1. The Capitalist State
Title and Contract
The state is a capitalist state if it does not demand ownership to be justified, and does not interfere for his own good with a person's contracts.
The origin of capitalist ownership is that "finders are keepers."
This is the acknowledgement that permits the passage from possession to ownership, to good title to property, independently of its particularities, of who the title-holder may be and also of the use he may or may not make of the property. The state which recognized title to property on this ground (though it may do so on other grounds as well) fulfils one of the necessary conditions of being a "capitalist state" in the sense I am using here (a sense which will become very clear as I proceed). The title is not invalidated by scarcity, is contingent neither upon merit nor status, and entails no obligation. The reference to scarcity may need some elucidation. What I mean is that if a man can own an acre, he can own a million acres. If his title is good, it is good regardless of whether, in Locke's famous words, "enough and as good" is left for others. Ownership is not invalidated by the scarcity of the things owned nor by the non-owners' desire for it, so that in a capitalist state access to scarce goods is regulated by price and substitution and not by sovereign authority, however constituted.
Those brought up on the notions of primitive accumulation, division of labour and appropriation of surplus value as the source of continuing accumulation, might balk at this manner of approaching the origin of capital and the essence of the capitalist state. No doubt very little capital has ever been "found" and a lot has been accumulated. Moreover, to both Marxists and perhaps most non-Marxists it might look like putting the cart before the horse to proceed from the "relations of production" (which, as Plamenatz has demonstrated, mean relations of ownership "if they are to have any identity at all")*10 to the "means of production," the things owned. Yet it is not, or at least not generally, a change in the means of production or in the techniques applied to them, that transforms them into capitalist property. Land held by any major French or German noble family down to the Thirty Years' War was owned by it in the most tenuous sense only. It was a means of production but assuredly not capitalist property in the manner of English or Italian land. Land owned by the English nobility and gentry from the sixteenth century on, can rightly be regarded as capital and has in fact served as the main springboard of English capitalism. Shipping and other mercantile accumulation of capital got off to a flying start in late Tudor and Stuart times due, in great part, to the stakes put up by landowners. Non-capitalist (I am advisedly avoiding the term "feudal") tenure of land usually originated in service and continued on the strength of a (more or less well founded and realistic) expectation of future service. This was true of the landlord who was supposed to owe service, directly or indirectly, to the sovereign, and of his serfs who owed service to him.*11 It is characteristic of English social evolution that land tenure became so rapidly unconditional, and that such (light, and unwritten) conditions as remained, concerned local justice and charity where the landlord supplanted rather than served the state.
The peasant in the North and Central Russian "repartitional" village held land because of who he was and because he had so many adults in his family. His title, such as it was, could be argued to have depended on status, need for and capacity to use, the land. Every so many years, when the cumulative change in the needs of his and other families in the village demanded it, the caucus of influential peasants who ran the obshchinnoe might take away his strips of land and deal him out other, inferior strips. Nobody, however, could sell out or buy into the village; if they could have done, the land would have become capital. The land the American farmer "found" on the frontier, or "proved up" under the 1862 Homestead Act, or got from somebody else who did, was capital. The premises, tools and stock of materials of a master of a craft guild, were not capital. The physically very similar premises, tools and materials of his successor, the small entrepreneur-artisan under Gewerbefreiheit were the very essence of capital.*12 Unlike his guild predecessor, he could be anybody and could run his shop the way he saw fit. It is not the scale of the undertakings nor the fact of employing the labour of others which makes the first pre-capitalist and the second capitalist. Both generated "surplus value" and enabled their owner to appropriate it. However (except perhaps in Italy north of the Papal States), the guild master's title to his business was contingent not only upon constraints on output, price and quality, but also upon who he was and how he lived.
Ownership which does not have to be born into, lived up to, served and atoned for, but just is, is of course no less an ideological phenomenon for that. Its recognition is a distinctive mark of the ideology defining the capitalist state, just as ownership which is contingent upon its conformity to some principle of social utility, justice, equality or efficiency and which is forfeit or at least forcibly adjusted if it does not so conform, satisfies an ideology which is variously called democratic, liberal, socialist or combinations of these words.
Unsurprisingly, the relation connecting the finders-are-keepers principle of ownership to the capitalist state runs both ways. Like other implicit functions which mostly make up the base of the social sciences, it does not feature an independent and a dependent variable, an unmistakeable cause and an effect. The relation really asserts that it takes the capitalist state to accept and uphold such a quintessentially positivist, non-normative principle of ownership, and that it takes such a severe, contingent-upon-nothing kind of ownership to make the state a capitalist state.
There is a second necessary condition of capitalism, which is inevitably bound up with the first without being part of the same thing. It is the freedom of contract. When, as in most of medieval Europe, the tenure of property involved onerous obligations and was open to persons of a defined status or other defined characteristics, alienation by free contract could not have been countenanced by the sovereign. Even the marriage contract was subject to state approval and for really prominent families remained so into the eighteenth century. Property came gradually to be governed by contract rather than status, partly because servitudes in kind were commuted into money and partly because, from being the obligations of the owner, they became those of the property—of the marquisat rather than of the marquis—so that the state interest was not harmed by letting it pass into the hands of any upstart tax farmer or venal magistrate. Much the same mutation led from a man's debts, which he had to discharge or go to prison, to the no-recourse mortgage on property and to the liabilities of an undertaking which permitted its changing hands, even before formal limited liability became widespread.
Freedom of contract, as a necessary condition for the state to be a capitalist one, can be construed as the freedom of the finder not just to keep what he found, but to transfer all his rights in it to another on whatever terms he chooses, and by extension the freedom of the latter to transfer it to yet another. The capitalist state must let freedom of contract prevail over both ideas of status and propriety, and ideas of just contracts (fair wage, just price).
If all the world's goods were divided up into random bundles belonging to nobody, and if everybody were blindfolded and could pick one bundle, and when the blindfolds were taken off all could see their own and anyone else's bundle, we would have a properly translucent setting for the interaction of free contracts, status and just contracts. If some of the bundles contained beaver hats, and some people liked beaver hats more than other things while for other people it was the other way round, after some scurrying about they could all end up holding what they liked best, subject of course to the constraints of feasibility fixed by the initial bundles. If (as used to be the case before the late seventeenth-century flooding of the European market with Canadian pelts), people below a certain status were then forbidden to wear beaver hats, their price in terms of other things would decline and even so a number of swaps of hats for other things would be prevented from taking place, for some people of the requisite high status but not so keen on beaver, would half-heartedly hang on to the hats they found in their bundles. If, in addition, there was an authority entitled to outlaw unjust contracts and it felt that the just price of beaver was what it has always been, the number of mutually agreeable exchanges would be further restricted, only people of the requisite status and very keen on beaver being prepared to pay the just price. A number of hats would go begging, their holders being unable either to wear or to swap them.
Analogous, though less outlandish, problems arise when we imagine bundles made up of all sorts of talents, skills, knowledge and muscle-power, and various job opportunities, outlets for this talent, needs for that skill or muscle. As we can expect from a random distribution, there would be a hopeless mismatch within each bundle between talents and opportunities, skills and the occasions for using them. Status rules and the banning of unjust bargains, e.g. the setting of minimum wages or of a "rate for the job," would prevent at least a part of the possible matching between bundles from taking place. In this context, the capitalist state is naturally one that will not enforce status-related and justice-related rules and constraints on the freedom of contract,*13 passively allowing the ideas which gave rise to them to be eroded by the tide (when such a tide is running) of the capitalist ideology and the exigencies of capitalist business practice. The state which will actually outlaw and suppress such rules, however, may learn to like outlawing and suppressing in a general way, and may not remain a capitalist state for very long.
Pareto has laid down the precise sense in which the voluntary reshuffling by their owners of the contents of random bundles, results in the "best" distribution of the world's goods. If two consenting adults close a contract, and there is no independent evidence of duress (i.e. evidence other than the contract looking unfavourable to one party), we accept a prima facie case that they like the terms of this contract better than not entering into a contract with each other. (The precise condition, in fact, is that one of them prefers and the other either prefers, or is indifferent to, contracting.) There is also an (albeit weaker) case for holding that there is no other contract which these two people, given their respective situations, could have concluded instead such that it would be preferred by one of them to the contract they did conclude, while leaving the other party at worst indifferent. If, then, it cannot be shown that their contract violates the rights of a third party (it may violate his interests), no one—neither the third party, nor anyone purporting to defend his interests—has the right to hinder them in executing their contract as agreed. Overriding the contract, or forcibly amending its terms ex post, let alone insisting that, as amended, it is still binding on the parties, are the ways of "hindering" typically reserved for the state (cf. pp. 112-3).
The condition "it cannot be shown that their contract violates the rights of a third party" is, however, obviously neither straightforward nor easy, though it is putting the onus of proof where it belongs. Sometimes the onus is allowed to shift the other way, the contracting parties having to prove that they are not violating third-party rights. This is not an unfair characterization, for instance, of the practice of some American regulatory agencies. Norms for judging the rights of someone in relation to a contract to which he is not a party cannot be laid down independently of culture and ideology and may, even so, remain contentious. For instance, to stay safely in a realm of capitalist culture and ideology, does it violate the rights of the lowest bidder if he is not awarded the contract, assuming that the tender specified no explicit rule about accepting the lowest bid? Must the best qualified candidate for a job get it? Can land use be changed if it spoils the view for the neighbours? Different capitalist answers appear to be possible. Different capitalist jurisprudence might interpret the "third party" condition in a more or less austere manner, and careful thought may be needed before one can say that a particular state is not respecting the freedom of contract and is, on this ground, an adversary of capitalism.
What, on the other hand, is an unambiguous denial of the freedom of contract is the interdiction or forcible amendment of a contract (in order, for example, to tilt its terms in favour of one of the parties) on grounds not involving the rights of third parties. Admission of such grounds appears to presuppose that a person, in entering into a contract, is capable of violating his own rights and it is incumbent upon the state, whose proper function is the defence of recognized rights, to prevent him from doing so. This is the key to a whole boxful of cases where it can be claimed that a person needs to be protected against himself. One oft-cited case (which involves other problems, too) is the puzzle about a man's freedom (in the sense of right) to sell himself into slavery.*14 A fundamentally different case for denying the freedom of contract arises out of the claim that, in agreeing to a certain set of terms, a person would be mistaking his own preference or interest. The ground for stopping him is no longer one of his right, and a fortiori not one of a conflict between two of his rights, but of his utility as seen from the outside by the sympathetic observer. On this ground, prohibition stops a man from buying whisky because his real (or "rational," "true," "long-term" or "unconfused" as it is sometimes called to distinguish it from plain) preference is for sobriety. The weakness-of-will argument may have to be invoked to justify the distinction between plain revealed preference for whisky and unconfused long-term preference for a sober life. However, much the same distinction must be agreed to support other applications of the principle of paternalism: the payment of wages in kind, the provision by the state of welfare services (e.g. health) in kind, compulsory insurance, education, etc., each of these in contra-distinction to giving the recipient cash in lieu, to be spent as he saw fit.
Another's conception of a person's good or utility, another's diagnosis of his real preference or long-term interest, is adequate ground for interfering with his freedom to enter into contracts a consenting adult partner is prepared to agree to if, and only if, it is accepted that it is a proper function of the state to use its monopoly power of coercion to enforce A's conception of B's good. Now A may be anybody, or the sympathetic observer, or the majority of voters, or the foremost socio-psycho-economic research institute, or the state itself. Different kinds of states could be distinguished according to which of these potential sources they would profess to follow. The test of the capitalist state is that it follows neither source, for it gives priority to the freedom of contract, including under it the extremely important freedom not to contract at all. Anticipating chapter 2, I might say broadly that other states profess to follow one or more of the possible sources. The choice of "sources," whose conception of the good is to be listened to, is inevitably determined by the state's own conception of the good; it will choose to be guided by congenial spirits, kindred intellects. Selection of the adviser, no less than selection of what advice to accept, is tantamount to doing what one wanted to do all along. In choosing to promote B's good, the state is in effect pursuing its own ends. This, to be sure, is a quasi-tautology; it calls for more attention to the nature of the state's ends.
Notes for this chapter
John Plamenatz, Man and Society, 1963, vol. II, pp. 280-1. See also his German Marxism and Russian Communism, 1954, ch. 2.
Cf. C. B. Macpherson, The Political Theory of Possessive Individualism, 1962, p. 49, for the view that without unconditional ownership, there can be no market for land. The same argument must hold for any other "means of production," including labour. (For Macpherson, no less than for Marx, the rot set in when the individual was acknowledged to own his labour and came to sell it rather than its products.) In Russia, service tenure of land meant that serfs ("souls") could not, prior to 1747, be sold off the land because they were needed to maintain the landlord's capacity to serve the state. The transferability of "souls" (hitherto regarded as managed by the landlord on behalf of the ultimate owner, the state) was a symptom of social progress, a sign that private property was taking root in Russia. The reader must bear in mind that the Russian nobility had no title to its lands prior to 1785 and that its service tenure was quite precarious. In view of the recent nature of private property as a social institution, the progress of capitalism in Russia in the short run-up to 1917 was most remarkable.
Gewerbefreiheit, the freedom to engage in a particular craft or commerce, was introduced in Austria-Hungary in 1859 and in the various German states in the early 1860s. Prior to it, a cobbler needed a state licence to cobble and even a mercer needed one to sell thread. The licence was granted, or not, at the state's discretion, ostensibly on grounds of proficiency and good standing, in fact as a means to regulate competition. At all events, because of the licence, the goodwill of the business could not be easily negotiated.
One must not confuse injustice and cheating. An unjust man will, if he can, hire you for wages you cannot be expected to work for. (What this may precisely mean is a large question. As I am not concerned with substantive questions of justice, happily I can pass it by.) A cheat will not pay you the wages he said he would. The capitalist state must, of course, go after the cheat.
The answer consistent with the capitalist ideology whose contours I am trying to sketch, might run like this: "Yes, a man should be left free to sell himself into slavery; there is no more competent judge than he of his reason for doing so." The state has nonetheless the duty to withhold legal protection from the institution of slavery, contributing to its removal as an option available under contractual freedom. Contracts under which slave-traders sell captured Africans to slave-owners obviously violate the Africans' rights. If plantation-bred third-generation slaves, for reasons which will always remain debatable but which are their reasons, do not seek freedom, we have to think again. Note that the British government first prohibited the slave trade without prohibiting slavery. The state must simply ensure that if he wants to walk off the plantation, he should not be prevented from doing so, i.e., it should not help enforce a contract under which the planter owns the slave. This is patently not an abolitionist position. It is doubtful whether it would have been an acceptable compromise to Calhoun and Daniel Webster.
End of Notes
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