The Iron Law of Liberalism states that any market reform, any government initiative intended to reduce red tape and promote market forces will have the ultimate effect of increasing the total number of regulations, the total amount of paperwork, and the total number of bureaucrats the government employs.

Far from being anti-bureaucratic, the neoliberal regime creates ever more rules to be enforced.

From a review of David Graeber’s Utopia of Rules, by the Center for Stateless Society’s Matthew Harwood:

“Pioneer of the welfare state, German Chancellor Otto von Bismarck, told an American writer that government beneficence was a calculated strategy to train the working class to heal with scraps rather than bite its master’s hand. “My idea was to bribe the working classes, or shall I say, to win them over, to regard the state as a social institution existing for their sake and interested in their welfare.” Bismarck’s sleight of hand was then successfully replicated all across the Western world throughout the 20th century.

What Graeber realizes is that actually existing capitalism endlessly generates bureaucracy so much that he believes it deserves its own general sociological law.

He writes:

The Iron Law of Liberalism states that any market reform, any government initiative intended to reduce red tape and promote market forces will have the ultimate effect of increasing the total number of regulations, the total amount of paperwork, and the total number of bureaucrats the government employs.

This is the reason why, according to Graeber, so many former Soviet functionaries felt at home when the Soviet Union fell and Russia began to “liberalize” and supposedly throw off the fetters of the state. “[A]nd in the process, true to the Iron Law, [the Russians] managed to increase the total number of bureaucrats employed in their country dramatically” as they transitioned from state-socialism to capitalism. Meet the new boss, Graeber smirks, same as the old boss.

Right libertarians would no doubt claim that they are opposed to what Graeber describes as “state capitalism,” or what is more disparagingly known today as “crony capitalism.” Graeber, however, would push back, much like C4SS’s own Kevin Carson has, and argue historical capitalism was, is, and will always be a creature of the state. This is particularly true inside the United States, where state-subsidized internal improvements, tariffs, and land giveaways after the Revolutionary War created the conditions for domestic industries to survive and then thrive to the benefit of the privileged few who owned and controlled large-scale capital.

In his 2011 book, Debt: The First 5000 Years, Graeber makes a compelling argument that the free-market theories of classical liberals, such as Adam Smith, are fundamentally ahistorical. Using anthropology to prove his thesis, Graeber says that impersonal markets and money don’t arise spontaneously among individuals trucking and bartering to make economic life more efficient. Historically speaking, economic exchange was facilitated by credit arrangements, essentially trust, because it occurred locally among people who knew each other. Instead, Graeber argues that formal markets characterized by monetary exchange are the byproduct of imperial armies on the march.

Cash transactions between strangers were different, and all the more so when trading is set against a background of war and emerges from disposing of loot and provisioning soldiers; when one often had best not ask where the objects traded came from, and where no one is much interested in forming ongoing personal relationships anyway. Here, transactions really do become simply a figuring-out of how many of X will go for how many of Y, of calculating proportions, estimating quality, and trying to get the best deal for oneself.”