F.6 Is "anarcho"-capitalism against the state?

No. Due to its basis in private property, "anarcho"-capitalism implies a class division of society into bosses and workers. Any such division will require a state to maintain it. However, it need not be the same state as exists now. Regarding this point, "anarcho"-capitalism plainly advocates "defence associations" to protect property. For the "anarcho"-capitalist these private companies are not states. For anarchists, they most definitely. As Bakunin put it, the state "is authority, domination, and force, organised by the property-owning and so-called enlightened classes against the masses." [The Basic Bakunin, p. 140] It goes without saying that "anarcho"-capitalism has a state in the anarchist sense.

According to Murray Rothbard [Society Without A State, p. 192], a state must have one or both of the following characteristics:

    1) The ability to tax those who live within it.

    2) It asserts and usually obtains a coerced monopoly of the provision of defence over a given area.

He makes the same point elsewhere. [The Ethics of Liberty, p. 171] Significantly, he stresses that "our definition of anarchism" is a system which "provides no legal sanction" for aggression against person and property rather than, say, being against government or authority. [Society without a State, p. 206]

Instead of this, the "anarcho"-capitalist thinks that people should be able to select their own "defence companies" (which would provide the needed police) and courts from a free market in "defence" which would spring up after the state monopoly has been eliminated. These companies "all . . . would have to abide by the basic law code," [Op. Cit., p. 206] Thus a "general libertarian law code" would govern the actions of these companies. This "law code" would prohibit coercive aggression at the very least, although to do so it would have to specify what counted as legitimate property, how said can be owned and what actually constitutes aggression. Thus the law code would be quite extensive.

How is this law code to be actually specified? Would these laws be democratically decided? Would they reflect common usage (i.e. custom)? "Supply and demand"? "Natural law"? Given the strong dislike of democracy shown by "anarcho"-capitalists, we think we can safely say that some combination of the last two options would be used. Murray Rothbard argued for "Natural Law" and so the judges in his system would "not [be] making the law but finding it on the basis of agreed-upon principles derived either from custom or reason." [Op. Cit., p. 206] David Friedman, on the other hand, argues that different defence firms would sell their own laws. [The Machinery of Freedom, p. 116] It is sometimes acknowledged that non-"libertarian" laws may be demanded (and supplied) in such a market although the obvious fact that the rich can afford to pay for more laws (either in quantity or in terms of being more expensive to enforce) is downplayed.

Around this system of "defence companies" is a free market in "arbitrators" and "appeal judges" to administer justice and the "basic law code." Rothbard believes that such a system would see "arbitrators with the best reputation for efficiency and probity" being "chosen by the various parties in the market" and "will come to be given an increasing amount of business." Judges "will prosper on the market in proportion to their reputation for efficiency and impartiality." [Op. Cit., p. 199 and p. 204] Therefore, like any other company, arbitrators would strive for profits with the most successful ones would "prosper", i.e. become wealthy. Such wealth would, of course, have no impact on the decisions of the judges, and if it did, the population (in theory) are free to select any other judge. Of course, the competing judges would also be striving for profits and wealth -- which means the choice of character may be somewhat limited! -- and the laws which they were using to guide their judgements would be enforcing capitalist rights.

Whether or not this system would work as desired is discussed in the following sections. We think that it will not. Moreover, we will argue that "anarcho"-capitalist "defence companies" meet not only the criteria of statehood we outlined in section B.2, but also Rothbard's own criteria for the state. As regards the anarchist criterion, it is clear that "defence companies" exist to defend private property; that they are hierarchical (in that they are capitalist companies which defend the power of those who employ them); that they are professional coercive bodies; and that they exercise a monopoly of force over a given area (the area, initially, being the property of the person or company who is employing the company). Not only that, as we discuss in section F.6.4 these "defence companies" also matches the right-libertarian and "anarcho"-capitalist definition of the state. For this (and other reasons), we should call the "anarcho"-capitalist defence firms "private states" -- that is what they are -- and "anarcho"-capitalism "private state" capitalism.

F.6.1 What's wrong with this "free market" justice?

It does not take much imagination to figure out whose interests prosperous arbitrators, judges and defence companies would defend: their own as well as those who pay their wages -- which is to say, other members of the rich elite. As the law exists to defend property, then it (by definition) exists to defend the power of capitalists against their workers. Rothbard argued that the "judges" would "not [be] making the law but finding it on the basis of agreed-upon principles derived either from custom or reason." [Society without a State, p. 206] However, this begs the question: whose reason? whose customs? Do individuals in different classes share the same customs? The same ideas of right and wrong? Would rich and poor desire the same from a "basic law code"? Obviously not. The rich would only support a code which defended their power over the poor.

Rothbard does not address this issue. He stated that "anarcho"-capitalism would involve "taking the largely libertarian common law, and correcting it by the use of man's reason, before enshrining it as a permanently fixed libertarian law code." ["On Freedom and the Law", New Individualist Review, Winter 1962, p. 40] Needless to say, "man" does not exist -- it is an abstraction (and a distinctly collectivist one, we should note). There are only individual men and women and so individuals and their reason. By "man's reason" Rothbard meant, at best, the prejudices of those individuals with whom he agreed with or, at worse, his own value judgements. Needless to say, what is considered acceptable will vary from individual to individual and reflect their social position. Similarly, as Kropotkin stressed, "common law" does not develop in isolation of class struggles and so is a mishmash of customs genuinely required by social life and influences imposed by elites by means of state action. [Anarchism, pp. 204-6] This implies what should be "corrected" from the "common law" will also differ based on their class position and their general concepts of what is right and wrong. History is full of examples of lawyers, jurists and judges (not to mention states) "correcting" common law and social custom in favour of a propertarian perspective which, by strange co-incidence, favoured the capitalists and landlords, i.e. those of the same class as the politicians, lawyers, jurists and judges (see section F.8 for more details). We can imagine the results of similar "correcting" of common law by those deemed worthy by Rothbard and his followers of representing both "man" and "natural law."

Given these obvious points, it should come as no surprise that Rothbard solves this problem by explicitly excluding the general population from deciding which laws they will be subject to. As he put it, "it would not be a very difficult task for Libertarian lawyers and jurists to arrive at a rational and objective code of libertarian legal principles and procedures . . . This code would then be followed and applied to specific cases by privately-competitive and free-market courts and judges, all of whom would be pledged to abide by the code." ["The Spooner-Tucker Doctrine: An Economist's View", pp. 5-15, Journal of Libertarian Studies, Vol. 20, No. 1, p. 7] By jurist Rothbard means a professional or an expert who studies, develops, applies or otherwise deals with the law, i.e. a lawyer or a judge. That is, law-making by privately-competitive judges and lawyers. And not only would the law be designed by experts, so would its interpretation:

"If legislation is replaced by such judge-made law fixity and certainty . . . will replace the capriciously changing edicts of statutory legislation. The body of judge-made law changes very slowly . . . decisions properly apply only to the particular case, judge-made law -- in contrast to legislation -- permits a vast body of voluntary, freely-adapted rules, bargains, and arbitrations to proliferate as needed in society. The twin of the free market economy, then, is . . . a proliferation of voluntary rules interpreted and applied by experts in the law." ["On Freedom and the Law", Op. Cit. p. 38]

In other words, as well as privatising the commons in land he also seeks to privatise "common law." This will be expropriated from the general population and turned over to wealthy judges and libertarian scholars to "correct" as they see fit. Within this mandatory legal regime, there would be "voluntary" interpretations yet it hardly taxes the imagination to see how economic inequality would shape any "bargains" made on it. So we have a legal system created and run by judges and jurists within which specific interpretations would be reached by "bargains" conducted between the rich and the poor. A fine liberation indeed!

So although only "finding" the law, the arbitrators and judges still exert an influence in the "justice" process, an influence not impartial or neutral. As the arbitrators themselves would be part of a profession, with specific companies developing within the market, it does not take a genius to realise that when "interpreting" the "basic law code," such companies would hardly act against their own interests as companies. As we noted in section F.3.2, the basic class interest of keeping the current property rights system going will still remain -- a situation which wealthy judges would be, to say the least, happy to see continue. In addition, if the "justice" system was based on "one dollar, one vote," the "law" would best defend those with the most "votes" (the question of market forces will be discussed in section F.6.3). Moreover, even if "market forces" would ensure that "impartial" judges were dominant, all judges would be enforcing a very partial law code (namely one that defended capitalist property rights). Impartiality when enforcing partial laws hardly makes judgements less unfair.

Thus, due to these three pressures -- the interests of arbitrators/judges, the influence of money and the nature of the law -- the terms of "free agreements" under such a law system would be tilted in favour of lenders over debtors, landlords over tenants, employers over employees, and in general, the rich over the poor just as we have today. This is what one would expect in a system based on "unrestricted" property rights and a (capitalist) free market.

Some "anarcho"-capitalists, however, claim that just as cheaper cars were developed to meet demand, so cheaper defence associations and "people's arbitrators" would develop on the market for the working class. In this way impartiality will be ensured. This argument overlooks a few key points.

Firstly, the general "libertarian" law code would be applicable to all associations, so they would have to operate within a system determined by the power of money and of capital. The law code would reflect, therefore, property not labour and so "socialistic" law codes would be classed as "outlaw" ones. The options then facing working people is to select a firm which best enforced the capitalist law in their favour. And as noted above, the impartial enforcement of a biased law code will hardly ensure freedom or justice for all. This means that saying the possibility of competition from another judge would keep them honest becomes meaningless when they are all implementing the same capitalist law!

Secondly, in a race between a Jaguar and a Volkswagen Beetle, who is more likely to win? The rich would have "the best justice money can buy," even more than they do now. Members of the capitalist class would be able to select the firms with the best lawyers, best private cops and most resources. Those without the financial clout to purchase quality "justice" would simply be out of luck -- such is the "magic" of the marketplace.

Thirdly, because of the tendency toward concentration, centralisation, and oligopoly under capitalism (due to increasing capital costs for new firms entering the market, as discussed in section C.4), a few companies would soon dominate the market -- with obvious implications for "justice." Different firms will have different resources and in a conflict between a small firm and a larger one, the smaller one is at a disadvantage. They may not be in a position to fight the larger company if it rejects arbitration and so may give in simply because, as the "anarcho"-capitalists so rightly point out, conflict and violence will push up a company's costs and so they would have to be avoided by smaller ones (it is ironic that the "anarcho"-capitalist implicitly assumes that every "defence company" is approximately of the same size, with the same resources behind it and in real life this would clearly not the case). Moreover, it seems likely that a Legal-Industrial complex would develop, with other companies buying shares in "defence" firms as well as companies which provide lawyers and judges (and vice versa). We would also expect mergers to develop as well as cross-ownership between companies, not to mention individual judges and security company owners and managers having shares in other capitalist firms. Even if the possibility that the companies providing security and "justice" have links with other capitalism firms is discounted then the fact remains that these firms would hardly be sympathetic to organisations and individuals seeking to change the system which makes them rich or, as property owners and bosses, seeking to challenge the powers associated with both particularly if the law is designed from a propertarian perspective.

Fourthly, it is very likely that many companies would make subscription to a specific "defence" firm or court a requirement of employment and residence. Just as today many (most?) workers have to sign no-union contracts (and face being fired if they change their minds), it does not take much imagination to see that the same could apply to "defence" firms and courts. This was/is the case in company towns (indeed, you can consider unions as a form of "defence" firm and these companies refused to recognise them). As the labour market is almost always a buyer's market, it is not enough to argue that workers can find a new job without this condition. They may not and so have to put up with this situation. And if (as seems likely) the laws and rules of the property-owner will take precedence in any conflict, then workers and tenants will be at a disadvantage no matter how "impartial" the judges.

Ironically, some "anarcho"-capitalists (like David Friedman) have pointed to company/union negotiations as an example of how different defence firms would work out their differences peacefully. Sadly for this argument, union rights under "actually existing capitalism" were hard fought for, often resulting in strikes which quickly became mini-wars as the capitalists used the full might associated with their wealth to stop them getting a foothold or to destroy them if they had. In America the bosses usually had recourse to private defence firms like the Pinkertons to break unions and strikes. Since 1935 in America, union rights have been protected by the state in direct opposition to capitalist "freedom of contract." Before the law was changed (under pressure from below, in the face of business opposition and violence), unions were usually crushed by force -- the companies were better armed, had more resources and had the law on their side (Rothbard showed his grasp of American labour history by asserting that union "restrictions and strikes" were the "result of government privilege, notably in the Wagner Act of 1935." [The Logic of Action II, p. 194]). Since the 1980s and the advent of the free(r) market, we can see what happens to "peaceful negotiation" and "co-operation" between unions and companies when it is no longer required and when the resources of both sides are unequal. The market power of companies far exceeds those of the unions and the law, by definition, favours the companies. As an example of how competing "protection agencies" will work in an "anarcho"-capitalist society, it is far more insightful than originally intended!

Now let us consider Rothbard's "basic law code" itself. For Rothbard, the laws in the "general libertarian law code" would be unchangeable, selected by those considered as "the voice of nature" (with obvious authoritarian implications). David Friedman, in contrast, argues that as well as a market in defence companies, there will also be a market in laws and rights. However, there will be extensive market pressure to unify these differing law codes into one standard one (imagine what would happen if ever CD manufacturer created a unique CD player, or every computer manufacturer different sized floppy-disk drivers -- little wonder, then, that over time companies standardise their products). Friedman himself acknowledges that this process is likely (and uses the example of standard paper sizes to illustrate it). Which suggests that competition would be meaningless as all firms would be enforcing the same (capitalist) law.

In any event, the laws would not be decided on the basis of "one person, one vote"; hence, as market forces worked their magic, the "general" law code would reflect vested interests and so be very hard to change. As rights and laws would be a commodity like everything else in capitalism, they would soon reflect the interests of the rich -- particularly if those interpreting the law are wealthy professionals and companies with vested interests of their own. Little wonder that the individualist anarchists proposed "trial by jury" as the only basis for real justice in a free society. For, unlike professional "arbitrators," juries are ad hoc, made up of ordinary people and do not reflect power, authority, or the influence of wealth. And by being able to judge the law as well as a conflict, they can ensure a populist revision of laws as society progresses.

Rothbard, unsurprisingly, is at pains to dismiss the individualist anarchist idea of juries judging the law as well as the facts, stating it would give each free-market jury "totally free rein over judicial decisions" and this "could not be expected to arrive at just or even libertarian decisions." ["The Spooner-Tucker Doctrine: An Economist's View", Op. Cit., p.7] However, the opposite is the case as juries made up of ordinary people will be more likely to reach just decisions which place genuinely libertarian positions above a law dedicated to maintaining capitalist property and power. History is full of examples of juries acquitting people for so-called crimes against property which are the result of dire need or simply reflect class injustice. For example, during the Great Depression unemployed miners in Pennsylvania "dug small mines on company property, mined coal, trucked it to cities and sold it below the commercial rate. By 1934, 5 million tons of this 'bootleg' coal were produced by twenty thousand men using four thousand vehicles. When attempts were made to prosecute, local juries would not convict, local jailers would not imprison." [Howard Zinn, A People's History of the United States, pp. 385-6] It is precisely this outcome which causes Rothbard to reject that system.

Thus Rothbard postulated a judge directed system of laws in stark contrast to individualist anarchism's jury directed system. It is understandable that Rothbard would seek to replace juries with judges, it is the only way he can exclude the general population from having a say in the laws they are subjected to. Juries allow the general public to judge the law as well as any crime and so this would allow those aspects "corrected" by right-"libertarians" to seep back into the "common law" and so make private property and power accountable to the general public rather than vice versa. Moreover, concepts of right and wrong evolve over time and in line with changes in socio-economic conditions. To have a "common law" which is unchanging means that social evolution is considered to have stopped when Murray Rothbard decided to call his ideology "anarcho"-capitalism.

In a genuinely libertarian system, social customs (common law) would evolve based on what the general population thought was right and wrong based on changing social institutions and relationships between individuals. That is why ruling classes have always sought to replace it with state determined and enforced laws. Changing social norms and institutions can be seen from property. As Proudhon noted, property "changed its nature" over time. Originally, "the word property was synonymous with . . . individual possession" but it became more "complex" and turned into private property -- "the right to use it by his neighbour's labour." [What is Property?, p. 395] The changing nature of property created relations of domination and exploitation between people absent before. For the capitalist, however, both the tools of the self-employed artisan and the capital of a transnational corporation are both forms of "property" and so basically identical. Changing social relations impact on society and the individuals who make it up. This would be reflected in any genuinely libertarian society, something right-"libertarians" are aware of. They, therefore, seek to freeze the rights framework and legal system to protect institutions, like property, no matter how they evolve and come to replace whatever freedom enhancing features they had with oppression. Hence we find Rothbard's mentor, Ludwig von Mises asserting that "[t]here may possibly be a difference of opinion about whether a particular institution is socially beneficial or harmful. But once it has been judged [by whom?] beneficial, one can no longer contend that, for some inexplicable reason, it must be condemned as immoral." [Liberalism, p. 34] Rothbard's system is designed to ensure that the general population cannot judge whether a particular institution has changed is social impact. Thus a system of "defence" on the capitalist market will continue to reflect the influence and power of property owners and wealth and not be subject to popular control beyond choosing between companies to enforce the capitalist laws.

Ultimately, such an "anarcho"-capitalist system would be based on simple absolute principles decided in advance by a small group of ideological leaders. We are then expected to live with the consequences as best we can. If people end up in a worse condition than before then that is irrelevant as that we have enforced the eternal principles they have proclaimed as being in our best interests.

F.6.2 What are the social consequences of such a system?

The "anarcho" capitalist imagines that there will be police agencies, "defence associations," courts, and appeals courts all organised on a free-market basis and available for hire. As David Wieck points out, however, the major problem with such a system would not be the corruption of "private" courts and police forces (although, as suggested above, this could indeed be a problem):

"There is something more serious than the 'Mafia danger', and this other problem concerns the role of such 'defence' institutions in a given social and economic context.

"[The] context . . . is one of a free-market economy with no restraints upon accumulation of property. Now, we had an American experience, roughly from the end of the Civil War to the 1930's, in what were in effect private courts, private police, indeed private governments. We had the experience of the (private) Pinkerton police which, by its spies, by its agents provocateurs, and by methods that included violence and kidnapping, was one of the most powerful tools of large corporations and an instrument of oppression of working people. We had the experience as well of the police forces established to the same end, within corporations, by numerous companies . . . (The automobile companies drew upon additional covert instruments of a private nature, usually termed vigilante, such as the Black Legion). These were, in effect, private armies, and were sometimes described as such. The territories owned by coal companies, which frequently included entire towns and their environs, the stores the miners were obliged by economic coercion to patronise, the houses they lived in, were commonly policed by the private police of the United States Steel Corporation or whatever company owned the properties. The chief practical function of these police was, of course, to prevent labour organisation and preserve a certain balance of 'bargaining.' . . . These complexes were a law unto themselves, powerful enough to ignore, when they did not purchase, the governments of various jurisdictions of the American federal system. This industrial system was, at the time, often characterised as feudalism." [Anarchist Justice, pp. 223-224]

For a description of the weaponry and activities of these private armies, the Marxist economic historian Maurice Dobb presents an excellent summary in Studies in Capitalist Development. [pp. 353-357] According to a report on "Private Police Systems" quoted by Dobb, in a town dominated by Republican Steel the "civil liberties and the rights of labour were suppressed by company police. Union organisers were driven out of town." Company towns had their own (company-run) money, stores, houses and jails and many corporations had machine-guns and tear-gas along with the usual shot-guns, rifles and revolvers. The "usurpation of police powers by privately paid 'guards and 'deputies', often hired from detective agencies, many with criminal records" was "a general practice in many parts of the country."

The local (state-run) law enforcement agencies turned a blind-eye to what was going on (after all, the workers had broken their contracts and so were "criminal aggressors" against the companies) even when union members and strikers were beaten and killed. The workers own defence organisations (unions) were the only ones willing to help them, and if the workers seemed to be winning then troops were called in to "restore the peace" (as happened in the Ludlow strike, when strikers originally cheered the troops as they thought they would defend them; needless to say, they were wrong).

Here we have a society which is claimed by many "anarcho"-capitalists as one of the closest examples to their "ideal," with limited state intervention, free reign for property owners, etc. What happened? The rich reduced the working class to a serf-like existence, capitalist production undermined independent producers (much to the annoyance of individualist anarchists at the time), and the result was the emergence of the corporate America that "anarcho"-capitalists (sometimes) say they oppose.

Are we to expect that "anarcho"-capitalism will be different? That, unlike before, "defence" firms will intervene on behalf of strikers? Given that the "general libertarian law code" will be enforcing capitalist property rights, workers will be in exactly the same situation as they were then. Support of strikers violating property rights would be a violation of the law and be costly for profit making firms to do (if not dangerous as they could be "outlawed" by the rest). This suggests that "anarcho"-capitalism will extend extensive rights and powers to bosses, but few if any rights to rebellious workers. And this difference in power is enshrined within the fundamental institutions of the system. This can easily be seen from Rothbard's numerous anti-union tirades and his obvious hatred of them, strikes and pickets (which he habitually labelled as violent). As such it is not surprising to discover that Rothbard complained in the 1960s that, because of the Wagner Act, the American police "commonly remain 'neutral' when strike-breakers are molested or else blame the strike-breakers for 'provoking' the attacks on them . . . When unions are permitted to resort to violence, the state or other enforcing agency has implicitly delegated this power to the unions. The unions, then, have become 'private states.'" [The Logic of Action II, p. 41] The role of the police was to back the property owner against their rebel workers, in other words, and the state was failing to provide the appropriate service (of course, that bosses exercising power over workers provoked the strike is irrelevant, while private police attacking picket lines is purely a form of "defensive" violence and is, likewise, of no concern).

In evaluating "anarcho"-capitalism's claim to be a form of anarchism, Peter Marshall notes that "private protection agencies would merely serve the interests of their paymasters." [Demanding the Impossible, p. 653] With the increase of private "defence associations" under "really existing capitalism" today (associations that many "anarcho"-capitalists point to as examples of their ideas), we see a vindication of Marshall's claim. There have been many documented experiences of protesters being badly beaten by private security guards. As far as market theory goes, the companies are only supplying what the buyer is demanding. The rights of others are not a factor (yet more "externalities," obviously). Even if the victims successfully sue the company, the message is clear -- social activism can seriously damage your health. With a reversion to "a general libertarian law code" enforced by private companies, this form of "defence" of "absolute" property rights can only increase, perhaps to the levels previously attained in the heyday of US capitalism, as described above by Wieck.

F.6.3 But surely market forces will stop abuses by the rich?

Unlikely. The rise of corporations within America indicates exactly how a "general libertarian law code" would reflect the interests of the rich and powerful. The laws recognising corporations as "legal persons" were not primarily a product of "the state" but of private lawyers hired by the rich. As Howard Zinn notes:

"the American Bar Association, organised by lawyers accustomed to serving the wealthy, began a national campaign of education to reverse the [Supreme] Court decision [that companies could not be considered as a person]. . . . By 1886, they succeeded . . . the Supreme Court had accepted the argument that corporations were 'persons' and their money was property protected by the process clause of the Fourteenth Amendment . . . The justices of the Supreme Court were not simply interpreters of the Constitution. They were men of certain backgrounds, of certain [class] interests." [A People's History of the United States, p. 255]

Of course it will be argued that the Supreme Court is chosen by the government and is a state enforced monopoly and so our analysis is flawed. Yet this is not the case. As Rothbard made clear, the "general libertarian law code" would be created by lawyers and jurists and everyone would be expected to obey it. Why expect these lawyers and jurists to be any less class conscious then those in the 19th century? If the Supreme Court "was doing its bit for the ruling elite" then why would those creating the law system be any different? "How could it be neutral between rich and poor," argues Zinn, "when its members were often former wealthy lawyers, and almost always came from the upper class?" [Op. Cit., p. 254] Moreover, the corporate laws came about because there was a demand for them. That demand would still have existed in "anarcho"-capitalism. Now, while there may nor be a Supreme Court, Rothbard does maintain that "the basic Law Code . . . would have to be agreed upon by all the judicial agencies" but he maintains that this "would imply no unified legal system"! Even though "[a]ny agencies that transgressed the basic libertarian law code would be open outlaws" and soon crushed this is not, apparently, a monopoly. [The Ethics of Liberty, p. 234] So, you either agree to the law code or you go out of business. And that is not a monopoly! Therefore, we think, our comments on the Supreme Court are valid (see also section F.7.2).

If all the available defence firms enforce the same laws, then it can hardly be called "competitive"! And if this is the case (and it is) "when private wealth is uncontrolled, then a police-judicial complex enjoying a clientele of wealthy corporations whose motto is self-interest is hardly an innocuous social force controllable by the possibility of forming or affiliating with competing 'companies.'" [Wieck, Op. Cit., p. 225] This is particularly true if these companies are themselves Big Business and so have a large impact on the laws they are enforcing. If the law code recognises and protects capitalist power, property and wealth as fundamental any attempt to change this is "initiation of force" and so the power of the rich is written into the system from the start!

(And, we must add, if there is a general libertarian law code to which all must subscribe, where does that put customer demand? If people demand a non-libertarian law code, will defence firms refuse to supply it? If so, will not new firms, looking for profit, spring up that will supply what is being demanded? And will that not put them in direct conflict with the existing, pro-general law code ones? And will a market in law codes not just reflect economic power and wealth? David Friedman, who is for a market in law codes, argues that "[i]f almost everyone believes strongly that heroin addiction is so horrible that it should not be permitted anywhere under any circumstances anarcho-capitalist institutions will produce laws against heroin. Laws are being produced on the market, and that is what the market wants." And he adds that "market demands are in dollars, not votes. The legality of heroin will be determined, not by how many are for or against but how high a cost each side is willing to bear in order to get its way." [The Machinery of Freedom, p. 127] And, as the market is less than equal in terms of income and wealth, such a position will mean that the capitalist class will have a higher effective demand than the working class and more resources to pay for any conflicts that arise. Thus any law codes that develop will tend to reflect the interests of the wealthy.)

Which brings us nicely on to the next problem regarding market forces.

As well as the obvious influence of economic interests and differences in wealth, another problem faces the "free market" justice of "anarcho"-capitalism. This is the "general libertarian law code" itself. Even if we assume that the system actually works like it should in theory, the simple fact remains that these "defence companies" are enforcing laws which explicitly defend capitalist property (and so social relations). Capitalists own the means of production upon which they hire wage-labourers to work and this is an inequality established prior to any specific transaction in the labour market. This inequality reflects itself in terms of differences in power within (and outside) the company and in the "law code" of "anarcho"-capitalism which protects that power against the dispossessed.

In other words, the law code within which the defence companies work assumes that capitalist property is legitimate and that force can legitimately be used to defend it. This means that, in effect, "anarcho"-capitalism is based on a monopoly of law, a monopoly which explicitly exists to defend the power and capital of the wealthy. The major difference is that the agencies used to protect that wealth will be in a weaker position to act independently of their pay-masters. Unlike the state, the "defence" firm is not remotely accountable to the general population and cannot be used to equalise even slightly the power relationships between worker and capitalist (as the state has, on occasion done, due to public pressure and to preserve the system as a whole). And, needless to say, it is very likely that the private police forces will give preferential treatment to their wealthier customers (which business does not?) and that the law code will reflect the interests of the wealthier sectors of society (particularly if prosperous judges administer that code) in reality, even if not in theory. Since, in capitalist practice, "the customer is always right," the best-paying customers will get their way in "anarcho"-capitalist society.

For example, in chapter 29 of The Machinery of Freedom, David Friedman presents an example of how a clash of different law codes could be resolved by a bargaining process (the law in question is the death penalty). This process would involve one defence firm giving a sum of money to the other for them accepting the appropriate (anti/pro capital punishment) court. Friedman claims that "[a]s in any good trade, everyone gains" but this is obviously not true. Assuming the anti-capital punishment defence firm pays the pro one to accept an anti-capital punishment court, then, yes, both defence firms have made money and so are happy, so are the anti-capital punishment consumers but the pro-death penalty customers have only (perhaps) received a cut in their bills. Their desire to see criminals hanged (for whatever reason) has been ignored (if they were not in favour of the death penalty, they would not have subscribed to that company). Friedman claims that the deal, by allowing the anti-death penalty firm to cut its costs, will ensure that it "keep its customers and even get more" but this is just an assumption. It is just as likely to loose customers to a defence firm that refuses to compromise (and has the resources to back it up). Friedman's assumption that lower costs will automatically win over people's passions is unfounded as is the assumption that both firms have equal resources and bargaining power. If the pro-capital punishment firm demands more than the anti can provide and has larger weaponry and troops, then the anti defence firm may have to agree to let the pro one have its way. So, all in all, it is not clear that "everyone gains" -- there may be a sizeable percentage of those involved who do not "gain" as their desire for capital punishment is traded away by those who claimed they would enforce it. This may, in turn, produce a demand for defence firms which do not compromise with obvious implications for public peace.

In other words, a system of competing law codes and privatised rights does not ensure that all individual interests are meet. Given unequal resources within society, it is clear that the "effective demand" of the parties involved to see their law codes enforced is drastically different. The wealthy head of a transnational corporation will have far more resources available to him to pay for his laws to be enforced than one of his employees on the assembly line. Moreover, as we noted in section F.3.1, the labour market is usually skewed in favour of capitalists. This means that workers have to compromise to get work and such compromises may involve agreeing to join a specific "defence" firm or not join one at all (just as workers are often forced to sign non-union contracts today in order to get work). In other words, a privatised law system is very likely to skew the enforcement of laws in line with the skewing of income and wealth in society. At the very least, unlike every other market, the customer is not guaranteed to get exactly what they demand simply because the product they "consume" is dependent on others within the same market to ensure its supply. The unique workings of the law/defence market are such as to deny customer choice (we will discuss other aspects of this unique market shortly). Wieck summed by pointing out the obvious:

"any judicial system is going to exist in the context of economic institutions. If there are gross inequalities of power in the economic and social domains, one has to imagine society as strangely compartmentalised in order to believe that those inequalities will fail to reflect themselves in the judicial and legal domain, and that the economically powerful will be unable to manipulate the legal and judicial system to their advantage. To abstract from such influences of context, and then consider the merits of an abstract judicial system. . . is to follow a method that is not likely to take us far. This, by the way, is a criticism that applies. . .to any theory that relies on a rule of law to override the tendencies inherent in a given social and economic system" [Op. Cit., p. 225]

There is another reason why "market forces" will not stop abuse by the rich, or indeed stop the system from turning from private to public statism. This is due to the nature of the "defence" market (for a similar analysis of the "defence" market see right-"libertarian" economist Tyler Cowen's "Law as a Public Good: The Economics of Anarchy" [Economics and Philosophy, no. 8 (1992), pp. 249-267] and "Rejoinder to David Friedman on the Economics of Anarchy" [Economics and Philosophy, no. 10 (1994), pp. 329-332]). In "anarcho"-capitalist theory it is assumed that the competing "defence companies" have a vested interest in peacefully settling differences between themselves by means of arbitration. In order to be competitive on the market, companies will have to co-operate via contractual relations otherwise the higher price associated with conflict will make the company uncompetitive and it will go under. Those companies that ignore decisions made in arbitration would be outlawed by others, ostracised and their rulings ignored. By this process, it is argued, a system of competing "defence" companies will be stable and not turn into a civil war between agencies with each enforcing the interests of their clients against others by force.

However, there is a catch. Unlike every other market, the businesses in competition in the "defence" industry must co-operate with its fellows in order to provide its services for its customers. They need to be able to agree to courts and judges, agree to abide by decisions and law codes and so forth. In economics there are other, more accurate, terms to describe co-operative activity between companies: collusion and cartels. These are when companies in a specific market agree to work together (co-operate) to restrict competition and reap the benefits of monopoly power by working to achieve the same ends in partnership with each other. By stressing the co-operative nature of the "defence" market, "anarcho"-capitalists are implicitly acknowledging that collusion is built into the system. The necessary contractual relations between agencies in the "protection" market require that firms co-operate and, by so doing, to behave (effectively) as one large firm (and so resemble a normal state even more than they already do). Quoting Adam Smith seems appropriate here: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." [The Wealth of Nations, p. 117] Having a market based on people of the same trade co-operating seems, therefore, an unwise move.

For example, when buying food it does not matter whether the supermarkets visited have good relations with each other. The goods bought are independent of the relationships that exist between competing companies. However, in the case of private states this is not the case. If a specific "defence" company has bad relationships with other companies in the market then it is against a customer's self-interest to subscribe to it. Why subscribe to a private state if its judgements are ignored by the others and it has to resort to violence to be heard? This, as well as being potentially dangerous, will also push up the prices that have to be paid. Arbitration is one of the most important services a defence firm can offer its customers and its market share is based upon being able to settle interagency disputes without risk of war or uncertainty that the final outcome will not be accepted by all parties. Lose that and a company will lose market share.

Therefore, the market set-up within the "anarcho"-capitalist "defence" market is such that private states have to co-operate with the others (or go out of business fast) and this means collusion can take place. In other words, a system of private states will have to agree to work together in order to provide the service of "law enforcement" to their customers and the result of such co-operation is to create a cartel. However, unlike cartels in other industries, the "defence" cartel will be a stable body simply because its members have to work with their competitors in order to survive.

Let us look at what would happen after such a cartel is formed in a specific area and a new "defence company" desired to enter the market. This new company will have to work with the members of the cartel in order to provide its services to its customers (note that "anarcho"-capitalists already assume that they "will have to" subscribe to the same law code). If the new defence firm tries to under-cut the cartel's monopoly prices, the other companies would refuse to work with it. Having to face constant conflict or the possibility of conflict, seeing its decisions being ignored by other agencies and being uncertain what the results of a dispute would be, few would patronise the new "defence company." The new company's prices would go up and it would soon face either folding or joining the cartel. Unlike every other market, if a "defence company" does not have friendly, co-operative relations with other firms in the same industry then it will go out of business.

This means that the firms that are co-operating have simply to agree not to deal with new firms which are attempting to undermine the cartel in order for them to fail. A "cartel busting" firm goes out of business in the same way an outlaw one does -- the higher costs associated with having to solve all its conflicts by force, not arbitration, increases its production costs much higher than the competitors and the firm faces insurmountable difficulties selling its products at a profit (ignoring any drop of demand due to fears of conflict by actual and potential customers). Even if we assume that many people will happily join the new firm in spite of the dangers to protect themselves against the cartel and its taxation (i.e. monopoly profits), enough will remain members of the cartel so that co-operation will still be needed and conflict unprofitable and dangerous (and as the cartel will have more resources than the new firm, it could usually hold out longer than the new firm could). In effect, breaking the cartel may take the form of an armed revolution -- as it would with any state.

The forces that break up cartels and monopolies in other industries (such as free entry -- although, of course the "defence" market will be subject to oligopolistic tendencies as any other and this will create barriers to entry) do not work here and so new firms have to co-operate or loose market share and/or profits. This means that "defence companies" will reap monopoly profits and, more importantly, have a monopoly of force over a given area.

It is also likely that a multitude of cartels would develop, with a given cartel operating in a given locality. This is because law enforcement would be localised in given areas as most crime occurs where the criminal lives (few criminals would live in Glasgow and commit crimes in Paris). However, as defence companies have to co-operate to provide their services, so would the cartels. Few people live all their lives in one area and so firms from different cartels would come into contact, so forming a cartel of cartels. This cartel of cartels may (perhaps) be less powerful than a local cartel, but it would still be required and for exactly the same reasons a local one is. Therefore "anarcho"-capitalism would, like "actually existing capitalism," be marked by a series of public states covering given areas, co-ordinated by larger states at higher levels. Such a set up would parallel the United States in many ways except it would be run directly by wealthy shareholders without the sham of "democratic" elections. Moreover, as in the USA and other states there will still be a monopoly of rules and laws (the "general libertarian law code").

Hence a monopoly of private states will develop in addition to the existing monopoly of law and this is a de facto monopoly of force over a given area (i.e. some kind of public state run by share holders). New companies attempting to enter the "defence" industry will have to work with the existing cartel in order to provide the services it offers to its customers. The cartel is in a dominant position and new entries into the market either become part of it or fail. This is exactly the position with the state, with "private agencies" free to operate as long as they work to the state's guidelines. As with the monopolist "general libertarian law code", if you do not toe the line, you go out of business fast.

"Anarcho"-capitalists claim that this will not occur, but that the co-operation needed to provide the service of law enforcement will somehow not turn into collusion between companies. However, they are quick to argue that renegade "agencies" (for example, the so-called "Mafia problem" or those who reject judgements) will go out of business because of the higher costs associated with conflict and not arbitration. Yet these higher costs are ensured because the firms in question do not co-operate with others. If other agencies boycott a firm but co-operate with all the others, then the boycotted firm will be at the same disadvantage -- regardless of whether it is a cartel buster or a renegade. So the "anarcho"-capitalist is trying to have it both ways. If the punishment of non-conforming firms cannot occur, then "anarcho"-capitalism will turn into a war of all against all or, at the very least, the service of social peace and law enforcement cannot be provided. If firms cannot deter others from disrupting the social peace (one service the firm provides) then "anarcho"-capitalism is not stable and will not remain orderly as agencies develop which favour the interests of their own customers and enforce their own law codes at the expense of others. If collusion cannot occur (or is too costly) then neither can the punishment of non-conforming firms and "anarcho"-capitalism will prove to be unstable.

So, to sum up, the "defence" market of private states has powerful forces within it to turn it into a monopoly of force over a given area. From a privately chosen monopoly of force over a specific (privately owned) area, the market of private states will turn into a monopoly of force over a general area. This is due to the need for peaceful relations between companies, relations which are required for a firm to secure market share. The unique market forces that exist within this market ensure collusion and the system of private states will become a cartel and so a public state - unaccountable to all but its shareholders, a state of the wealthy, by the wealthy, for the wealthy.

F.6.4 Why are these "defence associations" states?

It is clear that "anarcho"-capitalist defence associations meet the criteria of statehood outlined in section B.2 ("Why are anarchists against the state"). They defend property and preserve authority relationships, they practice coercion, and are hierarchical institutions which govern those under them on behalf of a "ruling elite," i.e. those who employ both the governing forces and those they govern. Thus, from an anarchist perspective, these "defence associations" are most definitely states.

What is interesting, however, is that by their own definitions a very good case can be made that these "defence associations" are states in the "anarcho"-capitalist sense too. Capitalist apologists usually define a "government" (or state) as something which has a monopoly of force and coercion within a given area. Relative to the rest of the society, these defence associations would have a monopoly of force and coercion of a given piece of property: thus, by the "anarcho"-capitalists' own definition of statehood, these associations would qualify!

If we look at Rothbard's definition of statehood, which requires (a) the power to tax and/or (b) a "coerced monopoly of the provision of defence over a given area", "anarcho"-capitalism runs into trouble.

In the first place, the costs of hiring defence associations will be deducted from the wealth created by those who use, but do not own, the property of capitalists and landlords. Let us not forget that a capitalist will only employ a worker or rent out land and housing if they make a profit from so doing. Without the labour of the worker, there would be nothing to sell and no wages to pay for rent and so a company's or landlord's "defence" firm will be paid from the revenue gathered from the capitalists power to extract a tribute from those who use, but do not own, a property. In other words, workers would pay for the agencies that enforce their employers' authority over them via the wage system and rent -- taxation in a more insidious form.

In the second, under capitalism most people spend a large part of their day on other people's property -- that is, they work for capitalists and/or live in rented accommodation. Hence if property owners select a "defence association" to protect their factories, farms, rental housing, etc., their employees and tenants will view it as a "coerced monopoly of the provision of defence over a given area." For certainly the employees and tenants will not be able to hire their own defence companies to expropriate the capitalists and landlords. So, from the standpoint of the employees and tenants, the owners do have a monopoly of "defence" over the areas in question. Of course, the "anarcho"-capitalist will argue that the tenants and workers "consent" to all the rules and conditions of a contract when they sign it and so the property owner's monopoly is not "coerced." However, the "consent" argument is so weak in conditions of inequality as to be useless (see section F.3.1, for example) and, moreover, it can and has been used to justify the state. In other words, "consent" in and of itself does not ensure that a given regime is not statist. So an argument along these lines is deeply flawed and can be used to justify regimes which are little better than "industrial feudalism" (such as, as indicated in section B.4, company towns, for example -- an institution which right-"libertarians" have no problem with). Even the "general libertarian law code," could be considered a "monopoly of government over a particular area," particularly if ordinary people have no real means of affecting the law code, either because it is market-driven and so is money-determined, or because it will be "natural" law and so unchangeable by mere mortals.

In other words, if the state "arrogates to itself a monopoly of force, of ultimate decision-making power, over a given area territorial area" then its pretty clear that the property owner shares this power. As we indicated in section F.1, Rothbard agrees that the owner is, after all, the "ultimate decision-making power" in their workplace or on their land. If the boss takes a dislike to you (for example, you do not follow their orders) then you get fired. If you cannot get a job or rent the land without agreeing to certain conditions (such as not joining a union or subscribing to the "defence firm" approved by your employer) then you either sign the contract or look for something else. Rothbard fails to draw the obvious conclusion and instead refers to the state "prohibiting the voluntary purchase and sale of defence and judicial services." [The Ethics of Liberty, p. 170 and p. 171] But just as surely as the law of contract allows the banning of unions from a property, it can just as surely ban the sale and purchase of defence and judicial services (it could be argued that market forces will stop this happening, but this is unlikely as bosses usually have the advantage on the labour market and workers have to compromise to get a job). After all, in the company towns, only company money was legal tender and company police the only law enforcers.

Therefore, it is obvious that the "anarcho"-capitalist system meets the Weberian criteria of a monopoly to enforce certain rules in a given area of land. The "general libertarian law code" is a monopoly and property owners determine the rules that apply on their property. Moreover, if the rules that property owners enforce are subject to rules contained in the monopolistic "general libertarian law code" (for example, that they cannot ban the sale and purchase of certain products -- such as defence -- on their own territory) then "anarcho"-capitalism definitely meets the Weberian definition of the state (as described by Ayn Rand as an institution "that holds the exclusive power to enforce certain rules of conduct in a given geographical area" [Capitalism: The Unknown Ideal, p. 239]) as its "law code" overrides the desires of property owners to do what they like on their own property.

Therefore, no matter how you look at it, "anarcho"-capitalism and its "defence" market promotes a "monopoly of ultimate decision making power" over a "given territorial area". It is obvious that for anarchists, the "anarcho"-capitalist system is a state system. And, as we note, a reasonable case can be made for it also being a state in the "anarcho"-capitalist sense as well. So, in effect, "anarcho"-capitalism has a different sort of state, one in which bosses hire and fire the policeman. As anarchist Peter Sabatini notes:

"Within [right] Libertarianism, Rothbard represents a minority perspective that actually argues for the total elimination of the state. However Rothbard's claim as an anarchist is quickly voided when it is shown that he only wants an end to the public state. In its place he allows countless private states, with each person supplying their own police force, army, and law, or else purchasing these services from capitalist vendors . . . Rothbard sees nothing at all wrong with the amassing of wealth, therefore those with more capital will inevitably have greater coercive force at their disposal, just as they do now." [Libertarianism: Bogus Anarchy]

Far from wanting to abolish the state, then, "anarcho"-capitalists only desire to privatise it - to make it solely accountable to capitalist wealth. Their "companies" perform the same services as the state, for the same people, in the same manner. However, there is one slight difference. Property owners would be able to select between competing companies for their "services." Because such "companies" are employed by the boss, they would be used to reinforce the totalitarian nature of capitalist firms by ensuring that the police and the law they enforce are not even slightly accountable to ordinary people. Looking beyond the "defence association" to the defence market itself (as we argued in the last section), this will become a cartel and so become some kind of public state. The very nature of the private state, its need to co-operate with others in the same industry, push it towards a monopoly network of firms and so a monopoly of force over a given area. Given the assumptions used to defend "anarcho"-capitalism, its system of private statism will develop into public statism -- a state run by managers accountable only to the share-holding elite.

To quote Peter Marshall again, the "anarcho"-capitalists "claim that all would benefit from a free exchange on the market, it is by no means certain; any unfettered market system would most likely sponsor a reversion to an unequal society with defence associations perpetuating exploitation and privilege." [Demanding the Impossible, p. 565] History, and current practice, prove this point.

In short, "anarcho"-capitalists are not anarchists at all, they are just capitalists who desire to see private states develop -- states which are strictly accountable to their paymasters without even the sham of democracy we have today. Hence a far better name for "anarcho"-capitalism would be "private-state" capitalism. At least that way we get a fairer idea of what they are trying to sell us. Bob Black put it well: "To my mind a right-wing anarchist is just a minarchist who'd abolish the state to his own satisfaction by calling it something else . . . They don't denounce what the state does, they just object to who's doing it." ["The Libertarian As Conservative", The Abolition of Work and Other Essays, p. 144]