Terry Anderson and Peter Hill in “The Not So Wild, Wild West: Property Rights on the Frontier” describe how in the late 1800s, the federal government pursued an aggressive homesteading policy in the west. Advertising “free land” was politically popular and it was a way to quickly secure the nations expanding territory. However, in doing this the federal government ignored privately established property rights negotiated between Indians and ranchers or amongst early settlers of the lands and redistributed arbitrary plot sizes with residency and improvement requirements that were not market based. The result of this was a “race for property rights” that led to both land owners with insufficient capital to successfully use the land, they could only afford the “free land” and not the equipment, seed, etc. to profit from it, and to the landowner-tenant farmer system. Landowners from other regions and around the state of Oklahoma claimed stakes during homesteading land races and then rented the land to tenant farmers. Since the land was “free” and did not constitute the landowner’s primary residence or income he had less incentive in the maintenance or improvement of the land and the tenants often could not afford to make improvements or did not think of the land as their own and thus could not justify extra expenses to improve the landowner’s property.

This is in contrast to the three ways to acquire property according Murray Rothbard in “Man, Economy, and State,” which itself has a firm basis in Lockean principles: The first way that unused land or resources may be converted to private property is through the mixing of an individual’s labor with those natural resources. Second an individuals may voluntary exchange or gift property, that they either gained by mixing their labor with unused natural resources or through previous voluntary exchanges. Third individuals may inherit property from their ancestors that previously acquired the property through mixing their labor with unused natural resources or through voluntary exchange. In this case, either the ranchers who voluntarily exchanged with the Indians with the property or possibly the tenant farmers who mixed their labor, if the land was otherwise not in use, would be the actual property owners. Approaching property rights from this perspective would have prevented arbitrary homesteading by the government, premature settling, misallocation of capital, and increased investment by the eventual settlers of the land due to a sense of ownership. This applies today because much of the accumulation of current wealth began with the unjustified appropriation and redistribution of property rights in ways contrary to these principles that have protected and ensured continued growth of wealth for the few against the rightful claims of the many. Also, eminent domain, zoning, and regulations of “private property” continue to erode our sense of ownership and undermine the benefits of a system based on property rights.

In “The Grapes of Wrath,” a representative from the Shawnee Land and Cattle Co. informs a sharecropper that he has to leave his land. The sharecropper inquires into who has made the decision. The representative informs him that it would be no use to talk to the Company as it is not a person, not that it would matter because it is following orders of the bank which itself is answering to auditors in the East. He also mentions the benefits the landowner will receive in hiring wage earners instead of splitting the crops with tenant farmers. However, the movie does not give the context to all of these aforementioned parts working against the interest of the sharecropper. In article titled, “Boom, Bust, Dust” by Doug French, he explains that from 1917 to 1919 “the government guaranteed $2 per bushel” for wheat to help win World War I. As a result, “the number of acres put into wheat production increased 70 percent…But when the war ended, the price collapse…The debts incurred to buy equipment and property still had to be paid…But farmers could only sell the wheat for half of what it cost to produce…if they could find buyers at all.” This distortion in the market created by war and government price intervention led to an artificial boom in the wheat industry followed by a disastrous bust that left farmers and landowners with debt they could not repay and many lost their property. Government further distorted the markets with legislation such as the Agricultural Adjustment Acts of 1933 and 1938 and the Soil Conservation and Domestic Allotment Act of 1935. They allowed landowners to receive federal dollars for not growing on their land in order to lower supply and raise prices of crops. The landowners were supposed to provide a percentage of these funds to the tenant farmers but instead found it in their interest to hire wage earners and kick the tenant farmers from the property so they could receive all federal funds and the full yield of the crop. This legislation probably explains much of the beginning of “The Grapes of Wrath” and why the farmers were being removed from the property.

Government distortion of the markets is a very big player in modern poverty as well. The whole boom-bust cycle is the result of the Federal Reserve Fractional Banking system that allows for continuous credit expansion. The most obvious recent catastrophe this has caused is the Housing Crisis. The quasi-public Fannie mae and Freddie mac corporations guaranteeing home loans severely distorted the markets, as well as legislation that provided incentives to make sub-prime mortgages. The subsidies and hard push towards ethanol in 2007 that pushed the price of corn from “$2 per bushel in January 2005 to over $6” in 2008. (Boom, Bust, Dust) This also resulted in a world wide food shortage as farmers shifted their resources towards the guaranteed money, corn, and sold it for fuel instead of food.

Another prevalent them throughout “The Grapes of Wrath” was law enforcement working on behalf of corporations to ensure their profits and snuff out any “agitators.” However, many confuse this with being a symptom of capitalism when it is truly the nature of corporatism. A system can no longer be called capitalism and a market can no longer be called free when coercion, which government usually maintains a monopoly on, is used to choose winners and losers. The direct coercion to achieve desired ends for favored groups, classes, or companies is only the most obvious form of corporatism. The plethora of regulations, advertised as reigning in corporations, actually remove their competition as small business and individual entrepreneurs can not afford to comply, leaving only the large corporations as the only ones who can afford to do business. This is still very much the nature of our current economic system and that is why people’s distrust or criticisms of capitalism are misplaced since the government has used their monopoly on coercion to influence the market since the very beginning.

Finally, in addition to the causes of poverty for the “Okies” in the late 1930s there are additional factors causing poverty today. The federal government has instituted a much more interventionist monetary policy where during recessions they intentionally create inflation through lower interest rates and printing money. This increases prices at the worst time, when there is high unemployment. Their hope is to lower the real wages of workers while maintaining the same or higher nominal wages, in other words keep the dollar amount the same but make the dollar worth less so they are actually getting paid less with the illusion they are getting paid the same. Also, since the early 1900s government spending has gone from less than 10 percent of GDP to 35-40 percent of GDP over the last 30 years. (USgovernmentspending.com) As the government consumes more of the nation’s resources there is less left to grow the economy.

1. Anderson, Terry L. (2004). “The Not So Wild, Wild West: Property Rights on the Frontier.” Stanford, California: Stanford University Press
2. French, Doug. Mises Daily Article, April 07, 2008. “Boom, Bust, Dust.” http://mises.org/daily/3181. Accessed on 16 October 2011.
3. Rothbard, Murray N. (2004). “Man, Economy, and State, Third Edition, Scholar’s Edition.” Auburn, Alabama: Ludwig von Mises Institute.
4. Usgovernmentspending.com. “Spending as a Percent of GDP from 1900-2010.” http://www.usgovernmentspending.com/downchart_gs.php?year=1900_2010&units=p&title=Spending%20as%20percent%20of%20GDP. Accessed on 16 October 2011.

The “Elite Theory,” by G. William Domhoff, posited “that a power elite, drawn from the social upper class, corporate leaders, and officials of policy-making organizations, collectively dominates American politics,” and that all of the unifying traits mentioned earlier are, in fact, present.  However, despite many revisions and the sophistication in Domhoff’s theories, he points to actions by the state that are opposed by business and those that they advocate as both being in the interest of business, and neither, according to Domhoff, detract from the “view that the elite perpetually dominates” and “thus raises questions about nonfalsifiability” and the overall legitimacy of this theory.(Mizruchi and Bey, 2005, 323)

The next two theories are best understood in the context of the “Berle and Means Thesis,” which basically states that “because of the large and increasing size of corporations, and because of the consequent difficulty of maintaining substantial family holdings in individual firms, stock holdings in large U.S. corporations gradually dispersed.  The consequence of this dispersal…was the usurpation..of power by the firm’s managers.  These managers…were viewed as a self-perpetuating oligarchy, unaccountable to the owners who had elected them.” (Mizruchi and Bey, 2005, 312)  With this in mind, Michael Useem, found that since the “largest single block of stockholders by the 1990s was not individuals,…but institutional investors,” they were the dominant power holders in business.(Mizruchi and Bey, 2005, 324)  Useem, however, made no claim to their unity and so his theory mostly contradicts that the managers are unaccountable, at least in recent decades, due to the influence of institutional investors.  The third theory, proposed by Gerald Davis, also attempts to negate the Berle and Means thesis by claiming that it makes no difference if a corporation is owner or manager run since they both must conform to “pressure from an amorphous, but no less real, source,” the “capital market.” (Mizruchi and Bey, 2005, 324-325)  The elites are “compelled to vow allegiance to ‘shareholder value’” and their “structures and policies are driven by anticipations of their economic consequences.” (Mizruchi and Bey, 2005, 325)  However, while Davis tries to use this observation to show a unity of purpose and political domination by the anonymous members of the “capital market,” but the very nature of this group, where no individuals, elite or otherwise, or their interests can be specified indicates that Davis’s theory simply creates a generalization so broad that almost anyone could be a part of it.  If that is the case, then the dispersal and division of interests that would exist in the “capital market” would actually be a boon to democracy if they were the truly the dominating force.

The fourth theory is conceptually different than the previous theories due to its international scale.  “Several scholars have suggested that with the increasing globalization of economic activity” and “the extent to which corporations have the ability to move capital outside their borders” giving “them leverage over their host states…national governments have lost the ability to regulate their own business communities.” (Mizruchi and Bey, 2005, 329)  This would certainly appear to diminish the power of national governments, but it does not necessarily mean an increase in corporate power, or the general business community, since that would still require unity in effort, which faces all of the difficulties present in the earlier theories.

I would like to close with my theory on corporate power and politics.  The first part explains why corporate interests seem to be advanced, overall, in spite of real conflicting interests within the corporate community. The state holds a monopoly over “legal” coercion and this is its only real service it has to offer on the marketplace.  The “passive electorate” is not as concerned, or as dependent a customer, of government coercion; whereas, corporations are interested in using state coercion to prevent or reduce competition and to advance its interests.  So overall, the government responds to the market for coercion, acting in the interests of various corporate entities who are most able to afford it, in means of resources and influence to protect the political elites’ privileges.  This does not require unity from the various corporate interests and the inconsistency of the policies enforced through state coercion seem to support that there is no need for unity from the corporate community in order for the state to act generally in their favor.  This on its own is destructive to society and damaging to the democratic ideal but does not cause a complete collapse of they system because of the lack of unity.  However, this trend may very likely lead to the second part of this theory which will lead to the collapse of democracy.  As the state continues to use coercion to choose the “winners” and “losers”, whether among the corporate community or between the corporate community and the rest of the electorate, there will be fewer and fewer parties competing or seeking the state’s coercive service.  Common sense dictates that it is easier for a few to coalesce, than the many, and so this increased centralization of both political and corporate elites will make it much more likely that complete unity, and the destruction of democracy will occur.

Mizruchi, M.S., & Bey, D.M. (2005). Rule Making, Rule Breaking, and Power. In T.A. Janoski, A.M. Hicks, & M.A. Schwartz (Eds.), Handbook of Political Sociology: States, Civil Societies, and Globalization (310-330). Cambridge, UK: Cambridge University Press.

The first definition of monopoly is that of one seller or producer of a good or service. This is the most literal definition (“monos” means “only and “polein” means “to sell”) and the most common understanding of the word monopoly. While this is a very clear cut and precise definition of monopoly its application is much less so and its use to justify government intervention is even more hazy. The application of this definition becomes difficult when one has to determine what constitutes a single product or service. Since there will be some sort of differentiation between every product offered by different people one could rationally claim that everyone is a monopolist. For example, while Hershey’s Chocolate company may not be a monopolist of chocolate they are monopolists of “Hershey’s Kisses” and John’s doctor is a monopolist of medical services to John. This is further complicated if we accept that fact that the point that the differentiation is substantial to lead to a product being categorized by a different product is solely in the mind of the consumer and can not be defined by any specific attributes or by committee. The second flaw with the use of this definition is when it is used to justify government intervention in the markets based on misconceptions of individual rights and freedom. While individuals do have the freedom to act on available choices they are not entitled to any certain number of choices. If there truly was only the choice of purchasing a product or service from one producer or not purchasing it at all then the individual is free to act on that choice, not require more choices be made available to him. Murray Rothbard uses the example of “Crusoe and Friday bargaining on a desert island” where they “have very little range or power of choice; their power of substitution is limited. Yet if neither man interferes with the other’s person or property, each one is absolutely free. To argue otherwise is to adopt the fallacy of confusing freedom with abundance or range of choice. No individual producer is or can be responsible for other people’s power to substitute.”²

The second definition, achieving monopoly price is explained best by Ludwig von Mises: “If conditions are such that the monopolist can secure higher net proceeds by selling a smaller quantity of his product at a higher price than by selling a greater quantity of his supply at a lower price, there emerges a monopoly price higher than the potential market price would have been in the absence of monopoly.”³ The concerns raised by the proponents of this defintion are that a single producer or a cartel made up of a few producers will restrict supply in order to gain increased profit margins at a higher price point on the supply-demand curve. However, this will only be profitable for products or services whose prices are inelastic above the “theoretical” competitive price. The flaw in this defintion is determining “competitive price” versus “monopoly price.” Since in the free, or unhampered, market every seller will “absolute control…over the price he will attempt to charge for any particular good…the question is whether he can find any buyer at that price. Similarly,…any buyer can set any price at which he will purchase a certain good; the question is whther he can find a seller at that price.”⁴ Naturally, sellers will seek the highest price and consumers will seek the lowest price and whatever price they agree on, absent coercion, is the competitive price. Along the same line, how would one determine if the producer was moving from a “sub competitive price” to the competitive price for their goods as opposed to moving from the competitive price to a monopoly price. The “demand curve is not simply ‘given’ to a producer, but must be estimated and discovered” and any restriction may simply be a correction of past supply to demand errors by the producer.⁵ These flaws lead to the conclusion that there can be no definable monopoly price on the free market since all prices are based on free-exchange between buyer and seller and whatever terms they come to are by definition the competitive price.

The third definition of monopoly is the original definition of government granted, direct or indirect, market power or protected status. Lord Coke, a definitive source of Common Law in 17^th Century England, defined monopoly as “an institution or allowance by the king, by his grant, commission, or otherwise . . . to any person or persons, bodies politic or corporate, for the sole buying, selling, making, working, or using of anything, whereby any person or persons, bodies politic or corporate, are sought to be restrained of any freedom or liberty that they had before, or hindered in their lawful trade.”⁶ The formation of monopolies and the negative consequences of monopoly power is made possible only due to government intervention and it is therefore ironic that one of the few areas where limited government advocates tolerate government intervention is in the regulation of monopolies. Monopolies are created through barriers to entry into their market and government is the creator of these barriers, which include explicit grants of monopoly status, in industries deemed “public utilities” or “natural monopolies”, patents, license requirements, and economies of scale.⁷ Another barrier is the entire system of corporatism, the alliance between big business and government to create regulations and other burdens on new entrants into the market in order to hamper competition.

The most obvious, and accepted as necessary by some, way the government creates monopolies is by granting exclusive franchises to industries deemed “public utilities.” Some common examples have been energy providers (gas and electric), telephone service providers, and cable tv. The rationalization used is that certain industries, due to high fixed costs, economies of scale, and land usage limitations, are better served by having a single provider. The conclusion is that government should choose a single provider and protect them from competition while at the same time heavily regulating the selected monopoly to prevent monopoly pricing and pass the savings of the increased efficiency on to the customer. However, history does not seem to support this theory. Many industries that claim they are “public utilities” were competitive in the past or became competitive after time spent with protected monopoly status and the customer did not see great advantage in the monopoly years, especially when taxes used to subsidize the utilities are taken into account and other government intervention is not present in the competitive years. “In one of the first statistical studies of the effects of rate regulation in the electric utilities industry, published in 1962, George Stigler and Claire Friedland found no significant differences in prices and profits of utilities with and without regulatory commissions from 1917 to 1932.”⁸ Also, substitutes or alternative technology prevents the formation of “natural monopolies” on the free market. For example, when three competing gas companies tried to merge in 1888, an inventor named Thomas Edison “introduced the electric light which threatened the existence of all gas companies” and while all had “heavy fixed costs which led to economies of scale…no free-market or ‘natural’ monopoly ever materialized.”⁹ In 1940, economist Horace M. Gray noted that “public utility status was to be the haven of refuge for all aspiring monopolists,” to include, “radio, real estate, milk, air transport, coal, oil, and agricultural industries…who found it too difficult, too costly, or too precarious” otherwise. The label of “public utility” is arbitrary and history has shown that government designated monopolies to do serve the public well and stifle innovation and technological progress as well as violate the rights of entrepreneurs who wish to enter protected industries.

One of the first industries to be deemed a “natural monopoly” or “public utility” was the telecommunications industry, led by AT&T. Initially the monopoly was due to patents that Alexander Graham Bell held from 1876 to 1894. During this time period AT&T held between 85-100 percent of the market power for telephone systems and adoption was slow with average daily calls per 1,000 people increasing from 4.8 in 1880 to only 37 in 1895; the number of telephones per 1,000 people also increased slowly from 1.1 in 1880 to 4.8 in 1895. However, after the patents expired and competition was able to set in daily calls per 1,000 jumped from 37 in 1895 to 391.4 in 1910 and telephones per 1,000 people also increased much more rapidly, going from 4.8 in 1895 to 82 in 1910.¹⁰ The government, however, did not see this competition and rapid expansion of services and options as a good thing, instead they saw it as “duplicative,” “destructive,” and “wasteful” and during a Senate Commerce Committee hearing in 1921 it was stated that “telephoning is a natural monopoly.”¹¹ This was in spite of the apparent boom in competitors and service. AT&T lobbied for this “natural” monopolization and put itself “squarely behind government regulation, as the quid pro quo for avoiding competition.”¹²

From the AT&T case we can see that it was able to form its original monopoly, before the government explicitly granted it monopoly status, through another government barrier to competition, patents. Patents are probably the most common and most accepted, among capitalists, form of government barriers to competition since they supposedly protect the innovations of individuals and allow them to reap the benefits of research, investment and ingenuity without someone else profiting from an idea they did not share the costs in discovering. However, there is strong evidence that patents are unnecessary and in fact stifle innovation instead of promoting it as intended. The telephone industry demonstrated this earlier but another example would be in the field of steam engines and steam power. In 1768, James Watts patented the steam engine and used his political clout to extend the patents until 1800. He aggressively pursued his competitors with patent violations and prevented many innovations from taking place in the area of steam power or improvements in the steam engine. As a result, “during the period of Watt’s patents, the United Kingdom added about 750 horsepower of steam engines per year. In the thirty years following Watt’s patents, additional horsepower was added at a rate of more than 4,000 per year. Moreover, the fuel efficiency of steam engines changed little during the period of Watt’s patent; however between 1810 and 1835 it is estimated to have increased by a factor of five.”¹³ The book, Against Intellectual Monopoly, documents many examples like this in almost all fields. Without patents, the original innovators will still find advantage since people are only likely to imitate successful innovations that would mean the original innovators would have time to establish themselves and gain market power and brand name recognition before competitors really started entering the market.

The requirement of Licenses to conduct a particular type of business or to work in a particular field are another widely accepted form of government intervention that creates a barrier to entry for potential competition. One of the reasons for this is that licenses are not sold to the public as protection for existing businesses from potential competitors or as a restriction on the supply of labor to artificially raise wages above market level for favored professions, but instead is billed as a means to protect the consumer by ensuring quality service. However, just like the other barriers to competition, licenses, when required by law, do more harm to the consumer by reducing available options when there is a strict quota on the number of licenses available or when smaller competitors can not afford licensing fees; monopoly pricing due to cartelization since “the governmental administration of licensing is almost invariably in the hands of members of the trade”¹⁴ who have an obvious interest in limiting entry into their field to individuals who are of similar mind to keep prices higher.

All of the barriers mentioned so far and others have become part of the system of corporatism that is actually the dominant force in US and western markets, not capitalism. The high fixed price that leads to economies of scale and prevents smaller businesses from competing is government. “It is no surprise, then, that throughout U.S. history corporations have been overwhelmingly hostile to the free market. Indeed, most of the existing regulatory apparatus–including those regulations widely misperceived as restraints on corporate power–were vigorously supported, lobbied for, and in some cases even drafted by the corporate elite.”¹⁵ In this essay we have mostly focused on the direct barriers to competition placed by the government but there are also many less obvious ways that government intervention helps favored corporations such as inflationary credit expansion, where the first to receive the new dollars will get to use them before the inflationary effects kick in and corporate law itself that allows the individuals who act, or make decisions, in a business to separate themselves from the liabilities involved with those decisions causing a serious accountability issue in our markets today. A “corporation is an artificial being, invisible, intangible, and existing only in contemplation of the law.”¹⁶ This arbitrary grant of artificial personhood status to businesses is yet another barrier to free competition and a fraud is committed when corporate law is presented as part of capitalism and the free market or as advantageous to consumers.

In conclusion, monopolies, oligopolies, unnaturally high market concentrations all stem from government intervention into the free market placing various barriers to the entry and exit of competing businesses. This is done in the guise of regulating or promoting capitalism but is actually within a system of corporatism, the alliance of big business and big government. Big business works with big government to “socialize costs in exchange for a share of profits.”¹⁷ Big business also likes big government because “it has a competitive advantage over small business in doing business with it and negotiating favors. Big government, in turn, likes big business because it is manageable; it does what it is told.”¹⁸ This alliance has distorted our markets and increased the power of both partners at the expense of competition, consumers, and citizens.

1Jacqueline Brux, Economics Issues and Policy Fourth Edition, (Ohio: Cengage Learning, 2008), 246.

2Murray Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Alabama: Ludwing von Mises Institute, 2004), 653.

3Ludwig von Mises, Human Action: A Treatise on Economics (Alabama: Ludwig von Mises Institute, 2008), 278

4Murray Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Alabama: Ludwing von Mises Institute, 2004), 662.

5Ibid., 690

6 Quoted in Richard T. Ely and others, Outlines of Economics (3rd ed.; New York: Macmillan & Co., 1917), pp. 190–91.

7Jacqueline Brux, Economics Issues and Policy Fourth Edition, (Ohio: Cengage Learning, 2008), 251-253.

8Thomas DiLorenzo, “The Myth of Natural Monopoly”, The Review of Austrian Economics Vol.9, No.2 (1996), 49-50.

9Ibid., 48

10Adam Thierer, “Unnatural Monopoly: Critical Moments in the Development of the Bell System Monopoly”, The Cato Journal Vol. 14 No. 2 (Fall, 1994)

11Ibid.

12Ibid.

13Michele Boldrin, David Levine, Against Intellectual Monopoly (New York: Cambridge University Press, 2008), 1.

14Murray Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Alabama: Ludwing von Mises Institute, 2004), 1095.

15Roderick Long, “Corporations Versus the Market; Or, Whip Conflation Now”, Cato Unbound, 10 November 2008.

16Frank van Dun, “Is the Corporation a Free-Market Institution?,” Ideas on Liberty, March 2003.

17Robert Locke, “What is American Corporatism?,”, Front Page Magazine, 13 September 2002.

18Ibid.

The left supports several types of corporate welfare. The recent “Kelo” case involving eminent domain gave private lands to corporate interests and was decided by liberal judges. Also, many of the regulations that are supposedly done to restrict corporate actions are supported by the corporations themselves because it makes it more difficult for new competitors to enter the market. Roderick T. Long in an essay written for the Cato Institute, “Corporations versus the Market” wrote that , “the ability of colossal firms to exploit economies of scale is also limited in a free market…unless the state enables them to socialize these costs by immunizing them from competition- e.g., by imposing fees, licensure requirements, capitalisation requirements, and other regulatory burdens that disproportionately impact newer, poorer entrants as opposed to richer, more established firms.” (1)

The right also supports several types of corporate welfare, but they may be more dangerous since they shroud their policies in the cloak of the free market. For example, they advocate tax breaks for certain businesses or industries but “when a firm is exempted from taxes to which its competitors are subject, it becomes the beneficiary of state coercion directed against others, and to that extent owes its success to government intervention rather than market forces.” (1) The right’s use of privatization is often of a similar nature. In free market terminology privatization would be the removal of government and its influence from an industry but the right often uses it to mean a transfer of monopoly status over an industry to some contracted firm or corporation. Thus the monopoly status is maintained and the governments involvement and influence is still present.

The right and left both justify the more overt types of corporate welfare that they end up supporting, such as TARP and the bailouts of the auto and financial industry, as necessary evils. However, necessary evil is a contradiction as if something is necessary than it must be good and not evil. Here we can apply one of Ayn Rand’s famous quotes “Contradictions do not exist. Whenever you think you are facing a contradiction, check your premises. You will find that one of them is wrong.” In this case, either the bailouts were necessary and good, having a positive effect, while the principle that labeled them evil must be ill founded or the principle that makes such bailouts evil is correct and they were not in fact necessary. The contradiction should force us to check the two premises “necessary” and “evil” and see which one is wrong.

Libertarians, and the position I support, holds that all corporate welfare is wrong. The current “conflation” of corporatism and capitalism is especially dangerous since it rallies and multiplies the opponents of free markets who somehow see them tied to pro-corporate policies and also allows statist policies to be sold under the mantle of the free market. The current failures of “capitalism” and the “free market” are really only failures of the current system which is often labeled capitalism but is only one step away from socialism. In socialism, the state owns industry but in our current system, often labeled capitalism, the State offers privatized profits and socialized costs in exchange for regulation and willing “subjects” to form an alliance between government and industry; this corporatism should not be confused with real capitalism or free markets.

1. http://www.cato-unbound.org/2008/11/10/roderick-long/corporations-versus-the-market-or-whip-conflation-now/

Another good article I read while doing my research, but did not have room to include in my post was:
http://97.74.65.51/readArticle.aspx?ARTID=22594 An article in FrontPageMag.com

In “Human Action” Ludwig Von Mises explains human nature or human action as being the result of social evolution that began with the very basic need of survival. Modern society is also the result of the evolutionary process beginning with the most primitive forms of the division of labor which even Marx appears to recognize. “In every society…we find a particular mode of cooperation, corresponding to a particular level of echnological development, in which different productive tasks are relegated to different people. The most basic form of the division of labor…is that manifested in the sexual act. It takes two people each performing a unique role to produce a third.  Almost as basic is what Marx calls the “spontaneous” division of labor found in very technologically primitive societies. Here different tasks are assigned on the basis of natural or biological attributes. The stronger will become the hunters, the weaker food gatherers, and so forth.” (Text, 329) However, this seems to imply that society created the division of labor instead of the division creating society. This is why Marx is apt to conclude that society and “for the benefit” of society are and should be the primary motivators of men. The truth, however, is that men formed societies out of self-interest, a motivation evolved from the very basic instinct of survival. If this is in fact true the idea of communism nearly crumbles from this false assumption alone.

Another fatal flaw to communism is Marx’s misconception of economics. Marx posits a theory that “asserts that the market or exchange value of any commodity is the amount of labor embodied in it.” (Text, 335) However, history and modern economics have proved that labor is not necessarily what determines the value of a good or service but rather supply and demand. Demand being the subjective value placed on a good or service by those who would purchase it, the price they are willing to pay, as well as the number who wish to receive said product or service. Supply is simply the availability of the product or service. Supply and demand are what determine price which is what determines the allocation of property, not necessarily the amount of labor. Value has always been subjective to the individual and so is hard to incorporate into a general philosophy. The text also makes the following claim in reference to objections to Marxism or communism: One “objection implicitly assumes a condition of scarcity in which well-being, even survival, depends upon the ceaseless struggle to acquire more. Such a condition will not exist in a communist society.” (Text, 347) The very nature of economics is the assumption of a “condition of scarcity” based on finite resources. If communism somehow provides infinite resources and eliminates the concept of “scarcity” then it may very well work. A third economic problem with Marxism is the doing away with “specializations”, which are generally recognized as drastically increasing the efficiency, in a communist society. “In Marx’s words, communism ‘makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, to fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have a mind, without ever becoming hunter, fisherman, shepherd, or critic.’” (Text, 346) Without experts or specialists progress will be much more difficult to obtain and quality and innovation will almost certainly suffer. More advanced fields that take years of extensive training to master will all but fade away. For this the suggestion appears to keep some specialists but with the following caveat: “The specialist need not acquire more than others simply because he or she performs a highly skilled function.” (Text, 347) However, if a man could receive the same benefits from doing a task that can be learned in a day and requires significantly less effort to perform why would he spend much of his life studying and expend vast amounts of energy to perform a more specialized task. Marx claims the man would because it would benefit society and he would have no desire to receive more for his increased efforts. This, however, defies common sense and the burden of proof that such a consciousness can be achieved is on those who defy common sense with their theories and speculations.

Marx recognized that his ideas were contradictory to common sense or what he called consciousness so he claimed that the current consciousness was based on false perceptions and that his ideas would both require and cause “the transformation of social consciousness.” (Text, 348) While it may true that reality both forms the consciousness and is formed by it or that the actions of man are determined both by nature or the environment as well as man himself; the transformation of social consciousness is not likely to occur abruptly through revolution but gradually through evolution. That is why even if it were some day possible for leadership to lead solely “at the behest of the whole community” and that their “relations with others will be cooperative rather than conflictual” it is not according to the current consciousness and that will not change through any sort of revolution.

The evidence that Marx’s philosophy is incompatible with today’s social consciousness is through his own standard of praxis or practical application of his theories. Those who have claimed to be Marxists have failed to achieve anything remotely similar to that posited by Marx and “the failure of the proletariat…may be interpreted as a failure of Marx’s theoretical analysis of capitalism and, by extension, of the whole philosophy of historical materialism upon which it rests.” (Text, 351) Some may claim it is because the principles were never properly applied but the reason they were never properly applied is because they are incompatible with the nature of man in his current state of evolution. I can not say whether or not the nature of man will ever be compatible with communism or if it will ever be a viable philosophy. However, if it is in our future of social evolution it is more likely to occur as the Marxists who hold the classical view of Marxism insist…after capitalism has “become a worldwide phenomenon.” (Text, 354) Even then it will happen gradually and not through revolution.

Note: This essay was written for a college class. The source “Text” used in the citations refers to:
Nelson, Brian R. Wester Political Though: From Socrates to the Age of Ideology. 2nd Edition
Prentice Hall. New Jersey: 1996.