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The Egyptian Crisis and Libertarian Class-Conflict Theory

Tags World HistoryHistory of the Austrian School of Economics

02/14/2011David S. D'Amato

For weeks, Egyptians long frustrated by decades of stifling, autocratic rule have taken to the streets. The unity of their demonstrations has been centered on what they are against more than what they are for. The demands that have arisen from the crowds, the prescriptive messages for change, have been very general, asking for fair elections and a civilian rather than military government. Now that erstwhile president Hosni Mubarak has finally made his exit from Cairo, the immediate future of Egypt is no less uncertain.

The fulcrum of popular discontent in Egypt for years has been the fact that a small group of elites, enjoying the support of the US empire, has dominated the direction of country. Both economically and politically, Mubarak and his close retinue have domineered civil society from a safe distance, cloistered behind the barricades of authoritarian policies. And though the fate of Egypt in the wake of these protests remains far from clear, the lessons of Austrian theory are beginning to crystallize around these events.

The old personnel, symbolized by Mubarak and supplanted by widespread disapproval, has abdicated power, but the power itself may still be intact. If the complaints of Egyptians hinge on averting the ascendency of a tiny "power elite," then the message of Rothbard, Hayek, and Mises counsels that their rebukes ought to be directed at particular institutions, not particular people. It is the state that inflicts the ruinous conceits of dictators and their underlings on otherwise free people. Wherever the state's instrumentalities of coercive power are allowed to supplant the associations of the free market, the result will be the dominion of a favored few.

As Roderick Long has noted, the notion of class conflict is generally regarded as redolent of a corpus of scholarship unsavory to the libertarian tradition, encumbered with Marxist fallacies that particularly mangle economics.Download PDF As a result of its unfortunate association with Marxism and the ideologies of coercion, class analysis has been largely absent from the libertarian conversation, left to other schools of thought that have grasped at but regularly missed the most central questions. But in places like Egypt, saddled for so many generations with the suffocating policies of entrenched elites, the need for a proper vision of class conflict is indisputable.

More than any other economic approach, the Austrian School raises and provides answers to the critical inquiries of class theory, drawing the ultimate distinction between the types of interactions between individuals. Rather than accepting the idea of the state as a concretization of an immutable class conflict that preexists it, the Austrian School looks on the state as the source of all such conflict. Murray Rothbard, in affirming John C. Calhoun's ideas on class, described this as the view "that it was the intervention of the State that in itself create[s] the 'classes' and the conflict."

The Austrian formulation therefore disposes of the supernatural idea embedded in Marxist class theory that each class is imbued with its own mind and its own logic, and that these are fundamentally irreconcilable. That misconception of the underlying issue — what Ludwig von Mises labeled "Marxian polylogism" — is the stumbling block that renders Marx's theory of class incomplete and mistaken, preventing it from producing a complete account of class conflict. And a complete account is what economically backward countries like Egypt, with coercive oligopolies controlling all resources, are truly crying out for.

As Hans-Hermann Hoppe noted, once the "false starting point" of Marx's analytic method is removed, "all of [Marxism's conclusion about class] are essentially correct." The Austrian School, by replacing the blanket vilification of the bourgeois class inherent in the Marxist model, develops a more nuanced system and asks how an individual acts within society.

The aim of that query is to differentiate between those who acquire wealth from voluntary, consensual interactions within a free market and those who secure material gains through the use of coercion. The top of the pyramid in Egypt is not comprised of villains just because they are rich, but as a result of the way that they obtained their riches. The state, then, having the overarching monopoly on the "legitimate" use of force within society, is distinctly the instrument of the class of individuals who would rather steal and exploit than work and produce.

The "free market," by contrast, is simply a way of expressing the broad idea of the aggregate of all noncompulsory exchange, that is, the "economic means" that Franz Oppenheimer famously set against the "political means." Because it is the state alone that enjoys a license to employ violence, it is tempting to distinguish it sharply from those societal institutions that are not arms of the formal state but that are nominally participants in its opposite: the free market. The assumption is that, provided an organization exists apart from the theft-financed agencies of the state, it is to be considered a rival to the economic ways of the political class.

The Austrian School, however, has never been willing to accept this reduction of libertarianism to a mere apologia for business in and of itself — that is, without regard to the particulars of a given business's activities within the economic system. Certainly the Egyptian economic model represents a particularly grievous example of the kind of collusion between "private" businesses and the state that the free market rules out.

Preserving the class-conscious features of their analysis, Austrians have avoided conflating big business within statist economic programs with real free-market actors. They have consistently arraigned what Rothbard called the "oligarchic rule" that characterizes all of statism, the domination of economic activity "by a coercive elite which has managed to gain control of the State machinery." It's that "State machinery" that will be coveted in Egypt now that Mubarak has abandoned his post as principal plunderer.

So although the "binary intervention" of taxation is perhaps the most conspicuous incarnation of the "political means," there are many others, and libertarian class analysis from Ludwig von Mises to Joseph Stromberg has addressed itself to the ways that business has drawn on the state to insulate itself from competition.

Alongside the ethical quality of the free market — its deference to the rights of individuals and its peacefulness — the utilitarian functions of the libertarian society are well documented. Adam Smith and John Stuart Mill, adjudged radical "class warriors" in their own time, are notable not just for explaining the practical superiorities of liberty, but for attacking the waste and disutility of the status quo. Exegeses of the classical economists often note their explanations of how free markets work, relating the classicists ideas on comparative advantage and division of labor.

Less common, though, is any mention of the fact that, although Smith (for example) is today frequently painted as a forebear of some kind of conservatism, he was firstly a moral philosopher concerned with undermining the economics of ruling class of his day. He saw the economic elites — so inextricable from and intertwined with the state — as profiting from the inefficiencies that they created in much the same way that Rothbard assailed big business in the 20th century for benefitting from the "aid and protection" of the state.

Egyptians stand to gain tremendously from Rothbard's libertarian understanding of class, avoiding the seductive allure of charismatic leaders who seize on windows of opportunity like this one to capture the state for a new cabal of elites. For Mises and Rothbard, like the classical political economists, the practical, economic advantages that derive from the free market's splitting of authority or power were closely linked to its political and class implications. Especially relevant to Egypt is the pervasive inclination to regard state interference in the economy as "curb[ing] big business monopoly for the sake of the public weal." Egyptians should, in the midst of their political reorganization, be mindful of Rothbard's appreciation of the free market — as against the state — as the force that has always "vitiated and dissolved … attempts" at consolidating power within privileged groups.

"The starting point for the libertarian thinker," argued Laurence S. Moss in 1967, "must be the Power Elite."Download PDF Assuming that real, substantive political transformation and genuine social justice are the goals of Egyptians, the Austrian School has built a framework for advancing the country from Mubarak's statist elitism toward complete liberty.

No doubt the ouster of Mubarak and the end of his 30-year rule represent a historical moment for Egypt, but the state, built as it is on ideas, is more resilient than any one man.

Though the end of the Mubarak era presents an opening for libertarian ideas, Egyptians' trust in the military to deliver fair elections, and indeed the faith in elections themselves, may be misplaced. Austrian School ideas about the nature of power and ruling elites are revolutionary in the truest sense of the word, subverting the state's distributions of wealth and power for those of the free market.

Now that Egypt has been witness to the transformative power of peaceful interactions, its people should look with suspicion on "leaders" preparing to reimplement coercion.


Contact David S. D'Amato

David D'Amato is a news analyst for the Center for a Stateless Society. He is a lawyer with an LLM in the law of international business.