Economic Update: Libertarianism, Capitalism & Socialism


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[S9 E47]  This episode of Economic Update features an exploration by Professor Wolff of how Libertarians defend capitalism by saying its many current flaws/faults flow from the state's economic interventions, not from the system itself. He then explains why Libertarians oppose socialism as another, even more, state-dominated intervention into the capitalistic system. Prof. Wolff then offers a critique of Libertarianism based on Capitalism's long history of strong state interventions and socialism's long-standing anarchistic components. He goes on to wrap it all up by inviting Libertarians and Socialists to find potential points of agreement against capitalism.

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This transcript has been edited for clarity. 


Welcome, friends, to another addition of Economic Update, a weekly program devoted to the economic dimensions of our lives—jobs, incomes, debts—our own, those of our children. I’m your host, Richard Wolff.

Today I’m going to devote the program to another one of those topics you have been writing to me about that you wanted a comment about. And I respect your taking the time and trouble to tell me what you want me to deal with. And so, I’ve devoted this program and planning it to the topic of libertarianism. A growing number of people seem to be persuaded or interested, at least, in the libertarian approach. It has some currency in our political dialogues. And so it’s appropriate for you to be asking me and, likewise, appropriate for me to respond. So I entitled this talk “Libertarianism, Capitalism & Socialism”. And I’ll try to show you why I chose that title as we go along.

Let’s begin with capitalism’s history. It’s roughly 300 years old now. It started about 300 years ago in England—modern capitalism did—spread from there to Western Europe, from there to North America, Japan. And by now it is the world’s dominant system. So we’ve had 300 years to look at the different forms it takes, its tendencies, what lasted a short time and what is really part of this system and has a duration that is as old as the system itself. Indeed recently, I did a program about competition and monopoly, in which I spoke about how those have been phases moving from one to the other and back and forth throughout the history of capitalism. So I’d like to summarize what we had learned. And I’d like to do it by saying, “What are the strengths that capitalism has shown and what are its weaknesses?” Like every system, it has both.

Here are the strengths. It produces rapid economic growth—no question about it. It is an explosive system for producing goods and services. It is technologically dynamic. In other words, there’s something going on in capitalism that makes us change the technologies we use much more rapidly than systems before had done. It’s also been a system that has brought the world together, what we call in economics “a global system” or “globalization” has been furthered by capitalism compared to the systems that preceded it.

What about its major weaknesses? Well, here’s what we know. It’s a system that tends towards pretty extreme inequality. Occasionally, there’s a rebellion against the inequality. We get less inequality for a while, but then the basic system movement towards inequality reasserts itself and we get the kind of 1%–99% that generations of people living in capitalism have lived through and noticed. The system is also highly unstable. On the average, every 4–7 years it has an economic downturn, a recession or depression, or crisis, or cycle—lots of words for it—but it’s a part of this system. And there’s a lot of injustice in who suffers the worst of these downturns. Just as there is a lot of injustice in who gets the short end of the stick when it comes to the distribution of income and wealth.

We also know that there’s a little real democracy. We have the forms of democracy—we vote. But to suggest that we all have an equal influence on what happens to us in this society is an argument few would be able to sustain without a smile, at best. And he is another one that hasn’t been so often recognized. Capitalism has always relied on a big strong state apparatus.

Now, what do capitalism’s defenders do with the flaws I listed: the inequality, the injustice, the instability, the lack of real democracy, the big strong state? Some of the defenders of capitalism use what I call “advertising logic”. They simply ignore the flaws, they act as if they aren’t there, they celebrate the plus side, and imagine there is no a negative side. I’m not going to take time to criticize that. I don’t think you need it. I want to turn to the much more sophisticated defense of capitalism. And that one focuses on one of those qualities that I said were flaws—the big strong state. There’s a line of defense of capitalism that picks out that quality of capitalism—the big strong state—and attacks it, attacks it as though it were some outside influence coming in to our world, to our capitalism, and distorting it, changing it, weakening it, damaging it.

You can see in the history of the United States, particularly, that there is a strong strain of argument that says capitalism is not the problem, it’s the big strong state, that we don’t need it, we don’t want it, we’d like to get it out of our hair, out of our society, out of our economy for sure. And if only we could do that, if we could get rid of the big powerful state, why, then we would have a much better society, we would have a much better capitalism. The state messes up the beauty, the efficiency of the capitalist economic systems.

These folks have always been around. They were once called liberals as in England or neo-liberals, more recently, or laissez-faire, the French phrase that says, “Leave the economy alone. The government should not mess with it.” There are lots of ways of saying it, because this idea, the capitalism and societies—where capitalism is dominant—would do better if the state were not there or much weaker. This a very old idea. It is summarized in the famous phrase, “That government governs best, which governs least.” That is the best thing you can have is a government that’s not there. The modern group that embraces this idea or variations on it are libertarians. They like the word “liberty”, which they understand as being free from, unencumbered by a state of government telling us what to do, shaping our lives, limiting our options and so on. So I want to talk about that defense of modern capitalism’s flaws. The notion that the government is somehow responsible and that removing the government would be some sort of solution.

So let’s begin. That’s the argument libertarians offer us. They basically say, “Yes, modern capitalism has all kinds of flaws.” They accept that. I’ve noticed when I have had debates with libertarians, they accept many of the critiques I offer of capitalism. They tend to prefer the language they like to the one I use. So they like to use phrases like “crony capitalism” or “unfair capitalism” or “a capitalism that is distorted in some way”, because they want us to think in terms of a capitalism that isn’t as good as it could be, as it should be, because of the baleful influence of the government in stepping in. So they like—the libertarians do—ideas like deregulation: The government should step back from regulating the economy. Let it be, laissez-faire, as the old folks used to say. They like what they call privatization: Take activities run by the government and stop the government from doing it, because that’s always bad for libertarians and turn it over instead to the private sector, to people who are not in the government, who are not government officials.

So there shouldn’t be a public post office, there should be a private mail service, better yet competing capitalists offering to move the mail around. There shouldn’t be a social security system run by the government, it should be run by banks and stock brokerages, giving us little accounts that they would manage in some competitive a way. They want a capitalism, free of the government’s influence and they believe that will make capitalism work better and a society based on capitalism much better than what we have. So the problems of what we have for libertarians are not the result of capitalism, they are the result of the government’s intrusion into capitalism, and so the solution is to get the government out. And there shouldn’t be much difficulty in understanding why libertarians are particularly hostile to socialists, because of how they understand what socialism is. For them, socialism gives the government even more power, more power to intrude on the economy than capitalism, even at its worst, ever did. So since they’re critical of capitalism to the degree that the government is powerful, there are even more critical of socialists, because for the libertarian, the socialist is even worse, when it comes to justifying or rationalizing the intrusion of government onto the economy.

So that’s the libertarian position. They tend to be aligned with a Republican Party here in the United States, which is why the Republicans have traditionally argued against government intervention, against the government taxing people, all the ways that the government steps in. It’s a little hard to keep that in your mind when you have a president like Trump, since he roaringly intrudes the government into the economy, levying tariffs the way he asks is a governmental intrusion. Telling us that the Huawei corporation is a bad corporation, banning Americans from dealing with it is a massive government intrusion. These are intrusions that this Republican president is undertaking. And it’s interesting to see the Republican Party that used to be against such intrusions being remarkably silent in the face of Mr. Trump’s violating what they have espoused for so long.

We’ve come to the end of the first half of today’s program. Stay with me for the second half when we will do a critique of libertarians and then end with an invitation to them, which I think will be of interest.

I do want to remind you, please, to subscribe to our YouTube channel—very easy to do with a click, cost you no money and is an enormous source of support for everything we are trying to do. Make use of our websites. And there you can communicate to us through email, you can follow us on Facebook, Twitter, and Instagram. And as always, I want to thank our Patren community for their enthusiasm, for their support, for their encouragement all of which are major assists to everything that we do.

But one more item before we take our mid-program break. We recently produced a book that you know about, because we’ve talked about, it’s called “Understanding Marxism”. The reaction to that was so positive and was followed up by suggestions for something else that we have now produced our second book called “Understanding Socialism”. Once again, it is a response to the questions, comments that you have sent into us over the last year and a half.

It’s an attempt to give an overview of what socialism has meant, it’s different definitions, how it has changed over time, and particularly in the last 20 years, how to make sense of the efforts in places like Russia and China to institutionalize a socialist system, what was successful, what was not in their efforts, what the meaning of socialism has now become, the new directions it’s taking. Please, if you’re interested, follow us. Go to lulu.com, where you can find out more about this new book, “Understanding Socialism”. We will be right back.

Welcome back to the second half of today’s Economic Update.

This program is devoted to a discussion of libertarianism and its relationship to capitalism and socialism. In the first half, we talked mostly about how capitalism and its problems gave rise to a strain of thought that identified the problems capitalism has, the criticisms it deserves. As being the result of the intrusion of an outside force—the government—mocking up the economic system with all sorts of consequences that libertarians believe are both unwanted and unnecessary, and that the solution to the problems capitalism has should be the removal of the baleful influence of the government.

Here I would like to offer a critique of libertarianism, but it is a friendly critique in the sense that it will end up with a proposal, an invitation, if you like, that there are ways in which the various critics of capitalism, those who come at it from the left, and those who come at it from the libertarian side. There are ways in which we might work out our differences and find areas of useful agreement.

So let’s begin with the bad news, if you like—the criticism—and then the good news—the invitation. First to criticism, as I say. The notion that the government’s intrusion into the economy is some sort of external influence, some sort of outside intrusion on what would be better left without such intrusions. I would argue, based on a lifetime of work in the field we call economic history, that this is a complete illusion. Strong government has been part of capitalism throughout its history. It has been something both denounced by capitalists, and yet eagerly embraced by them usually at the same time. Nor is that all that unusual. We are often angry at the things we are most in need of. And we can leave the contradiction between needing it, and being angry about it all at the same time. And I think this is no exception. Let me give you some concrete examples.

Nothing is more important to the modern functioning of a capitalist economy than money. But to whom do we entrust the production, distribution, and control of the money we use every day, all the time? The government. We give the government an extraordinary power by being the only one allowed to print the money, to mint the coins, to set the interest rates, to determine how much money is in the economy. And we do that because capitalism needs it. In every capitalist country, there were times when lots of people were allowed to produce money, and that produced a level of chaos that led in every country for one authority—the government—to be given that job and for everybody else to be told if you print money yourself, we’re going to put you in jail. So the government is awfully important—isn’t it?—by having been given the control, the origination power for money.

But let me give you some others. Here in the United States, the government took the land from the Native Americans and distributed it to other people. The economic effect of that staggering, staggering. The government controls the water ways. The government controls traffic into and out of the country. The government controls the movement of people into and out of the country. The government sets limits on weights and measures and makes sure the scale in the butcher shop is accurate and not swindling us. We’ve brought the government in to check on food and drug to make sure it’s pure. You know why? Because capitalists adulterated it on and on. Capitalism has always needed a powerful government. We need an apparatus to prevent us from killing one another and stealing from one another and, likewise, from having folks outside come in and steal our stuff etc. So the notion of a Capitalism without a government has only one adjective that really applies. It is a utopian fantasy. Beautiful in a certain way. It would be wonderful if we didn’t have a government, but capitalism has not ever proven the way to get beyond a government. Capitalists like to denounce the government, but they do denounce what they also embrace and what they have had to turn to over and over again.

Just remember the crisis of 2008, when global capitalism collapsed. In every country, the leading private bankers, the leading private corporations sent their top executives to the capital city to beg the government to bail them out, which the government did. You don’t want a strong government. There would have been none there to save you. So my critique of the libertarians is, it’s a beautiful idea. We’ve never seen it work. And it’s hard for me to imagine so long as we have capitalism that we will not see the strong state that that system has always exhibited wherever it has existed.

And let me be real clear, if capitalism is defined, as we do on this program, as an organization of production with a small number of people at the top—we call them employers—and a large number of people at the bottom—we call them employees—if capitalism is the organization of production with employers and employees, and if that’s what distinguishes it from feudalism, where you have lords and serfs, or slavery, where you have masters in slaves, if capitalism is about how you organize production, then here’s what I need to say to you, libertarians: The socialism of the Soviet Union and the socialism of the People’s Republic of China did not do away with capitalism. They organized their industries with employers and employees, same system. They had different people in the role of employers, state officials rather than private citizens. So it’s a state form of capitalism versus a private form, but they did not do away with the employer–employee structure. So those powerful states are, again, a kind of capitalism to go beyond private capitalism. The state was necessary to take the next step, which it did in Russia, it did in China, and, by the way, it did elsewhere in India and Japan to lesser degrees than Russia in China. But it’s the same basic historical movement.

So let me take it now to the relationship of libertarianism to socialism. I would argue to my libertarian friends. Your definition of socialism is strange and not quite on target. Are there some socialists, who are in love with the state and the power of the state? You bet. You get that. But there have always been socialists, who are dead against that, and you seem either not to know it or to brush it decide. The history of socialism is intimately wrapped up with the history of anarchism. One of Marx’s closest associates for years was Mikhail Bakunin—one of the great leaders of anarchism and one of the great theoreticians of it. They had their differences to be sure. But they also had their solidarity, which is why they worked together. Socialists have always included complicated relationships with anarchists. One of the most famous remarks by the Lenin shortly after the revolution in Russia was that his commitment, and that of the Bolshevik leadership, was to accomplish, I quote, “The withering away of the state.” Interesting remark for a socialist Marxist. He didn’t want the state. He was committed to its withering away. He was the kind of socialist, who looked to the removal of the power of the state as part of the objectives of socialism. In fact, socialism, he thought, had a better shot at achieving that goal than capitalism throughout its history had shown itself to be able to do. You might put it this way: Lenin was less utopian in his hostility to the state then libertarians are today.

Modern socialism—I would ask my libertarian friends to think about—is all about democratizing the workplace, getting rid of the employer–employee relationship, and substituting a democratically run enterprise where everybody together—one person, one vote—makes the decisions of what to produce, how to produce, where to produce, and what to do with the fruits of the collective labor. You might think of modern socialism focus on democratizing the workplace as getting rid of—here we go now—the state inside the workplace. This tiny group of people at the top: the board of directors, the owner, who functions like a powerful state, who decides who works and who doesn’t, who has an income and who does it; who can threaten people with loss of job, loss of security, loss of promotion, and to achieve a power that no people should have over other people. To get rid of the state inside the enterprise is just as important—if not more so—than to get rid of it outside in the larger society. So maybe socialists, at least those, who see what I’ve just said that the future of socialism is the transformation of the workplace, have something to share with libertarians. They all want in some way to get rid of the baleful influence of the state. For socialists, who are interested in democratizing the workplace, the way forward is to get rid of capitalism, by which is meant the relationship of employer-to-employee.

I’ve noticed in my debates with libertarians that, when I talk about democratizing the enterprise, they are in agreement. They say, “We want that too.” Good. That is something we then have in common. We don’t like the state and we do want to democratize enterprises. Might that be the basis—I would like to leave you with this thought—might that be the basis for some coming together of libertarians and socialists with a shared agenda—put the old jogging aside—of democratizing the enterprise, getting rid of the state inside the enterprise, blend it together with making it no longer necessary to embrace the state in the larger society?

There’s an old argument socialist make that reaches the same point. They say that in the end the role of the state is to enforce the class divisions inside society, that the reason slave societies, feudal societies, and capitalist societies hold on to a strong state is because they are economic systems in which a small group of people—the employers—seek to keep control and to exploit the mass. And to do that safely, you need a monopoly of physical force in something called the government to be able to come in and keep that system from self-destruction. If that’s true, then socialists see the democratization of enterprises as a step towards a new economic system that can realize the shared goal of both the new socialists and the libertarians, who can wean themselves off of their dependence on capitalism.

I hope you have found this discussion of libertarianism interesting. We’ve come to the end of the program, and I look forward to talking with you again next week.


Transcript by Aleh Haiko
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