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A Marxist Critique of Hans-Hermann Hoppe and Austrian Theory

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fegeldolfy Posted: Wed, Jan 2 2013 7:48 PM

Someone posted this on one of the Facebook pages for Hoppe. Thoughts?

http://www.gonzotimes.com/2012/12/a-marxist-critique-of-hans-hermann-hoppe-and-austrian-theory/

 

 

I received plenty of feedback in my last article (See: The Poverty of Ethics: Dissecting the Non-aggression Principle), some positive, some negative. A popular request was to review a few Austrian (I use ‘Austrian’ here as a popular reference to the Austrian School of Economics) works which challenge the Marxist interpretation of classes and exploitation. I accepted the request.

This is a critical response to Hans-Hermann Hoppe’s Marxist and Austrian Class Analysis (all excerpts used are directly quoted from the work).

Time Preference and the Austrian Critique of Marxist Analysis 

Hoppe’s intention for his work is demonstrated quite simply in the introduction:

“I want to do the following in this paper: First to present the theses that constitute the hard core of the Marxist theory of history. I claim that all of them are essentially correct. Then I will show how these true theses are derived in Marxism from a false starting point. Finally, I will demonstrate how Austrianism in the Mises-Rothbard tradition can give a correct but categorically different explanation of their validity.”

Hoppe then goes onto make fairly accurate descriptions of core Marxist beliefs surrounding historical materialism, the labor theory of value, and class antagonisms. He then tackles the issue of surplus value and its exploitative properties with a criticism of Marx’s analysis:

“What is wrong with this analysis? The answer becomes obvious once it is asked why the laborer would possibly agree to such an arrangement! He agrees because his wage payment represents present goods while his own labor services represent only future goods-and he values present goods more highly. After all, he could also decide not to sell his labor services to the capitalist and then reap the “full value” of his output himself”

The classical answer to any Marxist conception of surplus value/labor: time preference. Hoppe continues to expand upon his previous criticism:

“…he [Marx] does not understand the phenomenon of time preference as a universal category of human action.’ That the laborer does not receive his “full worth” has nothing to do with exploitation but merely reflects the fact that it is impossible for man to exchange future goods against present ones except at a discount. Unlike the case of slave and slave master, where the latter benefits at the expense of the former,the relationship between the free laborer and the capitalist is a mutually beneficial one. The laborer enters the agreement because…he prefers a smaller amount of present goods over a larger future one.”

Hoppe’s criticism rests firmly on two conjectures. Firstly, time preference as an explanation as to why surplus value exists within the realm of ‘clean capitalism’. Secondly, the relationship between the laborer and capitalist is ‘mutually beneficial’, void of any exploitation.

Let’s start with time preference. First, Hoppe’s commits the fatal error of ignoring context. As I pointed out in my previous article, the greatest failure of any libertarian philosophy surrounding socio-economic action is that it divorces action from the material conditions it exists in. The only way to understand why a person acts is to understand the environment which shapes that action. Thus, time preference can only be seen as a valid explanation if you presume the legitimacy of private ownership.

Marx’s entire premise regarding capitalist property relations is that they exist to reproduce a material condition which legitimize private property. Giving birth to the circular logic of Capital. Time preference can only exist because the laborer exists in a property relation where his only choice is to sell his labor-power. The material conditions of depravity that pressure the laborer to sell his labor-power do not affect the capitalist who owns the means of production (aside from the obvious duty of a capitalist being to produce and sell commodities). The capitalist class is the sole class with any feasible sense of flexibility as they exclusively access the means by which one may subsist. Therefore the statement that “After all, he could also decide not to sell his labor services to the capitalist and then reap the “full value” of his output himself” is utterly nonsensical.In capitalism, time is money and the worker cannot afford to wait. To reproduce his existence, he must sell his labor-power; even if this means being exploited. With this understanding it becomes obvious that there is little ‘decision’ to be made. The choice of Capitalism is illusory. Where before the slave/serf would be bound to a master/lord, the laborer is only bound to material conditions which force him to hunt for a capitalist in which he can sell his labor-power.

Capitalism is based on an inequality of access and economic actions within its realm only serve to reproduce the existing conditions. Therefore, the principle of time preference is an insufficient attempt to legitimize (and trivialize) an inherently unequal and exploitative property relation.

Mutual Benefit?

Next, there is the issue of “mutual benefit”. Hoppe draws distinction between capitalist property relations and those that existed in forms of feudalism and chattel slavery. As I stated above, there areclear distinctions. However, to suggest that capitalism somehow uniquely proposes mutual benefit compared to previous property relations, is ridiculous. Capitalist property relations are mutual only insofar as they allow the capitalist to prosper and provide the worker with subsistence, paid piecemeal. This is not wholly different than previous forms of property relations where the slave/serf was (meagerly) fed and subsisted in a life of servitude to the master/lord. Engels points out the differences between the social existence of slaves and workers:

“The individual slave, property of one master, is assured an existence, however miserable it may be, because of the master’s interest. The individual proletarian, property as it were of the entire bourgeois class which buys his labor only when someone has need of it, has no secure existence. This existence is assured only to the class as a whole.” – Friedrich Engels, Principles of Communism

In this sense, the system of capitalism can hardly be considered “mutually beneficial” as Hoppe might intend the phrase. The entire property relation and all action therein (including conceptualizations such as time preference) is based on a system of brutal inequality and deliberate exclusion from the means of production. Therefore, the system of capitalism is still a system of exploitation.

‘Socialized Production’, Ownership, and Capital

“Under a system of socialized production, quite contrary to Marx’s proclamations, the development of productive forces would not reach new heights but would instead sink dramatically…”

A classic Austrian objection to social ownership of the means of production. He continues:

“For obviously, capital accumulation must be brought about by definite individuals at definite points in time and space through homesteading, producing, and/or saving…”

Let’s see how he attaches this to his objection against social ownership:

“In the case of collectively owned factors of production, an actor is no longer granted exclusive control over his accumulated capital…for him of the expected income and hence that of the capital goods is reduced.”

Hoppe presents a rather interesting criticism of social ownership, different from the cliche ‘calculation problem’.

First, let’s unpackage the language of his argument. He starts by identifying the source of wealth, or capital accumulation, as individual action. He does this so he can use ‘libertarian’ philosophy, posited by this interpretation of individual action, as a legitimization of private property. His mistake is in the subtle acceptance of the ideal abstraction of labor that overemphasizes individual production of capital; which can then be interpreted as an individual product. The real nature of capital is described by Marx and Engels:

“..capital is not a thing, but rather a definite social production relation, belonging toa definite historical formation of society,which is manifested in a thing and lends this thing a specific social character.” – Capital Volume III, Chapter 48, The Trinity Formula

Hoppe’s entire objection revolves around the idea that capital accumulation and the value of capital goods can be interpreted solely through an individual’s exclusive ownership, and likewise that this subjective interpretation holds the key to productive forces (which there is no reason or analysis given as to why). The truth is much different. The entire system of capitalism is based on a social context, an interrelated conundrum of values and productive units. In fact, exchange value, the locomotive of market interaction, is dependent on society as it is a social expression. This is because the exchange value of commodities is impossible to determine unless contrasted against other commodities. All production in capitalism is social, and likewise so is all consumption.

Ergo, the entire premise of Mr. Hoppe’s objection falls flat on its face. If we can recognize accumulation as a consequence of social production we can destroy any reasoning behind a “sinking” in productive capacities under social ownership because of a lack of “exclusive control”.

Moreover, Hoppe misinterprets the entire structure of social ownership. Genuine social ownership seeks to empower the worker by including him in a direct control over the product of his labor and the fixed capital he employs. The course of production, consumption, and the fate of his labor will be firmly in the hands of the worker, defeating any logic about there being a lack of “control” (especially when realizing all production as social production, see above).

Austrian Theory of Exploitation

“The starting point for the Austrian exploitation theory is plain and simple…Exploitation occurs whenever a person successfully claims partial or full control over scarce resources he has not homesteaded, saved, or produced, and which he has not acquired contractually from a previous producer-owner.”

It is interesting that Hoppe’s definition of exploitation readily includes so called ‘clean capitalism’ before the insertion of the phrase “acquired contractually from a previous producer-owner”. We know that in capitalism, the worker labors, the capitalist subtracts. If we were to simply remove the phrase in question, a much more agreeable definition of exploitation might be reached. The moral livelihood of capitalism hinges on the the interpretation of words such as “voluntary” and modifiers like “contractually”. So much so that these words and modifiers must first be divorced from a social context as to eliminate any doubts about the honesty of their application. The Austrian theory would like to paint billionaires as victims of exploitation via taxes or sweatshop owners as victims of unions or some other bourgeois interpretation of what it means to ‘aggress’. Which is really the cornerstone of Austrian ‘ethics’, being bourgeois reaction (see: The Poverty of Ethics: Dissecting the Non-aggression Principle). The propertied classes need to redefine the meaning of ‘ethics’, or rather, co-opt its usage to protect private property and the right to it. This pandering is a natural political necessitation coming from a class that exists through and for the leverage of property.

Another interesting point here is the inclusion of the conjunction “and”; as if the property barons of today not only obtained their power through socio-economic coercion (I mean contractual agreement) but also through their own personal saving, producing, or homesteading. Such a nonsensical interpretation of capitalist accumulation really draws Mr. Hoppe’s perspective into question.

Nature and Development of the State

“And in the course of economic development, just as producers and contractors can form firms, enterprises, and corporations, so can exploiters create large-scale exploitation enterprises, governments, and states. The ruling class…is initially composed of the members of such an exploitation firm.”

Hoppe here is referring to the development of a state or a similar tool of suppression. Notice the distance he draws between your everyday, average, ‘nothing-to-see-here’, producers (bourgeoisie) and the ‘ruling class’. Interestingly enough, this is a common theme among Austrians. Precisely so because Austrian theory would have observers believe that capitalist property relations can exist separate of a form of institutionalized violence (e.g. the state). Admitting that the same bourgeois, drawn here as distinguished from the ruling class, are indeed the ruling class, would be catastrophic to Austrian theory. This is, however, the historical truth on the matter. The state is a tool of suppression, having evolved in modern society as a institution the capitalist class utilizes to suppress opposition and enforce their privilege. The bourgeois property rights proposed by Austrians, is the same property rights that necessitated the existence of a state.

“…with a ruling class established over a given territory and engaged in the expropriation of economic resources from a class of exploited producers, the center of all history indeed becomes the struggle between exploiters and the exploited.”

Once again, we see the same attempt at distancing property holders from the ruling class. Now, Hoppe goes as far as to mimic Marx’s famous “history of all hitherto existing societies is the history of class struggle” with his reinvented “center of all history…the struggle between exploiters and exploited”. A bold claim indeed, but does it stand true? In the blunt reading of the phrase, yes. With an actual analysis of what Hoppe means by “exploited” and “exploiters”, using the Austrian theory of exploitation, the answer is no. Hoppe is almost likening himself with modern day GOP pundits by painting the chilvary of private business against the tyranny of the state. The truth is much different. The state serves to protect the interests of the capitalist class, not exploit them. A quick reading of US Presidential history will make that very clear. Even small business interests are not exactly pitted against those of the state. Many small business owners enjoy a predictable rate of profit and market stability. The state through its suppressive functions helps maintain both a constant pool of uneducated and unemployed persons, as well as a stable market environment with minimal competition. All the factors necessary for a moderately successful capitalist enterprise. Austrians will point to the ‘red tape’ and excessive regulation coming from the state as proof of this antagonism, this is no proof at all. Given, some grievances exist about the quality of state administration, no grievances exist about the actual existence of these functions. This is why even the petit bourgeois anarcho-capitalist still supports private institutions of violence such as ‘private defense forces’ against none such institutions at all. This is because they recognize, subconsciously perhaps, the need for a violent and suppressive tool which can essentially mimic most of the functions of the modern state; only then more tailored to their preference. Thus, Austrian theory cannot clean the house, only reorganize the mess.

“While productive enterprises come or go because of voluntary support or its absence, a ruling class never comes to power because there is a demand for it…”

Perhaps this is only my rudimentary understanding of modern economics speaking, but for something to be produced, must not there be a demand for it? The demand is clear and present, and my analysis has shown that this demand comes precisely from the propertied classes.

Now Mr. Hoppe goes onto describe a society free of exploitation:

“Contrary to Marxist claims, this society will not be the result of any historical laws…Nor will it be the result of a tendency for the rate of profit to fall with an increased organic composition of capital…Just as the labor theory of value is false beyond repair, so is the law of the tendency of the profit rate to fall, which is based on it…”

The Labor Theory of Value is such an incredibly spacious concept, as its its conflict with Austrian theory, I will not elaborate too much on this final point.

The disagreement I will draw is with the denial of the tendency for the rate of profit to fall. The tendency for the rate of profit to fall is a critical measure of understanding the internal contradictions within capitalism and attempting to denounce it in a brief conclusion did Hoppe no good. Without anymore analysis, allow me to cite some empirical evidence to the contrary:

Also, an interesting paper on the subject:

http://akliman.squarespace.com/storage/Persistent%20Fall%20whole%20primo%2010.17.09.pdf

Conclusion

Overall, Hans-Hermann Hoppe’s Marxist and Austrian Class Analysis was an entertaining read. Despite all the false interpretations, misperceptions, and the predictable assortment of Austrian theory punch-lines, it was one of the more polished criticisms of Marxist theory I have read. Marxist theory, however, far exceeds Austrian theory in class analysis and I hope every reader may come to understand this.

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I can't comment on the rest of it, but I'm curious as to where this person got his/her definition of classes. Marx never really was clear on his definition of classes - we know that it has nothing to do with how much wealth you have or if you are impovrished or not - as the man himself as well as Engels were from wealthy families, and accused various individuals of being bourgeois who were poor themselves. As far as I know, Marxists (particularly Orthodox ones) have failed to actually give us a concise definition of their view of a class.

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Good point,this is something I've always wondered about too. I haven't read Marx however,so I can't really comment on it that much.

As far as I know classical liberals like J.B. Say were the first to propose a "class conflict" theory, and then the Saint-Simonians and Marx applied socialist thinking to it.

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Well, class theory has always been sketchy, especially due to misconceptions about capitalism. I think it's just best if everyone leaves the whole class thing in the dust. But it's unfortunate that we can't, especially since there are still Marxists who are talking about some hypothetical "proletariat" and "bourgeoisie," that they themselves have never given a clear-cut definition of (the bourgeoisie always just seems to be a name for anyone who they don't like).

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bump

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Conza88 replied on Thu, Jan 3 2013 4:28 AM

Re: "As I pointed out in my previous article, the greatest failure of any libertarian philosophy surrounding socio-economic action is that it divorces action from the material conditions it exists in. The only way to understand why a person acts is to understand the environment which shapes that action. Thus, time preference can only be seen as a valid explanation if you presume the legitimacy of private ownership."

No.

"Thymology has no special relation to praxeology and economics.  The very act of valuing is a thymological phenomenon. But praxeology and economics do not deal with the thymological aspects of  valuation. Their theme is acting in accordance with the choices made by the actor. The concrete choice is an offshoot of valuing. But praxeology is not concerned with the events which within a man's soul or mind or brain produce a definite decision between an  A and a  B. It takes it for granted that the nature of the universe enjoins upon man choosing between incompatible ends. Its subject is not the content of these acts of choosing but what results from them: action. It does not care about what a man chooses but about the fact that he chooses and acts in compliance with a choice made.

It is neutral with regard to the factors that determine the choice and does not arrogate to itself the competence to examine, to revise, or to correct judgments of value. It  is  wertfrei [value-free].  Why one man chooses water and another man wine is a thymological (or, in the traditional terminology, psychological) problem. But it is of no concern to praxeology and economics."  - Mises, TH III. 12. 2.

Does not understand economics, or what time preference is actually grounded in... and as such heads down an entirely irrelevant path. Assuming they actually do understand all this, then they beg the question completely (as to it's relevance), and their conclusion is a massive non sequitur.

Re: "Thus, time preference can only be seen as a valid explanation if you presume the legitimacy of private ownership."

Rightio. Great. It is in fact axiomatic.

The institution of private property and in particular the establishment of private property by means of original appropriation are frequently referred to as "conventions." However, as should have become clear, this is false. A convention serves a purpose, and it is something to which an alternative exists. For instance, the Latin alphabet serves the purpose of written communication. There exists an alternative to it, the Cyrillic alphabet. That is why it is referred to as a convention. What, however, is the purpose of action-norms? The avoidance of possible conflict! Conflict-generating norms are contrary to the very purpose of norms. However, with regard to the purpose of conflict-avoidance, the two mentioned institutions are not just conventional; no alternative to them exists. Only private property makes it possible for all otherwise unavoidable conflicts to be avoided; and only the principle of property acquisition by acts of original appropriation performed by specific individuals at a specific time and location makes it possible for conflicts to be avoided from the beginning of mankind on.

http://mises.org/daily/2265

Re: "Marx’s entire premise regarding capitalist property relations is that they exist to reproduce a material condition which legitimize private property. Giving birth to the circular logic of Capital. Time preference can only exist because the laborer exists in a property relation where his only choice is to sell his labor-power."

“The formation of capital is a process performed with the cooperation of the consumers: only those entrepreneurs can earn surpluses whose activities best satisfy the public. And the utilization of the once-accumulated capital is directed by the anticipation of the most urgent of the not-yet-fully satisfied wishes of the consumers. Thus capital comes into existence and is employed according to the wishes of the consumers.”
-     Ludwig Von Mises

"Some may object that man is not really free because he must obey natural laws. To say that man is not free because he is not able to do anything he may possibly desire, however, confuses freedom and power.[9]  It is clearly absurd to employ as a definition of "freedom" the power of an entity to perform an impossible action, to violate its nature.[10]"

-      http://mises.org/rothbard/mantle.asp

And I can no longer be bothered...

Ron Paul is for self-government when compared to the Constitution. He's an anarcho-capitalist. Proof.
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Time Preference and the Austrian Critique of Marxist Analysis

 Let’s start with time preference. First, Hoppe’s commits the fatal error of ignoring context. As I pointed out in my previous article, the greatest failure of any libertarian philosophy surrounding socio-economic action is that it divorces action from the material conditions it exists in. The only way to understand why a person acts is to understand the environment which shapes that action. Thus, time preference can only be seen as a valid explanation if you presume the legitimacy of private ownership.

Time preference does not necessarily have to do with private property, or context. This paragraph is a confusion between two concepts, action and property. Action is purposeful behavior—action implies time preference. One cannot not act according to time preference, be it in a capitalist libertopia or a worker's paradise. Private property has no bearing on man's actions vis-à-vis time preference insofar as it pertains to whether he has a time preference. Since man acts, he has a time preference regardless of the ownership status of property, his own property or the property relations he has with others; this is the case regardless of what shirt he's wearing, of whether he is living in isolation or among friends, or with animals. This is not to say that private property has no effect on what man's time preference is (e.g. high or low). 

The problem is that this paragraph, intentionally or not, can be read as saying that action depends on private property (which, to say the least, if that is its intent, the argument has some pretty shocking, and impossible, implications). This paragraph seems to want to examine the "what" of action in the third sentence, but explicitly moves towards the "why" of action in the fourth and reexamines the "what" of action in the last sentence. It's a valid argument that property ownership affects time preference, but the mistake is in stating that something that can be relegated to either psychology or thymology (the whys of action) as something that pertains to praxeology or economics (the whats of action). 

Praxeology starts with action. The praxeologist does not necessarily concern himself with the whys of action, which can include anything from what chemicals are in flux in the actor's brain to how the actor was treated as a child by his parents, but with the whats of action. The action axiom is true a priori, and all economic, and praxeological, truths are obtained via this premise. The whys of action precede this premise, which is why the praxeologist qua praxeologist does not regard these whys. The meaning of the why of an action is different from what the writer is considering from what can be considered by a praxeologist. For instance, thinking to oneself " Gee, I'm thirsty" is a why for action, but this thought is also, itself, an action. Conscious thinking is an action because it is a cognitively-guided adjustment to physical reality. This is different from regarding the particular state of the chemical/neurological operations in the individual's brain, or his hydration, that causes him to have this thought, which can be better examined in the science better suited to such examination (psychology, neuroscience, biology, et cetera). The latter type of thinking seems to be what the writer is picking at, but his critique of this type of thinking has no bearing for praxeological truths since praxeology is not concerned with this type of thinking, and its truths are not premised on such bodily processes, but with action.

Marx’s entire premise regarding capitalist property relations is that they exist to reproduce a material condition which legitimize private property. Giving birth to the circular logic of Capital. Time preference can only exist because the laborer exists in a property relation where his only choice is to sell his labor-power.

As stated above, these first few sentences are false in that time preference is not dependent on property relations and social norms for its existence. While time preference is certainly affected by these relations, time preference is implied in action, which means that the existence of time preference is independent of property ownership. It's more accurate to say that property relations depend on time preference because property acquisition is based on action, which implies time preference. The main proposition of the writer thus far, that time preference is dependent on private property relations, is due to the misunderstanding that action itself depends on private property relations. This is not true. In fact, the opposite is true: property relations depend on action.

The circular logic, to which the writer refers, indicates that the writer has a misunderstanding as to what precedes what. Property relations cannot exist without property, as the relations stem from property. Therefore, property relations presuppose the existence of property. Property does not come from property relations. Further, conditions cannot by themselves "legitimize" anything; in other words, an “ought” cannot be derived from an “is”. Only man can legitimize something and, insofar as he does, he acts. Insofar as man acts, he purposefully wills an end into existence through means. Therefore, Marx's premise would be better said that: "acting agents establish property and interact through relations of this property for the sake of achieving ends; in a capitalist society, these relations are all voluntary and each end is mutually beneficial insofar as the end does not pertain to a single agent only." 

On his next contention, the writer confuses ideal types. The laborer by definition sells his labor-power. This has nothing to do with whether the laborer "has" a time preference. It is this time preference that is implied by, and governs, action. The particular action under examination in this section of the writer's article is employment of labor in production. The word "choice" implies alternatives. As Mises writes in Theory and History,

To choose is to pick one out of two or more possible modes of conduct and to set aside the alternatives. Whenever a human being is in a situation in which various modes of behavior, precluding one another, are open to him, he chooses. Thus life implies an endless sequence of acts of choosing. Action is conduct directed by choices.

It is impossible to literally have an "only" choice. The writer does not observe this difference because he does not regard the situation through the lens of his laborer, but through his own subjective assessment of what he thinks someone (possibly himself) would do in that situation. Choosing implies that alternatives to the actor’s choice exist; the choice of one alternative excludes the others by definition.

Marx’s entire premise regarding capitalist property relations is that they exist to reproduce a material condition which legitimize private property. Giving birth to the circular logic of Capital. Time preference can only exist because the laborer exists in a property relation where his only choice is to sell his labor-power. The material conditions of depravity that pressure the laborer to sell his labor-power do not affect the capitalist who owns the means of production (aside from the obvious duty of a capitalist being to produce and sell commodities). The capitalist class is the sole class with any feasible sense of flexibility as they exclusively access the means by which one may subsist.
 

The definition of "material conditions" the writer is regarding are not provided unless he means the existence of scarcity or the existence of capitalism, both of which can be inferred from his statement and neither of which "pressure" anyone. Scarcity is a prerequisite of action, and man acts to substitute better states of being for worse states of being. This proposition is valid irrespective of what type under which one may fall. Scarcity affects entrepreneurs and laborers alike. The responsibilities that constrain the actions of the entrepreneur and the laborer, these responsibilities brought about by consequence of man's past choices, are similar in that they are themselves costs and the results of scarcity. Both types (the entrepreneur and the laborer) act, which means both types have ends and both types utilize means to bring about those ends. No type is exempt from scarcity and no type is exempt from action.

Therefore the statement that “After all, he could also decide not to sell his labor services to the capitalist and then reap the “full value” of his output himself” is utterly nonsensical.In capitalism, time is money and the worker cannot afford to wait.

It is not nonsensical, but is in fact an alternative to being a laborer (i.e. being an entrepreneur for oneself). In fact, if the writer would but read the next sentence, he would see that Hoppe does understand the choice one faces in deciding to sell his labor services, as well as the implications of that actor’s choice. As Hoppe provides, deciding to not sell one's labor services,

would of course imply that he [the laborer] would have to wait longer for any consumption goods to become available to him. In selling his labor services he demonstrates that he prefers a smaller amount of consumption goods now over a possibly larger one at some future date.

An alternative to working for someone else (to be "expropriated" in the Marxian sense) is to work for oneself. In what way is this proposition nonsensical? The reason why someone may decide to sell his labor services would be precisely because one sees that goods are scarce and must be economized ("time is money") and one's valuation of those means is related back to his time preference, such that it is not inconceivable that the agent under examination may choose to produce for himself—it's just that he can see himself bearing many more costs in being an entrepreneur than if he chooses to be a laborer, where he is guaranteed an income insofar as he utilizes the saved capital of the entrepreneur, which is acquired at costs to the entrepreneur, and minimizes his cost to the entrepreneur by his employment. The means by which the entrepreneur can "subsist" cannot be accessed but for, both, the employment of laborers and the consent of consumers. Who is not affected by the "material conditions of depravity" again?

Further, these types would not simply disappear in a society not operating under capitalist relations. After all, the needs for agents to act are not tied to private property relations: the means of production and consumption would not vanish under an alternative economic organization of resources. Both call for entrepreneurs and laborers; although, the socialist or Marxist may be hesitant to recognize those who will fulfill these types as acting according to these types. This misunderstanding stems back, again, to the misunderstanding on the part of the writer of the relation between action and private property: while action can operate in accordance with private property relations, action is not an implication of private property relations. Rather, the opposite is true: private property relations are the results of action.

The concluding paragraph of this section traces these arguments back to time preference. It is not capitalism that operates (creates?) inequality, but reality, scarcity. Nature is what endows man with his faculties whereas capitalism is a means conceived by actors to facilitate conditions on himself and others. Socialism, also, is an attempt to reach the same ends via different means. Both capitalism and socialism operate under conditions of scarcity. Capitalism does not have any inherent aims, as it is not itself an actor but an aggregation of the interactions of unknown numbers of actors who each have their own unique aims. What aims they have are irrespective for capitalism, but there is an ingrained truth to their actions: namely, that they act. Each actor aims to remove uneasiness through his subjectively valued means. 

The writer's concerns regarding exploitation and mutual benefits will be examined now.

Mutual Benefit?

Next, there is the issue of “mutual benefit”. Hoppe draws distinction between capitalist property relations and those that existed in forms of feudalism and chattel slavery. As I stated above, there areclear distinctions. However, to suggest that capitalism somehow uniquely proposes mutual benefit compared to previous property relations, is ridiculous. Capitalist property relations are mutual only insofar as they allow the capitalist to prosper and provide the worker with subsistence, paid piecemeal. This is not wholly different than previous forms of property relations where the slave/serf was (meagerly) fed and subsisted in a life of servitude to the master/lord. Engels points out the differences between the social existence of slaves and workers ... In this sense, the system of capitalism can hardly be considered “mutually beneficial” as Hoppe might intend the phrase. The entire property relation and all action therein (including conceptualizations such as time preference) is based on a system of brutal inequality and deliberate exclusion from the means of production. Therefore, the system of capitalism is still a system of exploitation. 

 

Hoppe and the writer both addressed the reasons as to why laborers labor and entrepreneurs produce above. A reproduction of these reasons is unnecessary as Hoppe and the writer both provide their reasons in the writing above. Attention must be paid, however, to the writer's focus on exploitation. Exploitation, under the Marxian sense, refers to the difference in prices between the laborer's wages and the selling price of the produced good, from which the entrepreneur profits should the good be sold. The certainty on profit implied by the writer's writing is a cause for concern, as is some unexamined aspects of the entrepreneur's actions. Particular attention should be paid to what is meant by "mutual benefit", and how it is distinguished from "exploitation", as well as the relevance of both to capitalism.

Mutual benefit is the situation in which a interaction between actors reduces costs to both parties. Mutual benefits in capitalism are rendered by trade, and is the result of an inequality, on the part of the traders, in valuations of what is traded. In fact, the valuation between both traders is precisely the opposite: A values X more than he values Y, and B values Y more than he values X. Trade, ex ante, benefits both parties by definition. As capitalism is an economic order in which property ownership is governed by appropriation via trade, production, and homesteading of unowned goods, there is nothing inherent to capitalism that can be called exploitation as all transactions are either voluntary between multiple actors or involve the individual alone (where the question as to whether his actions are voluntary is not appropriate). 

Employment is a trade between the laborer's labor services for the entrepreneur's wages. Both goods contain additional elements that the writer either does not recognize or ignores. The laborer can desire security. Employment provides this by wages. The employee agrees to terms set by the entrepreneur or he does not. By accepting these wages, the laborer is provided the means to carry out a production that yields a good for which he need not necessarily care. All that concerns the laborer is what concerns his operation as a laborer. He must familiarize himself with his job and the capital goods he uses to carry out his job and he must produce, or he risks being fired. In this sense, the writer is correct the laborer's means of livelihood comes from the entrepreneur, insofar as he does not change his employment status, according to the valuations of the laborer. The laborer need only produce a good and he will be compensated from the entrepreneur's savings. These capital goods do not come to him from his own costs, but by the costs of the entrepreneur in acquiring them and hoping that he can attract laborers to use them. The entrepreneur bears risks with which the laborer need not concern himself. The entrepreneur must oversee the production of goods that appeal to consumers, in addition to working conditions that appeal to laborers. The entrepreneur must produce something that pleases consumers enough so that they are willing to purchase his goods. Laborers profit insofar as they labor; entrepreneurs profit insofar as they labor and are able to attract consumers to his business. The entrepreneur is at the whim of the consumers, who, by no stretch of the imagination, are easy to please. Every entrepreneur competes not only for profits, but also for laborers. While the entrepreneur must economize his expenses, he must also offer wages that appeal to laborers so that he can economize on his costs. To the entrepreneur, the costs of, both, being a laborer and an entrepreneur are greater than the costs of being an entrepreneur only. Therefore, the entrepreneur hires laborers to minimize his costs of production. These costs are determined according to mutual benefit of the potential laborer and the potential entrepreneur in their negotiations.

Differences in valuations are the prerequisites of any trade. An opposite valuation of two goods between two potential traders must exist for trade to occur. Applied to employment, the entrepreneur must value the labor services of the laborer greater than the costs of the labor services he bears by offering him wages; in addition, the laborer must value the wages paid to him greater than the costs that he bears in acquiring those wages. By definition, then, the trade called “employment” states that the laborer must agree to a wage that is not the "full product of his labor" in Marxian terms. But the act of choosing employment with this entrepreneur, and not that one, demonstrates that the laborer values the wages more than the costs that come with not accepting the employment of his labor services in other uses. This is what Hoppe touches on above. It is the writer's inability to grasp this economic truth that fuels his contention that capitalism breeds exploitation. The Marxian idea of "exploitation" is not only borne by laborers, but by entrepreneurs as well. Examined in a higher order of production, the entrepreneur must pay for the final higher order goods, which he then integrates into his production process, at a greater amount than the higher order producer values the output of his production. As such, the writer can say that the entrepreneur "exploited" in the same sense just as his laborers are so "exploited." After all, the entrepreneur must pay for his capital goods at a price greater than the costs borne by laborers and entrepreneurs of this higher order good. The reason for this difference in valuations is based in the minds of the entrepreneurs and the laborers. The entrepreneur purchases one good, as an input, in hopes that it will be transformed into a final good that consumers value enough to purchase this final good. The laborers are the inputs that transform the good with the aid of capital goods in the production process. There is no exploitation because of the existence of voluntary trade, constrained by scarcity, and there exist differences in valuation by definition of what trade consists. There is no exploitation in that one gains only at the expense of another; both Hoppe and the writer properly relegate this condition to slavery.

It is not the system of capitalism that provides inequality because capitalism a term that describes the means by which multiple actors attempt to limit scarcity and inequality via action and voluntary relations concerning private property. It is not the fault of capitalism that all men are not born equal. Some have exceptional vision whereas others are blind. Some are short whereas others are tall. Everyone gets hungry. Everyone gets thirsty. It is not natural for man to be born into wealth. Wealth is an extraordinary exception to the rule of man's condition. It is because there is an inequality from one individual to another, and it is because there is a difference in the material conditions of different places in the world, that trade occurs. Trade redistributes goods from where they are least valued to where they are most valued. This is the mechanism by which equality and wealth are aspired by actors in capitalism. Inequalities are mitigated and wealth is acquired via capitalist mechanisms only.

 

I may tackle the next sections of the article later. This is it for me for today.

 




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Neodoxy replied on Thu, Jan 3 2013 2:32 PM

I'm sorry but I don't really understand why this needs a critique because it's kind of full of holes. It's not even that impressive from a Marxist standpoint.

 

"Let’s start with time preference. First, Hoppe’s commits the fatal error of ignoring context. As I pointed out in my previous article, the greatest failure of any libertarian philosophy surrounding socio-economic action is that it divorces action from the material conditions it exists in. The only way to understand why a person acts is to understand the environment which shapes that action. Thus, time preference can only be seen as a valid explanation if you presume the legitimacy of private ownership."

 

Time preference is inherent in human decision making. Even in the socialist utopia time preference would have to exist in the realm of production. While I do think that it's relevant that we look at the social context of what makes something possible, the fact is that all that makes capitalism possible is private ownership of the means of production. This doesn't tell us anything about the actual relationships which will take place in capitalism. If workers were wiser and had lower time preferences then workers would have formed syndicates and these would have dominated the market a long time ago. The fact that this doesn't happen even when workers would be able to enjoy higher wages shows exactly how superior the capitalist mode of production is both in terms of time preference and the provision of goods.

Even Marx basically understood the role of the capitalist in forwarding the means of production to workers where they would have otherwise produced nothing at all. This displays the failure of the syndicates and communes that socialists love so much to actually grow up organically as opposed to the "evil" capitalist which happens all the time and is very successful at providing goods and services.

 

"Time preference can only exist because the laborer exists in a property relation where his only choice is to sell his labor-power. The material conditions of depravity that pressure the laborer to sell his labor-power do not affect the capitalist who owns the means of production (aside from the obvious duty of a capitalist being to produce and sell commodities). The capitalist class is the sole class with any feasible sense of flexibility as they exclusively access the means by which one may subsist. Therefore the statement that “After all, he could also decide not to sell his labor services to the capitalist and then reap the “full value” of his output himself” is utterly nonsensical.In capitalism, time is money and the worker cannot afford to wait. To reproduce his existence, he must sell his labor-power; even if this means being exploited."

 

In the socialist Utopia people wouldn't magically desire things a million years from now than they do today. Furthermore the fact is that it would only be a short matter of time before the worker could become a capitalist or and entrepreneur. If a worker making 40 thousand a year were willing to forego ten thousand dollars a year then within twenty years he will be a greedy rich capitalist in his own right. Furthermore to claim that he has no other option in the modern welfare state is ridiculous. Unless you believe that all luxuries of this earth will be provided to you just because you exist then you will always be forced to work for someone, even if it is just yourself. At any rate, so long as you accept the idea that the capitalist can own property then the idea that the brunt of the value created by the laborer is indeed the capitalists. Labor by itself is practically useless, it is only through capital accumulation that it attains any real productive capabilities

 

As for the next section: exploitation is a loaded word because it varies between what it means. The capitalist performs an absolutely vital service in the economy and therefore he deserves recompense, not allowing him to have this would indeed be exploitation. Furthermore the fact is that in developed societies which have the purest forms of capitalism it is clear that employment is relatively stable so long as people are willing to accept the market wage and there is no reason that this should not be the case. By this same measure the capitalist has nothing assuring him of his continued existence. He could well be out in serious debt if the affair goes awry.

 

"Hoppe’s entire objection revolves around the idea that capital accumulation and the value of capital goods can be interpreted solely through an individual’s exclusive ownership, and likewise that this subjective interpretation holds the key to productive forces (which there is no reason or analysis given as to why). The truth is much different. The entire system of capitalism is based on a social context, an interrelated conundrum of values and productive units. In fact, exchange value, the locomotive of market interaction, is dependent on society as it is a social expression. This is because the exchange value of commodities is impossible to determine unless contrasted against other commodities. All production in capitalism is social, and likewise so is all consumption.

Ergo, the entire premise of Mr. Hoppe’s objection falls flat on its face. If we can recognize accumulation as a consequence of social production we can destroy any reasoning behind a “sinking” in productive capacities under social ownership because of a lack of “exclusive control”."

The fact that this section is so mired in jargon (what the hell is "social control" anyway?) and a lack of any real analysis of human action is entirely representative of Marxism as a system. He does nothing to actually criticize the calculation problem. The very fact that there are a collection of workers and not a single worker (as he makes out) means that there is no "exclusive control" and even if there was exclusive control it could only experience calculation if it were integrated into a market system and the workers here enjoyed inequalities with all of the other worker's syndicates in the land. You would still have the wicked inequalities and all of the workers will still have to sell their labor to the other syndicates in order to eat.

Furthermore this isn't about "liberation" of any kind. The fact that workers don't organize in this way shows that what the author is trying to propogate here is not only artificial but pure fantasy. Without the willingness on behalf of workers to forego the lions share of their income now in return for their pay later in each time period they will all be out of a job. This is also assuming (idiotically) that democratic control would be as efficient as hierarchical control when this would almost certainly not be the case since in many cases what makes sense for the whole does not make sense for a single group. Even if it does we are assuming that people who are trained in being laborers (since that is what they are) are also trained in managing a company and organizing production. This is clearly not the case. You might as well say that a janitor is fit to program super computers or that an accountant is fit to drive race cars. Managing a firm is outside of a normal laborers skill set and so they will do it badly. Furthermore they have little invested in the outcome either way since they are only one vote and if it's less than a life-or-death vote for the firm what he will see of the return is petite. Capitalists and entrepreneurs exist  to properly manage productive undertakings and to forward current goods so that they might be productive at all.

The author is right that production is social. This is exactly why market are essential in providing a true social production structure: because they provide information and display preferences to producers.

 

"The propertied classes need to redefine the meaning of ‘ethics’, or rather, co-opt its usage to protect private property and the right to it. This pandering is a natural political necessitation coming from a class that exists through and for the leverage of property."

 

Most people who support the NAP aren't very rich, and anyway the NAP is just the logical non-doublethink extension of the most traditional ethics of all. It is the author who seeks to rewrite ethics so that ownership is not legitimate and the real productive services of the entrepreneur and the capitalist are illegitimate.

At any rate, all that really needs to be said to destroy the socialist viewpoint is the fact that even though workers could enjoy higher pay both by receiving the full fruits of profit, interest, and supposedly superior efficiency from management (according to many socialists) they have not done so through two and a half centuries of capitalism. No law (to my knowledge) has ever prevented workers from owning syndicates. If any union or other voluntary association of workers saved up for any significant amount of time then they could likely purchase the whole business and convert it into a syndicate, yet this has never happen. This would indicate to any sane individual that the working class would have to be (once again, assuming that the socialists are correct) so stupid, small minded, and shortsighted to allow this to happen that this class would clearly be wholly unfit to control the means of production and that to grant them control over production would signal economic oblivion.

To provide an example let's say we take a large a thousand workers and that the union takes an average of 500 dollars out of each monthly paycheck in the hopes of eventually buying the firm because the workers are desperate to get ahold of what is rightfully theirs. This means that the average person pays 6,000 dollars a year. Those who make less pay less into the union and those who make more pay more so that each year the firm receives 6,000,000 dollars. Even if the union just locks this away; after ten years they have sixty million dollars, much more than this if they deposit the sum at any significant rate of interest after the end of this year. After this point they could likely just buy the factory outright and the workers could proceed to gain their syndicalist paradise. Unlikely? Sure, but something of the like in two hundred and fifty years with billions of people concerned? Not so likely. This is also assuming that they would want to fully buy the factory outright instead of accepting a loan from a bank which they would presumably be happy to do since in the long run they could make much more personally by doing this since they would benefit from both profits and superior management.

As soon as we accept this then it becomes clear that the entrepreneur and capitalist perform invaluable services and that they deserve every penny they receive, just as workers deserve every penny they are paid. Just as liberal Robert H. Frank argues in his book "The Darwin Economy" it makes no sense to expect that there will be money on the table indefinitely. If cooperatives are truly more efficient and provide better pay then there is no reason to think they wouldn't come about in the long run.

Syndicates are such an unnatural creation and concept that it's preposterous that their existence could thought to be the "right" state of affairs or that the role of the entrepreneur and capitalist could be considered as unnatural and exploitative.

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Neodoxy replied on Thu, Jan 3 2013 3:25 PM

It's also interesting to note that in one case he actually capitalized the word "capital". I don't know whether or not this was a mistake, but if it wasn't then it helps to emphasize the mystical conception that Marxists have when talking about capital. Capital is just the sum of ones assetts, nothing more, there's nothing especially mystical about it nor the process by which it is accumulated once one gets his panties out of a bunch about the fact that it's "unequal!!!111". This is especially true once one looks past Marx's equally mystical Labor Theory of Value. As someone who's about a whopping one fourth of the way through capital, I can tell you that Marx's entire theory of value, despite being investigated in great detail, is entirely illogical exactly because it is never given an actual reason why it, and not something else, is what brings about value. Indeed in the past I made a thread that easily bends Marx's theory of value into the Austrian theory without much effort. Throughout Capital value is a twisting thing, a vague thing, something with several meanings which is hard to pin down and which is then twisted into "contradictions".

Finally, even in what may be the author's "truest" point we see a fundamental flaw. Capitalism is a "social relationship" it comes about through very definite social conditions which are indeed removable, however the same can be said about every other imaginable system of human organization. It's an important concept, but it's not especially profound in terms of incriminating the capitalist system. The human body is a "physical relationship" to the outside world... Therefore what? Who cares? We must weigh the quality of the system by looking at its actual effects, not just moving on to a dream of a "non-body" system in which I existed as something without form in a vacuum. Socialism too is a "social relationship" and a radically inferior one in ensuring high living standards.

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Off topic: How is Capital? Do you recommended reading it?

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Neodoxy:
It's also interesting to note that in one case he actually capitalized the word "capital". I don't know whether or not this was a mistake, but if it wasn't then it helps to emphasize the mystical conception that Marxists have when talking about capital.

That caught my attention as well. I gave a thought of joking at his expense that "Capital" (as in, Marx's Das Kapital; and assuming that what he calls Marx's premise re: property relations is actually Marx's premise re: property relations) was what had circular logic (i.e. he got something right). But, since I haven't yet read Das Kapital, I left that out.

Neodoxy:
Indeed in the past I made a thread that easily bends Marx's theory of value into the Austrian theory without much effort.
That's interesting.

In his Wealth of Nations, Adam Smith gave a few explanations as to where value originates, two of which regard labor. In one account, he makes an argument that vaguely resembles the labort theory of value; it is this explanation that I believe that Smith was attempting to explain price formation, or cost, and poorly makes the argument that value is derived. In another explanation, he spoke of labor in terms of what one gives up in order to acquire something. He writes the same way when he argues that value is best measured in terms of commodities (corn, in particular) that are given up in exchange for a good. With both of these accounts of value, Smith might have been trying to articulate that value is imputed, and not intrinsic to the good (which is entirely consistent with the Austrian position on value). Unfortunately, Ricardo misinterpreted Smith and then Marx got a hold of it...

 

If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH

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Neodoxy replied on Thu, Jan 3 2013 4:01 PM

Off topic: How is Capital? Do you recommended reading it?

The real reason that I'm reading is that I'm trying to better understand how systems of thought are constructed and how they work/are organized. As long as I'm doing this why not also learn more about Marxism? It's very interesting and it raises a lot of very interesting questions. Having the duel perspective of Austrianism/Marxism is really interesting and it's broadening my perspective greatly, especially in terms of how the implications of certain assumed relationships lead to value/action, but for the most part it's pretty f***ing useless in terms of the actual content. While I do think that Marx has been misrepresented by many of his critics, I also feel that this is inevitable because Marx's writing in Capital was awful and it's a reasonably disjointed work (it's not inherently disjointed but he doesn't cover the massive amount of material that needs to be covered because of how broad the system he is dealing with really is).

Half the reason that I'm reading it with the frequency I am is that I'm reading Keynes' general theory at the same time. If Marx writes like this:

Then Keynes writes like this

Seriously, I thought that some of Hayek's stuff was dense until I started reading Keynes. He's likely most uncompelling author that I ever read in terms of his actual writing. F*** you Keynes! Learn to write good!!!/rant

What's especially sad is that I know that Marx could write quite well. The communist Manifesto is some of the best political writing that I've ever read (once again, we're just talking about the words not ideas) but it appears that as soon as Marx had to sit down and actually explain his ideas that he lost a lot of his authorial brilliance, perhaps because this is what is needed to make his ideas actually work.

Edit

TOG

It's important to note that Marx uses the LTV both to express cost and a truly independent form of "value". The two are somewhat different but all social exchange value within the capitalist society ultimately matches with the latter. He is clear that labor isn't actually "labor" if it does not increase utility, yet then we have to ask how much utility needs to be made. As soon as we aknowledge this and subjectivism then it's clear that the utility created depends upon who it goes to and based purely upon the utility itself. Labor is just a means to an end, and from here the Austrian conception of value is a much better explanation of things, especially since land and capital as well as other services naturally attract pay and provide real services, as I discussed above.

Therefore the fact that Marx treats labor value as inherent is contradicted by his own admission that it must create utility.

Edit'

FML. I don't know why the images aren't showing up, they are in th edit page but whatever, I'll do this in the old fashioned way. The first image is just below your quote. It contains a picture of Jesus saying "haha, no." this wittily indicates that you probably shouldn't waste your time reading capital. The second image occurs where I indicate how Marx writes. It is a picture of a brick. This wittily indicates that his writing is boring. The final image comes when indicating how Keynes writes. It's a picture of a smashed brick, wittily indicating that Keynes' writing is even more boring and less firmly structured than Marx.

See how witty I am?

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I can't see those images.

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TOG - I think there was a reply posted to this on Reddit.

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A reply to my post here?

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Sorry - a reply to the critique of Hoppe.

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Could you post the link here?

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I can't find it, otherwise I would have.

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Cortes replied on Fri, Jan 4 2013 11:32 AM

If workers were wiser and had lower time preferences then workers would have formed syndicates and these would have dominated the market a long time ago.

 

What do you mean by this? It sounds like you're saying that syndicalism would predominate if workers are wise, but since they aren't, corporations persist. Did you mean that if syndicalism was supposedly the wisest course of action, then it would have arisen?

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Neodoxy replied on Fri, Jan 4 2013 11:55 AM

^

Yes. If we assume (possibly fallaciously) that there are inherently three different possibilities for the efficiency of syndicates

1. They are generally more efficient than hierarchical firms

2. They are generally as efficient as hierarchical firms

3. They are generally less efficient than hierarchical firms

If 1 or 2 was the case then Syndicates, once formed, could naturally out-compete hierarchical firms because they could offer higher wages by  forwarding interest income (the minimum rate of profit) on to the salaries of workers.

Therefore two possibilities for why syndicates haven't arisen exist:

1. Workers are not wise

2. They have a very high time preference which means that they will not save

If worker's were "wise" enough to make good decisions and see the advantages of communal savings, and if they were "selfless" enough to make good decisions even in a democratic system, then possibilities 1 or 2 would have to predominate.

Therefore "wisdom"  here serves the role of helping to bring about savings and of making syndicates superior to the traditional firm structure. Because this has not happened and syndicates are practically unheard of outside of theory and relatively distant past, we can determine that either workers are not "wise" or they have a very high time preference.

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
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