|
Chapter Nine: Ends and Means
A. Organizing Principles.
The Cost Principle. The cost principle is central to mutualist economics. That means that all costs and benefits of
an action should be internalized in the actor responsible for it--or in other words, that the person consuming goods and services
should pay the full cost of producing them. The cost principle does not require an authoritarian government to apportion costs
in accordance with benefits. It requires only a non-coercive marketplace, in which all transactions are voluntary. Given that,
the market actors themselves will engage only in transactions where the benefits are sufficient to pay for the real costs.
The most important thing is to avoid hidden costs, or externalities, not reflected in price.
Every single evil of capitalism we examined in Part Two of this book can be traced, in a sense, to a violation of the cost
principle. In every case, the benefits of the action were divorced from the cost, so that the person benefiting from a particular
form of action did not bear the costs associated with it.
Government, in its essence, is a mechanism for externalizing costs. By externalizing costs, government enables the privileged
to live at the expense of the non-privileged. But every such intervention leads to irrationality and social cost. For example:
Because labor does not keep its own product, and the disutility and the output of labor are not internalized by the same
individual, there is a crisis of overproduction and under-consumption and a need for further state intervention to dispose
of the surplus product.
Because labor does not own its means of production, the process of capital accumulation works against labor instead of
for it. Instead of investment being the decision of a worker to consume less of his own product today in order to work less
or consume more tomorrow, it is the decision of a boss to invest some of the worker‘s product today so he can receive
even less of his product tomorrow. Instead of an improved standard of living for the worker-owner, increased productivity
results in unearned wealth for the owner and unemployment for the worker.
Because large corporations do not pay the full cost of the factors they consume, they consume irrationally and inefficiently;
because the inefficiency costs of large size are externalized on the taxpayer, they are able to grow beyond the point of maximum
efficiency. At the same time that American goods are produced at many times the energy and transportation costs actually needed,
the country faces chronic energy shortages and transportation bottlenecks.
It is only through the free market, organized on the basis of voluntary exchange, that the cost principle can be realized.
The law of cost operates through the competitive mechanism, by which producers enter the market when price is less than cost
and leave it in the opposite case. In a free market, the price of a good or service is a signal of the cost entailed in providing
it. Because costs are on the table, reflected in price rather than hidden, people (including business firms) will only consume
goods and services that they are willing to pay for.
As Proudhon pointed out, there is no way of knowing the real cost, or exchange value, of anything produced outside the
market.
How much does the tobacco sold by the administration cost? How much is it worth? You can answer the first of these questions:
you need only call at the first tobacco shop you see. But you can tell me nothing about the second, because you have no standard
of comparison and are forbidden to verify by experiment the items of cost of administration…. Therefore the tobacco
business, made into a monopoly, necessarily costs society more than it brings in; it is an industry which, instead of subsisting
by its own product, lives by subsidies….1
Here’s an excellent picture of the functioning of the cost principle in Proudhon’s society of voluntary contract:
Its law… is service for service, product for product, loan for loan, insurance for insurance, credit for credit,
security for security, guarantee for guarantee. It is the ancient law of retaliation, …as it were turned upside down
and transferred… to economic law, to the tasks of labor and to the good offices of free fraternity. On it depend all
the mutualist institutions, mutual credit, mutual aid, mutual education; reciprocal guarantees of openings, exchanges and
labor for good quality and fairly priced goods.2
As this quote implies, fair exchange is closely bound up with reciprocity, a defining feature of the cost principle.
What really is the Social Contract? An agreement of the citizen with the government? No, that would mean but the continuation
of [Rousseau’s] idea. The social contract is an agreement of man with man; an agreement from which must result
what we call society. In this, the notion of commutative justice, first brought forward by the primitive fact of exchange,
…is substituted for that of distributive justice…. Translating these words, contract, commutative justice, which
are the language of the law, into the language of business, and you have commerce, that is to say, in its highest significance,
the act by which man and man declare themselves essentially producers, and abdicate all pretension to govern each other.
Commutative justice, the reign of contract, the industrial or economic system, such are the different synonyms for the
idea which by its accession must do away with the old systems of distributive justice, the reign of law, or in more concrete
terms, feudal, governmental or military rule….
….The contract is therefore essentially reciprocal, it imposes no obligation upon the parties, except that which
results from their personal promise of reciprocal delivery; it is not subject to any central authority….
We may add that the social contract of which we are now speaking has nothing in common with the contract of association
by which… the contracting party gives up a portion of his liberty, and submits to an annoying, often dangerous obligation,
in the more or less well-founded hope of a benefit. The social contract is of the nature of a contract of exchange: not only
does it leave the party free, it adds to his liberty; not only does it leave him all his goods, it adds to his property; it
prescribes no labor; it bears only upon exchange.3
Voluntary Cooperation and Free Association. As our previous quote from Proudhon suggests, the cost principle and reciprocity
in exchange depend on the observance of two other mutualist principles: voluntary cooperation and free association. As we
saw in Part One, the law of value works through competition and the free decision of market actors to shift purchasing power
and resources among competing alternatives. It is only through such action that price is able to signal the amount of socially
necessary labor embodied in goods and services.
Proudhon advocated the abolition of the centralized territorial state and its replacement by a society organized on the
basis of contract and federation. These were necessarily implied in the cost principle. In The Principle of Federation,
Proudhon used some five-dollar words to describe the cost principle: synallagmatic (when the contracting parties undertake
reciprocal obligations) and commutative (when the exchange involves goods or services of equal value). These requirements
can be met only under conditions of equal exchange, in which each participant could freely obtain value for value without
being compelled to accept something less. And equal exchange is possible only with free market entry and competition.
Social relations organized on this basis of reciprocity required a federation: a "state" that exercised only those revocable
powers that the individual conferred upon it, and only to the extent that the individual expressly consented to them. The
individual remained sovereign and possessed of all his inalienable rights, voluntarily relinquishing only those courses of
action necessary to obtain the object of the contract into which he freely entered.4
More recently, most free market anarchists have adopted the "non-aggression principle" as the basis around which to organize
a libertarian society.
Most anarcho-capitalists (with some honorable exceptions) automatically imagine a market society based on non-aggression
as having the capitalist business firm as the dominant form of organization. But as we will see later in this chapter, this
is no necessary reason for this. Mutualists prefer the workers’ and consumers’ cooperative, the mutual, the commons,
and the voluntary collective to the capitalist corporation as a market actor. And except to the kind of vulgar libertarian
who instinctively sees big business as the "good guy," there is no reason not to accept these as valid ways of associating
freely.
|
