(Note: the word “capitalism” in this essay is meant to refer to the free market, not state capitalism. This article was also published in The Free Press.)
Often times when one listens to or reads the arguments of those who make it their job to “overthrow the capitalist system,” one will be subjected to the notion that many of the ills of the status quo (which is invariably labeled as “capitalism”) are due in large part to certain institutions which, it is insinuated, are inherent to a capitalist system. Usually such insinuations are peculiar to me, as, more often than not, the exact opposite is true. The International Monetary Fund and the World Bank are two institutions that often take the brunt of the “anti-capitalist” storm, but do they really deserve such treatment?
The IMF and the World Bank are both known for their practice of lending to the cash-strapped governments of developing countries, and both institutions tend to use this lending power as leverage that can be used in order to incentivize participating governments to bend to the will of the institutions. The will of these institutions tends to call for the privatization of government services. This is where those who tend to call themselves “anti-capitalists” point when they say that these institutions are “capitalist.”
Just calling for privatization, however, does not necessarily constitute a “capitalist” or “free market” position. A market can only be considered “free” when there is an absence of forceful coercion perpetrated against the individual, and all transactions are conducted in a free and voluntary manner. Many of the privatization efforts called for by these institutions are directly counter to the notion of a market free from coercion, as many of the efforts simply call for governments to hand over monopoly control of certain services (water, power, communications, etc.) to large multi-national corporations. A policy of allowing only one company or group to legally perform a service necessarily rests on coercion and in-voluntarism, i.e., if an entrepreneur digs a well and begins pumping and selling water to his fellow villagers for less than the price that the government-contracted multi-national corporation is charging, or if another clever individual begins collecting rainwater in a number of large steel drums that he owns and then begins to sell or otherwise distribute that, each will inevitably be shut down by local authorities for the benefit of the large corporation. It is not difficult to see how this is not a true capitalist or free market situation, this is, essentially, a fascist (or national corporatist) situation, wherein the country is essentially run for and by a few key corporations with control over the state monopoly of the use of force. In the most common view espoused by libertarians and classical liberals, a minarchic state wields objective law-based monopoly control over the use of force, without special privilege given to any entity or group. In the most extreme view of capitalism, which happens to be my own view as a Rothbardian anarcho-capitalist, there should exist no entity with such a monopoly. So, it does not logically follow that a view that calls for special privilege for none before the state’s rule, at the very least, and the absence of any and all coercive interference, at the very most, should lead to situations like those seen in the developing countries effected by the policies of the World Bank or the IMF.
Aside from that argument, the supposition that such institutions are an organic and inherent feature of capitalism is totally negated by the fact that they were, in fact, created by states through treaties, and would cease to exist without state funding; they were not and could not have been emergent market occurrences.
In fact, the creation of government funded development banks, and therefore the centralization of the control of credit in state hands, happens to be the fifth of the ten point program of communism given in Karl Marx’s and Friedrich Engels’ infamous work, The Communist Manifesto. It almost seems laughable that anyone could even think to call such a policy “capitalist,” but, indeed, many do so without reservation.
Are the World Bank and the IMF really capitalist ideas?
(Note: the word “capitalism” in this essay is meant to refer to the free market, not state capitalism. This article was also published in The Free Press.)
Often times when one listens to or reads the arguments of those who make it their job to “overthrow the capitalist system,” one will be subjected to the notion that many of the ills of the status quo (which is invariably labeled as “capitalism”) are due in large part to certain institutions which, it is insinuated, are inherent to a capitalist system. Usually such insinuations are peculiar to me, as, more often than not, the exact opposite is true. The International Monetary Fund and the World Bank are two institutions that often take the brunt of the “anti-capitalist” storm, but do they really deserve such treatment?
The IMF and the World Bank are both known for their practice of lending to the cash-strapped governments of developing countries, and both institutions tend to use this lending power as leverage that can be used in order to incentivize participating governments to bend to the will of the institutions. The will of these institutions tends to call for the privatization of government services. This is where those who tend to call themselves “anti-capitalists” point when they say that these institutions are “capitalist.”
Just calling for privatization, however, does not necessarily constitute a “capitalist” or “free market” position. A market can only be considered “free” when there is an absence of forceful coercion perpetrated against the individual, and all transactions are conducted in a free and voluntary manner. Many of the privatization efforts called for by these institutions are directly counter to the notion of a market free from coercion, as many of the efforts simply call for governments to hand over monopoly control of certain services (water, power, communications, etc.) to large multi-national corporations. A policy of allowing only one company or group to legally perform a service necessarily rests on coercion and in-voluntarism, i.e., if an entrepreneur digs a well and begins pumping and selling water to his fellow villagers for less than the price that the government-contracted multi-national corporation is charging, or if another clever individual begins collecting rainwater in a number of large steel drums that he owns and then begins to sell or otherwise distribute that, each will inevitably be shut down by local authorities for the benefit of the large corporation. It is not difficult to see how this is not a true capitalist or free market situation, this is, essentially, a fascist (or national corporatist) situation, wherein the country is essentially run for and by a few key corporations with control over the state monopoly of the use of force. In the most common view espoused by libertarians and classical liberals, a minarchic state wields objective law-based monopoly control over the use of force, without special privilege given to any entity or group. In the most extreme view of capitalism, which happens to be my own view as a Rothbardian anarcho-capitalist, there should exist no entity with such a monopoly. So, it does not logically follow that a view that calls for special privilege for none before the state’s rule, at the very least, and the absence of any and all coercive interference, at the very most, should lead to situations like those seen in the developing countries effected by the policies of the World Bank or the IMF.
Aside from that argument, the supposition that such institutions are an organic and inherent feature of capitalism is totally negated by the fact that they were, in fact, created by states through treaties, and would cease to exist without state funding; they were not and could not have been emergent market occurrences.
In fact, the creation of government funded development banks, and therefore the centralization of the control of credit in state hands, happens to be the fifth of the ten point program of communism given in Karl Marx’s and Friedrich Engels’ infamous work, The Communist Manifesto. It almost seems laughable that anyone could even think to call such a policy “capitalist,” but, indeed, many do so without reservation.