Marx was right about capitalism

Marx's main mistake was his understanding of exploitation, but he was right that a free market in land and the means of production would inevitably tend to produce capitalistic patterns of ownership and control.

A stone sculpture of Karl Marx, founder of the communist movement, is seen in the eastern German town of Chemnitz in this file photo. Despite his aversion to the free market, Marx's ideas about capitalism were on target, Kinsella argues.

Klaus Jedlicka/AP/File

October 27, 2011

Hoppe has explained how Marx was “essentially correct” in his theory of history and class analysis. His main mistake was his understanding of exploitation, which was based on a flawed understanding of the labor theory of value. As Hoppe argues, drawing on Rothbardian libertarian and Austrian insights, the only meaningful exploitation is aggression against private property. Once you understand exploitation in this light, a Marxian style class analysis and understanding of history makes sense.

And Marx was also right about some of his views about capitalism. In the comments section on a recent Mises post, Chartier: Markets Not Capitalism, left-libertarian Charles Johnson perceptively writes:

The term “capitalism” was introduced by anti-capitalists but not by Marx. Its most notable early appearance is in Louis Blanc’s Organisation du Travail (1840), published while Marx was still a grad student in Berlin.

Fun fact: Marx himself actually hardly ever uses the word — “capitalism” (Kapitalismus) appears all of about 2 or 3 times in the whole three volumes of Das Kapital, and hardly anywhere else in all of his work. But he does talk about “capitalists” and the “capitalistic mode of production” all over the place, and when later Marxist writers took up the term “capitalism” from Blanc, Proudhon, and other early adopters (mostly French), it was fairly straightforward to treat the term as more or less equivalent in meaning to Marx’s “capitalistic mode of production” (i.e. a mode of production based on concentrated absentee ownership of capital and the hiring of employees to work it).

None of these folks, incidentally, understood the term to mean “a free market in land and means of production.” Some (Blanc, Marx) believed that a free market in land and the means of production would inevitably tend to produce capitalistic patterns of ownership and control. Others (Proudhon, Warren, Tucker) dissented, and argued explicitly that a free market in land and the means of production could possibly, or even would naturally tend to, undermine capitalistic patterns of ownership and control (in the sense that large-scale inequalities of wealth would tend to dissipate, absolute poverty would largely disappear, and the working class would become the owning class, no longer subject to perpetual rent or debt, and no longer dependent on relationships with absentee owners of capital in order to make a living); hence (they held) if you were serious about being an anti-capitalist, then you ought to be serious about freeing markets and abolishing the state. On this one, I side with the Anarchists.

I side with Marx, not the “Anarchists,” here: in their belief “that a free market in land and the means of production would inevitably tend to produce capitalistic patterns of ownership and control.” I believe that if you respect private property rights (which the (good) left-libertarians do) then you will end up with a productive, advanced industrialized and “capitalist” society with differences in wealth, widespread use of firms, concentration of capitalism, employers and employees and employment, and inequalities in income. And there is nothing wrong with these features, assuming they do not arise due to state intervention or property theft. This does not mean that the capitalist order that would characterize a key aspect of the economy of a free society would be exactly like the one we see today. There may well be more self-employment, more localism, more self-sufficiency, and at the same time even more international trade, more billionaires, more wealth disparities (who can say?), more specialization and division of labor, and even larger “companies” (formerly known as “corporations”) and multi-national enterprises (MNE’s; well as nation-states would not exist, maybe they would be called multi-country firms, or multi-continent-firms) than we see now.

A couple of related points: even to the extent some current property holdings have arisen by unlibertarian acts in the past, as Rothbard explains:

It might be charged that our theory of justice in property titles is deficient because in the real world most landed (and even other) property has a past history so tangled that it becomes impossible to identify who or what has committed coercion and therefore who the current just owner may be. But the point of the “homestead principle” is that if we don’t know what crimes have been committed in acquiring the property in the past, or if we don’t know the victims or their heirs, then the current owner becomes the legitimate and just owner on homestead grounds. In short, if Jones owns a piece of land at the present time, and we don’t know what crimes were committed to arrive at the current title, then Jones, as the current owner, becomes as fully legitimate a property owner of this land as he does over his own person. Overthrow of existing property title only becomes legitimate if the victims or their heirs can present an authenticated, demonstrable, and specific claim to the property. Failing such conditions, existing landowners possess a fully moral right to their property. (See my post Justice and Property Rights: Rothbard on Scarcity, Property, Contracts….)

Also, note that Johnson mentions that the Anarchists he sides with think that in a free market the “working class” would “no longer dependent on relationships with absentee owners of capital in order to make a living.” The left-libertarians variously criticize several phenomenon, sometimes lumped together. I think they should be treated separately:

  1. Unowned land claimed by the state. Truly “unowned” land: this is land not yet really improved or homesteaded but fenced off and claimed by the state–such as the vast interior of national parks and forests and other lands controlled e.g. by the Bureau of Land Management, and other untransformed areas such as the deep sea bed (subject to the Law of the Sea Treaty), antarctica, the moon, and so on. The libertarian position here is that upon dissolution of the state these resources are subject to homesteading, as they are not yet truly owned.
  2. Property legally owned by the state. Other property that is legally owned by the state, such as roads and government buildings and military bases. It is crankish to regard these as “unowned”, as some libertarians do. This property has been homesteaded, either by the state; or by some private owner that the state either expropriated or purchased from. These should be regarded, in my view, as assets legally owned by the state but morally owned by the state’s victims and subject to claims of restitution by them. For specific pieces of property expropriated from an owner by the state, that victim ought to reclaim his property. For the rest, it should be subject to a pro-rata claim by all the various creditors of the state–e.g., auctioned off and then the proceeds split among the claimants. Consider a piece of property that the state acquire by sale: the previous owner has no specific claim since he sold his land to the state. He was already compensated. Likewise, someone who had their property taken by eminent domain but then received a payment of “fair market value” has (mostly) been compensated already–and with money stolen from taxpayers at large. Thus, for condemned or purchased property where the state paid the previous owner, this should be an asset available for restitution to the state’s victims at large.
  3. Unimproved property legally owned by a private owner. Land that is unimproved but held by a nominally private owner under color of title granted by the state. This land is arguably similar to class 1 above, and the current legal/nominal owner perhaps ought not have his state-granted title recognized. Perhaps such unimproved property should be subject to homesteading if the state were to wither away. I am not sure of this, but I grant that it is arguable.
  4. Land owned by “absentee” owners. Land that was at one point homesteaded, but which is occupied on a day to day basis by tenants or employees of an “absentee” or “distant” owner. Now the comment above implies that this is illegitimate. I disagree completely, as I argue in A Critique of Mutualist Occupancy. Contrary to the claims of some mutualists and left-libertarians, absentee ownership is not unlibertarian. It cannot be plausibly argued that the absentee owner has “abandoned” the property. In fact, even if you argue that property that is never improved, or that is not kept in a state of active use, is to be regarded as unowned, in the landlord or employer situation the property is actively used, and the tenants or employees keep the property in a state of use on behalf of the (absentee) owner, as his agent, by contract. To hold otherwise is to undercut property rights by denying the right of free individuals to enter into property contracts.