Classical Economics

Beginning with the ideas of Adam Smith (An Inquiry into the Nature and Causes of the Wealth of Nations, 1750), including the ideas of David Ricardo, and ending approximately with John Stuart Mill (1850’s) the framework was established for classical economics.

Mill in particular established the foundation for free trade in advocating individual libertarian autonomy rights which had the effect of limiting legislative authority in matters effecting the private economy.  In the context of 19th Century Europe, this argument makes much sense, monopolies had been granted to crown corporations for most major state projects and independent private business moguls were working toward respectability. In the context of our 21st Century corporate global climate the argument may validly be reversed. It can be argued that individual rights have the effect of lending legitimacy to legislation over matters effecting the private economy.

Overall, the first classical theorists began the analysis of wealth or economic growth by focusing on determinations of economic value based on the agrarian model. Land, capital, and labour were the three categories that created wealth. These relate to value derived from the use of rents, profits, and labour.

The Progress of Industrialization

The first ripple encounter by classical economics came from sources such as Karl Marx, around the 1850’s. He focused on the disparity of equality between the various classes and proposed reorganization of the traditional economic model that divided people into landowners, capitalists, or labourers. Marx advocated the overthrow of the bourgeois capitalist by the proletariat labourer, and the confiscation of land under the centralized control of a Communist government. He also predicted that capitalism and the wage system would end in revolution because the mass of people, the labourer, would not allow the ownership of resources to be managed by the few, the rich, once capitalism ran its course creating a gulf of disparity between the rich and the poor.

Anarchist economic theorists proposed other models of economic reorganization. Free trade has its origins in anarchist thinking. Although Mill’s ideas are described as libertarian, his free trade ideas were anarchist. Anarcho-capitalism is the unwaivering extreme view that absolute free trade will promote the benefit of capitalists and trickle down to benefit everyone. Free trade ideas have their origin in the economic work of Pierre Proudhon, the “father of anarchism.”

Proudhon, 1850’s

Pierre Proudhon libertarian ideas involved advocating a form of sovereignty association in the guise of decentralized federalism. Anarchism was presented as a pragmatic solution to commerce and trade. Anarchism was to be founded on concrete and practical solutions of organized society for the mass of people, a conscious attempt to avoid abstractions and self-created power ideologies.

It was proposed that a tariff free environment would allow for individual effort and needs to efficaciously guide the flow of material goods from union owned manufacturing centres to the people. The minimal impairment of the individual by the government was key to a cost effective environment, as least intrusive as possible, while eradicating the govern/governed class difference. He coined the refrain, “Property is theft,” and was concerned with limiting the role of authority in society to the maximum.

Proudhon did not advocate an absolute or extreme position but rather warned against utopianism, and absolutism as a kind of thought that fails to distinguish between concrete reality and abstract products of the mind. In The Federal Principle, 1852, Proudon sought to find a realistic pragmatic balance in political life between, “Authority and Liberty, two principles which underlie all forms of organized society, on the one hand contrary to each other, in a perpetual state of conflict, and on the other can neither eliminate each other nor be resolved, some kind of compromise between the two is necessary. Whatever the system favoured, whether it be monarchical, democratic, communist or anarchist, its length of life will depend to the extent to which it has taken the contrary principle into account.”

Anarchist society is to be achieved by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of the state. He labelled himself a practical reformer and saw the life of society as perpetual reformation, reform which should go on unceasingly. The role of the federation was to reserve power for the citizen rather than the state based on free association concepts. Proudhon was in favour of private ownership of small-scale property. He opposed the corporate ideal of individual ownership over large industries because workers would lose their rights and ownership. Property was essential to building a strong democracy through co-operative associations, like labour unions, but only as to empower the mass of people, not for the benefit of the bourgeoisie. Although anarchist thought after Proudhon was also used as an absolutist doctrine representing the demand “for every human being the right and means to do whatever pleases him.” Proudhon’s contribution to history is still reflected in politics represented by comity, free trade, and the federalist movements of today.

The Economics of Kropotkin

The Conquest of Bread

Most anarchists rejected capitalism and strove to create a system beyond the free market. Kropotkin claimed that economics should be approached from the standpoint of consumption–of human needs. The needs of mankind should govern production, and the means of satisfying production should include the least possible waste of human energy. According to Kropotkin, personal property should be abolished, the wage system, cash and credit discarded, and to the extent possible, all goods and services should be provided free of charge to all. Goods available in abundance should be available without limit; those in short supply should be rationed. He envisions a decentralized anarchist economic polity to oversee production and distribution of necessities, in all their variety, not on the basis of position or productivity, but on need in a free and democratic society.

Bakunin, 1914.

Bakunin offered a critique of capitalism, in which authority and economic inequality went hand in hand, and a critique of state socialism, (Marx) which was said to be one sided in its concentration on economic factors while grossly underestimating the dangers of social authority. Marx was centralist. Bakunin opposed centralism with federalism.

Bakunin believed that representative democracy, or parliamentary democracy, had found a way of gaining legitimacy through the illusion that some how the voters were in charge of running the system. The reality, he posits, is that the capitalist class is in permanent control. So long as the great mass of the population has to sell its labour power in order to survive, there cannot be democratic government. So long as people are economically exploited by capitalism and there are gross inequalities of wealth, there cannot be real democracy. Economic facts are much stronger than political rights. No one can govern for the people in their interests. Only personal and direct control over our own lives will ensure that justice and freedom will prevail. To abdicate direct control is to deny freedom. To grant political sovereignty to others, whether under the mantle of democracy, republicanism, the people’s state, or whatever, is to give others control and therefore domination over our personal lives.


Anarchism is the name given to a principle or theory of life and conduct under which society is conceived without government – harmony in such a society being obtained, not by submission to law, or by obedience to any authority, but by free agreements concluded between the various groups, territorial and professional, freely constituted for the sake of production and consumption, as also for the satisfaction of the infinite variety of needs and aspirations of a civilized being.

As to their economical conceptions, the anarchists, in common with all socialists, of who they constitute the left wing, maintain that the now prevailing system of private ownership in land, and our capitalist production for the sake of profits, represent a monopoly which runs against both the principles of justice and the dictates of utility. Capitalists are the main obstacle which prevents the success of modern techniques from being brought into the service of all, so as to produce general well-being. True progress lies in the direction of decentralization, both territorial and functional, in the development of the spirit of local and personal initiative, in a free federation of autonomous sovereign groups.

Political organization ought to be governed by the expressions of individual and group opinions, not directing centres which control people. They should balance group rights of self-determination with the freedom to associate or not with larger political bodies, free from coercion. Anarchy is based upon the free federation of participants in order to maximize individual and collective well-being. Self-protection is the only end for which society may legitimately infringe upon the liberty of action of any individual. Power should be exercised to prevent the individual from doing harm to others, but that is the only part of conduct for which a person should be answerable to society. In every other way people should have freedom.