The 'Economic Means' vs. the 'Political Means': Franz Oppenheimer Makes a Key Political-Capitalism Distinction

[Editor Note: With T. Boone Pickens (et al.) trying to get natural gas vehicles off the ground with a $80,000 per vehicle special tax break, it is worth examining the origins of the political means versus the economic means to business (profit/loss) success. All roads lead to Franz Oppenheimer (1864–1943), a German sociologist/political scientist who saw capitalism’s business leaders at work.]

“I propose in the following discussion to call one’s own labor, and the equivalent exchange of one’s own labor for the labor of others, the ‘economic means’ for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the ‘political means’.”

– Franz Oppenheimer, The State. New York: Free Life Editions, 1908 (1975), pp. 24-25 (full quotation at end of blog).

MasterResource sharply distinguishes between enterprise that is motivated by and dependent upon consumer demand in a free market, and profit-seeking that is abetted by special government favor (SGF). SGF can be a special provision in the tax code, a check from the U.S. Treasury, or a regulation that benefits a company or whole industry at the expense of consumers or taxpayers.

The useful terms economic means and political means were introduced by Franz Oppenheimer in 1908 (see above) and have become part of libertarian political economy as explained at Wikipedia:

Albert Jay Nock introduced these concepts to American readers in his own book “Our Enemy the State.” His market and political ideas, especially about economic and political means, influenced Murray Rothbard‘s thesis through Nock and Frank Chodorov….

Ludwig Erhard studied economics with Franz Oppenheimer and was strongly influenced by Oppenheimer’s ideas of “liberal socialist” economic policy that attempted to steer a middle path between state socialism and liberalism. Albert Jay Nock, although a libertarian and minarchist, as well as vocal critic of state-socialism, was deeply influenced by Oppenheimer’s analysis of the fundamental nature of the state.

The Economic Means, a Modern Restatement

A challenge and opportunity for the growing free-market populist movement, as represented by the Tea Parties and libertarian wing of the Republican Party, as well as Left groups in opposition to corporate welfare, is to reorient the amorphous concept of “social corporate responsibility” along the lines of Principled Entrepreneurship™.

Principled Entrepreneurship™ has been defined by libertarian entrepreneur Charles Koch in his book The Science of Success as follows:

Principled Entrepreneurship™ is defined as “maximizing long-term profitability for the business by creating real value in society while always acting lawfully and with integrity.” Such value creation can only be measured in a free market where consumers have choices, and where profits (and losses) are meaningful measures of business performance.

Principled entrepreneurship eschews political profiteering, which redistributes and destroys wealth rather than creates it. Thus political capitalism is discouraged in favor of free-market capitalism by the company practicing principled entrepreneurship.

In practice, principled entrepreneurs spend their time anticipating and meeting consumer demand rather than seeking non-market political favors such as a special tax provision, a cash subsidy, or a restriction placed on a competitor.

More quotations and discussion of principled entrepreneurship™, the economic versus political means, and political capitalism is theory and practice can be found on my website, www.PoliticalCapitalism.org and specifically here: http://www.politicalcapitalism.org/what/.

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Other blogs on political capitalism at MasterResource include:

Wisdom from T. Boone against Rent-Seeking Pickens (remember when you said ….?)

Dear U.S. Chamber of Commerce: Why Attempt to Resuscitate a Brain Dead Climate Bill?

Political Capitalism: Understanding the Beast that Broke the Cage (Part I: what is political capitalism?)

Origins of the Gasoline Tax (Part II of “Political Capitalism: Understanding the Beast that Broke the Cage”)

“[Nuclear] Fortunes in Cap-and-Trade” (Part III of “Political Capitalism: Understanding the Beast that Broke the Cage”)

Appendix: Oppenheimer’s Vital Distinction

“There are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one’s own labor and the forcible appropriation of the labor of others. Robbery! Forcible appropriation! These words convey to us ideas of crime and the penitentiary, since we are the contemporaries of a developed civilization, specifically based on the inviolability of property.

And this tang is not lost when we are convinced that land and sea robbery is the primitive relation of life, just as the warrior’s trade – which also for a long time is only organized mass robbery – constitutes the most respected of occupations. Both because of this, and also on account of the need of having, in the further development of this study, terse, clear, sharply opposing terms for these very important contrasts, I propose in the following discussion to call one’s own labor and the equivalent exchange of one’s own labor for the labor of others, the “economic means” for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the “political means.” (pp. 24-25)

Franz Oppenheimer’s The State can be read online.