Regarding the terms ‘anarchy’ and ‘anarchist’

January 22, 2009

I have seen several variations of these terms, including ‘anarcho-socialism’ and ‘anarcho-fascism’.  I have also heard the term ‘free market anarchism’.  All of these terms are oxymoronic. 
There is no such thing as ‘anarcho-socialism’ simply because term ‘socialism’ implies the use (or threat) of force by the state to accomplish its ends.  Implicit in a socialist system or even in what is today described as a ‘social market economy’ is the state’s monopoly on force to confiscate and compel.  Note my aim here is not to critique socialism or debate its merits.  It is simply a matter of fact that socialism requires a strong state, with a monopoly on force, to confiscate capital and redistribute it to specific industries, groups or individuals judged by the state (with varying degrees of input from those governed) to be worthy.  Capital allocation is determined by the state.  Even in ‘social market’ economies where one may observe elements of free market economics, the state plays a large role in allocating capital.  Therefore, the term ‘anarcho-socialism’ has no meaning and you should be highly suspect of anyone using this terminology. 
The term ‘free market anarchism’ is simply redundant.  In a hypothetical scenario of true and complete anarchy – the absence of the state or any other governing body – one would observe a free market (though this is not the only condition under which a free market can exist).  Therefore, the term is inefficient; using three words when only one is needed.  The market is not an ‘ism’ that can be granted or taken away by the state or the tribe.  The market simply is what is, in the absence of the state’s interference in human affairs.  ‘The market’ is always there, whether black, white, or grey.  It is only government interference that turns a market ‘black’ or ‘grey’.
Similarly, the term ‘capitalism’ has been misconstrued and contorted, primarily in the mainstream media.  Not a day goes by when I do not here the term ‘capitalism’ being misused by the media, frequently in connection to questions such as, “Is capitalism the problem?”, “Has capitalism failed?”, etc.  The term capitalism is itself redundant.  A free market implies the private ownership of capital and the dynamics we associate with the allocation of capital in such a market.  Capitalism today is often associated, or used syonomously, with the term ‘corporatism’ – a form of ‘fascism lite’ – that describes the economic system we have in the United States today.
Many ills are associated, in our mainstream culture, with large corporations.  These ills, both real and perceived, are not a function of ‘capitalism’ or of a free market.  Rather, the growth of the large corporation and its expansion beyond the level of local or even regional accountability is a function of a corporatist government and regulation that favors the growth of such corporations.  Through countless forms of regulation and taxation, the state encourages certain enterprises at the expense of others: certain business formations, strategies and ultimately the nature of the product produced and delivered.
Name an industry, and you will hard-pressed to find a local business that has not been squeezed to the breaking point or put out of business all together by a national, or international, corporation.  Again, despite a host of ‘social’ ills, both real and perceived, there is nothing fundamentally wrong with this assuming the larger competitor operates, in a market free of government distortion, more efficiently than the smaller, local company.  The problem is that, in reality, the market is anything but free.  There are layers of regulation that disproportionately effect the small business owner.  In some cases, the difference in regulation is overt.  In other ways it is more insidious, and involves the financial economies of scale.  Much of the later manifests in exorbitant the legal costs of compliance to workplace safety regulations, tax accounting and lawsuit defense.  In this regard, the regulatory framework favors the large corporation – and the larger the better.  While many will focus on the overt economies of scale –  those involving cost efficiency of production, purchasing, or distribution – these basic economic concepts are not deciding factors in the ability of a local company to compete.
Exacerbating this problem is the responsiveness of our government to money in the form of campaign donations and off-the-books perks.  This is yet another area where large corporations have the edge.  The result, as we see time and time again, is regulation that is custom tailored to the desires of the large corporation and at the expense of the smaller, local competitor.  These manifest overtly, as barriers to entry – licensing is an excellent example of this.  But they also manifest the overall cost of compliance.  In this case, large corporations may lobby for vast and unnecessary licensing or workplace safety regimes simply because they can afford the cost of compliance and know full well their current and future/potential competitors cannot.
This is not ‘the market’.  And this is not ‘capitalism’.  This is corporatism: fascism-lite.
“We must get credit going again.”
In the United Kingdom the cost of the government bailout of the finance sector has now reached an almost unfathomable 40% of GDP.  By comparison, the current relative cost of TARP in the United States is roughly 5% of GDP.  Regarding the looming nationalization of the UK banking system, William Buiter, a former member of the Bank of England’s committee on monetary policy, said “They will probably do it quite soon, because the situation is getting pretty bad.  We must get credit going again.”  Relative to the dominant fiat currency economic paradigm, he is correct.  A continued seizure of the credit markets will mean more job losses, more government bailouts and/or nationalization, and continued pressures on both the residential and commercial real estate markets.
This speaks to another aspect of our economy that favors the formation and growth of large corporations: the cheap and easy credit inherent in fiat currency models.  Those with the scale to borrow big, can and do.  The velocity of credit favors the growth and success of large corporations at the expense of small local and regional businesses simply because their scale affords them less access to credit.  When credit is king, scale matters.   In the absence of an inflationary credit model, there would be little incentive (or opportunity) for businesses to reach the size and scale of our most successful national and international corporations.  Many observe that within such an economy, the velocity of money would slow down considerably.  But this is not the case.  In fact, what would slow down is the velocity of money being sucked out of local communities to be sent back to the ‘mother ship’.  The circulation of capital with local communities and regions would in fact increase, as sales revenues were earned -and spent- largely within those areas. 
But this assumes a relatively finite -or, at least, stable- supply of money.  As you know, in our economy, this is not the case.  Fiat currency economies are inherently inflationary, as money is created out of thin air, in copious amounts, on a daily basis due to fractional reserve lending regulations and the absence of any predictable control on the supply of money.  This lack of predictability favors a credit based economy as much as the inflationary nature of the currency itself.  When business relies entirely on credit to maintain its day-to-day operations, we are in a position where a temporary seizure in the capital markets can have disproportionate and catestrophic effects on the international economy.  For citizens, the fiat currency economy creates an stealth tax on their earnings in the form of inflation, which disproportionately effects wage earners.  This is the irony of the modern American left and their calls for a more ‘progressive’ wage tax.  

Gold, and ‘gold’
The alternative?  Volumes have been written on the merits of currency backed by gold.  What I find curious, however, is what I refer to as ‘paper gold’.  Many, in observing the volatility and risk of ‘conventional’ paper investments, have instead turned their attention, and in many cases their dollars, to gold funds.  There are several such investment firms specializing in gold where you can pay to be issued a receipt for the gold that you supposedly own.  My question is: how is the paper receipt for invisible gold different than holding any other paper investment?  Typically the reason for holding gold boils down to two primary issues:

1) capital flight to the presumed ‘safety’ of gold when paper assets are underperforming or capsizing and/or

2) the desire to own gold in the event of true economic crisis and potential collapse of the currency. 

In either case, I fail to see how owning a receipt for the ‘promise’ of gold is any different than owning shares of equity or even CDOs.  The assumption is that you gold is safe in a vault somewhere – perhaps in Switzerland.  In the event of a collapse of the equities markets, the currency or the broader economy, how is one supposed to call in the receipt of this gold locked, as it is, in a hypothetical vault over 4,000 miles away.  In such an economic catastrophe, are we to assume the bank will release this gold?  And if so, are we to assume that this gold will somehow make it via truck or train to a port?  And if it does, are we to assume this gold will be safe as loaded on to a ship or plane?  And if it does are we to assume this gold will make it all the way back to a sea or airport near you?  And if it does, are we to assume this gold will make it from this sea or airport back onto another truck or train and arrive safely at your doorstep?  I am skeptical.  But even if it does, what then are you to do with this gold?  Are you to safely store tens of thousands of dollars (or more) in gold bars at your home?  Will guarding it be your full-time job?  And if it is, how then will you spend this gold?  Will you go down to your local store or find a local farmer and trade him chips off your gold bar for corn or wheat?  And what then will you do with this corn or wheat?  Who will guard the gold while you are bartering?  If all of this seems rather nonsensical, it’s because it is.
Regarding gold funds and gold receipts – look for big surprises in 2009 as the economy continues its slow-motion meltdown.  There will be scandals and losses as ‘fractional reserve gold’ is exposed. 
Regarding those holding gold receipts, or even physical gold, as barter tender for SHTF scenarios – I would suggest instead, to the extent you feel compelled to prepare for such a situation, holding toothbrushes, toothpaste, toilet paper, pocket knives, soap, batteries and other useful items that will be more realistic barter material for common items you may want in reasonable quantities.  These will be much more practical and in much higher demand in a true SHTF situation than coins or chunks of gold.  Further, if you are robbed, you won’t feel so bad about handing over your suitcase full of Charmin.


4 Responses to “Regarding the terms ‘anarchy’ and ‘anarchist’”

  1. […] But what you ask is a common misperception. To expand on some of the concepts I introduced here:  , let us take the example of a furniture maker. In some rural areas of the United States there […]

  2. […] But what you ask is a common misperception. To expand on some of the concepts I introduced here:  , let us take the example of a furniture maker. In some rural areas of the United States there […]

  3. […] associated with the term “anarchy”.  For more information on this subject, please see here:, here:, and here: […]

  4. Ben Moreno Says:

    Some more oxymoron’s to consider.

    Civil War
    US Department Of Justice
    Military Intelligence
    Holy war
    Business Ethics
    Mutual Differences

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