that on the contrary every man thus adding to his riches makes every other man richer; that increase and concentration of wealth through labor tend to increase, cheapen, and vary production; that every increase of capital in the hands of the laborer tends, in the absence of legal monopoly, to put more products, better products, cheaper products, and a greater variety of products within the reach of every man who works; and that this fact means the physical, mental, and moral perfecting of mankind, and the realization of human fraternity.25

This line of thought reached full development in the work of Franz Oppenheimer. Oppenheimer called himself a "liberal socialist": "a socialist in that he regard[ed] capitalism as a system of exploitation, and capital revenue as the gain of that exploitation, but a liberal in that he believ[ed] in the harmony of a genuinely free market." Unlike Marx, who recognized no legitimate role for monopoly in his theoretical system (which assumed cost price), Oppenheimer blamed exploitation entirely on monopoly and unequal exchange.26 Profit was a monopoly income, resulting from unequal exchange, accruing to the class which controlled access to the means of production.27 This control was made possible only by the state.

Oppenheimer contrasted "the State," by which he meant "that summation of privileges and dominating positions which are brought into being by extra-economic power," with "Society," which was "the totality of concepts of all purely natural relations and institutions between man and man...."28 He made a parallel distinction between the "economic means" to wealth, i.e., "one's own labor and the equivalent exchange of one's own labor for the labor of others," and the "political means": "the unrequited appropriation of the labor of others...."29 The state was simply the "organization of the political means."30 The state existed for an economic purpose, exploitation, which could not be achieved without force; but it presupposed the pre-existence of the economic means, which had been created by peaceful labor.31

Oppenheimer criticized Marx for his confusion in not properly distinguishing between economic purposes and economic means.

In the case of a thinker of the rank of Karl Marx, one may observe what confusion is brought about when economic purpose and economic means are not strictly differentiated. All those errors, which in the end led Marx's splendid theory so far away from truth, were grounded in the lack of clear differentiation between the means of economic satisfaction of needs and its end. This led him to designate slavery as an "economic category," and force as an "economic force"--half truths which are far more dangerous than total untruths, since their discovery is more difficult, and false conclusions from them are inevitable.32

We have already seen, in our examination above of Engels argument in Anti-Dühring, a clear example of the false conclusions resulting from such confusion.

The economic means to wealth were production and voluntary exchange. The political means were violent robbery.33 Or, as Voltaire defined it, the state was "a device for taking money out of one set of pockets and putting it into another."34

This theory of the state as the agent of exploitation was developed by both Albert J. Nock, and by Murray Rothbard. According to Nock, a Georgist, the state

did not originate in the common understanding and agreement of society; it originated in conquest and confiscation. Its intention, far from contemplating "freedom and security," contemplated nothing of the kind. It contemplated primarily the continuous economic exploitation of one class by another, and it concerned itself with only so much freedom and security as was consistent with this primary intention.... Its primary function or exercise was... by way of innumerable and most onerous positive interventions, all of which were for the purpose of maintaining the stratification of society into an owning and exploiting class, and a propertyless dependent class.35

The positive testimony of history is that the State invariably had its origin in conquest and confiscation.... Moreover, the sole invariable characteristic of the State is the economic exploitation of one class by another. In this sense, every State known to history is a class-State.36

Murray Rothbard later used these same principles in his attempted elaboration of Misean theory, making very much the same substantive points in the language of marginalist economics.

Any exchange in the free market, indeed any action in the free society, occurs because it is expected to benefit each party concerned.... [W]e may say that the free market maximizes social utility, since everyone gains in utility from his free actions.

Coercive intervention, on the other hand, signifies per se that the individual or individuals coerced would not have voluntarily done what they are now being forced to do by the intervener. The person who is being coerced ... is having his actions changed by a threat of violence. The man being coerced, therefore, always loses in utility as a result of the intervention....

In contrast to the free market, therefore, all cases of intervention supply one set of men with gains at the expense of another set.37

This last was not simply something the state sometimes did, a side-effect of bad policy to be rectified by "good government" or policy "reform." It was the defining characteristic of government.

Rothbard contemptuously dismissed the belief, especially common since democracy has become the dominant legitimizing ideology in most societies, that the state is simply an expression of "the interests of 'society.'"

The State is almost universally considered an institution of social service. Some theorists venerate the State as the apotheosis of society; others regard it as an amiable though often inefficient organization for achieving social ends; but almost all regard it as a necessary means for achieving the goals of mankind, a means to be ranged against the "private sector" and often winning in this competition of resources. With the rise of democracy, the identification of the State with society has been redoubled, until it is common to hear sentiments expressed which violate virtually every tenet of reason and common sense: such as "we are the government." The useful collective term "we" has enabled an ideological camouflage to be thrown over the reality of political life. If "we are the government," then anything a government does to an individual is not only just and tyrannical [sic]; it is also "voluntary" on the part of the individual concerned. If the government has incurred a huge public debt which must be paid by taxing one group for the benefit of another, this reality of burden is obscured by saying that "we owe it to ourselves."....

We must therefore emphasize that "we" are not the government; the government is not "us". The government does not in any accurate sense "represents [sic] the majority of the people" but even if it did, even if 70 per cent of the people decided to murder the remaining 30 per cent, this would still be murder, and would not be voluntary suicide on the part of the slaughtered minority. No organicist metaphor, no irrelevant bromide that "we are all part of one another," must be permitted to obscure this basic fact.

If, then, the State is not "us," if it is not "the human family" getting together to solve mutual problems, if it is not a lodge meeting or country club, what is it? Briefly, the State is that organization in society which attempts to maintain a monopoly of the use of force and violence in a given territorial area; in particular, it is the only organization in society that obtains its revenue not by voluntary contribution or payment for services rendered, but by coercion.38

The chief act of coercion by which the state exploits labor, as our free market socialist school has understood it, is by restricting, on behalf of a ruling class, the laboring classes' access to the means of production. By setting up such barriers, the ruling class is able to charge tribute in the form of unpaid labor, for allowing access on its own terms. It is only because of the state's enforced separation of labor from the means of production that labor acquires the perverse habit of thinking, not of work as a creative activity performed by the worker with the help of the material prerequisites of production, but of a job that he is given. Work is not something that one does; it is a boon granted by the ruling class, of its grace.

Our natural resources, while much depleted, are still great; our population is very thin, running something like twenty or twenty-five to the square mile; and some millions of this population are at the moment "unemployed," and likely to remain so because no one will or can "give them work." The point is not that men generally submit to this state of things, or that they accept it as inevitable, but that they see nothing irregular or anomalous about it because of their fixed idea that work is something to be given.39


In the chapters of this section, we will proceed in the light of the free market socialist assumption that exploitation is impossible without force, and attempt to demonstrate the extent of such force in "actually existing capitalism." Free market socialists in the Hodgskinian and individualist tradition contend that capitalism has been a radical departure from genuinely free market principles, from its very beginnings. The following chapters will demonstrate the ways in which the state has intervened in the economy from the first beginnings of capitalism. We will begin with the primitive accumulation process, largely neglected by Tucker, in which the laboring classes of the world were robbed of their rightful property in the means of production, and in which the state's coercive means were used to maintain social control over this population. We will continue with the statist features of the so-called "laissez-faire" capitalism of the nineteenth century. We will go on to study the vast expansion of state intervention from the late nineteenth century onward. Finally, we will examine the internal contradictions created by this state intervention in the free market, and the resulting crises of state capitalism.