Study Notes


AQA, Edexcel, IB

Last updated 26 May 2019

Anarcho-capitalism first emerged in the 1970s and 1980s, partly due to growing criticism in the west of government regulation of capitalism and a revival of interest in free market economics.

Closely associated with, but different from, libertarianism, anarcho-capitalism has been championed by US economists Murray Rothbard (1926-95) and David Friedman (1945-). Rothbard first used the term ‘anarcho-capitalism’ to categorise his own ideas and argued that they were based on three specific ideological traditions – 19th century classical liberalism, 19th century US individualist anarchism and the 20th century Austrian school of economics.

According to anarcho-capitalists, the state has to be removed for two principal reasons. First, state intervention (for example in the form of government regulation and the creation of public/private monopolies) threatens economic freedom, efficiency and competition. Trade unions are also seen as major obstacles to the free play of market forces. Consequently, all state functions should be taken over by the free market. Second, the state cannot restrict individual autonomy or sovereignty. In particular, state taxation violates the individual’s right to private property by removing part of the reward for a person’s labour and thus represents a form of institutionalised theft.

Instead, anarcho-capitalists call for a completely unregulated free market capitalist economy on the grounds that it is the most effective mechanism to supply and distribute goods, services and private property. They also maintain that the unrestricted free market provides competition which compels suppliers to keep prices low, offer a high quality product or service, and respond to consumer demand. Furthermore, anarcho-capitalists argue, such an economic arrangement offers incentives and promotes growth and innovation. All goods and services, including health, education, law enforcement, sanitation and the court system, would be provided by the free market on a profit-making basis. Monopoly companies would eventually succumb to free competition and private charity would cater for disadvantaged groups (e.g. the elderly and unemployed) because, in the past, state provision had been wasteful and easily exploited.

From an anarcho-capitalist perspective, humans are rational, competitive and acquisitive economic animals who ‘own’ themselves. Rothbard refers to the autonomous nature of the individual as the ‘self-ownership principle’. For Friedman, humans are motivated to work to acquire private property because they have an innate sense of entitlement. It is natural for people to act in a self-interested way and particularly to engage in free and self-serving economic relationships. Rothbard rejects the criticism that human self-interest in the economic sphere is nothing more than greed. Such behaviour, he argues, is simply trying to ‘relieve the nature-given scarcity that man was born with’ and, in turn, this gives capitalism its incentives and dynamism.

Anarcho-capitalists envisage a competitive, hierarchical, almost social Darwinian society where the wealthy and powerful benefit most and the weakest struggle. Nevertheless, anarcho-capitalism argues that free competition would establish some form of social balance and stability because people would have an obvious interest in avoiding disorder. Thus, the anarcho-capitalist social vision is of an extremely individualistic world driven by the rational pursuit of enlightened self-interest within a free market system. As Rothbard concedes, the resulting entity is perhaps more accurately described as a collection of interacting individuals rather than a society.

© 2002-2024 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.