By Joseph Stromberg
Ludwig von Mises Institue
July 9, 2004


For all the talk about the triumph of capitalism, it seems
that the free market—the real thing and not someone's imagined
conception of it—has very few friends in politics or the world
of ideas. Thus do the writings Murray Rothbard, the leading
defender of the market economy of his generation, still have
the power to shock and clarify the essential ideological and
political battles of our time. This essay in particular
constitutes on commentary on his powerful piece from 1973: "A
Future of Peace and Capitalism."

The traditional enemies on the left are all-too predictable in
their insistence that market processes must be bent, shape,
and chopped to conform to the demands of social justice,
egalitarian ethics, or environmental concerns. On the right,
the neoconservatives insist that global capitalism must be
financed by credit expansion and escorted by the US global
military empire in order to truly serve the interests of world
order. Also on the right, the paleoconservatives cast
aspersions on the market for its supposed disruptions of
community life, its internationalism, and it baneful moral effects.

Who now obeys Ozymandias, Caesar, or Ceaucescu?
The result is that interventions are cheered from all sides.
For example, the movement for the (government-imposed) family
wage spans left and right, when the state intervenes to curb
mass retailing, free trade, sound money, freedom of
association, private property, and all the other institutional
marks of commercial society, it can count on wide intellectual
agreement. Capitalism, it seems, despite its triumphs, remains
an irresistible target of the opponents of liberty and property.

How striking to discover, then, how few writers and thinkers
are willing to spell out precisely what they mean when they
refer to the economics of capitalism. For many, the term
capitalism is nothing but a vessel into which they pour all
the people, institutions, and ideas that they hate. And so
capitalism emerges as a synonym for greed, dirty rivers and
streams, pollution, corrupt businessmen, entrenched social
privilege, the Republican Party, criminal syndicates, world
Jewry, war for oil, or what have you. In fact, the advocates
of capitalism themselves haven't always been entirely clear on
the meaning and implications of capitalist theory.

And this is why Murray Rothbard went to such lengths to spell
out precisely what he was endorsing when he championed the
economics of capitalism. This was especially necessary when he
was writing in 1973, a time which was arguably the low point
for capitalist theory. Mises died that year, all economists
were said to be Keynesians, Nixon closed the gold window, wage
and price controls were fastened on industry as an inflation
fix, and the US was locked in a titanic Cold War struggle that
emphasized government weaponry over private enterprise. Murray
Rothbard, meanwhile, was hard at work on his book For A New
Liberty: The Libertarian Manifesto, an effort to breath new
life into a traditionally liberal program by infusing it with
a heavy dose of political radicalism. It must have seemed like a hopeless task.

The same year, he was asked to contribute an essay in a series
of readings called Modern Political Economy (Boston: Allyn and
Bacon, 1973). He was to address "The Future of Capitalism"
(pp. 419-430), the conclusion of which might have seemed
self-evidently bleak. But not to Rothbard. His contribution to
the volume was lively, optimistic, enormously clarifying, and
prescient to the extreme. Above all, he used the opportunity
to explain with great clarity what precisely he means when he
refers to capitalism: no more and no less than the sum of
voluntary activity in society, particularly that characterized by exchange.

Does that seem like a stretch? Rothbard explains that the term
capitalism itself was coined by its greatest enemy Karl Marx,
and ever since the term has conflated two very different
ideas: free-market capitalism, on the one hand, and state
capitalism, on the other. "The difference between them,
Rothbard notes, "is precisely the difference between, on the
one hand, peaceful, voluntary exchange, and on the other,
violent expropriation." This may seem like a small point, but
the confusion accounts for why whole swaths of American
historiography are incorrect, for example, in distinguishing
Alexander Hamilton's supposed sympathy for capitalism from
Thomas Jefferson's sympathy for "agrarianism." Rothbard points
out that Jefferson was in fact an advocate of laissez-faire
who had read and understood the classical economists; as an
"agrarian" he was merely applying the doctrine of free markets
to the American regional context, even as Hamilton's
mercantilist and inflationist sympathies are best described as
a preference for state capitalism.

As Rothbard explains, capitalism is nothing but the system
that emerges in the framework of free exchange of property and
the absence of government efforts to stop it. Whether you are
talking about buying a newspaper from a vendor or a group of
stockholders hiring a CEO, the essence of the exchange is the
same: two parties finding ways to benefit by the trade goods
and services. From the exchange, both parties expect to
benefit else the trade would not have occurred. The global
marketplace at all levels is nothing but the extension of the
idea of mutual betterment through peaceful exchange.

In contrast to market exchange, we have its opposite in
government intervention. It can be classified in two ways:

either as prohibiting or partially prohibiting an exchange
between two people or forcing someone to make an "exchange"
that would otherwise not take place in the market. All
government activity—regulation, taxation, protectionism,
inflation, spending, social insurance, ad infinitum—can be
classified as one of those two types of interventions.

Taxation is nothing more than robbery (Rothbard challenges
anyone to define taxation in a way that would not also
describe high-minded theft), and the state itself is nothing
but a much-vaunted robber on a mass scale—and it matters not
whether the state is conducting domestic or foreign policy;
the essence of statecraft is always coercion whereas the
essence of markets is always voluntarism.

In Rothbard's conception, it is not quite correct to
characterize support for free markets as either right or left.
In 1973, he heard as many complaints about the supposed greed
unleashed by markets from the followers of Russell Kirk as he
did from the new left socialists. The right, in fact, was
afflicted with a serious intellectual attachment to
pre-capitalistic institutional forms of monopoly privilege,
militarism, and the unrelenting drive to war.

This was what Rothbard saw the political establishment of 1973
bringing to the US: the march of the partnership between
government and business that is nothing but the reinvention of
political forms that pre-dated the capitalist revolution that
began in the Italian city states of the 16th century. The US
conservatives were entirely complicit in this attempt to
reverse the classical liberal revolution in favor of free
markets in order to fasten an old-world monopolist system on society.

In this, the conservatives resembled their supposed enemies,
the socialists. After all, socialism was, as Rothbard put it,
"essentially a confused, middle-of-the-road movement." Its
supposed goal of liberty, peace, and prosperity was to be
achieved through the imposition of new forms of regimentation,
mercantilism, and feudalism. Socialism seeks, in Rothbard's
words, "liberal ends by the use of conservative means." ("Left
and Right: The Prospects for Liberty," Left and Right, I, 1, Spring 1965).

Conservatives could be counted on to support the means but not
the ends, and the result is something that approaches the
current status quo in the US: a mixed political system that
combines the worst features of egalitarian ideology with
corporate militarism—a system that leaves enough of the
private sector unhampered to permit impressive growth and
innovation. It was precisely the productive power of market,
as versus the dead-end of statist methods favored by both left
and right, that led Rothbard to see that the gains of
capitalism could not finally be reversed.

In addition, he may have been the first to anticipate the way
in which the terms left and right would eventually come to
mean their precise opposite in the reforming economies of
Eastern Europe. He was fascinated but not entirely surprised
by the events in old Yugoslavia, where a Stalinist system had
been forced to reform into a more market oriented economy. In
fact, he noted that the trend had begun in the 1960s, and
extended all over Eastern Europe. What was essentially
happening, Rothbard wrote, was that socialism had been tried
and failed and now these countries were turning to market models.

Keep in mind that this was 1973, when hardly anyone else
believed these countries capable of reform: "In Eastern
Europe, then, I think that the prospects for the free market
are excellent--I think we’re getting free-market capitalism
and that its triumph there is almost inevitable." Ten years
later, it was still fashionable to speak of authoritarian
regimes that could reform, as contrasted with socialist
totalitarianism that could not be reform and presumably had to
be obliterated. Rothbard did not believe this, based on both
theory and evidence.

Rothbard saw that all sectors in all countries moving either
toward capitalism or toward socialism, which is to say, toward
freedom or toward control. In the US, the trends looked very
bleak indeed but he found trends to cheer in the antiwar
movement, which he saw as a positive development against
military central planning. "Both in Vietnam and in domestic
government intervention, each escalating step only creates
more problems which confront the public with tile choice:
either, press on further with more interventions, or repeal
them--in Vietnam, withdraw from the coun­try."

His conclusion must have sounded impossibly naïve in 1973 but
today we can see that he saw further than any other
"futurists" of his time:

"the advent of industrialism and the Industrial Revolution
has irreversibly changed the prognosis for freedom and
statism. In the pre-industrial era, statism and despotism
could peg along indefinitely, content to keep the peasantry
at subsistence levels and to live off their surplus. But
industrialism has broken the old tables; for it has become
evident that socialism cannot run an industrial system, and
it is gradually becoming evident that neomercantilism,
interventionism, in the long run cannot run an industrial
system either. Free-market capi­talism, the victory of
social power and the economic means, is not only the only
moral and by far the most productive system; it has become
the only viable system for mankind in the industrial era.
Its eventual triumph is therefore virtually inevitable."

Rothbard's optimism about the prospects for liberty is
legendary but less well understood is the basis for it:
markets work and government do not. Left and right can define
terms however much they want, and they can rant and rave from
the point of view of their own ideological convictions, but
what must achieve victory in the end is the remarkable
influence of millions and billions of mutually beneficial
exchanges putting relentless pressure on the designs of
central planners to thwart their will. To be optimistic about
the prospects for capitalism requires only that we understand
Mises's argument concerning the inability of socialist means
to produce rational outcomes, and to be hopeful about the
triumph of choice over coercion.

Keynes notwithstanding, in the long run we are not all dead.
Instead, the development of markets—locally and
globally—would, over the long haul, create the conditions for
liberty. Writing in the Southern Economic Journal in 1962,
Rothbard expressed a key motif of his historical vision.

Replying to an economist who held, somewhat contradictorily,
that advocates of laissez faire wanted to return to an earlier
status quo, the which status quo, however, had never existed,
Rothbard wrote:

"This problem can, however, be resolved fairly simply. There
was relatively less government intervention in the nineteenth
century than in the other eras—past or present–of human
history, and in that sense there was at least a significant
shift in favor of laissez-faire. On the other hand, the shift
was never completed, so that a certain amount of government
intervention still remained. Those economists and social
philosophers, few though they may be, who wish to change the
present system to one of laissez-faire, are therefore looking
to the future, but as redeeming the partially-fulfilled
promise of the past." (Murray N. Rothbard, "Epistemological
Problems of Economics: Comment," Southern Economic Journal,
XXVIiI, 4 (April 1962), p. 386.)

Rothbard firmly believed that the "partially-fulfilled promise
of the past"–heralding freedom, prosperity, and peace–would
indeed inform the future, which would be a future of
capitalism. Who now obeys Ozymandias, Caesar, or Ceaucescu?

Joseph Stromberg is historian in residence at the Mises Institute.