Chapter 26: Markets Versus Capitalism

Martin Elson

Cost the Limit of Price argues that where entry is open and costs can be seen, prices fall toward cost. What Prices Carry argues that prices also carry the rules they were set under, and names four ways those rules bend a market. Most people, left and right, assume markets and capitalism are the same thing. Defenders of the system the US and elsewhere have say its giants, its fortunes and its crashes are the price of free exchange, though much of what they defend is propped up by subsidy and privilege: socialism for the capitalists. Its critics agree that the giants and the crashes are what markets produce, and reject the whole package. The French historian Fernand Braudel traces the everyday economy and the rise of capitalism across four centuries in his three-volume Civilization and Capitalism, 15th–18th Century. He thought both sides were wrong, and said so plainly near the end of his life. This chapter sets out his distinction, tests it against the strongest objections from the right and from the left, and adds the thing neither markets nor states supply: the commons.

One word, three things

Gary Chartier sorts “capitalism” into three senses: free exchange; big business and government working hand in glove; and the rule of workplaces and society by the people who own capital. A defender can argue for the first and then claim the record of the second as its fruit. The anthology Chartier edited with Charles Johnson took its title from the fix: Markets Not Capitalism.

Roderick Long sorts both words along two questions: how control of the means of production is organized, and who holds it.

Who controls ↓ · How organized →	Privately	Socially
Workers themselves	Individualist anarchism, mutualist or agorist	Paradigmatic socialism, state or anarcho-communist
Capitalist owners	Paradigmatic capitalism	Corporate-state capitalism, or fascism

Long’s own reading: capitalist control (the bottom row) is largely the result of state intervention, so libertarians defend a genuine free market (the left column) and expect it to lead to worker control (the top row). That is the sense in which Benjamin Tucker, the individualist anarchist, called himself a socialist.

Johnson makes the same point about “privatization.” To the IMF, to neoliberal governments, and to Naomi Klein in The Shock Doctrine, privatization means things like tax-funded contracts for mercenary firms, prisons run for profit on the public’s money, and state monopolies in oil, water and power sold to well-connected corporations, with the proceeds going to the treasury and the monopoly left intact. What Johnson and other advocates of freed markets mean is close to the opposite: wealth handed back to the people who made it, and industry rebuilt on free association. Klein and the IMF mean the same sell-offs by “privatization”: the IMF praises them as the market at work, and Klein condemns them as the market at work. Klein documents the cronyism herself, but blames it on the market rather than on the states that arranged it, so both sides end up arguing over a transfer from the state to its friends as if it were free exchange. That is one reason the argument goes nowhere. The introduction already cites her on how a crisis can bring out a society’s “better devils” rather than its better angels; the sell-offs she documents are one shape that takes.

So, a rule for this part of the book. When I say market, I mean exchange people can see into and walk away from. When I say capitalism, I mean Chartier’s second and third senses: large capital fused with the state, and the rule of those who own over those who don’t. Whether the first can exist without the other two is the question here, not the premise.

Braudel’s house

In Civilization and Capitalism, 15th–18th Century and the shorter lectures published as Afterthoughts on Material Civilization and Capitalism, Braudel pictures economic life as a house with three floors.

The ground floor is material life: routines handed down for generations, farming, tools, cooking, the things made and used at home or in the village and never sold. For most of history, most people lived mostly there.

The middle floor is the market economy. It is regular, everyday exchange: grain and wood carted to a nearby town, and long-distance trade too, so long as it is routine and open to small merchants as well as large. Its marks are transparency and modest margins. Each party knows the rules and roughly the outcome in advance, the profit can be estimated beforehand, and buyer and seller deal face to face.

The top floor is what Braudel, with some reluctance about the word, calls “capitalism,” the “zone of the anti-market.” A handful of large merchants and financiers work there, in long-distance trade and banking, where profits are large and hidden. Braudel calls these large dealers capitalists and gives them three marks. They refuse to specialize: specialization grows from the bottom up, and a shopkeeper who got rich and became a merchant promptly stopped specializing, because the advantage at the top is being free to choose where the money goes next. They speculate. And they seek monopoly, in law or in fact. The large dealer stood between producer and final buyer, so only he knew prices at both ends, and he had cash when others had none. Braudel cites a Dutch merchant warning his partner in Bordeaux to keep their plan quiet, since once competition came in, the price would fall toward cost and the profit above it would be gone. Competition doesn’t stop anyone earning a living by making or carrying goods; what it removes is the margin on top, the part that is taken rather than made. That margin is what the top floor exists to protect. The refusal to specialize is about where the money goes, not about how the work is done, and it is easy to find today. The factories, mines and software teams are as specialized as ever; the capital above them is not. Berkshire Hathaway owns an insurer, a railroad, power companies and a candy maker. Private-equity firms such as Blackstone and KKR buy and sell companies in almost any industry, and the largest index funds hold a slice of nearly every listed company at once. Hedge funds go further still, moving money between stocks, bonds, currencies and commodities by the hour, often with borrowed money; that is the subject of the next chapter. Their edge is the one Braudel described: being free to move money to wherever the margin is.

Monopoly in law is easy to see, because it is written down. The Dutch and English East India Companies held charters giving them sole rights to trade east of the Cape of Good Hope, and French kings farmed out the salt tax and the tobacco monopoly to private syndicates. Today the charter has become the contract. Government agencies often bundle work into contracts so large that only a handful of firms can bid, and after the Cold War the Pentagon told its suppliers to merge, at a 1993 dinner insiders later called the Last Supper; dozens of major defense contractors became five. Licenses, airwaves auctioned in blocks only giants can afford, and compliance rules that cost a large firm little and a newcomer a great deal do the same work. Monopoly in fact is harder to see, because it looks like nature. Braudel’s merchant held his market without a charter: he advanced cash and raw materials to spinners and weavers, so they owed him their next season’s work, and only he knew what the cloth fetched at the far end. Even that rested on law, on courts that enforced the debts and the merchant’s title to the goods. The pattern holds today. Limited liability, corporate personhood, twenty-year patents, courts that enforce noncompete clauses, and laws against getting around digital locks are all choices made in law, yet they are usually described as simply how business works. A privilege that lasts long enough stops looking like a privilege and starts looking like a fact. What Prices Carry sets out the main ones; the point here is that the top floor stands on them, and its weight presses down on the two floors below: on the market, where newcomers can no longer get in, and on material life, where people lose what they could fall back on.

Two more of Braudel’s points matter here. Capitalism was a latecomer, it didn’t invent markets, production or hierarchy, but arrived when they were ready and used them. And it lived beside the state. The moneyed families of Venice, Genoa and Florence, and the merchants who steered the Dutch Regents, were friends of the prince, and Braudel concludes that capitalism triumphs only when it becomes identified with the state. Immanuel Wallerstein, summing him up, pointed to a fact about states that the left keeps running into, workers’ movements that asked the state to regulate capital and protect competition kept finding the state guaranteeing the very monopolies they were fighting. The same states also took away the tools workers had used to check capital without the state. The Sherman Antitrust Act, passed against the trusts, was turned on a hatters’ union boycott in the Danbury Hatters case of 1908. During and after the First World War, federal prosecutors convicted about a hundred leaders of the Industrial Workers of the World, and some twenty states passed criminal-syndicalism laws aimed at the Wobblies and their direct action. The Taft-Hartley Act of 1947 banned secondary boycotts and sympathy strikes, outlawed the closed shop, and let states pass right-to-work laws. Capital got a state to protect it; labor got a state to manage it.

The friends of the prince were easy to find in the Gilded Age. The companies that built the first transcontinental railroad got tens of millions of acres of federal land and federal bonds under the Pacific Railway Acts, and the Crédit Mobilier scandal showed where some of the money went. Andrew Carnegie made steel behind a tariff that kept British rails out of the American market. Henry Ford is the harder case: he broke the Selden patent cartel in court and got rich selling cheap cars, though he sold them for roads the public built. The friends of the prince are just as easy to find today. Elon Musk’s companies grew on public money and public rules: a $465 million federal loan to Tesla in 2010, nearly $9 billion by 2023 from selling the emissions credits that regulators require rival carmakers to buy, and billions more in NASA and Pentagon launch contracts for SpaceX. For its first two decades Amazon didn’t have to collect sales tax in states where it had no physical presence, thanks to a 1992 Supreme Court ruling about mail-order catalogs, and Amazon Web Services grew partly on a 2013 cloud contract with the CIA worth about $600 million. Mark Zuckerberg’s Meta bought its two most dangerous rivals, Instagram in 2012 and WhatsApp in 2014, with regulators’ approval, and in November 2025 a federal judge declined to undo the deals, a ruling the FTC has appealed. Outside the United States the pattern is plainer still: Carlos Slim led the group that bought Mexico’s state telephone monopoly when it was privatized in 1990, and Russia’s first oligarchs got their oil and metals companies through the loans-for-shares auctions of 1995. None of this means these companies make nothing people want. It means part of each fortune is a margin the state protected, not something that was made.

Braudel was no libertarian, and he doesn’t claim the top floor always needed the state. Secrecy and the size of a purse could do much of the work alone. That fits the objection in What Prices Carry that captivity doesn’t need a statute. The test stays the same whoever builds the fence: can the buyer see the cost (cost-price), and so the margin on top of it, and can they leave?

Pro-market is not pro-business

In 2003, at the height of the protests against the WTO and NAFTA, the economist Virgil Henry Storr pointed out how odd the coalition against free trade was. It joined unions and Pat Buchanan, environmentalists and polluters, people who agree on nothing else. His diagnosis was that big business wants freed trade even less than they do. Multinationals want subsidies and tax breaks at home and abroad, regulations that cost their rivals more than themselves, and exclusive contracts with foreign governments to extract resources. Storr compares them to the East India Company and the British South Africa Company, with one difference: the colonized saw through the old companies’ talk of civilization, while the new ones have persuaded much of the world that what they promote is free trade. Being pro-business and being pro-market, he concludes, pull in opposite directions. Capitalists seek rents and monopolies, not freed markets: captive, ratcheted and rigged so-called “markets,” where the rules are written in their favor and the exits are closed.

Storr turns on his own side, and that is the part worth keeping. The moral case for markets rests on respect for existing property. If the holdings were got by theft, conquest, slavery or colonial seizure, the market doesn’t correct that. It carries it forward, and it has no way to repair it. Storr cites Jamaica Kincaid’s A Small Place: people like her are wary of capitalism because, within living memory, they were the capital. His own picture is a robber who holds up a room at gunpoint and then proposes that from now on everyone respect property and trade freely. Storr ends unsatisfied. He doubts that reparations can work, points to land reforms that failed, Zimbabwe’s among them, and settles for open access to capital and information from here on.

Where I part ways: “start from here” is not neutral, and Storr knew it. Property Without Propertarianism argues that a title doesn’t clean itself by changing hands, and Braudel’s top floor was built partly on exactly these seizures; he follows Wallerstein in tying it to slavery in the Americas and the second serfdom in Eastern Europe. Storr’s warning about land seized and handed out by a new ruler is fair. But repair doesn’t have to mean a new master. What else it can mean starts with the commons.

The commons: neither market nor state

In 1968 Garrett Hardin published “The Tragedy of the Commons.” A pasture open to all will be overgrazed, he argued, because each herder gains the whole of an extra animal and bears only a share of the damage. Two cures followed: divide the land into private plots, or put the state in charge. Elinor Ostrom spent her career checking what people actually do. In Governing the Commons (1990) she found communities that had managed shared pastures, forests, fisheries and irrigation for centuries with neither cure. Among her cases: villagers in Törbel, in the Swiss Alps, have run their high meadows under their own rules, on record since 1483; Japanese villages kept common forests for generations; and in Valencia an irrigation court of farmers still meets every Thursday at the cathedral door to settle disputes over water. Other commons failed, and Ostrom drew her design principles from the difference: clear boundaries on who may use what; rules fitted to local conditions; the people bound by the rules help make them; monitors who answer to the users; sanctions that start small and grow; cheap, local ways to settle disputes; outsiders who respect the users’ right to organize; and, for large systems, layers nested inside one another. Thirty years on, in “Extensions of ‘The Tragedy of the Commons'” (1998), Hardin conceded that his argument held for unmanagedcommons. Ostrom shared the 2009 Nobel prize in economics, and titled her lecture “Beyond Markets and States.”

Why does the commons belong in a chapter on markets? Because of Braudel’s ground floor. A market is voluntary only if you can say no, and you can say no only if you have something to fall back on. Common pasture, woodland and fishing rights were that something for most people for centuries. Enclosure took them in England, as Ellen Meiksins Wood traces below, and colonial seizure took them across much of the world, and people with nothing left to fall back on had to sell their time on whatever terms were offered. Ostrom’s principles also read like this book’s own tests. Those bound by the rules make them; the monitors answer to those they watch; and if the people who most need a commons can’t fire whoever fails to protect it, the tragedy follows.

The strongest objections

From the right, the strongest case is Deirdre McCloskey’s. In Bourgeois Equality (2016) she points to the Great Enrichment: real income per person in the rich countries has grown roughly thirtyfold since 1800. Accumulation can’t explain it, she argues, since capital had been piled up before, and neither can exploitation, since theft is ancient. What changed was ideas: a new dignity and liberty for ordinary people to try things, and what she calls trade-tested betterment. She dislikes the word “capitalism” because it names the wrong cause. Pressed against this chapter, her case says that splitting the good market from bad capitalism lets me keep the credit and disown the bill. Many great fortunes came from real innovation, and Alfred Chandler argued in The Visible Hand that the big managerial firm won because it coordinated railroads, steel and distribution better than many small ones could.

McCloskey’s own words help the reply. If betterment is trade-tested, it is tested on the middle floor, where newcomers can enter and copy. Innovation earns its profit. The question, as in Labor and Property, is a profit that lasts. In a freed market a profit draws imitators and gets competed away, so a margin that persists long after the innovation usually rests on something else: a patent, a license, the size of the purse, a friend of the prince. Chandler’s own first example makes the point. The railroads, as we saw above, were built on federal land grants and bonds: land that might have stayed common, handed to private companies by charter. Their size was granted before it was earned, so their later skill at coordination can’t settle whether bigness won on its merits. That question gets its full hearing in the chapter on the Austrian school, where Israel Kirzner makes the best case for entrepreneurial profit. Whether the giants win by efficiency or by leverage is the chapter after this one.

From the left, the strongest case is Ellen Meiksins Wood’s. In The Origin of Capitalism she argues that Braudel, like Adam Smith, mistakes capitalism for commerce grown large. For her it began not in the counting-houses of Venice but in the English countryside, when tenant farmers had to compete in the market to keep their leases and landless laborers had to sell their work to eat. What makes it capitalism is not size or monopoly but market dependence: the market stops being an opportunity and becomes a compulsion. On that view, you can’t free the market from capitalism: freeing the market just unleashes capitalism, because market dependence is what capitalism is.

Wood is right about what matters most, and it is the leaving test seen from the other side. But markets are older and wider than capitalism: farmers, artisans, co-ops and street vendors trade every day without being capitalists. Capital uses the market the way a racketeer uses a neighborhood. It works inside it, bends it, and tries to corner it, so that no small trader can rock the boat and exchange stays tilted in its favor rather than fair. The damage spreads downward. Some small traders learn the game and copy it, adding whatever margin the market will bear. Others are squeezed from the opposite side: a giant with a large enough share can live on a thin margin per sale, because thin margins on enormous volume still add up, and the small seller who has to match its price is left working for little or no margin at all. Market dependence is what you get when the ground floor has been taken away. Her English tenants were dependent because the land had been enclosed and was held by a few. Her history is a case of what Charles Johnson calls concentration, and the answer to it is not fewer markets but more to fall back on: commons, tools owned by those who use them, the access rights set out in What Rights Are. A market people may refuse is a different institution from one they can’t.

Neither objection settles the question of whether a freed market would stay free. Braudel recalls Lenin’s warning that a freed village market might grow the whole tree of capitalism back. That is an empirical bet, and the introduction asks for the test to be set in advance. Here it is. Removing the state’s privileges isn’t enough on its own, since giants can begin to grow without them, as Braudel’s merchants showed. So suppose three things together: the privileges are gone, people still have a commons to fall back on, and firms are owned by the people who work in them and sell at cost. That is a different foundation, not the same game with fewer rules. Worker-owners have no outside shareholders demanding a margin, so the drive to corner a market loses its engine. If giants and lasting margins grow back even on that foundation, quickly, and stay, then Braudel’s distinction only describes the past. It would explain how capitalism grew, but give no reason to think a freed market would stay free.

What to keep

Braudel’s distinction holds as history: the open, modest market and the hidden, monopolizing summit are different things, and the people who worked in them knew it. Storr shows that pro-market and pro-business pull apart, and that markets inherit whatever theft came before them. Ostrom shows a third arrangement, neither market nor state, that can last for centuries. McCloskey is right that betterment came through trade; Wood is right that a market you can’t refuse is a compulsion. Put together: defend the middle floor, keep the ground floor under it, and watch the top floor, if not stop it. With a state, markets versus capitalism is David against Goliath, in fact and in law, as the examples above show. Without a state the top floor probably never gets built at all: even Braudel’s merchants needed courts to enforce their debts and their titles, and a top floor needs someone to grant the privileges it stands on. Whether big firms are rewarded for serving people better or simply for being big is where the next chapter begins.

Sources

• Fernand Braudel, Afterthoughts on Material Civilization and Capitalism (Johns Hopkins University Press, 1977). The three floors; the market as transparent and routine; capitalism as the anti-market; the capitalist’s refusal to specialize; capitalism identified with the state.
• Fernand Braudel, Civilization and Capitalism, 15th–18th Century, 3 vols. (Harper & Row, 1981–84). The full study; The Wheels of Commerce (vol. 2) on specialization from the bottom up.
• Immanuel Wallerstein, “Braudel on Capitalism, or Everything Upside Down” (Journal of Modern History 63, no. 2, 1991). The lesson for movements that asked the state to protect competition.
• Sebastian A. Stern, “Capitalism vs. The Market – A Braudelian Definition” (C4SS, Oct. 19, 2013). A left-libertarian reading of Braudel. original
• Gary Chartier and Charles W. Johnson, eds., Markets Not Capitalism (Minor Compositions, 2011). Chartier’s three senses of “capitalism” are in his essay “Advocates of Freed Markets Should Oppose Capitalism.”
• Roderick T. Long, “POOTMOP Redux!” (Austro-Athenian Empire, 2009). The two meanings each of “capitalism” and “socialism,” and the four-box chart. original
• Charles W. Johnson, “Sprachkritik: ‘Privatization'” (Rad Geek People’s Daily, 2007). Privatization as the IMF means it versus devolution to those who made the wealth. original
• Naomi Klein, The Shock Doctrine (Metropolitan Books, 2007). Crisis as the occasion for selling off public monopolies.
• Virgil Henry Storr, “Is It Markets and Big Business or Is It Markets versus Big Business?” (2003). Pro-business against pro-market; markets carry forward past theft.
• Jamaica Kincaid, A Small Place (Farrar, Straus and Giroux, 1988). Cited by Storr.
• Garrett Hardin, “The Tragedy of the Commons” (Science 162, 1968); “Extensions of ‘The Tragedy of the Commons'” (Science 280, 1998). The tragedy; the later concession that it concerns unmanaged commons.
• Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge University Press, 1990). Törbel, Japanese village forests, the Valencia huertas; the design principles.
• Elinor Ostrom, “Beyond Markets and States: Polycentric Governance of Complex Economic Systems” (Nobel lecture, 2009; American Economic Review 100, no. 3, 2010).
• Deirdre Nansen McCloskey, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World(University of Chicago Press, 2016). The Great Enrichment; trade-tested betterment.
• Alfred D. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Belknap Press, 1977). The big firm as better coordination.
• Ellen Meiksins Wood, The Origin of Capitalism: A Longer View (Verso, 2002). Capitalism as market dependence, born in English agrarian capitalism.
• Pacific Railway Acts of 1862 and 1864. Land grants and federal bonds for the first transcontinental railroad; the Crédit Mobilier scandal broke in 1872.
• F. W. Taussig, The Tariff History of the United States (G. P. Putnam’s Sons, 1888, and later editions). The duty on steel rails.
• Columbia Motor Car Co. v. C. A. Duerr & Co., 184 F. 893 (2d Cir. 1911). The Selden patent case Ford won.
• Loewe v. Lawlor, 208 U.S. 274 (1908). The Danbury Hatters case.
• United States v. Haywood et al. (N.D. Ill., 1918). The Chicago trial of the IWW leadership.
• Labor Management Relations Act (Taft-Hartley Act), 1947.
• Quill Corp. v. North Dakota, 504 U.S. 298 (1992), overturned by South Dakota v. Wayfair (2018). Sales tax and remote sellers.
• Bloomberg, “Tesla Rakes In $9 Billion From Carmakers Failing to Sell Enough EVs” (Feb. 9, 2024). original
• Associated Press, “Meta prevails in historic FTC antitrust case, won’t have to break off WhatsApp, Instagram” (Nov. 18, 2025). original
• Chrystia Freeland, Sale of the Century: Russia’s Wild Ride from Communism to Capitalism (Crown Business, 2000). The loans-for-shares auctions.