Wednesday, 18 November 2015

Anarchism: Its Rational Basis

Anarchism, far from being irrational and naively optimistic, may be our only hope.

Mikhail Bakunin, the founder of modern anarchism, though unsystematic, was a most prescient thinker.

Long before Ludwig von Mises and Friedrich Hayek Bakunin warned that no “group of intellectuals no matter how great their genius” could “understand the plethora of interests, attitudes and activities” needed to centrally plan and administer the rational allocation of preferences in a modern industrial economy.

The anarchist origin of this critique of central planning is just about universally ignored precisely because its neoliberal variant, which is crucial to the legitimacy of contemporary economic policy, claims a monopoly on rationality and efficiency.

It is often said that anarchism is an irrational way in which to organise a modern industrial society, and this argument is presented by serious minded critics as the most forceful against anarchist arrangements.

Anarchism is a doctrine for the warm hearted romantic, not the hard headed rationalist, we are told by those who possess the cynicism of the sophisticated.

One of the more well known dismissals of the “naive optimism” of anarchist thought and practice, that due to James Joll, observed that “mass production and consumption and large scale industry under a centralised direction, whether capitalist or socialist, have, whatever one may think about them, become the characteristic forms of western society and of the newly emergent industrial countries elsewhere.”

Anarchism swims against the tide for “the basic assumptions of anarchism are all contrary to the development of large scale industry and of mass production and consumption” so “for this reason, much anarchist thinking seemed to be based on a romantic, backward looking vision of an idealised past society of artisans and peasants, and on a total rejection of the realities of twentieth century social and economic organisation.”

The argument is an intriguing one for it presupposes that there is a necessary correlation between rationality and centralised modes of economic and political organisation, and the only defence offered for this presupposition is that is how matters are currently arranged.

The mere existence of centralised modes of organisation imply their rationality.

The reality, and necessity, of centralised modes of organisation is one of the charges that some Marxists continue to make against anarchist thought. Certainly Marxists would not disagree with Joll regarding present realities for, as related in The Communist Manifesto, capitalism “has agglomerated population, centralized the means of production, and has concentrated property in a few hands. The necessary consequence of this was political centralization.”

Marxists, crucially for our present purposes, have tended to argue that this centralisation is an historical stage that civilisation must traverse for the advent of production for surplus, and its underlying productive basis, make communism possible in a modern setting.

One of the reasons why the Bolsheviks ruled via the iron hand of the state was because they sought to amass capital, especially at the expense of the peasantry, so that Soviet society could pass through this necessary stage of industrial development upon the road to communism.

One may accuse Lenin and Stalin of many a thing but surely “naive optimism” be not one of them.
The last thirty to thirty five years has witnessed a one sided class war waged against the working classes by the corporate elites and the states to which they are tightly connected.

This attack on the population, dressed in the garb of neoliberal theory, has to no small degree been justified on grounds of rationality and efficiency. From “free trade” to labour market deregulation the market has been unleashed for the mantra has it that the market can ensure the rational production, allocation and distribution of resources. Behind the scenes, in the meanwhile, corporations derive benefit from state tutelage whilst the working classes are subject to its disciplining rigours.

A key argument made by neoliberals, following on from the socialist calculation debate, is that market based societies alone are rational or efficient allocators of resources because of their highly decentralised nature. The panoply of buyers and sellers operating in markets incorporate all available information needed to ensure the rational allocation of preferences. That information is reflected in market prices.

The most graphic, and most intellectually bankrupt, application of this doctrine is the efficient market hypothesis which asserts that capital market prices incorporate all available information regarding future capital earnings. This means that market prices are rational and based on economic fundamentals, rather than manias, irrational exuberance and the like. Given that it is via capital markets that investment is made in capitalist society there exists a strong tendency toward the rationality of investment and the allocation of capital.

The link drawn here, intriguingly, was one between rationality and decentralisation, yet it is the decentralised aspect to anarchism that makes it “naive optimism.”

The reality of financial market instability, most especially the manic driven cycles of boom and bust, demonstrate that capital market prices cannot be reflective of the rational processing of all available information regarding future earnings. This fact is of no small moment as the Chernobyl scale meltdown of financial markets and the resulting misallocation of capital sits at the core of the global financial crisis.

We all know that investors and speculators spend a great deal of time hunting for information prior to taking a position in capital markets. If capital market prices incorporated all available information such activity would not be necessary so the fact that it occurs, and that upon a large scale, suggests that markets in fact are quite inefficient.

The purported rationality of markets, despite the grim reality, is neither utopian nor naively optimistic. To the contrary, neoliberal policy making continues to frame our age.

A centrally planned economy cannot possibly incorporate all available information, the neoliberals told us, and we are told that only they told us, for the central apparatus of the state cannot possibly possess the information needed to ensure a rational allocation of goods and services.

Mikhail Bor, a Soviet central planner, observed in the 1960s that “the planned organisation of the economy in the USSR allows for the rational use of labour in the interest of the whole of society.” Similar sentiments applied to other sectors of the economy.The expectation was raised that advances in mathematical modelling, made by possible by supercomputing, linear programming and cybernetics, would make central planning yet more rational.

Such be a species of “naive optimism.” But one of no small moment as the travails of the Soviet economy were used to buttress the case made for the rationality of markets in the advanced industrial societies. The failure of Soviet central planning added impetus to the next, post cold war, phase of the neoliberal offensive on society. Alternative critiques, to the extent even addressed, could be dismissed as naïve optimism.

Ours is a society dominated by large corporations whose highly hierarchical and centralised systems of management plan the production, allocation, and distribution of goods and services. As Alfred Chandler observed “in many sectors of the economy the visible hand of management replaced what Adam Smith referred to as the invisible hand of market forces.”

It should be stressed that these visible hands are quite centralised and hierarchical. Ours is an economy composed of strategic alliances between connected islands of centralised economic and political power.

Interestingly Chandler argued that in the domain of consumption market dynamics still apply, but even here one must be cautious. The vast public relations industry, through highly crafted propaganda, plays a very important role in shaping the pattern of consumption, and this is done from cradle to grave twenty four hours a day, seven days a week.

Information asymmetries are endemic to corporate dominated societies for there is much that the visible hand of management knows that other hands do not. When there exist asymmetries in the possession of power so there must exist asymmetries in the possession of information. When asymmetries of information exist within markets then the misallocation of resources follows, and so we get, often colossal, market failure.

Markets have the tendency to encourage the central agglomeration of capital as they evolve with respect to time so this is an inherent tendency to any market based society.

Anarchism, at least its traditional left wing variants of anarchist communism and anarchosyndicalism, is a vision of a modern industrial society that is highly decentralised.

The vision is of a society that consists of a decentralised federation of worker owned and managed enterprises and that, for anarchist communists, distributes and remunerates production upon the basis of need.

The planning decisions of these enterprises would account for the production, distribution and allocation of resources.

These enterprises would be non hierarchical and non authoritarian. That is, their management would be based on principles of participatory democracy so therefore all economic agents would be managers involved in the framing of economic decisions. There would, thereby, exist a robust degree of equality among the participants of such an economic order.

One of the main arguments for democracy is epistemological. Democracy, unlike other systems of governance, has epistemic virtue for when all participate in the framing of decisions it is possible through free and equal deliberation to incorporate all the accessible information needed for a relatively rational allocation of preferences.

There is nothing inherent to economic governance that renders less force to this argument as when applied to the political domain.

A decentralised federation of worker owned and managed industries would be best at incorporating all accessible information needed for a relatively efficient production, distribution and allocation of resources because it would be thoroughly democratic. That is not to suggest that such a society would be a rationalist heaven in some absolutist Laplacian sense for such a society would be required to confront the pervasive effects of uncertainty like any other.

So we might say that of Marxist centralised systems of planning, corporate dominated society, free market nirvana, none would be more rational than anarchism for none is nearly as participatory.

Feel free to call this naïve optimism if you like. To paraphrase Princess Leia, it's our only hope.