The state is forced to intervene in society because of the anti-social effects of capitalism. The abstractly individualistic theory on which capitalism is based ("everyone for themselves") results in a high degree of statism since the economic system itself contains no means to combat its own socially destructive workings. The state must also intervene in the economy, not only to protect the interests of the ruling class but also to protect society from the atomising and destructive impact of capitalism. Moreover, capitalism has an inherent tendency toward periodic recessions or depressions, and the attempt to prevent them has become part of the state's function. However, since preventing them is impossible (they are built into the system — see section C.7), in practice the state can only try to postpone them and ameliorate their severity. Let's begin with the need for social intervention.

Capitalism is based on turning both labour and land into commodities. As Karl Polyani points out, however, "labour and land are no other than the human beings themselves of which every society consists and the natural surroundings in which it exists; to include labour and land in the market mechanism means to subordinate the substance of society itself to the laws of the market." [The Great Transformation, p. 71] And this means that "human society has become an accessory to the economic system," with humanity placing itself fully in the hands of supply and demand. But such a situation "could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness." [Ibid., pp. 41-42]

To expect that a community would remain indifferent to the scourge of unemployment, dangerous working conditions, 16-hour working days, the shifting of industries and occupations, and the moral and psychological disruption accompanying them — merely because economic effects, in the long run, might be better — is an absurdity. Similarly, for workers to remain indifferent to, for example, poor working conditions, peacefully waiting for a new boss to offer them better conditions, or for citizens to wait passively for capitalists to start voluntarily acting responsibly toward the environment, is to assume a servile and apathetic role for humanity. Luckily, labour refuses to be a commodity and citizens refuse to stand idly by while the planet's ecosystems are destroyed.

Therefore state intervention occurs as a form of protection against the workings of the market. As capitalism is based on atomising society in the name of "freedom" on the competitive market, it is hardly surprising that defence against the anti-social workings of the market should take statist forms — there being few other structures capable of providing such defence (as such social institutions have been undermined, if not crushed, by the rise of capitalism in the first place). Thus, ironically, "individualism" produces a "collectivist" tendency within society as capitalism destroys communal forms of social organisation in favour of ones based on abstract individualism, authority, and hierarchy — all qualities embodied in the state. In a free (i.e. communal) society, social self-defence would not be statist but would be similar in nature to trade unionism and co-operatives — individuals working together in voluntary associations to ensure a free and just society (see section I).

In addition to social protection, state intervention is required to protect a country's economy (and so the economic interests of the ruling class). As Noam Chomsky points out, even the USA, home of "free enterprise," was marked by "large-scale intervention in the economy after independence, and conquest of resources and markets. . . [while] a centralised developmental state [was constructed] committed to [the] creation and entrenchment of domestic manufacture and commerce, subsidising local production and barring cheaper British imports, constructing a legal basis for private corporate power, and in numerous other ways providing an escape from the stranglehold of comparative advantage." [World Orders, Old and New, p. 114]

In the case of Britain and a host of other countries (and more recently in the cases of Japan and the Newly Industrialising Countries of the Far East, like Korea) state intervention was, oddly enough, the key to development and success in the "free market." In other "developing" countries which have had the misfortune to be subjected to "free-market reforms" (e.g. neo-liberal Structural Adjustment Programs) rather than following the interventionist Japanese and Korean models, the results have been devastating for the vast majority, with drastic increases in poverty, homelessness, malnutrition, etc. (for the elite, the results are somewhat different of course).

In the nineteenth century, states only turned to laissez-faire once they could benefit from it and had a strong enough economy to survive it. "Only in the mid-nineteenth century, when it had become powerful enough to overcome any competition, did England [sic!] embrace free trade." [Noam Chomsky, Op. Cit., p. 115] Before this, protectionism and other methods were used to nurture economic development. And once laissez-faire started to undermine a country's economy, it was quickly revoked. For example, protectionism is often used to protect a fragile economy and militarism has always been a favourite way for the ruling elite to help the economy, as is still the case, for example, in the "Pentagon System" in the USA (see section D.8).

State intervention has been a feature of capitalism from the start. As Kropotkin argued, "nowhere has the system of 'non-intervention of the State' ever existed. Everywhere the State has been, and still is, the main pillar and the creator, direct and indirect, of Capitalism and its powers over the masses. Nowhere, since States have grown up, have the masses had the freedom of resisting the oppression by capitalists. . . The state has always interfered in the economic life in favour of the capitalist exploiter. It has always granted him protection in robbery, given aid and support for further enrichment. And it could not be otherwise. To do so was one of the functions — the chief mission — of the State." [Evolution and Environment, pp. 97-8] Its limited attempts at laissez-faire have always been failures, resulting in a return to its statist roots. The process of selective laissez-faire and collectivism has been as much a feature of capitalism in the past as it is now. Indeed, as Noam Chomsky argues, "[w]hat is called 'capitalism' is basically a system of corporate mercantilism, with huge and largely unaccountable private tyrannies exercising vast control over the economy, political systems, and social and cultural life, operating in close co-operation with powerful states that intervene massively in the domestic economy and international society. That is dramatically true of the United States, contrary to much illusion. The rich and privileged are no more willing to face market discipline than they have been in the past, though they consider it just fine for the general population." ["Anarchism, Marxism and Hope for the Future", Red and Black Revolution, issue 2]

Therefore, contrary to conventional wisdom, state intervention will always be associated with capitalism due to: (1) its authoritarian nature; (2) its inability to prevent the anti-social results of the competitive market; (3) its fallacious assumption that society should be "an accessory to the economic system"; (4) the class interests of the ruling elite; and (5) the need to impose its authoritarian social relationships upon an unwilling population in the first place.

State intervention is as natural to capitalism as wage labour. As Polyani summarises, "the countermove against economic liberalism and laissez-faire possessed all the unmistakable characteristics of a spontaneous reaction. . . [and] a closely similar change from laissez-faire to 'collectivism' took place in various countries at a definite stage of their industrial development, pointing to the depth and independence of the underlying causes of the process." [Op. Cit., pp. 149-150] For "government cannot want society to break up, for it would mean that it and the dominant class would be deprived of sources of exploitation; nor can it leave society to maintain itself without official intervention, for then people would soon realise that government serves only to defend property owners. . . and they would hasten to rid themselves of both." [Errico Malatesta, Anarchy, p. 22]

And neither should it be forgotten that state intervention was required to create the "free" market in the first place. To quote Polyani again, "[f]or as long as [the market] system is not established, economic liberals must and will unhesitatingly call for the intervention of the state in order to establish it, and once established, in order to maintain it." [Op. Cit., p. 149] Protectionism and subsidy (mercantilism) — along with the liberal use of state violence against the working class — was required to create and protect capitalism and industry in the first place (see section F.8 - What role did the state take in the creation of capitalism?).

In short, although laissez-faire may be the ideological basis of capitalism — the religion that justifies the system — it has rarely if ever been actually practised. So, while the ideologues are praising "free enterprise" as the fountainhead of modern prosperity, the corporations and companies are gorging at the table of the State.

The recent enthusiasm for the "free market" is in fact the product of an extended boom, which in turn was a product of a state co-ordinated war economy and highly interventionist Keynesian economics (a boom that the apologists of capitalism use, ironically, as "evidence" that "capitalism" works) plus an unhealthy dose of nostalgia for a past that never existed. It's strange how a system that has never existed has produced so much!