This Text Can Be Found in the Book,
The Evolution of Consent: Collected Essays (Vol. I)
There are two natural tendencies within an economy; that toward competition and that which approaches monopoly. While most monopolies are due to state interference in the market, natural monopolies may persist in a free market, though they also have potential to be corrected without state regulation. Thus, economies of scale and scope should dictate not only the preferred economic model for such markets, but also the means by which this model may be accomplished; by way of bilateralizing the monopoly, or out-competing it.
Supply and Demand
Economies are systems of resource allocation, usually maintained between relations of producers and consumers. In a barter economy there is no distinction between producers and consumers, because goods and services are being directly exchanged, but in a market economy the holder of currency (title to goods and services) is called the consumer and the holder of (material) goods and/or services is called the producer.
Markets are the voluntary exchange of goods and services using a means of exchange (such as currency). It’s important to note that both (producers and consumers) are naturally producers and consumers, since producers must produce to become consumers and consumers have to earn their money through production; but these describe roles in a particular exchange facilitated by currency. The voluntary exchange of goods and services, in a market unregulated by government, relies on the consent of all parties involved. If you have currency, it is because you have produced (at least, in a healthy economy!).
The forces in the market between buyers (consumers) and sellers (producers) are called supply and demand. Supply is attributed to production and selling, and demand is attributed to consumption and buying. Buyers always want lower prices, and sellers always want higher prices.[ For sellers (supply), as price is increased more goods and services are being happily provided; for buyers (demand), as price is increased less goods and services are being happily purchased. So, supply increases with an increase of price, and demand decreases with an increase of price. When a price is decreased demand is increased, and supply is decreased.
Equilibrium is the point where supply and demand meet. That is, where the quantity demanded at a specific price equals the quantity supplied at that price. It is the price that makes both consumers and producers happiest. It is the price based on cost. No-one is being overcompensated, and no-one is being ripped off at this price. It is the price that provides the most satisfaction for both consumers and producers.
A free price system operating in a competitive market always results in equilibrium prices that are equal to the long-term costs of the business; that is, the best prices possible for both producers and consumers simultaneously. Prices are kept low because of competition.
*Equilibrium price highlighted.
Markets can range all the way from perfect competition to monopoly. In perfect competition all prices are brought down to cost by the competition of prices, whereby firms will engage in price wars, constantly trying to reduce their costs in order to undersell the others. This renders these firms price-takers, as they have to accept the price the market offers for their service. Perfect competition is a desirable state of a market, where everything is priced on its cost. What mechanisms restrict competition and keeps prices from remaining at an equilibrium level? Barriers to the entry of a market. Barriers to entry create the opposite of competition, known as monopoly. Monopolies have no competition and so can set their price. They are called price-makers and can charge whatever they want; they have the market power.
All monopolies are due to barriers to entry in the market, which means that competition isn’t allowed and so there are no price wars to bring down prices. Aside from natural monopoly (where the only barrier is that it’s more efficient to have one supplier than many), monopolies are usually created out of state favoritism by way of subsidies, patent protection, zoning laws, licensing, and more. These kinds of monopolies are inefficient and never necessary.
Some monopolies have the ability to be cheaper than firms in perfect competition, but their owners don’t usually allow that for long. These monopolies are called natural monopolies and become monopolies through benefits of economies of scale (It’s possible that most, or even all, natural monopolies don’t truly exist, or at least wouldn’t under proper conditions). The positive characteristics of a natural monopoly are that they run at lower costs and, under the right circumstances, this means that they have potential to have reduced prices as well. The negative characteristic of the natural monopoly is that, unless they are somehow regulated, they will not offer these lower prices, but instead will opt to make a profit, push their items rather than submit to demand, and create unnecessary surplus.
You can tell if a market is best suited for a monopoly or for competition by examining its ideal firm size. The ideal firm size has the least diseconomies of scale (loss to size) and the most economies of scale (returns to size) relative to one another. If a market has few diseconomies of scale, and many economies of scale, it will develop toward a natural monopoly. All other monopolies are inefficient and are outside of their ideal firm size, suffering from horrible diseconomies of, and negative returns on, scale (costs to larger organization than needed), which are then passed on to consumers in their prices (which are also jacked in order to make a higher profit).
States are entities that interfere with markets and keep prices from being stable at the equilibrium rate through force. They are the chief perpetrator of monopoly. Marxists, Keynesians, and others, not understanding this, or wanting to correct it with a bigger monopoly, typically look to the state for regulatory power of monopolies. The problem with this approach is that, like most modern medicine, it tends to treat the symptoms rather than the cause of the illness in the economy. The cause is the state. The state was the original monopoly, and seeking its help only increases the problem, treating illness with its cause. Anarchism takes a more holistic approach.
There are two extremes a state can take. On the extreme supply-side you have capitalism, which is a system where prices are kept artificially high and those who produce also hold a large portion of unused surplus because consumers don’t want to buy. Capitalism, being the result of monopolies, exists when prices are above equilibrium and there exists a privately held surplus due to supply controlling the price. On the other end of the spectrum, on the extreme demand-side, you have the communist state, which is a system where prices are kept artificially low and consumers face scarcity because producers don’t want to produce. Communism, being the result of monopsony, is when there exist prices below equilibrium and therefor the price is dictated by the demands of the state.
Mutualism (anarchism), on the other hand, is when all prices reach equilibrium (cost, the limit of price) and when opposing forces (supply/demand) balance each other either through competition (perfect) or cooperation (bilateral). It is when no one is able to make a better choice given the available resources and actions of others. This is the absence of state.
Monopoly, Monopsony, and Bilateralism
Monopolies are categorized into “natural” and legal monopolies. In truth, however, all unilateral monopolies are legal monopolies. This is because a state is necessary for the enforcement of unilateral property-rights. In order for someone to be able to have access to, and exclude others from, a resource, they must be willing to use violence. I can’t own all the gold in the gold-mines of the world, unless people will shoot you for mining in them for me in my absence. Thus, the state is necessary for the violent establishment of individual property claims over scarce resources (and thus for unilateral management of natural monopoly).
In our economy, many markets are artificially turned into monopolies, creating massive problems. Those monopolies that may exist naturally because of economies of scale are kept by the state from being balanced.
Whenever monopolies or monopsonies arise it is important to find an equilibrium through the opposite. Some want to use the state to promote balance, but this is no balancing act, as a state itself is the lack of balance, and lacks incentive to promote such balance. A better method of regulating these kinds of activities, that doesn’t come from a central command center (and is much more libertarian in nature), is the bilateral monopoly.
A bilateral monopoly exists when two monopolies exist in the same market; one on the consumer’s end and one on the producer’s end. When consumers are organized into a monopsony and sellers have formed a monopoly a bilateral monopoly exists and prices are determined by contract. Examples of a bilateral monopoly include monopsonies in the labor market (think of a factory town with a single employer) that employ workers in a monopoly (labor union) or any market that could exist with a single provider and a single user. For instance, if a miner’s cooperative had a monopoly on mining metals in a given area and those who bought the metal for refining organized a purchasing cooperative this would be a situation of bilateral monopoly. Such a situation mirrors perfect competition in that there is more balanced bargaining power between the two entities. This is a preferable method of dealing with monopoly to giving more power to the state, which is the original monopolist (and dictates its prices as well, thus giving us taxes, war, and the draft whereby we have no say in our labor’s ability to be sent to kill because they have the power to choose).
Monopolies are strictly on the side of sellers, while monopsonies are on the side of buyers. Just as a monopoly is a single seller, capable of determining their price as a price-maker, a monopsony is a single buyer, also capable of determining their price. A monopsony dictates demand-price and a monopoly dictates supply-price. Therefor to reach an equilibrium price at cost it is important to bilateralize monopoly or use non-market bargaining power, such as civil disobedience and nonviolent direct-action, to demand a price at cost.
The best way to bilateralize, and find the cost price, in behemoth institutions, is certainly to have forethought and plan to become a mutual organization after a certain size is reached; with either buyers or sellers owning the firm (actual capital), and with the other party owning the policy of the organization and given considerable voting rights in the way it functions. This can, and perhaps should, be demanded by capital investment in the early entrepreneurial stage, perhaps by the bank. If such fore-thinking must be made up for later it will take organized civil disobedience and nonviolent direct action to put prices back to cost. Here, as always, the state steps in to protect monopoly.
Who is the first to show up at a general strike? The police. The state is threatened by bilateral monopoly. Without the state, competitive markets would stay competitive, or institutions meant to balance power (such as creating a buyer cooperative for purchasing from a monopoly, or starting a union) and bilateralize monopoly would arise to set prices right. It certainly has potential to replace the state as well.
Despite their affinity for unions, mutualists favor a free market scenario, whereby the individual remains sovereign over him or herself and his or her labor, capable of exchanging it however he or she pleases. Oftentimes those who are against the free market will state that this leads to monopoly. Long ago I would have debated this fact altogether, but I have come to realize that this is so in the case of natural monopolies; the state showing an example of the natural monopoly on the use of force. I have since disengaged from my hatred of monopolies, in and of themselves, as, at times, they can be more economical and thus allow more freedom to the laborer who, with their existence, pays less for their goods (and thereby commands more of his or her own time and energy). This, however, all rests on prices being reduced, which is not so natural for a monopoly that remains unchecked, unilateral. What many are missing is the opportunity that a free market has to offer in the way monopolies can be dealt with.
The free market has never promised a problem-free society; such is the dream of the communists. What the anarchist free market offers is the flexibility of people to deal with, and to solve, problems as they occur. It is not a rigid system, but one which responds to needs organically as entrepreneurs find new ways to make people happy and solve their problems. One of the mechanisms of the free market, just as natural as a monopoly may be, is the monopsony; but look at what occurs when we try to create these institutions; the state finds a way to destroy them. It creates laws, such as the Taft-Hartley Act, for instance, that render labor monopolies incapable to spread as widely as they are needed in order to combat their repressive monopsonies. A natural mechanism of the market it is, but the bilateralization of monopoly is repressed by the state in order to retain its power, and the power of the class from which its participants are derived.
Dual-power is the act of competing with the state by building alternative institutions. If a monopoly is in operation with diseconomies of scale, due to a legal monopoly, dual power should involve the act of providing the service at a smaller scale, at a more competitive ideal firm size. If a natural monopoly is in operation with economies of scale, but is not providing fair prices, it must be balanced with economies of scope from a monopsony, creating a bilateral monopoly that has a much better price, but retains the efficiency of economies of scale and scope. In other areas, it is much more efficient to provide goods and services to each other. We can sell each other food from our own kitchens and gardens. Monopolies, such as Monsanto and other monoculture giants, destroy the Earth and enslave farmers.
We have to stop participating in this and start providing for ourselves and each other. Such an action is known as civil disobedience and/or nonviolent direct action in some circles.
This process of revolution, known as gradualism or incrementalism, is not passively reformist in its nature, wishing to win political battles that will always remain statist; neither is it violently insurrectionist, taking part in aggression, the violent act that defines a state (once it is maintained). The reformist may be well intentioned, but, without others’ participation, even their own good intentions may cause people unnecessary misery. The same is true of the insurrectionist, as they blindly take apart a system without having built a framework of mutual aid to replace it. Someone once said, “The road to hell is paved with good intentions.” This is especially true when these intentions fuel actions taken on behalf of others without their consent.
Mutualist gradualism takes another approach. By providing goods and services to each other, or by uniting against monopolies (or monosonies) and creating the alternative, we are, as the Wobblies say, “creating the new world in the shell of the old.” If we don’t like what we see, it is up to us to create, and defend, the alternative. No one else will, or should, do it for us, nor should we allow them to do so.
It is important to note, as Gustav Landauer does in his work, and as did many other anarchists, that the state is not a body of people or individuals. The state is their relationship to us, the fact that they can control and extract interest, taxes, rent, and profit. If you can remove yourself from dependency and fear of the state, the relationship changes. This can’t be done as individuals, however. To try to secede from the state individually would most likely be suicide. It must be done as a society, and this entails affecting culture and establishing organization.
There are many ways to affect culture, including art, music, protest, and more, but socio-anthropologists, like Gerhard Lenski, teach us that the largest factor in affecting culture is technology, and especially subsistence technology. As societies produce more and more wealth there are many things that change for the culture.
Since hierarchy was established in horiticultural societies, all of a society’s wealth has been monopolized and held as surplus by a certain class of people. However, we have definitely seen the decentralization of land and capital to a degree, as Roman rulers contracted their land to lords in order to maintain any power at all as people rose up, creating feudalism; as merchants and artisans claimed the capital that was leftover from the plague, creating capitalism as their guilds were chartered by the state; and from the quick wealth from the modern industrial age that allowed enough leisure for movements to be built, capable of reforming the system, such as unions. In the post-modern industrial age we are moving toward post-industrialism. We have enough wealth these days that we may create self-sufficient intentional communities.
Many of the things that we use on a daily basis are easily provided by friends and neighbors, such as produce, bread, canned goods, clothes, and just about any skill that doesn’t require a large amount of capital to utilize. The things that require a large amount of capital, if we want them, would require economies of scale, which are possible to have, but take more time to develop because they require specialized labor, membership, and investment, among other concerns. However, as a new economy is created and more people get involved it becomes that much easier to organize such endeavors. As a gray market provides a rise in standards of living, leisure time is freed up to be used for organization of other projects.
Oftentimes the first problem I see with movements that try to live sustainably today are that they are made up of, and/or support, and/or are owned by, middle-class people who were born into comfort. This, of course, is not always the case, but the problem facing most people’s sustainability is that it is flat out illegal. Many people are tenants, whose landlords are not cool enough to let them tear up the grass and grow. Many can’t afford unnecessary licensing to create local business. Zoning creates many problems for sustainability. The plain and gruesome fact is that it’s not sustainability if it is just for rich people.
Sustainability, and fairness, is largely related to cost and price. If prices are above cost, and a surplus is held (as in monopoly), there is waste. Surplus is waste. If prices are too low, there is not enough supply, and there is scarcity. When we are talking about sustainability we are talking about creating only as much as we need, but creating as much as we do need and distributing it wisely. If we create too little, we suffer and/or die, and this is not sustainable (if what we are trying to sustain and promote is human happiness, which I am). If we create too much we have waste, which means that people worked more than they had to (because no one needed the goods), and that rapidly depleting natural resources have been thrown away. Gross. Glut is gross.
Our project for now should be to participate in mutual aid. That doesn’t mean doing nice things for the community; it means reciprocity. If we want to abolish the state we have to abolish it from our own lives, individual by individual. The state is nonreciprocal in nature. We may not be able to have a completely separate dual-power and gradualist system that is self-reliant and autonomous from the state tomorrow, but we can free ourselves slowly but surely from interest, profit, taxes, and rent if we take the proper measures. We can create currencies and sell goods and services to one another at cost, generating employment while providing eachothers’ needs. If we can create cooperatives, and form unions, that provide for ourselves and our community we can make the state obsolete.
As each one of us takes part in dual-power it will inspire like actions. As we save money by buying from our friends, saving in fuel costs, and we are making good money in a similar manner, being free from the constraints of a boss, others will want to do similarly. As we organize our workplaces for collective victory, others will be intrigued. If we can elevate ourselves with our mutual aid, by eliminating or balancing monopolies in our lives, we will act as an example of the benefits of mutual aid. In biology, this is a process of self-organization known as stigmergy; where one individual lays down information or stimuli patterns that others begin to copy. We all have potential to be apparati for the stigmergent process.
There are two scales on which dual power is necessary, which correlate to naturally competitive and naturally monopolistic markets. In those markets in which competition is the most natural, the best method of solution is the creation of a gray market. This is perhaps more available to middle-class anarchists, who own property, while lower-class anarchists may be inclined toward the organization of syndicates, which are best used in order to deal with natural monopolies. Of course, there is also ample room for lower class anarchists to participate in the gray market, especially with the introduction of mutual credit. No matter the solution for which we personally opt, the state should not be seen as an option.