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, however, these private companies are not states. For anarchists, they most definitely are.

6 Is "anarcho"-capitalism against the state?

According to Murray Rothbard ["Society Without A State", in Nomos XIX, Pennock and Chapman, eds., 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 in The Ethics of Liberty [p. 171].

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 the 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" ["Society Without A State", 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, as noted in section 1.4, opposed the individualist anarchist principle that juries would judge both the facts and the law, suggesting instead that "Libertarian lawyers and jurists" would determine a "rational and objective code of libertarian legal principles and procedures." 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." ["Society without a State", 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.

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." [Rothbard, Op. Cit., p.199] Judges "will prosper on the market in proportion to their reputation for efficiency and impartiality." [Op. Cit., p. 204]

Therefore, like any other company, arbitrators would strive for profits and wealth, with the most successful ones becoming "prosperous." Of course, such wealth would have no impact on the decisions of the judges, and if it did, the population (in theory) are free to select any other judge (although, of course, they would also "strive 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, quoted above.

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 "association"). If, as Ayn Rand noted (using a Weberian definition of the state) a government is an institution "that holds the exclusive power to enforce certain rules of conduct in a given geographical area" [Capitalism: The Unknown Ideal, p. 239] then these "defence companies" are the means by which the property owner (who exercises a monopoly to determine the rules governing their property) enforce their rules.

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.

Before discussing these points further, it is necessary to point out a relatively common fallacy of "anarcho"-capitalists. This is the idea that "defence" under the system they advocate means defending people, not territorial areas. This, for some, means that defence companies are not "states." However, as people and their property and possessions do not exist merely in thought but on the Earth, it is obvious that these companies will be administering "justice" over a given area of the planet. It is also obvious, therefore, that these "defence associations" will operate over a (property-owner defined) area of land and enforce the property-owner’s laws, rules and regulations. The deeply anti-libertarian, indeed fascistic, aspects of this "arrangement" will be examined in the following sections.

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 argues 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" [Rothbard, Op. Cit., 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.

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. 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 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. A similar tendency towards the standardisation of output in an industry in response to influences of wealth can be seen from the current media system (see section D.3 — How does wealth influence the mass media?)

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.

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," as 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. In other words, in a conflict between a small firm and a larger one, the smaller one is at a disadvantage in terms of resources. 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 companies. 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. In real life, this would clearly not the case.

Fourthly, it is very likely that many companies would make subscription to a specific "defence" firm or court a requirement of employment. 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 point to current day 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 created and enforced by the state in direct opposition to capitalist "freedom of contract." Before the law was changed, unions were often crushed by force — the companies were better armed, had more resources and had the law on their side. Today, with the "downsizing" of companies we can see what happens to "peaceful negotiation" and "co-operation" between unions and companies when it is no longer required (i.e. 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 the "basic law code" itself. How the laws in the "general libertarian law code" would actually be selected is anyone’s guess, although many "anarcho"-capitalists support the myth of "natural law," and this would suggest an unchangeable law code selected by those considered as "the voice of nature" (see section 11. for a discussion of its authoritarian implications). David Friedman 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 indicate such a process).

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.

Thus a system of "defence" on the 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

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 Weick 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", Op. Cit., pp. 223-224]

For a description of the weaponry and activities of these private armies, the economic historian Maurice Dobbs presents an excellent summary in Studies in Capitalist Development [pp. 353-357]. According to a report on "Private Police Systems" cited by Dobbs, 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 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 their civil rights; 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 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 "general libertarian law code" and be costly for profit making firms to do (if not dangerous as they could be "outlawed" by the rest). Thus "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.

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 Weick.

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 — a result with which Rothbard would have no problem. 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. . . 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 a monopoly and so our analysis is flawed. In "anarcho"-capitalism there is no monopoly. But 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 be no 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 decision are valid.

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.’" [Weick, 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.

And, needless to say, it is very likely that the private police forces will give preferential treatment to their wealthier customers (what 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.

In other words, a system of competing law codes and privatised rights does not ensure that all consumers interests are meet. Given unequal resources within society, it is also 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 argue in sections 3.1 and 10.2, 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 other 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).

Weick sums up by saying "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" [Weick, Op. Cit., p. 225] (For a discussion of this problem as it would surface in attempts to protect the environment under "anarcho"-capitalism, see sections E.2 and E.3).

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 Tyler Cowen’s "Law as a Public Good: The Economics of Anarchy" in Economics and Philosophy, no. 8 (1992), pp. 249-267 and "Rejoinder to David Friedman on the Economics of Anarchy" in 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. Collusion and cartels is where companies in a specific market agree to work together to restrict competition and reap the benefits of monopoly power by working to achieve the same ends in partnership with each other. In other words this means that collusion is built into the system, with the necessary contractual relations between agencies in the "protection" market requiring that firms co-operate and, by so doing, to behave (effectively) as one large firm (and so, effectively, resemble the 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]

For example, when buying food it does not matter whether the supermarkets I visit have good relations with each other. The goods I buy 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 my self-interest to subscribe to it. Why join 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 I have to pay. 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.

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 so 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 but 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 (perhaps they will be fired if they change, perhaps they dislike change and think the extra money is worth peace, perhaps they fear that by joining the new company their peace will be disrupted or the outcomes of their problems with others too unsure to be worth it, perhaps they are shareholders and want to maintain their income) 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, see section C.4) 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.

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.

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 New York and commit crimes in Portland. 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.

A 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").

Some "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. However, 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.

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 monopoly.

In other words, 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. In other words, fascism.

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" as most definitely states.

What is interesting, however, is that by their own definitions a very good case can be made that these "defence associations" as states in the "anarcho"-capitalist sense too. Capitalist apologists usually define a "government" (or state) as those who have 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 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. Thus 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 sections 2.4 and 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 (see section 2.3 for more on this). 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-libertarianism has 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" [Rothbard, The Ethics of Liberty, p. 170] then its pretty clear that the property owner shares this power. 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. Of course Rothbard fails to note that bosses have this monopoly of power and is instead referring to "prohibiting the voluntary purchase and sale of defence and judicial services." [Op. Cit., 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 — see section 10.2 on why this is the case). 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 to 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. As, as we note, a reasonable case can be made for it also being a state in "anarcho"-capitalist theory as well.

So, in effect, "anarcho"-capitalism has a different sort of state, one in which bosses hire and fire the policeman. As Peter Sabatini notes [in Libertarianism: Bogus Anarchy], "[w]ithin 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."

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. As Bob Black writes in The Libertarian as Conservative, "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."

6.5 What other effects would "free market" justice have?

Such a system would be dangerous simply because of the power it places in the hands of companies. As Michael Taylor notes, "whether the [protection] market is competitive or not, it must be remembered that the product is a peculiar one: when we buy cars or shoes or telephone services we do not give the firm power based on force, but armed protection agencies, like the state, make customers (their own and others’) vulnerable, and having given them power we cannot be sure that they will use it only for our protection." [Community, Anarchy and Liberty, p. 65]

As we argued above, there are many reasons to believe that a "protection" market will place most of society (bar the wealthy elite) in a "vulnerable" position. One such reason is the assumptions of the "anarcho"-capitalists themselves. As they note, capitalism is marked by an extreme division of labour. Instead of everyone having all the skills they need, these skills are distributed throughout society and all (so it is claimed) benefit.

This applies equally to the "defence" market. People subscribe to a "defence firm" because they either cannot or do not want the labour of having to protect their own property and person. The skills of defence, therefore, are concentrated in these companies and so these firms will have an advantage in terms of experience and mental state (they are trained to fight) as well as, as seems likely, weaponry. This means that most normal people will be somewhat at a disadvantage if a cartel of defence firms decides to act coercively. The division of labour society will discourage the spread of skills required for sustained warfare throughout society and so, perhaps, ensure that customers remain "vulnerable." The price of liberty may be eternal vigilance, but are most people willing to include eternal preparation of war as well? For modern society, the answer seems to be no, they prefer to let others do that (namely the state and its armed forces). And, we should note, an armed society may be a polite one, but its politeness comes from fear, not mutual respect and so totally phoney and soul destroying.

If we look at inequality within society, this may produce a ghettoisation effect within "anarcho"-capitalism. As David Friedman notes, conflict between defence firms is bad for business. Conflict costs money both in terms of weaponry used and increased ("danger money") wages. For this reason he thinks that peaceful co-operation will exist between firms. However, if we look at poor areas with high crime rates then its clear that such an area will be a dangerous place. In other words, it is very likely to be high in conflict. But conflict increases costs, and so prices. Does this mean that those areas which need police most will also have the highest prices for law enforcement? That is the case with insurance now, so perhaps we will see whole areas turning into Hobbesian anarchy simply because the high costs associated with dangerous areas will make the effective demand for their services approach zero.

In a system based on "private statism," police and justice would be determined by "free market" forces. As indicated in section B.4.1, right-libertarians maintain that one would have few rights on other peoples’ property, and so the owner’s will would be the law (possibly restricted somewhat by a "general libertarian law code", perhaps not — see last section). In this situation, those who could not afford police protection would become victims of roving bandits and rampant crime, resulting in a society where the wealthy are securely protected in their bastions by their own armed forces, with a bunch of poor crowded around them for protection. This would be very similar to feudal Europe.

The competing police forces would also be attempting to execute the laws of their sponsors in areas that may not be theirs to begin with, which would lead to conflicts unless everyone agreed to follow a "general libertarian law code" (as Rothbard, for one, wants). If there were competing law codes, the problem of whose "laws" to select and enforce would arise, with each of the wealthy security sponsors desiring that their law control all of the land. And, as noted earlier, if there were one "libertarian law code," this would be a "monopoly of government" over a given area, and therefore statist.

In addition, it should be noted that the right-libertarian claim that under their system anarchistic associations would be allowed as long as they are formed voluntarily just reflects their usual vacuous concept of freedom. This is because such associations would exist within and be subject to the "general libertarian law code" of "anarcho"-capitalist society. These laws would reflect and protect the interests and power of those with capitalist property, meaning that unless these owners agree, trying to live an anarchist life would be nearly impossible (its all fine and well to say that those with property can do what they like, if you do not have property then experimentation could prove difficult — not to mention, of course, few areas are completely self-sufficient meaning that anarchistic associations will be subject to market forces, market forces which stress and reward the opposite of the values these communes were set up to create). Thus we must buy the right to be free!

If, as anarchists desire, most people refuse to recognise or defend the rights of private property and freely associate accordingly to organise their own lives and ignore their bosses, this would still be classed as "initiation of force" under "anarcho"-capitalism, and thus repressed. In other words, like any authoritarian system, the "rules" within "anarcho"-capitalism do not evolve with society and its changing concepts (this can be seen from the popularity of "natural law" with right-libertarians, the authoritarian nature of which is discussed in section 11).

Therefore, in "anarcho"-capitalism you are free to follow the (capitalist) laws and to act within the limits of these laws. It is only within this context that you can experiment (if you can afford to). If you act outside these laws, then you will be subject to coercion. The amount of coercion required to prevent such actions depends on how willing people are to respect the laws. Hence it is not the case that an "anarcho"-capitalist society is particularly conducive to social experimentation and free evolution, as its advocates like to claim. Indeed, the opposite may be the case, as any capitalist system will have vast differences of wealth and power within it, thus ensuring that the ability to experiment is limited to those who can afford it. As Jonathan Wolff points out, the "image of people freely moving from one utopia to another until they find their heaven, ignores the thought that certain choices may be irreversible. . . This thought may lead to speculation about whether a law of evolution would apply to the plural utopias. Perhaps, in the long run, we may find the framework regulated by the law of survival of the economically most fit, and so we would expect to see a development not of diversity but of homogeneity. Those communities with great market power would eventually soak up all but the most resistant of those communities around them." [Robert Nozick: Property, Justice and the Minimal State, p. 135]

And if the initial distribution of resources is similar to that already existing then the "economically most fit" will be capitalistic (as argued in section J.5.12, the capitalist market actively selects against co-operatives even though they are more productive). Given the head start provided by statism, it seems likely that explicitly capitalist utopia’s would remain the dominant type (particularly as the rights framework is such as to protect capitalist property rights). Moreover, we doubt that most "anarcho"-capitalists would embrace the ideology if it was more than likely that non-capitalist utopias would overcome the capitalist ones (after all, they are self-proclaimed capitalists).

So, given that "anarcho"-capitalists who follow Murray Rothbard’s ideas and minimal-statist right-libertarians agree that all must follow the basic "general libertarian law code" which defends capitalist property rights, we can safely say that the economically "most fit" would be capitalist ones. Hardly surprising if the law code reflects capitalist ideas of right and wrong. In addition, as George Reitzer has argued (see The McDonaldization of Society), capitalism is driven towards standardisation and conformity by its own logic. This suggests that plurality of communities would soon be replaced by a series of "communities" which share the same features of hierarchy and ruling elites. ("Anarcho"-capitalists who follow David Friedman’s ideas consider it possible, perhaps likely, that a free market in laws will result in one standard law code and so this also applies to that school as well)

So, in the end, the "anarcho" capitalists argue that in their system you are free to follow the (capitalist) law and work in the (capitalist) economy, and if you are lucky, take part in a "commune" as a collective capitalist. How very generous of them! Of course, any attempt to change said rules or economy are illegal and would be stopped by private states.

As well as indicating the falsity of "anarcho"-capitalist claims to support "experimentation," this discussion has also indicated that coercion would not be absent from "anarcho"-capitalism. This would be the case only if everyone voluntarily respected private property rights and abided by the law (i.e. acted in a capitalist-approved way). As long as you follow the law, you will be fine — which is exactly the same as under public statism. Moreover, if the citizens of a society do not want a capitalist order, it may require a lot of coercion to impose it. This can be seen from the experiences of the Italian factory occupations in 1920 (see section A.5.5), in which workers refused to accept capitalist property or authority as valid and ignored it. In response to this change of thought within a large part of society, the capitalists backed fascism in order to stop the evolutionary process within society.

The socialist economic historian Maurice Dobbs, after reviewing the private armies in 1920s and 1930s America made much the same point:

"When business policy takes the step of financing and arming a mass political movement to capture the machinery of government, to outlaw opposing forms of organisation and suppress hostile opinions we have merely a further and more logical stage beyond [private armies]" [Op, Cit., p. 357]

(Noted Austrian Economist Ludwig von Mises whose extreme free market liberal political and economic ideas inspired right-libertarianism in many ways had this to say about fascism: "It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilisation. The merit that Fascism has thereby won for itself will live eternally in history." [Liberalism, p. 51])

This example illustrates the fact that capitalism per se is essentially authoritarian, because it is necessarily based on coercion and hierarchy, which explains why capitalists have resorted to the most extreme forms of authoritarianism — including totalitarian dictatorship — during crises that threatened the fundamental rules of the system itself. There is no reason to think that "anarcho"-capitalism would be any different.

Since "anarcho"-capitalism, with its private states, does not actually want to get rid of hierarchical forms of authority, the need for one government to unify the enforcement activities of the various defence companies becomes apparent. In the end, that is what "anarcho"-capitalism recognises with its "general libertarian law code" (based either on market forces or "natural law"). Thus it appears that one government/hierarchy over a given territory is inevitable under any form of capitalism. That being the case, it is obvious that a democratic form of statism, with its checks and balances, is preferable to a dictatorship that imposes "absolute" property rights and so "absolute" power.

Of course, we do have another option than either private or public statism. This is anarchism, the end of hierarchical authority and its replacement by the "natural" authority of communal and workplace self-management.