Anarcho Capitalism: A Definition and Guide on Why It Matters

By | Updated September 13th, 2021

Anarcho Capitalism refers to the philosophy that calls for the abolition of centralized states. In its stead, the state will be replaced by a system of private property which will be maintained by private institutions and civil society.

Anarcho-capitalism is truly radical in the sense that it strikes at the root of societal problems and attempts to offer solutions to these problems through market forces. Given the philosophy’s relatively young age, anarcho-capitalist thought merits a proper analysis in order for novices to fully comprehend it. 

Understanding the Philosophy of Anarcho Capitalism

The concepts of self-ownership and the non-aggression principle largely define anarcho capitalism. Individuals have full control of their lives and can pursue their own goals as long as they do not transgress on other people’s rights. The non-aggression principle makes it clear that individuals cannot encroach on the person or property of any other individual.

The initiation of force against others is categorically rejected under this philosophy’s precepts. This does not only apply between regular individuals but also between the relationship of the individual and state. 

The state itself is viewed as a coercive institution that is centered on said aggression through its practice of taxation and monopoly on violence. In addition, state activities such as economic and social regulation, prohibitions, and other forms of government intervention in people’s private affairs are categorically rejected by proponents of this philosophy.

The History of Anarcho Capitalist Thought

For starters, the word anarchy has a stereotypical perception of being associated with radical leftist political movements in most Western nations. However, the perception of anarchy as a leftist movement is warranted given its history. 

Most strands of anarchism, above all, the European variants, tend to have origins on the Left. There is still a broad consensus among anarchists sects on issues of state authority, which they generally eschew. 

Luminaries such as Peter Kropotkin, Joseph-Pierre Proudhon, and Mikhail Bakunin led the way in giving anarchism a coherent vision for people to follow during the nineteenth century. 

The anarchism of 19th century European radicals viewed private property in a negative light and were skeptical of capitalism. In many respects, these groups were adjacent to the ascendant Marxist movement that grew concurrently with classical anarchist thought. 

Some movements within the anarchist sphere had a revolutionary bent and were willing to engage in acts of political violence. Numerous statesmen such as Russian Tsar Alexander II and American president William McKinnley were assassinated by anarchists. 

The impact of these assassinations firmly ingrained in Westerners’ minds the idea that anarchism was associated with violence, thus requiring states to put tabs on these movements. 

However, the entry of anarcho-capitalism in the 1900s gave anarchism a new twist by not dismissing capitalism outright. In fact, the average anarcho-capitalist embraced the market and saw it as a tool to fight against the state. By taking a look at the roots of this subsect of anarchism, we can get an idea of how free-market anarchism came about.

Early European Figures of Anarchist Thought

Across the pond, existed some precursors to American-style anarcho-capitalism. Etienne de la Boétie (1530-1563), a French judge, was an early proponent of anarchist thought. 

In his work, the Discourse on Voluntary Servitude, he advocated for civil disobedience and nonviolent resistance. Mr. libertarian himself, Murray N. Rothbard praised de la Boétie’s work for its emphasis on civil disobedience against unjust state actions.

The French intellectual Frederic Bastiat (1801-1850) played an unheralded role during his career making the case for capitalism. 

His political theory of liberty was spelled out in his magnum opus, The Law, in which he made the case for a laissez-faire economy and viewed the use of state power in economic affairs as an immoral act. 

Although he was a minarchist, Bastiat was one of the 19th century’s strongest proponents of individual rights and an inspiration for Austrian economists such Ludwig von Mises and Friedrich A. Hayek in the subsequent century. Bastiat’s The Law remains an influential introductory text for pro-capitalist adherents.

Gustave de Molinari (1819-1912), a Belgian political theorist, was another European figure who gave a unique spin to the anarchist movement. De Molinari was one of the most notable pre-Rothbardian anarchist figures who blended anarchism with capitalist thought. 

In his work, the Production of Security, de Molinari made the case for private defense and property rights and railed against state monopolies. Modern anarchist figures such as Hans-Hermann Hoppe have lauded de Molinari’s work for being ahead of its time in pushing for anarchism with capitalistic features. 

The German philosopher Max Stirner also contributed to developing anarchist thought in Europe. Stirner was renowned for his emphasis on individualism and is seen as the father of modern individualist anarchism. His magnum opus, The Ego and Its Own is filled with anti-authoritarian and individualist themes that have been passed on to succeeding generations of anarchists.

Although not an anarchist per se, the British philosopher Herbert Spencer was known for his firm advocacy of capitalist principles in the latter half of the 1800s. Murray Rothbard described Spencer’s Social Statics as “the greatest single work of libertarian political philosophy ever written.” 

Anarchists in the United States

Thinkers such as Lysander Spooner and Benjamin Tucker provided much of the influence to individualist anarchist thought in the United States. Lysander Spooner gained notoriety for his unsuccessful efforts to challenge the U.S. Post Office with his American Letter Company and his support for secession during the Civil War. 

In Tucker’s case, he was prominent during the latter half of the 19th century and was one of the main opponents of intellectual property and patents. 

Tucker believed that patents served to prop up corporate interests and should be abolished in order to facilitate more competition. In addition, Tucker was an opponent of state socialism and believed in an anarchist society centered on decentralization. He was not particularly concerned about using a centralized state to seize the means of production.

Other figures such as Albert Jay Nock, a renowned libertarian author, made significant journalistic and literary contributions to anarchist thought in the United States through his publications at The Nation and other mainstream papers. Nock took many of the principles of classical liberalism and used them to justify his anarchist thought in his most famous text, Our Enemy, The State

Classical Liberalism Makes a Comeback In Reaction to Statism

The implementation of the New Deal and the subsequent Great Society legislative projects gave libertarianism a major boost in the United States. With progressivism becoming the dominant ideology, the new political philosophy of libertarianism began to take shape to counter this collectivist narrative. 

Libertarianism used the tradition of the classical liberals that preceded them to build a new philosophy that challenged statism and put the free market back on a pedestal

20th Century Anarcho-Capitalism in America

Born in New York City, Murray Rothbard became the leading voice for libertarian thought in the 1900s. Rothbard was heavily inspired by the principles of the Austrian school of economics as well as anarchist thought. 

He was a firm believer in natural law and the precepts of classical liberalism, but wanted to push the philosophical envelope even further. 

At the center of Rothbard’s anarcho capitalism definition is a focus on the free market. An anarcho-capitalist society would rely on a laissez-faire economic system. Some prerequisites for this system to function are markets, property rights, and the rule of law.

In penning numerous works such as Power and Market, For a New Liberty, and the Ethics of Liberty, Rothbard spelled out his radical take on libertarianism. Unlike his New York counterpart Ayn Rand, who championed the minarchist system of Objectivism, Rothbard was firmly against the state. 

Unlike most classical liberals, Rothbard viewed the state as immoral and an entity that routinely violated natural law. In addition, he brought forth the ideas of pacifism into foreign policy and challenged the prevailing foreign policy orthodoxy of interventionism.

The Rothbardian Vision for Libertarianism

Under Rothbard’s anarcho-capitalist vision, the state is viewed as an illegitimate institution. The libertarian economist even went out of his way to call for the market to step in to provide basic services that were usually reserved for the state. Namely, the courts, police, and national defense could be supplied by market forces.

Rothbard firmly believed that his system could allow for a free-market legal system to emerge. It would use arbitration and basic tort law to settle disputes between two conflicting parties. 

Unlike anarchists of the previous century such as Proudhon and Kropotkin, Rothbard viewed capitalism in a positive light. In an interview with the American libertarian journal The New Banner, Rothbard declared that “capitalism is the fullest expression of anarchism, and anarchism is the fullest expression of capitalism.” Rothbard’s sympathies with the Austrian school of economics largely explained his affinity with capitalism.

David Friedman’s Take on Anarcho-Capitalism

Another figure that stood out in the defense of anarcho-capitalist thought was David Friedman. The son of famous economist Milton Friedman, the younger Friedman was more radical than his father by advocating for anarcho-capitalism. In his most famous work, The Machinery of Freedom, Friedman made a compelling case for market anarchism. Like Rothbard, he argued that markets were capable of handling judicial, law enforcement, and defense matters.

What separated Friedman and Rothbard was their justification of anarchism. Rothbard was of the view that the state is an inherently immoral institution and must ultimately be abolished. 

Friedman, on the other hand, took a more consequentialist approach, in that he believed anarcho-capitalism would produce the best results for society at large. Friedman was not necessarily concerned with moral implications of the state’s existence and did not view it as evil per se.

Critiques of Anarcho-Capitalism

All political movements have their critics. Anarcho-capitalism has been no exception to this trend. Although ancaps will hear the frequently asked question (faq) “who will build the roads?”, there are some deeper questions that detractors will pose in order to challenge the market anarchist philosophy. 

Some of the most powerful critiques of anarcho-capitalism have come from the anarchist movement itself. We have to remember that the form of anarchism expressed by Rothbard holds certain principles such as market interactions and private property that left anarchists viewed negatively. 

Left anarchists argue that anarcho-capitalist policies would allow for individuals and corporations to gain too much financial power. Influential left anarchists like Noam Chomsky believed that market anarchist policies would lead to tyranny and oppression, with corporations wielding excessive power over the rest of society.

Libertarian Skepticism Towards Market Anarchy

While libertarians believe in a free society, some are skeptical of anarchism. Advocates of minarchism view a libertarian society as one where only the state is in charge of protecting private property and people’s lives. The state will still control law enforcement, the legal system, and the provision of defense services. 

Minarchists are skeptical of market forces providing law and order. Some believe that without a state, individual liberty cannot exist. A breakdown in order will result in a chaos spiral that puts natural rights in jeopardy and brings back society to its primordial state of violence and disorder. For minarchists, natural law can only be upheld by a strong state that only limits itself to a few functions.

Additionally, minarchists see the state as a critical institution in ensuring equal rights. By ceding legitimate government power to private courts, private defense agencies, and insurance providers, a market anarchist system could cause disparate results that generate social instability and conflict between people. 

How Supporters of Market Anarchy Respond to Their Critics

The supporters of market anarchism would counter these critiques by calling attention to how statism has already generated a considerable amount of instability and adds fuel to the fire of social unrest. In a stateless society, the market, which factors the wants and desires of people, would ultimately determine how goods and services are allocated.

The market operates under a profit and loss system. This signals to entrepreneurs whether they’re doing something right or they’re messing up. In a statist system, however, there is no way for them to gauge if they’re serving the interests of the public. Government services will always have the benefit of being financed by taxpayers, no matter how poor the government’s performance is. There is no way a private entity could stay afloat under those circumstances. 

Concluding Thoughts

An anarcho-capitalist society doesn’t promise utopia, but its most prominent theorists argue that it’s the best system to use when compared to the alternatives. 

Advocates of this kind of political philosophy use the examples of Anglo-Saxon England, medieval Iceland, and the nineteenth-century American West to show how these principles have existed in previous historical epochs. The jury is still out on the viability of anarcho-capitalism in the real world. 

Nonetheless, the arguments surrounding it are worthy of debate.

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