Capitalism is hierarchy: the market is freedom.

This article should be mandatory reading to all capitalists or “vulgar libertarians”: Hierarchy or the Market. Some extracts:

Necessarily, therefore, the absentee owners must resort to the expedients of hierarchy and top-down authority to elicit effort from a workforce with no rational interest in maximizing its own productivity. Oliver Williamson’s concept of “satisficing” is relevant here. Workers have an interest in maintaining just enough productivity to keep their jobs and increasing it enough to earn whatever limited administrative rewards are available, but no rational interest in maximizing it per se, because any additional increase in produc-tivity beyond the minimum will likely be appropriated by management.

Hierarchy necessarily results in the divorce of effort from reward, and of productive knowledge from authority. Each rung of authority interferes in the efforts of those who know more about what they’re doing; each rung of authority receives only information filtered from below based on what it wants to hear; and each rung of authority is accountable only to those higher up the chain of command who are even more unaccountable and out of touch with reality. The hierarchy, in short, is a textbook illustration of the zero-sum situation that results from substituting power for market relations.

The obvious solution, the worker cooperative, would—by uniting know-ledge with authority and reward with effort—slice through the overwhelming majority of the hierarchical corporation’s knowledge and agency problems, like a sword through the Gordian knot. The distributed knowledge of those engaged in production would be applied directly to the production process on their own authority, without the intervention of suggestion boxes and “quality improvement committees.” The problem of socially engineering the wages and benefits system so as to “encourage people to work” would disappear; the elimination of privilege and unearned income, and the receipt by labor of its full product, would tie reward directly to effort.

But this solution is ruled out by the system’s structural starting assumptions: concentrated wealth and absentee ownership. So the hierarchical corporation is adopted as a sort of Rube Goldberg expedient, the most rational means available given fundamentally irrational presuppositions.

19 thoughts on “Capitalism is hierarchy: the market is freedom.

  1. cork1 June 18, 2008 at 00:01

    Kevin is a good guy with a lot of decent work, but his faith in worker co-ops is just extremely naive. Even Benjamin Tucker didn’t seem to get what was so darn good about them.

    He is looking at the problems with *excessive* “hierarchy” and bigness, and then concluding the solution is to have none at all. It’s like saying “my girlfriend is too fat, so the solution is to make her anorexic.”

  2. cork1 June 18, 2008 at 00:33

    Here are two other fun Rothbard quotes.

    “In free-market capitalism, there have never been
    any restrictions on workers banding together in producers’ coops to own their own capital equipment. And yet, in the free economy, producers’ coops have been notorious by their non-existence, or rapid failure in competition with ‘capitalist’ firms.”

    “We can confidently predict that if Yugoslavia ever allows full-scale capitalist employment (as it does now for small-scale enterprise) that its producers’ coops will rapidly give way to orthodox ‘capitalist’ modes of production – to the benefit of all concerned.”


  3. Francois Tremblay June 18, 2008 at 00:36

    Yes, Rothbard was a capitalist. I know that already.

    These quotes are easy enough to refute once you abandon the concept of statist property rights, and realize that capitalist enterprises are non-legitimate because they are part of the State. Even Rothbard realized that, and he did state that workers should be allowed to retake the means of production that legitimately belong to them.

  4. Francois Tremblay June 18, 2008 at 00:36

    However, I must specify that I also know that Rothbard supported statist property rights for the most part, and that indicts him.

  5. cork1 June 18, 2008 at 00:42

    Rothbard only endorsed the worker takeover stuff when a corporation was getting 50% or more of its revenue from the state. And how is his property rights system statist?

  6. Francois Tremblay June 18, 2008 at 00:53

    “Suppose that Jones uses some new land, then finds it is unprofitable, and lets it fall into disuse. Or suppose that he clears new land and therefore obtains title to it, but then finds that it is no longer useful in production and allows it to remain idle. In a free so­ciety, would he lose title? No, for once his labor is mixed with the natural resource, it remains his owned land. His labor has been irretrievably mixed with the land, and the land is there­fore his or his assigns’ in perpetuity.” -Rothbard from Man, Economy, & State.

  7. cork1 June 18, 2008 at 00:58

    So what?

  8. cork1 June 18, 2008 at 00:59

    You haven’t gone luddite/greenie, have you Tremblay?

    (I keed, I keed ;)

  9. Francois Tremblay June 18, 2008 at 01:07

    So what what? You asked a question, I answered.

  10. cork1 June 18, 2008 at 01:12

    Which part of the quote implies statism? The part that allows for any form of modern industry to take place? The part that would allow for any form of civilization? What?

  11. Francois Tremblay June 18, 2008 at 01:17

    Wow, since when are statist property rights necessary for civilization? I guess all those civlizations without States were all made up huh?

  12. cork1 June 18, 2008 at 01:29

    So in your mind it is “statist” to be allowed to own anything (unless it is being “used”). Your luddite stance on property would effectively wipe out all industry and civilization. You have drinken the leftist kool-aid and now want everyone to live in caves and shit into mudpots. Is that right?

  13. Francois Tremblay June 18, 2008 at 01:47

    You can’t seriously expect me to indulge your strawman nonsense about living in caves, do you? Come on now, you are being vastly unreasonable. Your position is just plain nonsense, unless you define civilization in a statist sense.

  14. David Z June 21, 2008 at 11:41

    Cork, I might understand “the land is there­fore his or his assigns’ in perpetuity” to be Statist. Free men in free society recognize the principle of abandonment. After all, forever is a long time.

  15. cork1 June 21, 2008 at 18:41

    I agree that land can eventually come to be considered abandoned (as did Rothbard), but not the second after someone stops “occupying and using” it. Francois’ position is just a joke. We could not have any roads, hotels, parking lots, business chains etc at all if we chose to give up our freedom and standard of living to obey his retarded property system.

  16. David Z June 22, 2008 at 00:54

    I’ve not known Franc to espouse that sort of nihilistic belief, after all, I’m perfectly certain that he would agree: You own your car, even while you’re not driving it.

  17. Francois Tremblay June 22, 2008 at 01:00

    I think that’s a semantic trap. It all depends where it is and how long you haven’t been driving it.

    In your garage or on your street (and yes I mean “your” as in possessive).
    In some random field, hasn’t been driven for years, starting to fall apart.

  18. cork1 June 22, 2008 at 01:06

    It’s hard to know exactly what Francois’ position is, because he’s clearly more interested on being contrarian than in making any kind of argument for it. However, I assume he believes in the ridiculous “occupancy and use” system of the mutualists, which would mean suicide for all of civilization. It’s a system that even the Unabomber would dismiss as nuts.

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