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Anarcho-capitalism is a philosophy based on the idea of individual sovereignty, and a prohibition against initiatory coercion and fraud. It sees the only just basis for law as arising from private property norms and an unlimited right of contract between sovereign individuals. From this basis, anarcho-capitalism rejects the state as an unjustified monopolist and systematic aggressor against sovereign individuals, and embraces anti-statistlaissez-fairecapitalism. Anarcho-capitalists would aim to protect individual liberty and property by replacing a government monopoly, which is involuntarily funded through taxation, with private, competing businesses that use physical force only in defense of liberty and property against aggressors. Hence, they believe that all goods and services, including law, order, and security, should be supplied through the mechanism of a free market.
Because of this embrace of capitalism, there is considerable tension between anarcho-capitalists and anarchists who see the rejection of capitalism as being just as essential to anarchist philosophy as rejection of the state. Despite this tension, many anarcho-capitalists have identified their philosophy as evolving from the tradition of American individualist anarchists such as Benjamin Tucker and Lysander Spooner.
Anarcho-capitalism can be considered a radical development of classical liberalism. Its grounding in liberalism stems from Gustave de Molinari. Many proponents of anarcho-capitalism, including Rothbard, argue that Molinari was the first anarcho-capitalist. However, Rothbard admitted that "Molinari did not use the terminology, and probably would have balked at the name" anarcho-capitalist. Nonetheless, Molinari did argue for a free market, privatization of security, and did not oppose profit. His thoughts were influential on Rothbard and his contemporaries.
Philosophy
The nonaggression axiom
The term anarcho-capitalism was most likely coined in the mid-1950s by the economist Murray Rothbard. Other terms sometimes used for this philosophy include:
A postage stamp celebrating the thousandth anniversary of the Icelandic parliament. According to a theory associated with the economist David Friedman, medieval Icelandic society was anarcho-capitalist. Chieftancies could be bought and sold, and were not geographical monopolies; individuals could voluntarily choose membership in any chieftan's clan.
Main article: non-aggression axiom
Anarcho-capitalism, as formulated by Rothbard and others, holds strongly to the central libertariannonaggression axiom:
The basic axiom of libertarian political theory holds that every man is a selfowner, having absolute jurisdiction over his own body. In effect, this means that no one else may justly invade, or aggress against, another's person. It follows then that each person justly owns whatever previously unowned resources he appropriates or "mixes his labor with." From these twin axioms — self-ownership and "homesteading" — stem the justification for the entire system of property rights titles in a free-market society. This system establishes the right of every man to his own person, the right of donation, of bequest (and, concomitantly, the right to receive the bequest or inheritance), and the right of contractual exchange of property titles.
In general, the nonaggression axiom can be said to be a prohibition against the initiation of force, or the threat of force, against persons (i.e., direct violence, assault, murder) or property (i.e., fraud, burglary, theft, taxation). The initiation of force is usually referred to as aggression or coercion. The difference between anarcho-capitalists and other libertarians is largely one of the degree to which they take this axiom. Minarchist libertarians, such as most people involved in Libertarian political parties, would retain the state in some smaller and less invasive form, retaining public police, courts and military. In contrast, anarcho-capitalists reject any level of state intervention, defining the state as a coercive monopoly and, as the only entity in human society that derives its income from legal aggression, an entity that inherently violates the central axiom of libertarianism. Some, such as Rothbard, accept the nonaggression axiom on an intrinsic moral or natural law basis. Others, such as Friedman, take a consequentialist or egoist approach; rather than maintaining that aggression is intrinsically immoral, they maintain that a law against aggression can only come about by contract between self-interested parties who agree to refrain from initiating coercion against each other. It is in terms of the non-aggression principle that Rothbard defined anarchism; he defined "anarchism as a system which provides no legal sanction for such aggression " and said that "what anarchism proposes to do, then, is to abolish the State, i.e. to abolish the regularized institution of aggressive coercion." In an interview with New Banner, Rothbard said that "capitalism is the fullest expression of anarchism, and anarchism is the fullest expression of capitalism."
Everyone is the proper owner of his own physical body as well as of all places and nature-given goods that he occupies and puts to use by means of his body, provided only that no one else has already occupied or used the same places and goods before him. This ownership of "originally appropriated" places and goods by a person implies his right to use and transform these places and goods in any way he sees fit, provided only that he does not change thereby uninvitedly the physical integrity of places and goods originally appropriated by another person. In particular, once a place or good has been first appropriated by, in John Locke's phrase, 'mixing one's labor' with it, ownership in such places and goods can be acquired only by means of a voluntary — contractual — transfer of its property title from a previous to a later owner.
Anarcho-capitalism uses the following terms in ways that may differ from common usage or various anarchist movements::
Anarchism: any philosophy that opposes all forms of initiatory coercion (includes opposition to the State)
Contract: a voluntary binding agreement between persons
Coercion: physical force or threat of such against persons or property
Capitalism: economic system where the means of production are privately owned, and where investments, production, distribution, income, and prices are determined through the operation of a free market rather than by government
Free market: a market where all decisions regarding transfer of money, goods (including capital goods), and services are voluntary
Fraud: inducing one to part with something of value through the use of dishonesty
State: an organization that taxes and engages in regularized and institutionalized aggressive coercion
Voluntary: any action not influenced by coercion or fraud perpetrated by any human agency
This is the root of anarcho-capitalist property rights, and where they differ from collectivist forms of anarchism. Original appropriation allows an individual to claim any "unused" property, including land, and by improving or otherwise using it, own it with the same absolute right as his own body. According to Rothbard, original appropriation of land is not legitimate by merely claiming it or building a fence around it; it is only by using land — by mixing one's labor with it — that original appropriation is legitimized: "Any attempt to claim a new resource that someone does not use would have to be considered invasive of the property right of whoever the first user will turn out to be." As a practical matter, in terms of the ownership of land, anarcho-capitalists recognize that there are few (if any) parcels of land left on Earth whose ownership was not at some point in time transferred as the result of coercion, usually through seizure by some form of state. However, unless records and titles exist to confirm the theft and the rightful individual owner most do not believe that this history de-legitimizes current ownerships which are based on consensual transactions. They believe it is wrong to attempt to remedy past coercion by the use of present coercion (i.e., seizure or eviction).
By accepting an axiomatic definition of private property and property rights, anarcho-capitalists deny the legitimacy of a state on principle:
"For, apart from ruling out as unjustified all activities such as murder, homicide, rape, trespass, robbery, burglary, theft, and fraud, the ethics of private property is also incompatible with the existence of a state defined as an agency that possesses a compulsory territorial monopoly of ultimate decision-making (jurisdiction) and/or the right to tax."
The contractual society
The society envisioned by anarcho-capitalists has been called the Contractual Society; " a society based purely on voluntary action, entirely unhampered by violence or threats of violence." Because this system relies on voluntary agreements (contracts) between individuals as the only legal framework, it is difficult to predict precisely what the particulars of this society would look like. Those particulars are disputed both among anarcho-capitalists and between them and their critics.
One particular ramification is that transfer of property and services must be voluntary on the part of both parties. No external entities can force an individual to accept or deny a particular transaction. An employer might offer insurance and death benefits to same-sex couples; another might refuse to recognize any union outside his or her own faith. Individuals would be free to enter into contractual agreements as they saw fit, allowing discrimination or favoritism based on language, race, gender, sexual orientation, or any other categorization. Anarcho-capitalists maintain that the social structure would be self-regulating, since any disenfranchised group can avail themselves of boycott or protest, and other entrepreneurs will see their own interests (i.e., profit) in servicing the group.
Another important ramification is the fact that any social structure is permissible under anarcho-capitalism as long as it is formed by a contract between individuals. Therefore, radically different "governments" and subeconomies can form, creating a panarchic society. Individuals could live in a privately owned democracy, a republic, or even a monarchy if they so choose.
One social structure that is not permissible under anarcho-capitalism is one that attempts to claim greater sovereignty than the individuals that form it. The state is a prime example, but another is the modern corporation — defined as a legal entity that exists under a different legal code than individuals as a means to shelter the individuals who own and run the corporation from possible legal consequences of acts by the corporation. It is worth noting that Rothbard allows a narrower definition of a corporation: "Corporations are not at all monopolistic privileges; they are free associations of individuals pooling their capital. On the purely free market, such men would simply announce to their creditors that their liability is limited to the capital specifically invested in the corporation ." However, this is a very narrow definition that only shelters owners from debt by creditors that specifically agree to the arrangement; it also does not shelter other liability, such as from malfeasance or other wrongdoing.
There are limits to the right to contract under some interpretations of anarcho-capitalism. Rothbard himself asserts that the right to contract is based in inalienable human rights, and therefore any contract that implicitly violates those rights can be voided at will, which would, for instance, prevent a person from permanently selling himself into slavery. Other interpretations conclude that banning such contracts would in itself be an unacceptably invasive interference in the right to contract.
Private law and order
Anarcho-capitalists only believe in collective defense of individual liberty (i.e., courts, military or police forces) insofar as such groups are formed and paid for on an explicitly voluntary basis. According to Molinari, "Under a regime of liberty, the natural organization of the security industry would not be different from that of other industries." Proponents point out that private systems of justice and defense already exist, naturally forming where the market is allowed to compensate for the failure of the state: private arbitration, security guards, neighborhood watch groups, and so on. These private courts and police are sometimes referred to generically as Private Defense Agencies (PDAs.)
The defense of those unable to pay for such protection might be financed by charitable organizations relying on voluntary donation rather than by state institutions relying on coercive taxation, or by cooperative self-help by groups of individuals.
Retributive justice, meaning retaliatory force, is often a component of the contracts imagined for an anarcho-capitalist society. Some believe prisons or indentured servitude would be justifiable institutions to deal with those who violate anarcho-capitalist property relations, while others believe exile or forced restitution are sufficient.
The use of force
File:Bunkertrumbull.jpgMany anarcho-capitalists admire the American Revolution and believe it is the only U.S. war that can be justified.
The axiom of nonaggression is not necessarily a pacifist doctrine; it is a prohibition against the initiation of (interpersonal) force. Like classical liberalism, anarcho-capitalism permits the use of force, as long as it is in the defense of persons or property.
However, the permissible extent of this defensive use of force is an arguable point among anarcho-capitalists. Some argue that the initiator of any aggressive act should be subject to a retributive counterattack beyond what is solely necessary to repel the aggression. The counterargument is that such a counterattack is only legitimate insofar as it was defined in an agreement between the parties.
Another controversial application of defensive aggression is the act of revolutionary violence against tyrannical regimes. Many anarcho-capitalists admire the American Revolution as the legitimate act of individuals working together to fight against tyrannical restrictions of their liberties. In fact, according to Murray Rothbard, the American Revolutionary War was the only war involving the United States that could be justified. But, illustrating their general ambivalence toward war, these same people also sharply criticize the revolutionaries for the means used — taxes, conscription, inflationary money — and the inadequacy of the result: a state.
While some anarcho-capitalists believe forceful resistance and revolutionary violence against the state is legitimate, most believe the use of force is a dangerous tool at best, and that violent insurrection should be a last resort.
Conflicts within anarcho-capitalist theory
There is dispute on whether anarcho-capitalism is properly justifiable on deontological or consequentialist grounds. Natural-law anarcho-capitalism (such as that advocated by Rothbard) holds that rights can be determined through natural law and that consequences are not relevant to their determination. Consequentialists such as Friedman disagree, maintaining that rights are merely human constructs that rational humans create through contract as a result of concluding what sort of system leads to the best consequences. Many anarcho-capitalists also hold a subjective theory of rights, maintaining that the lack of a positive right to aggress is sufficient to hold up the derivative claims of the nonaggression principle.
Friedman describes an economic approach to anarcho-capitalism. His description differs with Rothbard's because it does not use moral arguments — i.e., it does not appeal to a theory of natural rights to justify itself. In Friedman's work, the economic argument is sufficient to derive the principles of anarcho-capitalism. Private defense or protection agencies and courts not only defend legal rights but supply the actual content of these rights and all claims on the free market. People will have the law system they pay for, and because of economic efficiency considerations resulting from individuals' utility functions, such law will tend to be libertarian in nature but will differ from place to place and from agency to agency depending on the tastes of the people who buy the law. Also unlike other anarcho-capitalists, most notably Rothbard, Friedman has never tried to deny the theoretical cogency of the neoclassical literature on "market failure," nor has he been inclined to attack economic efficiency as a normative benchmark.
Whether anarcho-capitalism is a true form of anarchism may depend on the meaning of the words "anarchism" and "capitalism". Many anarchists strongly argue that anarcho-capitalism is not a form of anarchism, since they believe capitalism (not anarcho-capitalism) to be inherently authoritarian. Joe Peacott has said that individualist anarchism is anti-capitalist, and contrasts it to anarcho-capitalism. Nevertheless, he does not deny that anarcho-capitalists are anarchists and refers to them as "capitalist anarchists" and "individualists.". Individualist anarchist Daniel Burton says that anarcho-capitalism is a "type of individualist anarchism", but that most individualists are class-war anti-capitalists. However, many individualists do not see their philosophy as a "class war" but a war against government repression of individual liberty. Murray Rothbard argues that an "anarchist society one where there is no legal possibility for coercive aggression against the person or property of any individual." Adherents of the traditional schools of anarchism reject the term "anarcho-capitalism". Likewise, many academics put anarcho-capitalism closer to libertarianism rather than to other forms of anarchism. However, some, such as social sciences scholar Richard Sylvan, notes anarcho-capitalism as one of "several recognized varieties of anarchism."
There is some terminological disagreement regarding "capitalism". According to Wendy McElroy, when traditional individualist anarchists referred to "capitalism" they "meant state capitalism, the alliance of government and business." However, modern individualist anarchists like Gambone believe that capitalism, as they define it, requires the presence of the state in order to function.
Hence, anarcho-capitalists depart from individualist anarchists on what constitutes concepts such as the "state", "capitalism", and a "free market". Jamal Hannah says that most anarchists and capitalists agree with the individualists in believing that capitalist economics require a state to defend private wealth. Despite disagreeing on whether or not anti-state capitalism is a coherent concept, most anarchists oppose a state and support private defence of wealth.
Morever, the common definition of capitalism has changed over time. Anarchist movements of early origin operated with a definition unlike contemporary definitions. For example, the 1909 Century Dictionary defined capitalism as "1. The state of having capital or property; possession of capital. 2. The concentration or massing of capital in the hands of a few; also, the power or influence of large or combined capital." In contrast, the contemporary Merriam-Webster Dictionary (unabridged) refers to capitalism as "an economic system characterized by private or corporation ownership of capital goods, by investments that are determined by private decision rather than by state control, and by prices, production, and the distribution of goods that are determined mainly in a free market."
According to The Anarchist International, capitalism is an economic plutocracy that includes its own hierarchy. They place anarcho-capitalism outside of the anarchist movement, and into the classical liberal tradition "Plutarchy without statism = liberalism." Some, while accepting that anarcho-capitalism is a radical form of liberalism, question the coherence of such a statement, holding that if socialism and communism can have anarchist forms, then liberalism can as well. Often, anarchist individualism is regarded as a form of socialism (for example, by individualist anarchists such as E. Armand). However, American individualist anarchism is sometimes regarded as a form of "liberal-anarchism." Also, as anarchists by definition favor voluntary interaction, anarcho-capitalists and their opponents disagree on whether certain actions are voluntary (see sidebar for definitions).
Some anarchists espouse a form of labor theory of value, which they put forth as one reason that profit, rent, and wage labour are exploitive. While classical capitalists such as Adam Smith also accepted the labor theory of value, most modern economists, including anarcho-capitalists, argue that value is subjective and adhere to marginalism.
Anarcho-capitalist philosophy has been influenced by many sources. The primary influence with the longest history is classical liberalism. Classical liberals have had two main themes since John Locke first expounded the philosophy: the liberty of man, and limitations of state power. The liberty of man was expressed in terms of natural rights, while limiting the state was based (for Locke) on a consent theory. While Locke saw the state as evolving from society via a social contract, later, more radical liberals saw a fundamental schism between society, the "natural" voluntary interactions of men, and state, the institution of brute force.
In the 18th century, liberal revolutionaries in Britain and America had opposed statism without grounding it in theory, while some French economists had theorized it without endorsing it. In the 19th century, classical liberals led the attack against statism. One notable was Frederic Bastiat (The Law), who wrote, "The state is the great fiction by which everybody seeks to live at the expense of everybody else." Henry David Thoreau's liberalism might be considered evolutionary anarchism, as he wrote, "I heartily accept the motto, 'That government is best which governs least'; and I should like to see it acted up to more rapidly and systematically. Carried out, it finally amounts to this, which also I believe, 'That government is best which governs not at all'; and when men are prepared for it, that will be the kind of government which they will have."
One of the first liberals to discuss the possibility of privatizing protection of individual liberty and property was France's Jakob Mauvillon in the 18th century. Later, in the 1840s, Julius Faucher and Gustave de Molinari advocated the same. Molinari, in his essay The Production of Security, argued, "No government should have the right to prevent another government from going into competition with it, or to require consumers of security to come exclusively to it for this commodity." Molinari and this new type of anti-state liberal grounded their reasoning on liberal ideals and classical economics. Historian Ralph Raico asserts what that these liberal philosophers "had come up with was a form of individualist anarchism, or, as it would be called today, anarcho-capitalism or market anarchism." Unlike the liberalism of Locke, which saw the state as evolving from society, the anti-state liberals saw a fundamental conflict between the voluntary interactions of people — society — and the institutions of force — the State. This society versus state idea was expressed in various ways: natural society vs. artificial society, liberty vs. authority, society of contract vs. society of authority, and industrial society vs. militant society, just to name a few. The anti-state liberal tradition in Europe and the United States continued after Molinari in the early writings of Herbert Spencer, as well as in thinkers such as Paul Émile de Puydt and Auberon Herbert.
Later, in the early 20th century, the mantle of anti-state liberalism was taken by the "Old Right". These were minarchist, antiwar, anti-imperialist, and (later) anti-New Dealers. Some of the most notable members of the Old Right were Albert Jay Nock, Rose Wilder Lane, Isabel Paterson, Frank Chodorov, Garet Garrett, and H. L. Mencken. In the 1950s, the new "fusion conservatism", also called "cold war conservatism", took hold of the right wing in the U.S., stressing anti-communism. This induced the libertarian Old Right to split off from the right, and seek alliances with the (now left-wing) antiwar movement, and to start specifically libertarian organizations such as the (U.S.) Libertarian Party.
Anarcho-capitalism is influenced by the work of the 19th-century American individualist anarchists. Rothbard sought to meld the 19th-century individualist theory with the principles of Austrian economics: "There is, in the body of thought known as 'Austrian economics', a scientific explanation of the workings of the free market (and of the consequences of government intervention in that market) which individualist anarchists could easily incorporate into their political and social Weltanschauung" (Egalitarianism). The 19th-century individualist anarchists espoused a labor theory of value, while the anarcho-capitalists adhere to a subjective theory, leading to differences over the legitimacy of profit. Anarchist historian Peter Marshall believes that anarcho-capitalists selectively interpret individualist anarchists texts, overlooking egalitarian implications. However, Marshall may have overlooked that the most noted individualist anarchist Benjamin Tucker explicitly supports the right to inequality in wealth and upholds it as the natural result of liberty. Tucker did, although, oppose vast concentrations of wealth which he believed were made possible by government intervention which protected monopoly. He believed the most dangerous intervention was the protection of a "banking monopoly" which concentrated capital in the hands of the privileged elite. Though, he also argued that harmful monopolies that were created by government intervention could be maintained in the absence of government protection because of the accumulation of great wealth (see predatory pricing). Anarcho-capitalists also oppose governmental restrictions on banking. They, like all Austrian economists, believe that monopoly can only come about through government intervention. Most modern individualists, following in the footsteps of historical counterparts, reject capitalism in the sense of government-backed privilege for capital. Individualists anarchists have long argued that monopoly on credit and land interferes with the functioning of a free market economy. Although anarcho-capitalists disagree on the critical topic of profit, both schools of thought agree on other issues. Of particular importance to anarcho-capitalists and the individualists are the ideas of private property, "sovereignty of the individual", a market economy, and the opposition to collectivism. In addition, like the individualists, anarcho-capitalists believe that land may be originally appropriated by, and only by, occupation or use; however, most traditional individualists believe it must continually be in use to retain title. Notable 19th-century American individualist anarchists include Lysander Spooner and Benjamin Tucker.
Lysander Spooner's articles, such as No Treason and the Letter to Thomas Bayard, were widely reprinted in early anarcho-capitalist journals, and his ideas — especially his individualist critique of the state and his defense of the right to ignore or withdraw from it — were often cited by anarcho-capitalists. Spooner was staunchly opposed to government interference in economic matters, and supported a "right to acquire property as one of the natural, inherent, inalienable rights of men one which government has no power to infringe ". Like all anarchists, he opposed government regulation: "All legislative restraints upon the rate of interest are arbitrary and tyrannical restraints upon a man's natural capacity amid natural right to hire capital, upon which to bestow his labor." He was particularly vocal, however, in opposing any collusion between banks and government, and argued that the monopolistic privileges that the government granted to a few bankers were the source of many social and economic ills.
Benjamin Tucker supported private ownership of the product of labor, which he believed entailed a rejection of both collective and capitalist ownership. He was a staunch advocate of the mutualist form of recompensing labor, which holds to "Cost the limit of price". He also advocated a free market economy, which he believed was prohibited by capitalist monopoly of credit and land backed by the state. He believed that anyone who wishes should be allowed to engage in the banking business and issue their private currency without needing special permission from government, and that unused land should not be restricted to those who wished to use it. He believed that if these and other coercive actions were eliminated that profit in economic transactions would be rendered nearly impossible because of increased availability of capital to all individuals and resulting increased competition in business. Accepting the labor theory of value and the resulting "cost principle" as a premise marks one of mutualism's main conflicts with anarcho-capitalism. Although his self-identification as a socialist and sympathy for the labor movement led to hostility from some early anarcho-capitalists such as Robert LeFevre, others, such as Murray Rothbard, embraced his critique of the state and claimed that he defined his "socialism" not in terms of opposition to a free market or private property, but in opposition to government privileges for business. However, individualists argue that capitalism cannot be maintained in the absence of the state. For example, Kevin Carson argues, "As a mutualist anarchist, I believe that expropriation of surplus value — i.e., capitalism — cannot occur without state coercion to maintain the privilege of usurer, landlord, and capitalist. It was for this reason that the free market mutualist Benjamin Tucker — from whom right-libertarians selectively borrow — regarded himself as a libertarian socialist." Tucker characterized the economic demands of Proudhon and Warren by saying, "though opposed to socializing the ownership of capital, they aimed nevertheless to socialize its effects by making its use beneficial to all instead of a means of impoverishing the many to enrich the few Absolute Free Trade; free trade at home, as well as with foreign countries; the logical carrying out of the Manchester doctrine; laissez-faire the universal rule."
Anarcho-capitalism is sometimes viewed by those sympathetic to it as a form of individualist anarchism, despite the fact that the original individualist anarchists universally rejected capitalism (i.e., they opposed profit, which is seen as a fundamental characteristic of capitalism). Organizations such as mutualist.org remain dedicated to "free market anticapitalism," while individualists like Larry Gambone explicitly state that all capitalism is state capitalism. Nonetheless, anarcho-capitalist Wendy McElroy considers herself to be an individualist, while admitting that the original individualists were universally anticapitalist. In addition, historian Guglielmo Piombini refers anarcho-capitalism as a form of individualist anarchism, though he offers no support for this statement. Collectivist anarchist author Iain McKay and historian Peter Sabatini both argue that anarcho-capitalism is fundamentally opposed to individualist anarchism.
The similarity to anarcho-capitalism in regard to private defense of liberty and property is probably best seen in a quote by 19th-century individualist anarchist Victor Yarros:
Anarchism means no government, but it does not mean no laws and no coercion. This may seem paradoxical, but the paradox vanishes when the Anarchist definition of government is kept in view. Anarchists oppose government, not because they disbelieve in punishment of crime and resistance to aggression, but because they disbelieve in compulsory protection. Protection and taxation without consent is itself invasion; hence Anarchism favors a system of voluntary taxation and protection.
The Austrian School of economics was founded with the publication of Carl Menger's 1871 book Principles of Economics. Members of this school approach economics as an a priori system like logic or mathematics, rather than as an empirical science like geology. It attempts to discover axioms of human action (called "praxeology" in the Austrian tradition) and make deductions therefrom. Some of these praxeological axioms are:
Humans act purposefully.
Humans prefer more of a good to less.
Humans prefer to receive a good sooner rather than later.
These are macro-level generalizations, or heuristics, which are true for the many, but not necessarily true for any particular person.
Even in the early days, Austrian economics was used as a theoretical weapon against socialism and statist socialist policy. Eugen von Böhm-Bawerk, a colleague of Menger, wrote one of the first critiques of socialism ever written in his treatise The Exploitation Theory of Socialism-Communism. Later, Friedrich Hayek wrote The Road to Serfdom, asserting that a command economy destroys the information function of prices, and that authority over the economy leads to totalitarianism. Another very influential Austrian economist was Ludwig von Mises, author of the praxeological work Human Action.
Murray Rothbard, a student of Mises, is the man who attempted to meld Austrian economics with classical liberalism and individualist anarchism, and is credited with coining the term "anarcho-capitalism". He was probably the first to use "libertarian" in its current (U.S.) pro-capitalist sense. He was a trained economist, but also knowledgeable in history and political philosophy. When young, he considered himself part of the Old Right, an anti-statist and anti-interventionist branch of the U.S. Republican party. When interventionist cold warriors of the National Review, such as William Buckley, gained influence in the Republican party in the 1950s, Rothbard quit that group and formed an alliance with left-wingantiwar groups. Later, Rothbard was a founder of the U.S. Libertarian Party. In the late 1950s, Rothbard was briefly involved with Ayn Rand's objectivism group, but later had a falling out. Rothbard's books, such as Man, Economy, and State, Power and Market, The Ethics of Liberty, and For a New Liberty, are considered by some to be classics of natural law libertarian thought.
Anarcho-capitalism is largely theoretical, and even sympathetic critics say that it is unlikely ever to be more than a utopian ideal. Despite this, some anarcho-capitalist philosophers point to actual societies to support their claim that stateless capitalism can function in practice.
Medieval Iceland
According to David Friedman, "Medieval Icelandic institutions have several peculiar and interesting characteristics; they might almost have been invented by a mad economist to test the lengths to which market systems could supplant government in its most fundamental functions." He argues that the Icelandic Commonwealth between 930 and 1262 had some of the features of an anarcho-capitalist society--while there was a single legal system, enforcement of law was entirely private--and so provides some evidence of how such a society would function. "Even where the Icelandic legal system recognized an essentially "public" offense, it dealt with it by giving some individual (in some cases chosen by lot from those affected) the right to pursue the case and collect the resulting fine, thus fitting it into an essentially private system."
However, some disagree with this assessment, arguing that Medieval Iceland was a communal rather than individualist society - eople of a communitarian nature... have reason to be attracted ... The economy barely knew the existence of markets. Social relations preceded economic relations. and that when a free market finally did arise, that it was the cause of the end of the republic - "During the 12th century, wealth and power began to accumulate in the hands of a few chiefs, and by 1220, six prominent families ruled the entire country. It was the internecine power struggle among these families, shrewdly exploited by King Haakon IV of Norway, that finally brought the old republic to an end."
Modern Somalia
A marketplace in Somalia, 1992, one year after the collapse of the government. Somalia is cited by some anarcho-capitalists as an example how stateless capitalism is possible.
More recently, Somalia is cited by some as a real-world example of how a stateless capitalist economy and a legal system can develop organically. Since 1991, Somalia as a whole has had no internationally recognised government. Large areas of the country are ruled by unrecognised mini-states such as Somaliland, Puntland, and Southwestern Somalia. The remaining area, including the capital Mogadishu, is divided up into smaller territories ruled by competing warlords. In many areas there are thus no formal regulations or licensing requirements for businesses, and individuals and businesses pay bribes and protection money to local warlords or gangsters rather than 'taxes' to a constituted state.
One World Bank study reports that "it may be easier than is commonly thought for basic systems of finance and some infrastructure services to function where government is extremely weak or absent." Journalist Kevin Sites, after a recent trip to Somalia, reported: "Somalia, though brutally poor, is a kind of libertarian's dream. Free enterprise flourishes, and vigorous commercial competition is the only form of regulation. Somalia has some of the best telecommunications in Africa, with a handful of companies ready to wire home or office and provide crystal-clear service, including international long distance, for about $10 a month." One of the poorest countries in the world in 1991, Somalia remains a very poor country. However, wealth distribution appears to be more uniform than in other African countries. When extreme poverty (percentage of individuals living on less than PPP$1 a day) was last measured in 1998, it was faring better than wealthier West African and neighboring countries.
In the absence of a state and business regulations the private sector has flourished. One business sector that is said to be doing well is telecommunications. Abdullahi Mohammed Hussein of Telecom Somalia says "The government post and telecoms company used to have a monopoly but after the regime was toppled, we were free to set up our own business" (according to a BBC report). Also, in 1989, before the collapse of the government, the national airline had only one airplane. Now there are approximately 15 airlines, over 60 aircraft, 6 international destinations, and more domestic routes. Electricity is now furnished by entrepreneurs, who have purchased generators and divided cities into manageable sectors (photo). With the collapse of the central government, the educations system is now private and includes universities such as Mogadishu University. A World Bank study reports "modest gains in education." As last measured in 2001, primary school enrollment, which stood at 17%, was nearly at prewar levels, and secondary school enrollment had been increasing since 1998. However, "adult literacy is estimated to have declined from the already low level of 24% in 1989 to 17.1% in 2001" (WB study). A more recent 2003 study reported that the literacy rate had risen to 19% (WB study). A statistic from 2000 indicated that only 21% of the population had access to safe drinking water at that time. The impact of collapse of the government and ensuing civil war on human development in Somalia has been profound, resulting in the collapse of political institutions, the destruction of social and economic infrastructure, and massive internal and external migrations."
An essential element of anarcho-capitalist theory is that private businesses should protect individual liberty and property rather than tax-funded institutions. As such, the Somali situation falls short of being anarcho-capitalism as it is severely lacking in such options. Though some urban areas such as Mogadishu have private police and are relatively safe, crime is rampant in other areas according to some news reports. Businessmen in Mogadishu have organized to fund private police that patrol the city streets for petty crime. There is a rudimentary legal system which has been called "a free market for the supply, adjudication and enforcement of law." It remains to be seen if private solutions develop to the point of providing high-quality security.
While most of what was Somalia is a stateless area, two internationally unrecognized democratic states exist in its north. These are Somaliland and Puntland, which are ruled by governments. These regions lack the armed competition in the more anarchic south, and the destruction this causes . Their people are correspondingly more prosperous on average. This is seen by many as evidence that competition in security should not be allowed.
Anarcho-capitalism is a radical development of liberalism. Therefore, the same general arguments for and against liberalism, laissez-faire capitalism and capitalism apply, excepting those points (such as the justice system) where anarcho-capitalism diverges from the classical liberal tradition.
Practical questions
Critics often assert that anarcho-capitalism will degenerate into plutocracy or feudalism in practice. They argue that it is a rational economic decision for organizations with the ability to exert coercion (private police, security and military forces) to exploit groups with less power. In this kind of environment, piracy, military imperialism, and slavery can be very profitable. Taken to its logical extreme, this argument assumes that allowing such "security" organizations to exert coercive power will inevitably lead to their becoming a de facto state. The anarcho-capitalist would respond that in the absence of what they call "victim disarmament" (gun politics), such domination would be expensive even for the most powerful, who would instead prefer peaceful trade with all. Skeptics often feel that anarcho-capitalists rely on "market solutions" to the point of ridiculousness.
Minarchist and statist critics often argue that the free rider problem makes anarcho-capitalism (and, by extension, any anti-statist political system) fundamentally unworkable in modern societies. They typically argue that there are some vital goods or services — such as civil or military defense, management of common environmental resources, or the provision of public goods such as roads or lighthouses — that cannot be effectively delivered without the backing of a government exercising effective territorial control, and so that abolishing the state as anarcho-capitalists demand will either lead to catastrophe or to the eventual re-establishment of monopoly governments as a necessary means to solving the coordination problems that the abolition of the state created. One counterargument by free market economists, such as Alex Tabarrok, emphasizes the private use of dominant assurance contracts. Some anarcho-capitalists also contend that the "problem" of "public goods" is illusory and its invocation merely misunderstands the potential individual production of such goods. Others, such as David Friedman, point out that problems of market failure are the exception in private markets but the norm in the political markets that control state action.
Robert Nozick argued in Anarchy, State and Utopia that anarcho-capitalism would inevitably transform into a minarchist state, even without violating any of its own nonaggression principles, through the eventual emergence of a single locally dominant private defense and judicial agency that it is in everyone's interests to align with, because other agencies are unable to effectively compete against the advantages of the agency with majority coverage. Therefore, he felt that, even to the extent that the anarcho-capitalist theory is correct, it results in an unstable system that would not endure in the real world.
Moral questions
Anarcho-capitalists consider a choice or action to be "voluntary", in a moral sense, so long as that choice or action is not influenced by coercion or fraud perpetrated by another individual. They also believe that maintaining private property claims is always defensive so long as that property was obtained in a way they believe to be legitimate. Thus, so long as an employee and employer agree to terms, employment is regarded as voluntary regardless of the circumstances of property restriction surrounding it. Some critics say this ignores constraints on action due to both human and nonhuman factors, such as the need for food and shelter, and active restriction of both used and unused resources by those enforcing property claims. Thus, if a person requires employment in order to feed and house himself, it is said that the employer-employee relationship cannot be voluntary, because the employer restricts the use of resources from the employee in such a way that he cannot meet his needs. This is essentially a semantic argument over the term "voluntary". Anarcho-capitalists simply do not use the term in that latter sense in their philosophy, believing that sense to be morally irrelevant. Other critics argue that employment is involuntary because the distributions of wealth that make it necessary for some individuals to serve others by way of contract are supported by the enforcement of coercive private property systems. This is a deeper argument relating to distributive justice. Some of these critics appeal to an end-state theory of justice, while anarcho-capitalists (and propertarians in general) appeal to an entitlement theory. Other critics regard private property itself to either be an aggressive institution or a potentially aggressive one, rather than necessarily a defensive one, and thus reject claims that relationships based on unequal private property relations could be "voluntary".
Critics also point out that anarcho-capitalist ethics do not entail any positive moral obligation to help others in need (see altruism, the ethical doctrine). Like other right libertarians, anarcho-capitalists may argue that no such moral obligation exists or argue that if a moral obligation to help others does exist that there is an overarching moral obligation to refrain from initiating coercion on individuals to enforce it. Anarcho-capitalists believe that helping others should be a matter of free personal choice, and do not recognize any form of social obligation arising from an individual's presence in a society. They, like all right libertarians, believe in a distinction between negative and positive rights in which negative rights should be recognized as being legitimate, and positive rights rejected. Critics often dismiss this stance as being unethical or selfish, or reject the legitimacy of the distinction between positive and negative rights. (Critics thereby redefine selfish to not include forcing other people to do what you want and disregarding the wishes of others.)
Property ownership rights and their extent are a source of contention among different philosophies. Most see the rights as less absolute than anarcho-capitalists do. The main issues are what kinds of things are valid property, and what constitutes abandonment of property. The first is contentious even among anarcho-capitalists: there is disagreement over the validity of intellectual property — intangible goods that are not economically scarce. Some supporters of private property but critics of anarcho-capitalism may question whether unused land is valid property (Agorism, Georgism, geolibertarianism, individualist anarchism). The second issue is a common objection among socialists who do not believe in absentee ownership. Anarcho-capitalists have strong abandonment criteria — one maintains ownership (more or less) until one agrees to trade or gift it. The critics of this view tend to have weaker abandonment criteria; for example, one loses ownership (more or less) when one stops personally using it. Also, the idea of original appropriation is anathema to most types of socialism, as well as any philosophy that takes common ownership of land and natural resources as a premise. There are also philosophies that view any ownership claims on land and natural resources as immoral and illegitimate, thus rejecting anarcho-capitalism as a philosophy that takes private ownership of land as a premise.
Utilitarian critics simply argue that anarcho-capitalism does not maximize utility, contending that it would fall far short of that goal. This kind of criticism comes from a variety of different political views and ideologies, and different critics have different views on which other system does or would do a better job of bringing the greatest benefits to the greatest number of people. Anarcho-capitalists consider the nonaggression axiom to be a "side-constraint" on civilized human action, or a necessary condition for human society to be beneficial (Herbert Spencer, Murray Rothbard), and thus should not be used as a trade-off for vague utilitarian values. Another response, implied by Austrian economics, is to argue that personal utility is not an additive quantity, therefore concluding that all utilitarian arguments, which invariably rely on aggregation of personal utilities, are logically and mathematically invalid.
Sylvan, Richard Anarchism. A Companion to Contemporary Political Philosophy, editors Goodin, Robert E. and Pettit, Philip. Blackwell Publishing, 1995, p.231,
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