Yes, it is but it would be unlikely to be free-market based as the reality of capitalism would get the better of its apologetics. This can be seen from the two current schools of economics which, rightly, reject the notion of equilibrium — the post-Keynesian school and the so-called Austrian school.

The former has few illusions in the nature of capitalism. At its best, this school combines the valid insights of classical economics, Marx and Keynes to produce a robust radical (even socialist) critique of both capitalism and capitalist economics. At its worse, it argues for state intervention to save capitalism from itself and, politically, aligns itself with social democratic ("liberal", in the USA) movements and parties. If economics does become a science, then this school of economics will play a key role in its development. Economists of this school include Joan Robinson, Nicholas Kaldor, John Kenneth Galbraith, Paul Davidson and Steven Keen. Due to its non-apologetic nature, we will not discuss it here.

The Austrian school has a radically different perspective. This school, so named because its founders were Austrian, is passionately pro-capitalist and argues against any form of state intervention (bar, of course, the definition and defence of capitalist property rights and the power that these create). Economists of this school include Eugen von Böhm-Bawerk, Lugwig von Mises, Murray Rothbard, Israel Kirzner and Frederick von Hayek (the latter is often attacked by other Austrian economists as not being sufficiently robust in his opposition to state intervention). It is very much a minority school.

As it shares many of the same founding fathers as neoclassical economics and is rooted in marginalism, the Austrian school is close to neoclassical economics in many ways. The key difference is that it rejects the notion that the economy is in equilibrium and embraces a more dynamic model of capitalism. It is rooted in the notion of entrepreneurial activity, the idea that entrepreneurs act on information and disequilibrium to make super profits and bring the system closer to equilibrium. Thus, to use their expression, their focus is on the market process rather than a non-existent end state. As such, it defends capitalism in terms of how it reacts of dis-equilibrium and presents a theory of the market process that brings the economy closer to equilibrium. And fails.

The claim that markets tend continually towards equilibrium, as the consequence of entrepreneurial actions, is hard to justify in terms of its own assumptions. While the adjustments of a firm may bring the specific market it operates in more towards equilibrium, their ramifications may take other markets away from it and so any action will have stabilising and destabilising aspects to it. It strains belief to assume that entrepreneurial activity will only push an economy more towards equilibrium as any change in the supply and demand for any specific good leads to changes in the markets for other goods (including money). That these adjustments will all (mostly) tend towards equilibrium is little more than wishful thinking.

While being more realistic than mainstream neo-classical theory, this method abandons the possibility of demonstrating that the market outcome is in any sense a realisation of the individual preferences of whose interaction it is an expression. It has no way of establishing the supposedly stabilising character of entrepreneurial activity or its alleged socially beneficial character as the dynamic process could lead to a divergence rather than a convergence of behaviour. A dynamic system need not be self-correcting, particularly in the labour market, nor show any sign of self-equilibrium (i.e. it will be subject to the business cycle).

Given that the Austrian theory is, in part, based on Say's Law the critique we presented in the last section also applies here. However, there is another reason to think the Austrian self-adjusting perspective on capitalism is flawed and this is rooted in their own analysis. Ironically enough, economists of this school often maintain that while equilibrium does not exist their analysis is rooted on two key markets being in such a state: the labour market and the market for credit. The reason for these strange exceptions to their general assumption is, fundamentally, political. The former is required to deflect claims that "pure" capitalism would result in the exploitation of the working class, the latter is required to show that such a system would be stable.

Looking at the labour market, the "Austrians" argue that free market capitalism would experience full employment. That this condition is one of equilibrium does not seem to cause them much concern. Thus we find von Hayek, for example, arguing that the "cause of unemployment . . . is a deviation of prices and wages from their equilibrium position which would establish itself with a free market and stable money. But we can never know at what system of relative prices and wages such an equilibrium would establish itself." Therefore, "the deviation of existing prices from that equilibrium position . . . is the cause of the impossibility of selling part of the labour supply." [New Studies, p. 201] Therefore, we see the usual embrace of equilibrium theory to defend capitalism against the evils it creates even by those who claim to know better.

Of course, the need to argue that there would be full employment under "pure" capitalism is required to maintain the fiction that everyone will be better off under it. It is hard to say that working class people will benefit if they are subject to high levels of unemployment and the resulting fear and insecurity that produces. As would be expected, the Austrian school shares the same perspective on unemployment as the neoclassical school, arguing that it is "voluntary" and the result of the price of labour being too high (who knew that depressions were so beneficial to workers, what with some having more leisure to enjoy and the others having higher than normal wages?). The reality of capitalism is very different than this abstract model.

Anarchists have long realised that the capitalist market is based upon inequalities and changes in power. Proudhon argued that "[t]he manufacturer says to the labourer, 'You are as free to go elsewhere with your services as I am to receive them. I offer you so much.' The merchant says to the customer, 'Take it or leave it; you are master of your money, as I am of my goods. I want so much.' Who will yield? The weaker." He, like all anarchists, saw that domination, oppression and exploitation flow from inequalities of market/economic power and that the "power of invasion lies in superior strength." [What is Property?, p. 216 and p. 215] This is particularly the case in the labour market, as we argued in section B.4.3.

As such, it is unlikely that "pure" capitalism would experience full employment for under such conditions the employers loose the upper hand. To permanently experience a condition which, as we indicate in section C.7, causes "actually existing" capitalism so many problems seems more like wishful thinking than a serious analysis. If unemployment is included in the Austrian model (as it should) then the bargaining position of labour is obviously weakened and, as a consequence, capital will take advantage and gather profits at the expense of labour. Conversely, if labour is empowered by full employment then they can use their position to erode the profits and managerial powers of their bosses. Logically, therefore, we would expect less than full unemployment and job insecurity to be the normal state of the economy with short periods of full unemployment before a slump. Given this, we would expect "pure" capitalism to be unstable, just as the approximations to it in history have always been. Austrian economics gives no reason to believe that would change in the slightest. Indeed, given their obvious hatred of trade unions and the welfare state, the bargaining power of labour would be weakened further during most of the business cycle and, contra Hayek, unemployment would remain and its level would fluctuate significantly throughout the business cycle.

Which brings us to the next atypical market in Austrian theory, namely the credit market. According to the Austrian school, "pure" capitalism would not suffer from a business cycle (or, at worse, a very mild one). This is due to the lack of equilibrium in the credit market due to state intervention (or, more correctly, state non-intervention). Austrian economist W. Duncan Reekie provides a summary:

"The business cycle is generated by monetary expansion and contraction . . . When new money is printed it appears as if the supply of savings has increased. Interest rates fall and businessmen are misled into borrowing additional founds to finance extra investment activity . . . This would be of no consequence if it had been the outcome of [genuine saving] . . . - but the change was government induced. The new money reaches factor owners in the form of wages, rent and interest . . . the factor owners will then spend the higher money incomes in their existing consumption:investment proportions . . . Capital goods industries will find their expansion has been in error and malinvestments have been incurred." [Markets, Entrepreneurs and Liberty, pp. 68-9]

This analysis is based on their notion that the interest rate reflects the "time preference" of individuals between present and future goods (see section C.2.6 for more details). The argument is that banks or governments manipulate the money supply or interest rates, making the actual interest rate different from the "real" interest rate which equates savings and loans. Of course, that analysis is dependent on the interest rate equating savings and loans which is, of course, an equilibrium position. If we assume that the market for credit shows the same disequilibrium tendencies as other markets, then the possibility for malinvestment is extremely likely as banks and other businesses extend credit based on inaccurate assumptions about present conditions and uncertain future developments in order to secure greater profits. Unsurprisingly, the Austrians (like most economists) expect the working class to bear the price for any recession in terms of real wage cuts in spite of their theory indicating that its roots lie in capitalists and bankers seeking more profits and, consequently, the former demanding and the latter supplying more credit than the "natural" interest rate would supply.

Ironically, therefore, the Austrian business cycle is rooted in the concept of dis-equilibrium in the credit market, the condition it argues is the standard situation in all other markets. In effect, they think that the money supply and interest rates are determined exogenously (i.e. outside the economy) by the state. However, this is unlikely as the evidence points the other way, i.e. to the endogenous nature of the money supply itself. This account of money (proposed strongly by, among others, the post-Keynesian school) argues that the money supply is a function of the demand for credit, which itself is a function of the level of economic activity. In other words, the banking system creates as much money as people need and any attempt to control that creation will cause economic problems and, perhaps, crisis. Money, in other words, emerges from within the system and so the Austrian attempt to "blame the state" is simply wrong. As we discuss in section C.8, attempts by the state to control the money during the Monetarist disasters of the early 1980s failed and it is unlikely that this would change in a "pure" capitalism marked by a totally privatised banking system.

It should also be noted that in the 1930s, the Austrian theory of the business cycle lost the theoretical battle with the Keynesian one (not to be confused with the neoclassical-Keynesian synthesis of the post-war years). This was for three reasons. Firstly, it was irrelevant (its conclusion was do nothing). Secondly, it was arrogant (it essentially argued that the slump would not have happened if people had listened to them and the pain of depression was fully deserved for not doing so). Thirdly, and most importantly, the leading Austrian theorist on the business cycle was completely refuted by Piero Sraffa and Nicholas Kaldor (Hayek's own follower who turned Keynesian) both of whom exposed the internal contradictions of his analysis.

The empirical record backs our critique of the Austrian claims on the stability of capitalism and unemployment. Throughout the nineteenth century there were a continual economic booms and slumps. This was the case in the USA, often pointed to as an approximately lassiez-faire economy, where the last third of the 19th century (often considered as a heyday of private enterprise) was a period of profound instability and anxiety. Between 1867 and 1900 there were 8 complete business cycles. Over these 396 months, the economy expanded during 199 months and contracted during 197. Hardly a sign of great stability (since the end of world war II, only about a fifth of the time has spent in periods of recession or depression, by way of comparison). Overall, the economy went into a slump, panic or crisis in 1807, 1817, 1828, 1834, 1837, 1854, 1857, 1873, 1882, and 1893 (in addition, 1903 and 1907 were also crisis years). Full employment, needless to say, was not the normal situation (during the 1890s, for example, the unemployment rate exceeded 10% for 6 consecutive years, reaching a peak of 18.4% in 1894, and was under 4% for just one, 1892). So much for temporary and mild slumps, prices adjusting fast and markets clearing quickly in pre-Keynesian economies!

Luckily, though, the Austrian school's methodology allows it to ignore such irritating constrictions as facts, statistics, data, history or experimental confirmation. While neoclassical economics at least pretends to be scientific, the Austrian school displays its deductive (i.e. pre-scientific) methodology as a badge of pride along side its fanatical love of free market capitalism. For the Austrians, in the words of von Mises, economic theory "is not derived from experience; it is prior to experience" and "no kind of experience can ever force us to discard or modify a priori theorems; they are logically prior to it and cannot be either proved by corroborative experience or disproved by experience to the contrary." And if this does not do justice to a full exposition of the phantasmagoria of von Mises' a priorism, the reader may take some joy (or horror) from the following statement:

"If a contradiction appears between a theory and experience, we must always assume that a condition pre-supposed by the theory was not present, or else there is some error in our observation. The disagreement between the theory and the facts of experience frequently forces us to think through the problems of the theory again. But so long as a rethinking of the theory uncovers no errors in our thinking, we are not entitled to doubt its truth" [emphasis added, quoted by Homa Katouzian, Ideology and Method in Economics, pp. 39-40]

In other words, if reality is in conflict with your ideas, do not adjust your views because reality must be at fault! The scientific method would be to revise the theory in light of the facts. It is not scientific to reject the facts in light of the theory! Without experience, any theory is just a flight of fantasy. For the higher a deductive edifice is built, the more likely it is that errors will creep in and these can only be corrected by checking the analysis against reality. Starting assumptions and trains of logic may contain inaccuracies so small as to be undetectable, yet will yield entirely false conclusions. Similarly, trains of logic may miss things which are only brought to light by actual experiences or be correct, but incomplete or concentrate on or stress inappropriate factors. To ignore actual experience is to loose that input when evaluating a theory.

Ignoring the obvious problems of the empirical record, as any consistent Austrian would, the question does arise why does the Austrian school make exceptions to its disequilibrium analysis for these two markets. Perhaps this is a case of political expediency, allowing the ideological supporters of free market capitalism to attack the notion of equilibrium when it clearly clashes with reality but being able to return to it when attacking, say, trade unions, welfare programmes and other schemes which aim to aid working class people against the ravages of the capitalist market? Given the self-appointed role of Austrian economics as the defender of "pure" (and, illogically, not so pure) capitalism that conclusion is not hard to deny.

Rejecting equilibrium is not as straightforward as the Austrians hope, both in terms of logic and in justifying capitalism. Equilibrium plays a role in neo-classical economics for a reason. A disequilibrium trade means that people on the winning side of the bargain will gain real income at the expense of the losers. In other words, Austrian economics is rooted (in most markets, at least) in the idea that trading benefits one side more than the other which flies in the face of the repeated dogma that trade benefits both parties. Moreover, rejecting the idea of equilibrium means rejecting any attempt to claim that workers' wages equal their just contribution to production and so to society. If equilibrium does not exist or is never actually reached then the various economic laws which "prove" that workers are not exploited under capitalism do not apply. This also applies to accepting that any real market is unlike the ideal market of perfect competition. In other words, by recognising and taking into account reality capitalist economics cannot show that capitalism is stable, non-exploitative or that it meets the needs of all.

Given that they reject the notion of equilibrium as well as the concept of empirical testing of their theories and the economy, their defence of capitalism rests on two things: "freedom" and anything else would be worse. Neither are particularly convincing.

Taking the first option, this superficially appears appealing, particularly to anarchists. However this stress on "freedom" — the freedom of individuals to make their own decisions — flounders on the rocks of capitalist reality. Who can deny that individuals, when free to choose, will pick the option they consider best for themselves? However, what this praise for individual freedom ignores is that capitalism often reduces choice to picking the lesser of two (or more) evils due to the inequalities it creates (hence our reference to the quality of the decisions available to us). The worker who agrees to work in a sweatshop does "maximise" her "utility" by so doing — after all, this option is better than starving to death — but only an ideologue blinded by capitalist economics will think that she is free or that her decision is not made under (economic) compulsion.

The Austrian school is so in love with markets they even see them where they do not exist, namely inside capitalist firms. There, hierarchy reigns and so for all their talk of "liberty" the Austrian school at best ignores, at worse exalts, factory fascism (see section F.2.1) For them, management is there to manage and workers are there to obey. Ironically, the Austrian (like the neo-liberal) ethic of "freedom" is based on an utterly credulous faith in authority in the workplace. Thus we have the defenders of "freedom" defending the hierarchical and autocratic capitalist managerial structure, i.e. "free" workers subject to a relationship distinctly lacking freedom. If your personal life were as closely monitored and regulated as your work life, you would rightly consider it oppression.

In other words, this idealisation of freedom through the market completely ignores the fact that this freedom can be, to a large number of people, very limited in scope. Moreover, the freedom associated with capitalism, as far as the labour market goes, becomes little more than the freedom to pick your master. All in all, this defence of capitalism ignores the existence of economic inequality (and so power) which infringes the freedom and opportunities of others. Social inequalities can ensure that people end up "wanting what they get" rather than "getting what they want" simply because they have to adjust their expectations and behaviour to fit into the patterns determined by concentrations of economic power. This is particularly the case within the labour market, where sellers of labour power are usually at a disadvantage when compared to buyers due to the existence of unemployment as we have discussed.

As such, their claims to be defenders of "liberty" ring hollow in anarchist ears. This can be seen from the 1920s. For all their talk of "freedom", when push came to shove, they end up defending authoritarian regimes in order to save capitalism when the working classes rebel against the "natural" order. Thus we find von Mises, for example, arguing in the 1920s that it "cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilisation. The merit that Fascism has thereby won for itself will live eternally in history." [Liberalism, p. 51] Faced with the Nazis in the 1930s, von Mises changed his tune somewhat as, being Jewish, he faced the same state repression he was happy to see inflicted upon rebellious workers the previous decade. Unsurprisingly, he started to stress that Nazi was short for "National Socialism" and so the horrors of fascism could be blamed on "socialism" rather than the capitalists who funded the fascist parties and made extensive profits under them once the labour, anarchist and socialist movements had been crushed.

Similarly, when right-wing governments influenced by the Austrian school were elected in various countries in the 1980s, those countries saw an increase in state authoritarianism and centralisation. In the UK, for example, Thatcher's government strengthened the state and used it to break the labour movement (in order to ensure management authority over their workers). In other words, instead of regulating capital and the people, the state just regulates the people. The general public will have the freedom of doing what the market dictates and if they object to the market's "invisible hand", then the very visible fist of the state (or private defence companies) will ensure they do. We can be sure if a large anarchist movement developed the Austrian economists will, like von Mises in the 1920s, back whatever state violence was required to defend "civilisation" against it. All in the name of "freedom," of course.

Then there is the idea that anything else that "pure" capitalism would be worse. Given their ideological embrace of the free market, the "Austrians" attack those economists (like Keynes) who tried to save capitalism from itself. For the Austrian school, there is only capitalism or "socialism" (i.e. state intervention) and they cannot be combined. Any attempt to do so would, as Hayek put it in his book The Road to Serfdom, inevitably lead to totalitarianism. Hence the Austrians are at the forefront in attacking the welfare state as not only counterproductive but inherently leading to fascism or, even worse, some form of state socialism. Needless to say, the state's role in creating capitalism in the first place is skilfully ignored in favour of endless praise for the "natural" system of capitalism. Nor do they realise that the victory of state intervention they so bemoan is, in part, necessary to keep capitalism going and, in part, a consequence of attempts to approximate their utopia (see section D.1 for a discussion).

Not that Hayek's thesis has any empirical grounding. No state has ever become fascist due to intervening in the economy (unless a right-wing coup happens, as in Chile, but that was not his argument). Rather, dictatorial states have implemented planning rather than democratic states becoming dictatorial after intervening in the economy. Moreover, looking at the Western welfare states, the key compliant by the capitalist class in the 1960s and 1970s was not a lack of general freedom but rather too much. Workers and other previously oppressed but obedient sections of society were standing up for themselves and fighting the traditional hierarchies within society. This hardly fits in with serfdom, although the industrial relations which emerged in Pinochet's Chile, Thatcher's Britain and Reagan's America does. The call was for the state to defend the "management's right to manage" against rebellious wage slaves by breaking their spirit and organisation while, at the same time, intervening to bolster capitalist authority in the workplace. That this required an increase in state power and centralisation would only come as a surprise to those who confuse the rhetoric of capitalism with its reality.

Similarly, it goes without saying Hayek's thesis was extremely selectively applied. It is strange to see, for example, Conservative politicians clutching Hayek's Road to Serfdom with one hand and using it to defend cutting the welfare state while, with the other, implementing policies which give billions to the Military Industrial Complex. Apparently "planning" is only dangerous to liberty when it is in the interests of the many. Luckily, defence spending (for example) has no such problems. As Chomsky stresses, "the 'free market' ideology is very useful — it's a weapon against the general population . . . because it's an argument against social spending, and it's a weapon against poor people abroad . . . But nobody [in the ruling class] really pays attention to this stuff when it comes to actual planning — and no one ever has." [Understanding Power, p. 256] That is why anarchists stress the importance of reforms from below rather than from above — as long as we have a state, any reforms should be directed first and foremost to the (much more generous) welfare state for the rich rather than the general population (the experience of the 1980s onwards shows what happens when reforms are left to the capitalist class).

This is not to say that Hayek's attack upon those who refer to totalitarian serfdom as a "new freedom" was not fully justified. Nor is his critique of central planning and state "socialism" without merit. Far from it. Anarchists would agree that any valid economic system must be based on freedom and decentralisation in order to be dynamic and meet needs, they simply apply such a critique to capitalism as well as state socialism. The ironic thing about Hayek's argument is that he did not see how his theory of tacit knowledge, used to such good effect against state socialist ideas of central planning, were just as applicable to critiquing the highly centralised and top-down capitalist company and economy. Nor, ironically enough, that it was just as applicable to the price mechanism he defended so vigorously (as we note in section I.1.2, the price system hides as much, if not more, necessary information than it provides). As such, his defence of capitalism can be turned against it and the centralised, autocratic structures it is based on.

To conclude, while its open and extreme support for free market capitalism and its inequalities is, to say the least, refreshing, it is not remotely convincing or scientific. In fact, it amounts to little more than a vigorous defence of business power hidden behind a thin rhetoric of "free markets." As it preaches the infallibility of capitalism, this requires a nearly unyielding defence of corporations, economic and social power and workplace hierarchy. It must dismiss the obvious fact that allowing big business to flourish into oligopoly and monopoly (as it does, see section C.4) reduces the possibility of competition solving the problem of unethical business practices and worker exploitation, as they claim. This is unsurprising, as the Austrian school (like economics in general) identifies "freedom" with the "freedom" of private enterprise, i.e. the lack of accountability of the economically privileged and powerful. This simply becomes a defence of the economically powerful to do what they want (within the laws specified by their peers in government).

Ironically, the Austrian defence of capitalism is dependent on the belief that it will remain close to equilibrium. However, as seems likely, capitalism is endogenously unstable, then any real "pure" capitalism will be distant from equilibrium and, as a result, marked by unemployment and, of course, booms and slumps. So it is possible to have a capitalist economics based on non-equilibrium, but it is unlikely to convince anyone that does not already believe that capitalism is the best system ever unless they are unconcerned about unemployment (and so worker exploitation) and instability. As Steve Keen notes, it is "an alternative way to ideologically support a capitalist economy . . . If neoclassical economics becomes untenable for any reason, the Austrians are well placed to provide an alternative religion for believers in the primacy of the market over all other forms of social organisation." [Keen, Debunking Economics, p. 304]

Those who seek freedom for all and want to base themselves on more than faith in an economic system marked by hierarchy, inequality and oppression would be better seeking a more realistic and less apologetic economic theory.